Interim Results

AGI Therapeutics

Interim financial results for the six months ended 30 June 2010

Business review continues

Dublin, Ireland, 8 September 2010 - AGI Therapeutics plc ("AGI" or "the Company") (AIM, ESM: AGI), a speciality pharmaceutical development company, today announces interim financial results for the six months ended 30 June 2010.

Financial summary

·; Cash and short-term deposits at 30 June 2010 of $10.4 million (31 December 2009: $12.0 million)

·; R&D spend $0.9 million (2009: $7.8 million)

·; G&A spend $0.6 million (2009: $1.5 million)

·; Loss per ordinary share $0.05 (2009: $0.14)

Operational summary

·; During the first six months of 2010 the restructuring of AGI's business continued. The Company has reset its cost base to more closely align it with that of an early-stage development company. AGI closed its US office in January as the Company no longer requires a clinical group to support a near term Phase III development programme. However, former US President of Operations, Dr David Young, has remained on AGI's Board of Directors and continues to advise on regulatory strategy and participate in key FDA meetings.

·; As previously reported, AGI embarked on an investigation of it's lead product Rezular™, in other GI indications. During the first half of 2010 a number of possibilities were explored in detail. AGI met with the US Food and Drug Administration (FDA) to discuss the possibility of developing Rezular as a therapy for chronic diarrhoea. However, a risk reward analysis does not support further development by AGI.

·; The Company also determined that, based on its unique serotonin related pharmacology, Rezular may have clinical utility in a new indication, namely, pulmonary arterial hypertension. Following extensive discussions with both clinical and academic leaders in the field, a number of pre-clinical experiments were conducted in an established experimental model of this disease. The preliminary results, while interesting, require further review and discussion with clinical experts. However, they do not support advancing this product into clinical development at this stage.

·; The AGI management team has carried out a review of other earlier stage programmes in the AGI pipeline with the objective of securing development partners for these programmes. This review included in some cases detailed due diligence by potential partners and performance of experimental work under a materials transfer agreement (MTA). The Company continues to pursue potential commercial arrangements.

·; In addition to the continuing evaluation of an internal project, the management team's efforts are now focused primarily on finding other opportunities for the business. All such opportunities are being evaluated from the perspective of enhancing shareholder value.

Cash position and intangible asset impairment charge

·; At 30 June 2010 the Company had $10.4 million in cash. Following extensive cost reduction measures undertaken late in 2009 and continuing during the first half of the this year AGI has limited the amount of cash resources needed to fund the day to day operations of the business. These steps are designed to maximize the availability of funds for investment in new business opportunities.

·; As referred to above, the Company has made considerable efforts to develop new indications for Rezular and to partner other programmes in its pipeline. The Company carries certain intangible assets and know-how on its balance sheet associated with these programmes. At 31 December 2009, total intangible assets amounted to $1.5 million. Because the ultimate success of these programmes is uncertain, AGI wrote off the carrying value of its intangible assets associated with Rezular and other programmes, which resulted in a non-cash impairment charge of $1.1 million in the six-month period to 30 June 2010. The remaining intangible assets, associated with ongoing early stage development programmes, amounted to $0.3 million at 30 June 2010.

Commenting on the announcement today, John Devane, CEO of AGI stated; "We are now focusing our efforts on identifying external opportunities which will serve as the future foundation for our business."

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Contact Information:

About AGI Therapeutics plc

AGI is a specialty pharmaceutical company which is focused on the development and commercialisation of differentiated specialty drug products to treat unmet medical needs, including conditions which qualify for Orphan drug status.

AGI's common shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM) and on the Irish Enterprise Exchange of the Irish Stock Market (IEX) as AGI.

For further information please see www.agitherapeutics.com.

Statements contained within this press release may contain forward-looking comments which involve risks and uncertainties that may cause actual results to vary from those contained in the forward-looking statements. In some cases, you can identify such forward-looking statements by terminology such as 'may', 'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or 'continue'. Predictions and forward-looking references in this press release are subject to the satisfactory progress of research which is, by nature, unpredictable. Forward projections reflect management's best estimates based on information available at the time of issue.

Financial review

For the six months ended 30 June 2010

Basis of preparation and International Financial Reporting Standards (IFRS)

The financial information for the six months ended 30 June 2010 has been prepared in accordance with IFRS as adopted by the European Union.

Operating performance

Revenue

In the six months ended 30 June 2010, AGI recognised $67,200 relating to license fees for access to certain of our intellectual property. For the six months to 30 June 2009, a total of $288,000 was recognised as revenue, relating to a license agreement with Axcan Pharma Inc. This agreement was terminated in 2009.

