strategy

28 March 2007

TroVaxGlobaldevelopmentandcommercialisationdealwithsanofi-aventis

Business Review: Strategy

3

BuSINESS REVIEw

STRATEGy

12 OxfordBioMedicaAnnualReport&Accounts2007

13

16

19

Key Performance Indicators

Markets

Principal Risks and Uncertainties

PATRICE MAUREIN MAUREIN / CIANFAGLIONE & GRAVEREAUx ARCHITECTES

Ourcorporatestrategyisdefinedbysixcorestrategicthemes.Thesethemesareconsistentwithournearandlong-termobjectivesforthebusiness,andwehaveadoptedthemasKeyPerformanceIndicatorstomeasureourprogress.Oursixthemesareasfollows:

1. Focusonadvancingkeydevelopmentprogrammes,whichofferthegreatestcommercialvalue

2. Broadenthetechnologyplatformandout-licensetechnologiesfornear-termrevenue

3. Expandtheclinicalpipelinebyatleastonenewproductperyear

4. Partnercertainproductswithcompaniesforlate-stagedevelopment

5. Retaincommercialrightsforcertainproductstomaximisevalue

6. Maintaineffectivemanagementoffinancialandhumanresources

Inthissection,wedescribetherelevanceofthesethemestoourcorporatestrategy,assessourperformancein2007,andsetoutourtargetsfor2008.

FOCUS ON ADVANCING KEY DEVELOPMENT PROGRAMMESLink to Strategy:In2007,weconductedareviewofourpipelinetoassessthereturnoninvestmentforeachproductcandidate,byconsideringthecommercialopportunitybasedontheanticipatedcompetitiveprofile,togetherwithtimelinesandcostsofdevelopment.Wearenowfocusingourinternalresourcesonthoseproductcandidatesthatofferthegreatestpotentialvalue.

Performance:Ourfocusin2007hasbeenonprogressingTroVaxthroughPhaseIIIdevelopmentinrenalcancer,advancingProSavinintoaPhaseI/IItrialinParkinson’sdisease,andpreparingfortheclinicaldevelopmentofRetinoStatinwetage-relatedmaculardegeneration.Wealsoinitiatedanewanti-cancerprogramme,EndoAngio-GT,whichisdesignedtoblockbloodvesselgrowth(angiogenesis)intumours.Thismechanismofactionhasbeenproveninvariouspreclinicalmodelsofsolidtumoursandconfirmedinclinicalstudieswithmonoclonalantibodiestargetingtumourvesselgrowth.ThedevelopmentofEndoAngio-GTisexpectedtobenefitfromsynergieswithRetinoStat.

Targets:Ourdevelopmentprioritiesin2008areunchanged.WewillcontinuetomanagethePhaseIIITRISTstudyofTroVax,whilesanofi-aventistakesresponsibilityforPhaseIIIdevelopmentincolorectalcancer.ForProSavin,inadditiontotheongoingPhaseI/IItrial,wearepreparingforthenextstageoftheproduct’sdevelopment,whichcouldbeaPhaseIIItrial.WearecontinuingourpreparationsforclinicaltrialsofRetinoStat.

BROADEN TECHNOLOGY PLATFORMLink to Strategy: Intellectualproperty(IP)isessentialtooursuccess.Itprovidesuswithfreedomtooperateandprotectsourproductsfromcompetition,enhancingtheircommercialvalue.Weaimtobetheleadingcompanyinourfieldsofgene-basedmedicinesandimmunotherapywithatoolboxoftechnologies,suchthatwecanapplythemostappropriategenedeliverysystemforanytherapeuticgene,mechanismofactionortargettissue.Byout-licensingourtechnologies,wealsogeneratenear-termrevenueandbuildcommercialrelationshipsthatmaybecomemorevaluableinthefuture.

Business Review: StrategyKey Performance Indicators

Our goal is to create a profitable biopharmaceutical company through the commercialisation of novel safe and effective gene-based medicines to treat unmet medical needs. To mitigate the inherent risks of drug development, we have adopted a hybrid business model that combines in-house and collaborative research and development, enabling us to establish a portfolio of product candidates that address multiple therapeutic areas. We also actively out-license our proprietary technologies for use in research or drug development to generate near-term revenue streams and, in some cases, royalties on product sales. In 2007, we undertook a review of our pipeline to prioritise our development efforts and maximise the potential return from our in-house investment. With rigorous financial management, we aim to deliver sustained growth and value for our shareholders and other stakeholders.

