Interim Results

27th Aug 2008 07:00



Ark Therapeutics Group plc

Interim Results for the First Half of 2008

London, UK, 27 August 2008 - Ark Therapeutics Group plc today announces its results for the six months ended 30 June 2008.

HIGHLIGHTS

Cerepro®	January 2008 DSMB meeting confirmed timing of preliminary results from Phase III Cerepro® trial due Q3 2008 Positive opinion letter received from EMEA for Cerepro® Paediatric Investigation Plan
Trinam®	Special Protocol Assessment approval received from US FDA for Phase III Pivotal Trial of Trinam®
Vitor™	Vitor™ pilot Phase III clinical programme commenced
Pre-clinical	Significant advances made with EG013 and EG014 pre-clinical programmes EG011 (refractory angina) demonstrated ability to grow new blood vessels and restore heart function following heart attack
Wound care	Sales in the six months to 30 June 2008 showed 68% increase over first six months of 2007 Neuropad® in-licensed and launched in the UK  Ark products won inclusion on new NHS Advanced Woundcare Therapies Contract
Corporate/ Commercial	Acquisition of Lymphatix Oy strengthened gene research technology and secured licences for VEGF C and VEGF D genes Finnish GMP manufacturing facility completed validation review to USA standards Cash, cash equivalents and money market investments of £50.5m at 30 June 2008 (£37.5m at 30 June 2007)
Post-period events	Preliminary Cerepro® Phase III results met primary endpoint  New GMP manufacturing facility opened in Finland EMEA Gene Therapy Working Party gave positive feedback on EG013 for foetal growth restriction on pre-clinical toxicology and Phase I study

Dr Nigel Parker, CEO of Ark, commented:

"The first half of 2008 has seen Ark continue to make solid progress across all the main areas of the business. Of our lead candidates Trinam® and Vitor™ have achieved the regulatory milestones we were expecting and our pre-clinical programmes have strengthened. The immediate post-period announcement that Cerepro® has achieved its primary endpoint in the Phase III study is a further significant step forward for gene-based medicine both for the Company and the overall gene therapy arena. 

We look forward to continuing our progress in the second half of the year giving clinical and regulatory updates on our lead products and updates on our commercialisation and pre-clinical development activities." 

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

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 four marketed devices, Kerraboot®, Kerraped®, Flaminal® 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's and Chief Executive's review

The first half of 2008 has seen the Company make continued progress across all its business areas with a number of significant developments and milestones being achieved. We started the year by securing, through the acquisition of Lymphatix Oy, the ability rapidly to advance and develop more VEGF based products. As the first half progressed we successfully moved our three lead products into late-stage clinical development through regulatory milestones including FDA approval of the application for Special Protocol Assessment ("SPA") for the Trinam® Phase III trial and in particular, post period, reported that Cerepro® had met its primary endpoint in its Phase III study. Our manufacturing capabilities have strengthened considerably with the opening in July of our new facility in Finland and we continue to protect the future of our lead candidates through the filing and securing of relevant patents. Our wound care business has continued the growth we reported early in the period and we expect sales to strengthen further during the remainder of the year as all existing products grow and additional products are launched. Whilst there is still much to achieve, we are particularly pleased with the way our gene-based business is advancing.

PIPELINE REVIEW

Cerepro® 

Early in the year we announced that the Data Safety Monitoring Board ("DSMB") had determined that the Cerepro® Phase III trial (Study 904) would give a preliminary read out of results in July 2008. In April, the EMEA formally approved our paediatric investigation plan. Throughout the period we have continued to monitor Study 904 locking the Phase III clinical database mid year. This allowed us to conduct the preliminary analysis and in late July we announced that the study had met its primary endpoint with secondary endpoints yet to be established with 45% of patients still alive. This is a significant result for the Company with Cerepro® demonstrating overall clinical superiority to standard care regimens. Further details of the results are scheduled to be presented at the European Association of Neuro-oncology meeting in September 2008. We now look forward to progressing the regulatory process during the remainder of this year.