Research and development expenses

Total Research and Development (R&D) expenses for the six months to 30 June 2010, were $0.9 million (2009: $7.8 million). R&D costs in this period arose primarily on the pre-clinical investigation of Rezular in pulmonary arterial hypertension. R&D costs in 2009 were dominated by the ARDIS Phase III clinical programmes associated with Rezular. As a result of the Company's decision to discontinue ARDIS in May 2009, all significant remaining costs associated with ARDIS had been incurred in the period to 30 June 2009.

General and administrative expenses

General and Administrative (G&A) expenses in the first six months of 2009 were $0.6 million (2009: $1.5 million). This decrease is attributable to a cost reduction exercise and reorganisation of the business activities of AGI in late 2009, which continued through the first half of 2010. Specifically, the Company's US office was closed, clinical programmes were cancelled and other costs were reduced.

Interest income and other income / (expense)

The Company earned interest on its cash balances amounting to $0.03 million in the first six months of 2010 (2009: $0.1 million). Interest income has fallen as cash balances have reduced and interest rates for cash deposits declined in 2010 compared to 2009. Other income / (expense) relates to an unrealised loss of $546,000 in 2010 (2009: $19,000) arising from the translation of cash balances, which AGI still holds in euro, into dollars at the period end.

Intangible asset impairment charge

A charge of $1.1 million has been recognised in the first half of 2010 (2009: $0.4 million), primarily relating to the write off of intellectual property associated with Rezular. The Company has made considerable efforts to develop new indications for Rezular and to partner other programmes in its pipeline. The Company carries certain intangible assets and know-how on its balance sheet associated with these programmes. Because the ultimate success of these programmes is uncertain, AGI wrote off the carrying value of its intangible assets associated with Rezular and other programmes, which resulted in a non-cash impairment charge of $1.1 million in the six-month period to 30 June 2010. The remaining intangible assets, associated with ongoing early stage development programmes, amounted to $0.3 million at 30 June 2010.

Taxation

The Company has had a loss to date and continues to incur losses. Because of these losses no charge for tax arose in the first six months of 2010 or 2009.

Share based compensation expense

During 2010, the Company issued 4.2 million (2009: 3.8 million) share options to certain employees. The Company accounts for the fair value of option grants as a charge in the income statement, using the Black-Scholes option-pricing model. A charge of $0.3 million was expensed during the first half of 2010 (2009: $0.6 million) in respect of share based compensation expense, divided between R&D and G&A expenses.

Operating cash flow

Net cash outflow from operating activities in the six-month period ended 30 June 2010, was $1.1 million (2009: $8.5 million), which consisted principally of the loss from operations and changes in working capital balances. At 30 June 2010, AGI had cash and short-term deposits of $10.4 million, (31 December 2009: $12.0 million). The Directors have considered the Company's cash position and are satisfied that it is sufficient to meet the Company's financial obligations for at least the coming twelve months.

UNAUDITED CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the six months ended 30 June 2010

The accompanying notes are an integral part of these interim financial statements

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2010

The accompanying notes are an integral part of these interim financial statements

UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

As at 30 June 2010

The accompanying notes are an integral part of these interim financial statements

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these interim financial statements

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 June 2010

The accompanying notes are an integral part of these interim financial statements

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2010

1 BASIS OF PREPARATION

These unaudited condensed consolidated interim financial statements (the interim financial statements) have been prepared in accordance with IFRS that are adopted by the European Union (EU) and effective at 30 June 2010. The interim financial statements do not include all of the information required for full annual financial statements.

These interim financial statements are presented in US dollars rounded to the nearest thousand, being the functional currency of the parent company and the group companies. They are prepared on the historical cost basis, except for share based payments, which are stated at fair value.

The accounting policies applied by AGI in these interim financial statements are the same as those applied by AGI in its consolidated financial statements as at and for the year ended 31 December 2009.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying our accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2009.

These interim financial statements do not constitute Statutory Financial Statements of the Company within the meaning of Regulation 40 of the European Communities (Companies: Group Accounts) Regulations, 1992. Statutory Financial Statements for the year ended 31 December 2009 have been filed with the Companies Office. The auditor's report on those financial statements was unqualified.

2 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in these interim financial statements are the same as those applied in the consolidated financial statements as at and for the year ended 31 December 2009, as set out on pages 29 to 33 of the 2009 Annual Report, except for the impact of the standards described below.

The following new interpretations and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010.