Key Performance Indicators

OxfordBioMedicaAnnualReport&Accounts2007 13

Performance:InJanuary2008,wesecuredexclusiverightstouseourLentiVectortechnologyinthefieldofRNAinterference(genesilencing),whichisatargetedtherapeuticapproachthathasmanyapplicationsandisattractingsubstantialinvestment.InMarch2007,weacquiredOxxonTherapeutics,whichhasstrengthenedourproprietarypositioninimmunotherapy.Sigma-AldrichisourstrategicpartnerforthecommercialisationofLentiVector-basedreagentsforuseinresearch.Wereceiveroyaltiesonsalesofthesereagents.During2007Sigma-Aldrichexpandeditsproductrange.In2007,OxfordBioMedicaandSigma-AldrichalsolicensedtheLentiVectortechnologytoanothermajorUS-basedbiotechnologycompanyforuseinitsin-houseresearchactivities.

Targets:Weareevaluatingvariousopportunitiestoin-licenseoracquiretechnologythatcomplementsourexistingIPandcangeneratebothnearandlong-termvalue.During2008,weplantoexploitourrightsinRNAinterferencethroughpartnershipsandalsonewin-houseprogrammes.

ExPAND CLINICAL PIPELINELink to Strategy:Oursuccesswillultimatelycomefromcommercialisationofnovel,safeandeffectivetherapiesthatutiliseourproprietarytechnologies,whetherdevelopedbyOxfordBioMedicaorourpartners.Broadeningourclinicalpipelinewithadditionalproductcandidatesincreasesourcommercialpotentialandalsoreducesdevelopmentriskthroughdiversification.

Performance: In2007,weaddedtwoprogrammestoourclinicalpipeline.Firstly,throughOxxonTherapeutics,weacquiredatherapeuticvaccineformelanoma,Hi-8MEL,whichisinPhaseIIdevelopment.Secondly,inDecember2007,wereceivedclearancefromtheregulatoryauthoritiestostartthePhaseI/IItrialofProSavininParkinson’sdisease.Thisisthefirstproduct

toenterclinicaldevelopmentthatusesourLentiVectortechnology.

Targets:WearepreparingforasubmissiontostartclinicaltrialsofRetinoStatforthetreatmentofwetage-relatedmaculardegeneration.Weexpectthistohappenin2009.Wehaveseveralfurtherpreclinicalcandidatesthatcouldentertheclinicinthenexttwoyears,includingEndoAngio-GTforcancerandStarGenforStargardt’sdisease.

PARTNER CERTAIN PRODUCTSLink to Strategy:Ourproductcandidatesareprincipallydesignedforuseinhospitalsettingsandspecialistcentres.Somehospitalproductsrequirecompetitivemarketingandsubstantialinvestmentincommercialinfrastructure.Basedonourcurrentresources,ourstrategyistoseekpartnersforthesetypesofproductstoaccessadditionalcapabilitiesforproductdevelopmentandcommercialisation.Inaddition,followingthestrategicreviewofourpipeline,weareseekingsuitablepartnersforournon-priorityproductcandidatestoensurethattheyaredevelopedandcommercialisedtotheirfullpotential.

Performance:In2007,ourlicensingdealwithsanofi-aventisforTroVaxwasamajorachievement.ThedevelopmentofTroVaxwillrequiresubstantialinvestmentoverthenextfewyears.Similarly,itscommercialisationwillbenefitfromanestablishedsalesandmarketinginfrastructure,particularlyiftheproducthasprovenapplicationinmultiplesettingsandcancertypes.Sanofi-aventisisanidealpartnerforTroVax,givenitsglobalcapabilitiesandexistingoncologyfranchise.

Targets:Inourstrategicreview,weidentifiedcertainnon-priorityproductcandidates,whichweintendtopartnerforfurtherdevelopment.TheseincludeMetXia,whichisalocalisedtherapyforaccessibletumours,thatcouldbedevelopedtotreatpancreatic,breastandprostatecancerandalsoglioma(braincancer).

RETAIN RIGHTS FOR CERTAIN PRODUCTSLink to Strategy: Themostsuccessfulbiotechcompaniesarefullyintegrated,whichmeansthattheydevelopandmarkettheirownproducts.Byfollowingthismodelinnichemarketsthatrequiresmallbutspecialisedsalesforces,wecancapturemorevaluefromthecommercialisationofourinnovativeproductswithlimitedinvestment.

Performance:In2007,weconductedarisk-rewardassessmentoftheProSavinprogrammeandconcludedthattherewasastrongrationaletoretaincommercialisationrightsincertainterritoriesandestablishaspecialisedneurologicalsalesandmarketinginfrastructure.Furthermore,inouralliancewithsanofi-aventis,wehaveretainedanoptiontoparticipateinthepromotionofTroVaxintheUSAandEU,whichwouldenableustoestablishanoncologyfranchise.