Vitor™ 

Following our decision late last year to conduct a pilot study to provide data to enable us to determine the final architecture for the Phase III study, we completed the manufacturing of 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.

Trinam® 

Trinam® has moved forward as planned in the period and the ongoing dialogue with the US regulators concerning the SPA process resulted in the SPA being formally awarded in June 2008. At the same time the Investigative New Drug ("IND") application reviewer requested one of the battery of assays be 'qualified' with further data. Work on qualification is well underway and US investigator sites for the trial are now being activated to enable enrolment of the first patient into the trial as soon as clearance of the assay is received. 

PRE-CLINICAL

Following the progress we have made with our clinical stage gene-based medicines and advances in manufacturing we took the decision late last year to invest in a number of further pre-clinical gene-based programmes in order to advance up to three into Phase I/IIa development.

The most advanced of these (EG011) is a short-form VEGF-D gene in our established adenoviral delivery platform (as used in Cerepro® and Trinam®) under development for treatment of refractory angina. This reported very promising 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) under development for foetal growth restriction again based on adenoviral delivered VEGF also showed promising results in producing improved blood flow for up to 50 days in an in vivo model. 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 on a proposed programme of in vivo and in vitro work to be completed prior to Phase I and on the Phase I trial endpoint.

In addition, 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 our lead optimisation work to provide a compound to take into the clinic.

Overall, we are pleased with the way our pre-clinical programmes are developing towards the key value-creating Phase I/IIa trial milestones and we believe that such progress in these gene-based programmes is uniquely possible at Ark.

WOUND CARE

For the six months overall sales were 68% up on the same period for 2007 and, on an annualised basis, monthly sales are at the £1m mark.

We were very pleased to see Flaminal®, Kerraboot® and Kerraped® accepted for inclusion on the new NHS advanced wound care therapies contract as part of the new NHS supply chain purchasing system. Products on the contract are effectively deemed as 'NHS best practice' and to achieve acceptance products have 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 and whilst available initially via podiatrists through non-reimbursed purchase, we are awaiting a decision from the NHS Drug Tariff Board concerning reimbursement in primary care. 

CORPORATE ACTIVITIES

Early in the period we completed the acquisition of Lymphatix Oy in an all-shares transaction, securing Ark milestone and royalty free exploitation rights to VEGF-C and -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.

Our patent estate had 5 patents granted in the period bringing the total number of patents now held by Ark to 192. We are confident our innovative medicines are well protected from competition. We are also pleased to report that the US patent office has commenced prosecution of the ACE stroke patent. The process of exploiting the value of this IP through further out-licensing activity is underway.

In February we announced that we had completed the work to validate our existing manufacturing facility in Finland (GMP 1) to US standards and throughout the year we have continued to manufacture commercial grade product. In mid July we announced that we have expanded our production capabilities with the opening of GMP 3. This commercial scale facility has been built as a result of a co-operation between the Company and the Kuopio University Business Park. GMP 3 is an advanced 'state of the art' building linked to Ark's existing laboratory suites. It has been specifically designed to manufacture gene-based medicines particularly those in viral vector constructs, right through to filling and packaging of finished product. The facility which contains 547 m2 of clean rooms, will operate to Biosafety level 2 ("BSL 2") and has taken three years to build. The new facility will initially be used for laboratory and pre-clinical grade production and dedicated production suites are being equipped and validated to enable full GMP certification. This is a significant achievement which greatly adds to our manufacturing capability allowing us to be self-sufficient in manufacturing all gene-based products in our portfolio for research through to commercial supply. The facility 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.

FINANCIAL REVIEW

Revenues of £0.412m were recorded in the six months ended 30 June 2008 (six months ended 30 June 2007: £0.245m), the increase of 68% in the period reflecting the successful launch of Kerraped® in the second half of 2007 and the strong growth in Flaminal® sales.

Expenditure on research and development for the period totalled £8.2m (six months ended 30 June 2007: £7.8m) as a result of increasing expenditure on the Trinam® and Vitor™ Phase III studies and the scale-up of our biologics manufacturing facility, offset by reduced expenditure on the Cerepro® Phase III trial. 