·; Improvements to IFRSs (issued April 2009)

·; IFRS 3 (Revised), "Business Combinations",

·; IAS 27 (Revised), "Consolidated and Separate Financial Statements",

·; IFRIC 17, "Distribution of Non-Cash Assets to Owners",

·; Amendments to IAS 39, "Financial Instruments: Recognition and Measurement: Eligible Hedged Items", (effective for annual periods beginning on or after 1 July 2009), and

·; Amendments to IFRS 2: Group Cash-settled Share-based Payment Transactions, effective on 1 January 2010.

The adoption of these amendments to standards and interpretations did not impact on our financial position or results from operations.

We have considered all EU endorsed IFRS standards, amendments to these standards and IFRIC interpretations that have been issued, but which are not yet effective and these have not been early adopted in these financial statements. These future requirements are as follows:

·; IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments, effective on 1 July 2010;

·; Revised IAS 24: Related Party Disclosures, effective on 1 January 2011;

·; Amendment to IFRIC 14: Prepayments of a Minimum Funding Requirement, effective on 1 January 2011;

·; Amendment to IAS 32: Financial Instruments: Presentation: Classification of Rights Issues, effective on 1 February 2010.

The above new or revised standards and interpretations will be adopted in future financial statements, if applicable. The Company does not anticipate that the adoption of these new or revised standards and interpretations will have a material impact on the Company's overall results from operation and financial position.

3 IMPAIRMENT AND OTHER RESTRUCTURING CHARGES

A charge of $1.1 million has been recognised in the first half of 2010 (2009: $0.4 million), primarily relating to the write off of intellectual property associated with Rezular. The Company has made considerable efforts to develop new indications for Rezular and to partner other programmes in its pipeline. The Company carries certain intangible assets and know-how on its balance sheet associated with these programmes. Because the ultimate success of these programmes is uncertain, AGI wrote off the carrying value of its intangible assets associated with Rezular and other programmes, which resulted in a non-cash impairment charge of $1.1 million in the six-month period to 30 June 2010. The remaining intangible assets, associated with ongoing early stage development programmes, amounted to $0.3 million at 30 June 2010.

4 LOSS PER SHARE

Basic loss per share is computed by dividing the loss for the period available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is computed by dividing the loss for the period, by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including stock options, warrants, and convertible debt securities on an as-if-converted basis.

The following table sets forth the computation for basic and diluted loss per share for the six months ended 30 June 2010 and 2009:

Potentially dilutive instruments, such as share options have not been treated as dilutive as the Company made a loss in both periods.

5 RELATED PARTY TRANSACTIONS

Transactions with founding members and shareholders

Frank Kenny, John O'Sullivan and Peter Sandys are Directors of the Company and are board nominees of Delta Partners, ACT Venture Capital and Seroba Bioventures respectively. Fees of $11,000 annually are paid by the Company to each of Delta, ACT and Seroba in respect of their nominees' appointments.

6 SUBSEQUENT EVENTS

There were no significant events after the balance sheet date which would require the adjustment of, or disclosure in, the financial statements.

7 APPROVAL

The unaudited condensed consolidated interim financial statements were approved by the directors on 7 September 2010.

Directors' Responsibility Statement

For the six months ended 30 June 2010

Statement of the directors in respect of the interim financial report:

Each of the directors, whose names and functions are listed on page 12 of our 2009 Annual Report, confirms that, to the best of our knowledge and belief:

Independent Auditor's Review Report to AGI Therapeutics, plc

Introduction

We have been engaged by AGI Therapeutics, plc (the "company") to review the condensed consolidated interim financial statements for the six months ended 30 June 2010, which comprises the condensed consolidated interim income statement, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim balance sheet, the condensed consolidated interim statement of cash flows, the condensed consolidated interim statement of changes in shareholders' equity and the related notes thereto. 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 consolidated interim financial statements.

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this 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 reached.

Directors' responsibilities

The half-yearly financial report, including the condensed consolidated interim financial statements contained therein, 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 ESM Rules for Companies as issued by the Irish Stock Exchange and the AIM Rules for Companies as issued by the London Stock Exchange.

As disclosed in note 1 - basis of preparation, the annual consolidated financial statements of the company are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union ("EU"). The directors are responsible for ensuring that the condensed consolidated interim financial statements included in this half-yearly financial report have been prepared in accordance with IAS 34 - Interim Financial Reporting, ("IAS 34"), as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim 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 Ireland and the UK. A review of interim financial information consists of making enquiries, 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 not 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 consolidated interim financial statements in the half-yearly financial report for the six months ended 30 June 2010 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the ESM Rules for Companies as issued by the Irish Stock Exchange and the AIM Rules for Companies as issued by the London Stock Exchange.

KPMG

Chartered Accountants

Dublin

7 September 2010