Targets:WeareevaluatingvariousstrategiesforthedevelopmentofProSavin,whichwouldprovideadditionalfinanceandresource,thusreducingthefinancialriskforOxfordBioMedica,whileallowingustoretaincommercialisationrights.ForProSavinandsomeofourpreclinicalproductcandidates,weaimtoprogressdiscussionswithpotentialpartnersinterritoriesthatareoutsideofourcorefocus,during2008.

MAINTAIN EFFECTIVE MANAGEMENT Link to Strategy:Ourcontinuedgrowthrequiresongoinginvestmentinourpipelineandtechnologies.Wealsoneedtorecruitandretainkeypeoplewithrelevantskillsandtrainingforourin-houseactivities.Weaimtokeepourfixedcoststoaminimumbyusingoutsourcedserviceproviderswhereappropriate.Toensurethatourbusinessissustainableduringourpre-commercialisation



phase,wemaintainaprincipleofhavingfinancialresourcesforaminimumoperationalperiodof12months.

Performance:Wehaveestablishedasolidtrackrecordofmeetingorbeatingourfinancialtargetsinrecentyears.In2007,wehavestrengthenedourcashpositionandhavesufficientresourcesforourongoingoperations.Duringtheyearweconductedastrategicreviewofourdevelopmentpipelinetoenableustofocusinvestmentonopportunitiesthatcouldgeneratethegreatestvalue.

Targets: Wewillcontinuetomonitortheinvestmentrequirementsforeachofourprogrammesandwillexpandourinternaloperationsasrequiredtomeetourobjectives.Ourfinancialgoalistobeprofitablewithin12monthsofregistrationofourfirstproduct,whichcouldbein2009followingasuccessfuloutcomefromthePhaseIIITRISTstudyofTroVaxinrenalcancer.

07 May 2007

RetinoStat & StarGenPreclinicaldatapresentedatARVOmeeting



2007couldbedescribedastheyearthatthepharmaceuticalindustryreinforceditslong-termcommitmenttothedevelopmentandcommercialisationofnovelbiologicaltherapiesandtechnologies.TheacquisitionoftheUSbiotechnologycompanyMedImmunebyAstraZenecawasoneofthelargesteverbiotechdeals,andfollowedAstraZeneca’spreviousbuyoutandintegrationofCambridgeAntibodyTechnologyintheUK.Pfizer,NovartisandRocheareinvestinginneworenhancedbiotechnologyunitswithincreasedbudgetsforthediscoveryanddevelopmentofnovelbiologics.PotentiallymorerelevanttoOxfordBioMedica,wasanannouncementbyourpartnerforTroVax,sanofi-aventis,ofitsgoaltoboostsalesfrombiologicstoupto30%oftotalsalesinfiveyearsfromabout10%today.

Biotechnologydrugs,whichcanbedefinedsimplyasdrugsderivedfromlivingcellculturesinsteadoftraditionalchemistry,areanattractiveinvestmentfortwobasicreasons:theindustryisfast-growingandgenericcompetitionislimited.

• Thebiotechnologyindustryisexpandingmuchmorerapidlythantraditionalpharmaceuticals.BiotechsalesintheUSAgrew20%toUS$40.3billionin2006,whilepharmaceuticalsalesgrew8%toUS$275billion,accordingtoIMSHealth.

• Biotechnologydrugsarelessvulnerabletogenericcompetitionuponpatentexpirations,whichisthemainconcernofthepharmaceuticalindustry.ThepharmaceuticalindustrylostUS$14billionworthofannualdrugsalestopatentexpirationsin2006andwasexpected

toloseanotherUS$12billionin2007,accordingtoIMSHealth.Biotechnologydrugsfacelesscompetitionfromgenericversionsbecausetheircomplexityraisestheclinicalandregulatoryrequirementsforapprovalof“biogenerics”andtheirmanufacturingrequiressubstantialinvestmentandinfrastructure.

Withinthemultiplesub-sectorsofbiotechnology,OxfordBioMedicaisfocusedongenetherapyandcancerimmunotherapy.

GENE THERAPY AND CANCER IMMUNOTHERAPYGenetherapyis‘thetreatmentorpreventionofdiseasebygenetransfer’andinvolvesthegeneticmodificationofhumancellsbyintroducingoneormoregenes.Thisapproachismostobviouslyassociatedwithreplacingmissingordefectivegenes,throughtheintroductionofanormalworkingversionofthegene.However,thefieldhasitsgreatestpotentialinprovidingendogenousfactoriesofpharmacologicallyactivemoleculesthatcannotbeadministeredbyconventionalmeans.ThisisourapproachwithProSavin,whichdeliversgenesforsynthesisingdopaminefortreatmentofParkinson’sdisease.Furthermore,gene-basedapproachescanbeusedtoactivatetheimmunesystemtokilldiseasecells.Ourleadproduct,TroVax,deliversagenethatproducesaproteinfoundoncancercellsinafashionthatenablesthistoberecognisedasforeignbythepatient’simmunesystem.Thepatient’simmunesystemthenattacksandkillscancercellsthatexpresstheprotein.