Selling, marketing and distribution costs for the period were £0.7m (six months ended 30 June 2007: £1.1m). The reduced expenditure in the period was principally a result of the completion of the first stage of key pre-marketing activities for Cerepro® by the end of 2007, pending receipt of the Phase III results in July.

Administrative expenses for the period totalled £3.6m (six months ended 30 June 2007: £3.5m).

Other income for the six months ended 30 June 2008 totalled £0.7m (six months ended 30 June 2007: £0.02m), the increase comprising primarily exchange gains on inter-company loans and on Euro-denominated cash balances. 

In the six months ended 30 June 2008, the Group earned interest of £1.6m on its cash deposits (six months ended 30 June 2007: £1.1m), reflecting the increased cash balance as a result of the £35.4m net of expenses received from the Placing and Open Offer in November 2007.

Total net assets (defined as total assets less total liabilities) have increased from £40.1m at 30 June 2007 to £61.3m at 30 June 2008, principally due to the increase in cash and cash equivalents and money market investments (£50.5m at 30 June 2008 versus £37.5m at 30 June 2007) following the share Placing and Open Offer in November 2007. Property, plant and equipment at 30 June 2008 of £9.8m (30 June 2007: £2.4m) reflected the investment in the Group's expanded biologics manufacturing facility in Finland.

Net cash outflow from operating activities for the period was £11.2m (six months ended 30 June 2007: £11.6m).

Risks and uncertainties over remaining six months

There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. In particular the risks which were identified and outlined in the Annual Report and Accounts 2007 in the Directors' Report on page 24, and which include clinical and regulatory risk, competition and intellectual property risk and counterparty risk, remain relevant for the remaining six months of 2008.

SUMMARY AND OUTLOOK

The first half of 2008 has seen Ark continue to make solid progress across all the main areas of the business. Of our lead candidates Trinam® and Vitor™ have achieved the regulatory milestones we were expecting and our pre-clinical programmes have strengthened. The immediate post-period announcement that Cerepro® has achieved its primary endpoint in the Phase III study is a further significant step forward for gene-based medicine both for the Company and the overall gene therapy arena. During the second half of 2008 we expect to give appropriate updates on the full analysis of the Cerepro® Phase III trial data and our progress with the European regulators. Trinam® is expected to enter its first patient into the Phase III study and Vitor™ is also expected to recruit into its pilot Phase III study. We look forward to progressing the commercialisation activities regarding our stroke patent as well as continuing the discussions for the commercialisation of Cerepro® in non-core territories. We also expect to bring further wound care products into our marketed portfolio and to hear a decision from the US agency concerning the reimbursement position for Kerraboot®. Finally we expect to update the market on the progress of our key pre-clinical candidates as we move them towards Phase I development.

Dennis Turner, Chairman

Dr Nigel Parker, Chief Executive Officer

27 August 2008

Consolidated income statement

For the six months ended 30 June 2008 (unaudited)

	Note	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year ended 31 December 2007 £'000
Revenue	3	412	245	1,125
Cost of sales		(235) ______	(224) ______	(374) ______
Gross profit		177	21	751
Research and development expenses		(8,188)	(7,797)	(14,611)
Selling, marketing and distribution costs		(736)	(1,081)	(2,035)
Other administrative expenses		(2,948)	(2,894)	(5,809)
Share-based compensation		(682) ______	(589) ______	(1,006) ______
Administrative expenses		(3,630) ______	(3,483) ______	(6,815) ______
Other income		678 ______	16 ______	491 ______
Operating loss		(11,699)	(12,324)	(22,219)
Investment income		1,631	1,075	2,226
Finance costs		(17) ______	(12) ______	(26) ______
Loss on ordinary activities before taxation		(10,085)	(11,261)	(20,019)
Taxation		919 ______	1,047 ______	1,838 ______
Loss on ordinary activities after taxation, being retained loss for the period		(9,166) ______	(10,214) ______	(18,181) ______
Loss per share (basic and diluted)	4	(4 pence)	(6 pence)	(11 pence)

All results relate wholly to continuing activities.