Business Review: StrategyMarkets

Markets

02005

Small Molecule

Biological

2006 2007

50

100

150

200

250

300

0

5

10

15

20

25

30

35

40

45

50

Average deal values for small molecule and biologic deals. (PharmaDeals, 2008)

Year

Proportion of biologics sales by big pharma in 2006 (Pharma Deals; Evaluate Pharma, 2008)

Bio

log

ics

sale

s (%

of

tota

l sal

es)

Roche

Johnso

n & Jo

hnson

Sanofi-A

ventis

GlaxoSm

ithKlin

e

Mer

ck &

Co.

Pfizer

Novarti

s

Astraz

enec

a

Tota

l po

ten

tial

dea

l val

ue

(US

$ m

illio

n)


DELIVERY SYSTEM IS KEY Thereisnoperfectdeliverysystemthatcanbeusedtotreateverydisorder.Likeanytypeofmedicaltreatment,adeliverysystemmustbecustomisedtoaddresstheuniquefeaturesofthedisorderandchoosingthemostsuitablevectorispartofthechallengeingenetherapy.Factorsthatinfluencetheselectionofthedeliverysystemincludethetargetcelltypeandwhetherthesehavebeenremovedfromthebody(ex vivo)orarestillinthebody(in vivo),thedurationofgeneexpressionrequiredfortherapeuticeffect,andthesizeofthepieceofDNAtobeusedinthegenetherapy.

Viralvectorsarewidelyusedforgenedeliverysincetheyhaveanaturalabilitytoenteracellanddelivergeneticmaterialbothefficientlyandinadefinedmanner.OxfordBioMedica’sproprietaryLentiVectorsystemisbasedonhighlyengineeredlentiviruses.Unlikesomeothercommonlyusedviralvectors,theLentiVectortechnologyhastheabilitytointegrategenesintothegenomeofnon-dividingcellsaswellasdividingcells.ThebreadthofourLentiVector-basedpipelinereflectstheutilityofthetechnology.Ithaspotentialapplicationinthetreatmentofneurologicaldisorders(e.g.ProSavinforParkinson’sdisease),eyediseases(e.g.RetinoStatforwetage-relatedmaculardegeneration),geneticdiseases,chronicinfectionsandalsocancer.

OurcancerimmunotherapyprogrammesutiliseaModifiedVacciniaAnkara(MVA)virus,whichisanattenuatedformofvaccinia.MVAisaneffectivevectorsystemfordeliveringandinducinganimmuneresponseagainstrecombinanttumourantigens.Thevectoritselfhasanexcellentsafetyprofileand

wasusedwidelysomeyearsagoasavaccinefortheeradicationofsmallpoxandmorerecentlyforbiodefencestockpiling.

SAFETY CONCERNSRegulatoryauthoritiesintheUSAandEUhaveyettoapproveahumangenetherapyforsale.Therehavebeensomenotableclinicalsuccesseswithgenetherapyinvariousdiseasesettings.However,thecriticsofgenetherapyhavealwaysfocusedonthehandfulofadverseeventsthathaveoccurredinsomeofthesetrials,althoughnoneofthesehavebeenwithOxfordBioMedica’sproductsorvectorsystems.

In1999,genetherapysuffereditsfirstmajorsetbackwiththedeathof18-year-oldJesseGelsinger.MrGelsingerwasparticipatinginagenetherapytrialandhisdeathisbelievedtohavebeentriggeredbyasevereimmuneresponsetotheadenoviralvectorbeingevaluated.

Anotherissuearosein2003whentheFDAplacedatemporaryhaltonallgenetherapytrialsusingretroviralvectorsinbloodstemcells.TheFDAtookthisactionaftertwochildrentreatedinaFrenchgenetherapytrialdevelopedaleukaemia-likecondition.Onanalysis,itwasconcludedthattheseeventswereprimarilydrivenbythetrialdesignandnatureofthetherapeuticgeneandnotabroaderissuerelatedtogenetherapyper se.Lessmediacoveragewasgiventothefactthatmostpatientsweresuccessfullytreatedbythispotentiallylife-savinggenetherapyforX-linkedseverecombinedimmunodeficiencydisease(X-SCID),alsoknownas‘bubbleboysyndrome’wherenoalternativetreatmentsexist.

Morerecently,in2007,apatientdiedfollowingtreatmentinatrialofanadeno-associatedvirus-basedproductforinflammatoryarthritisintheUSA.TheFDAsuspendedthetrialbutthenlifteditsholdafteritssafetyreviewindicatedthattheproductdidnotcontributetothepatient’sdeath.Veryfewpharmaceuticalsorbiopharmaceuticalshavezeroriskandgenetherapyisnoexception.

ItisworthstressingthatOxfordBioMedica’sLentiVectortechnologyandtheMVAsysteminourcancerimmunotherapieshavenotbeenassociatedwithanyserioussafetyissues.However,thesepreviousincidentsreinforcetheneedforrigoroussafetytestingofourgene-basedproducts.

REGULATORY PROGRESSAnewregulatoryprocessfortheapprovalofadvancedproducts,includinggenetherapies,intheEUcameintoforceon30December2007.TheregulationonadvancedtherapymedicinalproductsoffersaframeworktosupporttheadvancementoftheseproductswithaccesstoscientificadviceandacentralisedEuropeanapprovalprocess.ForOxfordBioMedica,thenewregulationprovidesgreaterclarityontheroutetomarketinEuropeforourproductcandidates,andpotentiallyreducesclinicaltimelinesandregulatoryuncertainty.

In2007,forthefirsttime,anadvisorypaneloftheUSFDAassessedatherapeuticcancervaccine.TheproductinquestionwasDendreon’sprostatecancervaccine,Provenge.Thepanelwasunanimousthatasafetyclaimcouldbesupportedandvoted13-4thattherewassubstantialevidenceofefficacybasedonasecondaryendpointofmediansurvival.


02000 2001 2002 2003 2004 2005 2006

10

20

30

40

50

60

70

0

5

10

15

20

25

30

35

Biotech R&D Pharma R&D Biotech NME Pharma NME

Biotech and big pharma R&D expenditures vs approvals (Ernst & Young, 2007)

R&

D e

xpen

dit

ure

s (U

S $

bill

ion

)

Nu

mb

er o

f n

ew m

ole

cula

r en

titi

es (

NM

E)

ap

pro

ved

by

the

FDA


TestimonyfrompatientsandpatientadvocacygroupsalsoappearedtoinfluencetheFDApanelinlightofthetoxicityassociatedwithotherexistingtreatments.Therewasaverystrongappealfortheapprovalofaproductthatcouldprovideabetterqualityoflifewithagoodsafetyprofile,evenifitconferredonlyaslightextensiononlife.

Thesupportivesentimentoftheadvisorypanelisalandmarkeventforthefieldofcancervaccines,althoughtheFDAsubsequentlyissuedan“approvableletter”requestingadditionalclinicaldata.ItindicatesthattheFDA’sadvisorycommitteehasadoptedapragmaticandflexibleapproachtothisnewtreatmentparadigmandisanencouragingsignforthefieldofcancervaccinesincludingTroVax.

Chinaisthefirstcountrytohaveacommercialgenetherapy.TheChinesebiotechnologycompany,ShenzhenSiBionoGenTech,receivedapprovalfromtheStateFoodandDrugAdministrationofChinaforitsanti-cancerproduct,Gendicine,forthetreatmentofheadandneckcancerin2003.Gendicineusesanadenoviralvectortodeliverthegeneforp53.ThesuccessofGendicinecanonlyhelpOxfordBioMedicaandthefieldofgenetherapygainglobalacceptance.

RNA INTERFERENCEInJanuary2008,OxfordBioMedicaenteredthefieldofRNAinterference(RNAi)basedtherapeuticsthroughalicensingagreementthatprovidesrightstokeyNobelPrize-winningRNAipatents.TherehasbeensubstantialinvestmentinthetherapeuticapplicationofRNAiinthelastfewyears.

Forexample,Merck&CoacquiredtheUSRNAicompanySirnaforUS$1.1billion,closingthetransactioninearly2007,andtherehavebeenseverallargepharma-biotechcollaborationsinthefield.

ADDRESSING LONG-TERM DELIVERYTraditionally,genetherapyhasfocusedonsupplyinganormalcopyofafaultyorabsentgene,whereasRNAiturnsoffaproblematicgene.Infact,thesecontrastingapproachessharesomeofthesamechallenges,principallythedeliveryofthetherapeuticgeneorsiRNAintocells.Formanydiseases,particularlygeneticandchronicdisorders,thesuccessofRNAitherapieswilldependuponefficientlong-termdeliveryoftheintermediatesofRNAi,particularlyshortinterferingRNA(siRNA).OxfordBioMedica’sLentiVectortechnologyprovidesanidealsolutionforlong-termdeliveryofsiRNA.Severalpharmaceuticalcompanies,suchasGlaxoSmithKline,Merck&CoandPfizer,arealreadyusingoursystemfortargeteddeliveryofsiRNAintheirresearchactivities,undertechnologylicensingagreements.WithrightsfortherapeuticRNAiapplications,weareevaluatingin-houseandcollaborativeopportunities.