Consolidated balance sheet

As at 30 June 2008 (unaudited)

	Note	30 June 2008 £'000	30 June 2007 £'000	31 December 2007 £'000
Non-current assets
Goodwill	5	2,328	1,306	1,306
Other intangible assets	6	1,187	263	742
Property, plant and equipment	7	9,759 ______	2,351 ______	5,327 ______
		13,274 ______	3,920 ______	7,375 ______
Current assets
Inventories		503	475	381
Trade and other receivables		2,369	1,329	2,175
Research and development tax credits receivable		2,696	2,557	2,055
Current tax receivable		-	-	20
Money market investments		42,500	27,000	46,000
Cash and cash equivalents		7,987 ______	10,515 ______	19,067 ______
		56,055 ______	41,876 ______	69,698 ______
TOTAL ASSETS	3	69,329 ______	45,796 ______	77,073 ______
Non-current liabilities
Obligations under finance leases		70	37	79
Loans		469 ______	316 ______	321 ______
		539 ______	353 ______	400 ______
Current liabilities
Trade and other payables		7,397	5,257	8,480
Obligations under finance leases		34	10	33
Loans		73 ______	86 ______	94 ______
		7,504 ______	5,353 ______	8,607 ______
TOTAL LIABILITIES		8,043 ______	5,706 ______	9,007 ______
Equity
Share capital		2,051	1,662	2,019
Share premium		117,897	81,397	116,571
Merger reserve		38,510	36,989	36,989
Foreign currency translation reserve		75	(24)	(31)
Share-based compensation		3,727	2,633	3,052
Reserve for own shares		(1,274)	-	-
Retained loss		(99,700) ______	(82,567) ______	(90,534) ______
TOTAL EQUITY		61,286 ______	40,090 ______	68,066 ______
TOTAL LIABILITIES AND EQUITY		69,329 ______	45,796 ______	77,073 ______

Consolidated statement of changes in equity

(unaudited)

	Share capital £'000	Share premium £'000	Merger reserve £'000	Foreign currency translation reserve £'000
Balance as at 31 December 2006	1,659	81,196	36,989	(22)
Exchange differences on translating foreign operations recognised directly in equity	-	-	-	(2)
Share-based compensation	-	-	-	-
Loss for the period	-	-	-	-
Equity share options issued	3 ______	201 ______	- ______	- ______
Balance as at 30 June 2007	1,662	81,397	36,989	(24)
Exchange differences on translating foreign operations recognised directly in equity	-	-	-	(7)
Share-based compensation	-	-	-	-
Loss for the period	-	-	-	-
Issue of share capital	356	37,062	-	-
Share issue expenses	-	(1,936)	-	-
Equity share options issued	1 ______	48 ______	- ______	- ______
Balance as at 31 December 2007	2,019	116,571	36,989	(31)
Exchange differences on translating foreign operations recognised directly in equity	-	-	-	106
Share-based compensation	-	-	-	-
Loss for the period	-	-	-	-
Issue of share capital	31	1,261	1,521	-
Share issue expenses	-	(4)	-	-
Equity share options issued	1	69	-	-
Purchase of own shares by Family Benefit Trust	- ______	- ______	- ______	- ______
Balance as at 30 June 2008	2,051 ______	117,897 ______	38,510 ______	75 ______

(continued from table above)