Riskassessmentandevaluationisanintegralpartofourplanning.Mostoftherisksanduncertaintiesthatwefacearecommontoalldevelopment-stagebiopharmaceuticalcompanies.Wherepossible,ourstrategyisdesignedtomanageandmitigatetheseissues.Ourprincipalrisksandtheuncertainties,particularlyastheyrelatetothenextfewyears,aredescribedbelow.

INTELLECTUAL PROPERTY AND PATENT PROTECTION RISKOurcommercialsuccesswilldepend,amongstotherthings,onmaintainingproprietaryrightstoourproductsandtechnologies.Therecanbenoassurancethatourproductsandtechnologiesareadequatelyprotectedbyintellectualproperty.Ifproceedingsareinitiatedagainstourpatents,thedefenceofsuchrightscouldinvolvesubstantialcostsandanuncertainoutcome.Third-partypatentsmayemergecontainingclaimsthatimpactourfreedomtooperate.Therecanbenoassurancethatwewillbeabletoobtainlicencestothesepatentsatreasonablecost,ifatall,orbeabletodeveloporobtainalternativetechnology.TheBoardofOxfordBioMedicagiveshighprioritytothestrategicmanagementoftheCompany’sintellectualpropertyportfolioandweactivelymonitorthecompetitiveenvironment.Aswellasprotectionofourproductsandtechnologies,weuseourintellectualpropertyestatetogeneratevaluethroughout-licensingactivities.

DEVELOPMENT RISKSafetyorefficacyissuesmayariseatanystageofthedrugdevelopmentprocess.Adverseorinconclusiveresultsfrompreclinicaltestingorclinicaltrialsmaysubstantiallydelay,orhalt,thedevelopmentofourproductcandidates,consequentlyaffectingourtimelinesforprofitability.ResultsoftheTRISTstudyandtheotherplannedPhaseIIItrialsmaydifferfromthoseobtainedinpreviousclinicaltrialsandadditionaldatamayberequiredforregulatoryapproval.Similarly,theresultsofourpreclinicalstudieswithProSavinandRetinoStatmaynotbereproducedinhumanclinicaltrials.

REGULATORY REVIEW RISKOurproductswillbesubjecttotheregulatoryreviewandapprovalprocessbyagenciesacrosstheworldtoassesstheirsafety,efficacyandmanufacture,amongstotheraspects.Therecanbenoassurancethatourproductswillsuccessfullygainthenecessaryregulatoryapprovalsforlaunch.Thetimetakentoobtainregulatoryapprovalvariesbetweenterritoriesandwhilesomeagencies,liketheUSFDA,havepre-definedreviewperiods,othersarelesspredictable.Furthermore,eachregulatoryauthoritymayimposeitsownrestrictionsontheproductlabel,ormayrequireadditionaldatabeforegrantinganapproval.InthecaseofTroVax,sanofi-aventishasglobalresponsibilityfortheregulatoryprocessandtheprogrammeremainson-trackforthefirstregulatorysubmissionandreviewin2009.

COLLABORATION AND THIRD-PARTY RISKOurcurrentandfuturerevenueisdependentonthesuccessfuloutcomeofanumberofcollaborations.Ourmostimportantalliancesarewithsanofi-aventis,WyethandSigma-Aldrich.Inaddition,wehavecollaborationswithothercompaniesrelatingtoproductsandtechnologies,aswellasagreementswithcontractorganisationsforpreclinicalandclinicaltestingandmanufacturing.Therecanbenoassurancethattheserelationshipswillbesuccessfulandtheymaybeterminatedorrequirere-negotiation.Circumstancesmayalsoarisewherethefailurebycollaboratorsandthirdpartiestoperformtheirobligationsinaccordancewithouragreementscoulddelay,orhaltentirely,theevaluation,development,productionorcommercialisationofourproductsandtechnologies.Sucheventscouldadverselyaffectourexistingandanticipatedrevenuestreams.

PHARMACEUTICAL PRICING RISKTheabilityofOxfordBioMedicaandourpartnerstocommercialiseourproductsmaydependontheextenttowhichreimbursementwillbeavailablefromgovernmenthealthadministrationauthorities,privatehealthcoverageinsurersandotherorganisations.Thereisnoassurancethatadequatehealthadministrationorthird-partyre-imbursementwillbeavailableorthat

Principal Risks and uncertainties

Business Review: StrategyPrincipal Risks and Uncertanties


19 May 2007

Hi-8 MELEncouragingresultsfromPhaseIItrialsofHi-8MELpresentedatAmericanAssociationofImmunologistsMeeting

satisfactorypricelevelswillbereached.Inaddition,thereisincreasingpressureinmanyterritoriestocontainhealthcarecostsbylimitingbothcoverageandthelevelofreimbursement.Increasingly,newtherapeuticproductsarebeingassessedonthebasisoftheircosteffectiveness.TroVaxisbeingevaluatedinPhaseIIItrialsincombinationwithstandardtherapy.Asanadd-ontoexistingtreatment,wewillneedtojustifyitscosteffectivenessinordertosecuresuitablepricingandreimbursement.

COMPETITION RISKOurcompetitors,andpotentialcompetitors,includesomeofthemajorpharmaceuticalandbiotechnologycompanies,manyofwhomhavesubstantiallygreaterresourcesthanus.Ourproductsarepotentially“bestinclass”candidatesand,inthecaseofTroVax,wearecollaboratingwithamajorcompanyinoncologyandvaccines.However,therecanbenoassurancethatcompetitorswillnotsucceedindevelopingproductsandtechnologiesthataremoreeffectiveoreconomicthanours,which,intheworstcase,couldrenderourproductsandtechnologiesobsoleteorotherwiseuncompetitive.

FINANCIAL RISKWeexpecttorecordanetcashoutflowfromoperationsin2008aswecontinuetoinvestinourresearchanddevelopmentefforts,takingintoaccountmilestonepaymentsfromsanofi-aventisandourotherlicensingincome.Wehavesufficientworkingcapitalforourcurrentoperatingactivitiesuntiltheendof2009,excludingfuturemilestone

paymentsfromsanofi-aventis.Ourcapitalrequirementsafterthatdate,ifany,dependontheachievementofTroVax-relatedmilestonesandsecuringnewcollaborations.Thefirstregulatorysubmissionoftheproductinrenalcancer,whichisanticipatedin2009intheUSA,triggersasignificantmilestonepayment.However,thereistheriskthatwemayhavetoincreasethefollow-updurationofthePhaseIIITRISTstudy,whichwoulddelaythetimingofthispayment.Similarly,theachievementoftheseregulatorymilestoneeventsdependsonvariousfactors,someofwhichareoutsideourcontrol,themostimportantdeterminantbeingtheoutcomeofthePhaseIIITRISTstudy.

STAFF RISKWhilewehaveemploymentcontractswithallofourpersonnel,theretentionoftheirservicescannotbeguaranteed.Recruitingandretainingkeymanagementandscientificpersonnelaswebuildthebusinesswillbecriticaltooursuccess.

GENE THERAPY RISKTherearenogenetherapiesapprovedforsaleintheUSAorEU.Thecommercialsuccessofgene-basedmedicinessuchasourswilldepend,inpart,onacceptancebythemedicalcommunityandthepublic.Furthermore,specificregulatoryrequirements,overandabovethoseimposedonpharmaceuticalproductsgenerally,applytogenetherapyandtherecanbenoassurancethatfurtheradditionalrequirementswillnotbeimposedinthefutureasaresultofnewconcerns.Thismayincreasethecostandtimenecessary

fordevelopmentofourproducts.However,therehavebeensomerecentdevelopmentsrelatingtocancervaccinesandgene-basedmedicinesthatsuggesttheregulatoryauthoritiesintheUSAandEUaresupportiveofthesenoveltreatmentapproaches.ThesearedescribedintheMarketssectionoftheBusinessReviewonpages16to18.



03 June 2007

TroVaxEncouragingPhaseIIresultsinrenalcancerpresentedatASCO

Business Review: Operational Review

4

BuSINESS REVIEw

OPERATIONAL REVIEw


23

26

35

36

37

38

44

Performance

Advanced Candidates

Early-stage Candidates

Technology Licensing

Intellectual Property

Financial Review

Outlook

TROVAx

FINALISE GLOBAL LICENSING DEAL WITH A MAJOR PHARMACEUTICAL COMPANY

InMarch2007,wesignedagloballicensingagreementwithsanofi-aventis.Itisoneofthelargestalliancesinthefieldofcancerimmunotherapyintermsofpotentialpayments.