	Share-based compensation      £'000	Reserve for own shares     £'000	Retained loss £'000	Total £'000
Balance as at 31 December 2006	2,042	-	(72,353)	49,511
Exchange differences on translating foreign operations recognised directly in equity	-	-	-	(2)
Share-based compensation	591	-	-	591
Loss for the period	-	-	(10,214)	(10,214)
Equity share options issued	- ______	- ______	- ______	204 ______
Balance as at 30 June 2007	2,633	-	(82,567)	40,090
Exchange differences on translating foreign operations recognised directly in equity	4	-	-	(3)
Share-based compensation	415	-	-	415
Loss for the period	-	-	(7,967)	(7,967)
Issue of share capital	-	-	-	37,418
Share issue expenses	-	-	-	(1,936)
Equity share options issued	- ______	- ______	- ______	49 ______
Balance as at 31 December 2007	3,052	-	(90,534)	68,066
Exchange differences on translating foreign operations recognised directly in equity	(7)	-	-	99
Share-based compensation	682	-	-	682
Loss for the period	-	-	(9,166)	(9,166)
Issue of share capital	-	-	-	2,813
Share issue expenses	-	-	-	(4)
Equity share options issued	-	-	-	70
Purchase of own shares by Family Benefit Trust	- ______	(1,274) ______	- ______	(1,274) ______
Balance as at 30 June 2008	3,727 ______	(1,274) ______	(99,700) ______	61,286 ______

Consolidated cash flow statement

For the six months ended 30 June 2008 (unaudited)

	Note	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year ended 31 December 2007 £'000
Net cash outflow from operating activities	9	(11,177)	(11,601)	(18,037)
Investing activities
Acquisition of Lymphatix Oy net of cash acquired	8	34	-	-
Interest received		1,601	1,251	2,114
Proceeds from/(purchases of) money market investments		3,500	13,000	(6,000)
Purchases of property, plant and equipment	7	(5,943)	(646)	(2,267)
Purchases of intangible assets		(56) ______	(40) ______	(698) ______
Net cash (used in)/generated from investing activities		(864)	13,565	(6,851)
Financing activities
Proceeds from borrowings		47	-	-
Repayment of borrowings		(87)	(28)	(68)
Proceeds on issue of shares		66	4	35,735
Finance costs		(13)	(10)	(12)
Grants received	7	1,060 ______	152 ______	- ______
Net cash generated from financing activities		1,073	118	35,655
Net (decrease)/increase in cash and cash equivalents		(10,968)	2,082	10,767
Cash and cash equivalents at beginning of period		19,067	8,433	8,433
Effect of exchange rate changes		(112) ______	- ______	(133) ______
Cash and cash equivalents at end of period		7,987 ______	10,515 ______	19,067 ______

Notes to the financial information

1 General information

This interim financial information was approved by the Board on 20 August 2008 and does not constitute statutory financial information within the meaning of Section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 December 2007 has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985.

Copies of the interim results for the six months ended 30 June 2008 are being sent to all shareholders. A copy can also be found on the Company's website at www.arktherapeutics.com.

2 Basis of preparation 

This condensed consolidated half-yearly financial information for the half-year ended 30 June 2008 has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

The same accounting policies, presentation and methods of computation have been followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements for the year ended 31 December 2007, except for the consolidation of the Family Benefit Trust (note 10). Seasonal changes to the Group's operations are not material.

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 no further information has been shown.

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 the sales of goods and out-licensing deals by geographical market, irrespective of the origin of the goods and services.

	Revenue by geographical market
	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year  ended 31 December 2007 £'000
UK	412	233	1,034
Rest of Europe	-	-	79
Other	- ______	12 ______	12 ______
	412 ______	245 ______	1,125 ______

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:

	Carrying amount of segment assets
	30 June 2008 £'000	30 June 2007 £'000	31 December 2007 £'000
UK	58,520	43,305	72,302
Finland	11,935	3,192	5,629
Inter-segment eliminations	(1,126) ______	(701) ______	(858) ______
	69,329 ______	45,796 ______	77,073 ______

(continued from table above)

	Additions to property, plant and equipment and intangible assets
	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year ended 31 December 2007 £'000
UK	58	88	809
Finland	6,634	598	3,748
Inter-segment eliminations	- ______	- ______	- ______
	6,692 ______	686 ______	4,557 ______

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 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 £9,166,000 for the six months ended 30 June 2008 (six months ended 30 June 2007 - £10,214,000; year ended 31 December 2007 - £18,181,000) and on 204,963,744 ordinary shares (June 2007 - 166,071,192; December 2007 - 169,202,455) being the weighted average number of ordinary shares in issue.

5 Goodwill

The increase in goodwill during the period totalled £1m, and arose from the acquisition of Lymphatix Oy (see note 8).

6 Other intangible assets

Additions to other intangible assets during the period included £0.7m for licences acquired with Lymphatix Oy (see note 8).

7 Property, plant and equipment 

During the period, payments in respect of expenditure on the new manufacturing facility in Finland totalled approximately £5.9m, including £1.5m which was capitalised as at 31 December 2007. Grant income received from the Employment and Economic Development Centre of Finland in respect of this investment totalled £1.1m.

8 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 £'000
Other intangible assets	737
Property, plant and equipment	5
Trade and other receivables	21
Cash and cash equivalents	96
Long term loans payable	(116)
Trade and other payables	(94) ______
	649
Goodwill	952 ______
Total consideration	1,601 ______
Satisfied by:
Ordinary shares issued in Ark Therapeutics Group plc	1,539
Directly attributable costs	62
	1,601
Net cash flow arising on acquisition:
Directly attributable costs
Cash and cash equivalents acquired	(62)
	96 ______
	34 ______

The goodwill arising on the acquisition is attributable to future product development synergies from the combination.

In accordance with IFRS 3 "Business Combinations", the fair values assigned to the identifiable assets, liabilities and contingent liabilities acquired on 8 January 2008 were determined provisionally on that date and these provisional estimates may be subject to revision to 7 January 2009. The acquisition had no material impact on operations during the period.

9 Reconciliation of operating loss to net cash outflow from operating activities 

	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year ended 31 December 2007 £'000
Operating loss	(11,699)	(12,324)	(22,219)
Depreciation and amortisation	755	435	1,019
Deferred income	(27)	(16)	(51)
Share-based compensation	682 ______	589 ______	1,006 ______
Operating cash flows before movements in working capital	(10,289)	(11,316)	(20,245)
Increase in receivables	(143)	(35)	(593)
(Increase)/decrease in inventories	(122)	(5)	89
(Decrease)/increase in payables	(921) ______	(220) ______	1,413 ______
Cash used by operations	(11,475)	(11,576)	(19,336)
Research and development tax credit received	298	-	1,300
Income taxes paid	- ______	(25) ______	(1) ______
Net cash outflow from operating activities	(11,177) ______	(11,601) ______	(18,037) ______

10 Non-cash investing and financing activities

The purchase of Lymphatix Oy (see note 8) was financed by the issue of 1,733,657 ordinary shares in Ark Therapeutics Group plc.

The Ark Therapeutics Group plc Family Benefit Trust (the "FBT") subscribed for 1,355,000 ordinary shares in the Company, funds for which were provided by the Company, £637,000 by way of a long term loan and £637,000 by way of a contribution.

11 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The following transactions with Company Directors took place during the period at arm's length:

	Six months ended 30 June 2008 £'000	Six months ended 30 June 2007 £'000	Year  ended 31 December 2007 £'000
Consultancy fees earned in period
P Keen	-	-	5
S Ylä-Herttuala	38 ______	35 ______	70 ______
Consultancy fees owed as at period end
P Keen	-	-	5
S Ylä-Herttuala	38 ______	35 ______	70 ______

The remuneration of key management personnel in the period was in line with the amounts disclosed in the annual report for the year ended 31 December 2007.

Statement of Directors' responsibilities

We confirm to the best of our knowledge:

(a) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as required by DTR 4.2.4R;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The Directors of Ark Therapeutics Group plc are listed in the Ark Therapeutics Group plc annual report for the year ended 31 December 2007, with the exceptions of the following two changes during the period: with effect from 24 April 2008 Bruce Carter resigned from the Board and Andrew Christie joined the Board. A list of current Directors is maintained on the Company's website: www.arktherapeutics.com.

By order of the Board

Martyn Williams

Company Secretary 

27 August 2008

Independent review report to 

Ark Therapeutics Group plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte & Touche LLP

Chartered Accountants and Registered AuditorCambridge, UK

27 August 2008

ENDIR DQLFLVVBXBBQ

---

Related Shares:

PVG.L