REPORT FURTHER RESULTS FROM PHASE II TRIALS IN RENAL CANCER

AtASCOinJune2007,wereportednewpositivedatafromtwoPhaseIItrials.68%ofevaluablepatientswithclearcellrenalcarcinomashoweddiseasecontrolwhentreatedwithTroVaxandtherewasarelationshipbetweenreductionintumourburdenandpatients’anti-5T4responses.

REPORT RESULTS FROM PHASE II TRIAL IN PROSTATE CANCER

AtAACRinApril2007,wereportedpreliminarydatafromthePhaseIItrialofTroVaxwithorwithoutstandardtherapyofGM-CSFinhormone-refractoryprostatecancer.TroVaxwaswelltoleratedandallpatientsdevelopedanti-5T4responses.

FIRST REVIEW BY DSMB OF PHASE III TRIST TRIAL IN RENAL CANCER

TheindependentDataSafetyMonitoringBoard(DSMB)hascompletedthreeanalyses,themostrecentonebeinginFebruary2008.Followingeachreview,theDSMBconcludedthatthetrialshouldcontinueasplannedwithoutmodification.

US NATIONAL CANCER INSTITUTE TO INITIATE PHASE II TRIAL IN BREAST CANCER

SinceTroVaxisinabroadPhaseIIIprogramme,OxfordBioMedicaandsanofi-aventisconcludedthatitwasnolongerappropriatetocarryoutastudyofthisdesign.WearecoordinatingwiththeUSclinicaltrialsnetworktodesignalargerstudyofTroVaxinbreastcancer.

QUASAR TO INITIATE PHASE III TRIAL IN EARLY-STAGE COLORECTAL CANCER

Followingourcollaboration,sanofi-aventisbecameapartytotheQUASARpreparationsandisactingasUSregulatoryagentforthetrial,whichhasbeensubmittedtotheUSandUKregulatoryauthoritiesforreviewpriortopatientrecruitment.

Business Review: Operational ReviewPerformance

In our 2006 Annual Report, we set out key operational objectives for our drug development and licensing activities in 2007. There were 20 key objectives for the year. In total, we achieved 14 of these during the period, and we expect to deliver on another four within the next 12 months, which equates to success rate of 90%. The two remaining objectives are no longer relevant to our modified strategy in 2008. We have listed our 2007 objectives and our performance in relation to these targets in the table below:

Performance


PROSAVINPUBLISH PRECLINICAL RESULTS IN SCIENTIFIC JOURNAL

In2007,wesubmittedamanuscriptforpublication.Wehavesubsequentlyupdatedthereporteddataandrespondedtocommentsfromthemedicaljournal.Weanticipatepublicationin2008.

GAIN REGULATORY APPROVAL FOR START OF CLINICAL TRIALS

InDecember2007,wereceivedregulatoryclearancefromtheFrenchHealthProductsSafetyAgencyforourClinicalTrialApplication(CTA).TheCTAwassubmittedinJuly2007.

START PHASE I/II TRIAL IN MODERATE TO LATE-STAGE PARKINSON’S DISEASE

Patientrecruitmentisunderwayandweplantoreportpreliminaryresultsoncethefirstcohortofpatientsisassessable,whichisexpectedinmid-2008.ThetrialisbeingconductedattheHenriMondorHospitalinCréteil,France.

METxIA

REPORT RESULTS FROM STAGE TWO OF PHASE II TRIAL IN PANCREATIC CANCER

Preliminaryresultshaveshowndiseasestabilisationin50%ofevaluablepatients.Patientsurvivalisdifficulttointerpretforthisheterogeneouspatientgroupbuthasrangedfromfourtoalmost110weeks.Mediansurvivalfortheevaluablepatientsis26weeks.

DEFINE OPTIMAL DOSE OF CYCLOPHOSPHAMIDE FROM STAGE TWO OF PHASE II TRIAL

Fivedoselevelsofcyclophosphamidehavebeenevaluatedandadditionalpatientsarebeingrecruitedatthemaximumtolerated(optimal)dosetoestablishmoreefficacydatainthispatientgroup.

START DISCUSSIONS WITH PRINCIPAL INVESTIGATORS AND REGULATORY AUTHORITIES TO DETERMINE ROUTE TO REGISTRATION IN PANCREATIC CANCER

Wehavediscussedthenextdevelopmentstepsinternallyandwithourclinicaladvisors.However,wehavedecidedtocollaboratewithanindustrypartnerforfurtherdevelopmentandcommercialisationofMetXia.

PROGRESS COMMERCIAL DISCUSSIONS

WehaveinitiatedsomediscussionswithprospectivepartnersbutweintendtobroadenourbusinessdevelopmenteffortsfollowingsuccessfulcompletionofthePhaseIItrial.



METxIA

REPORT RESULTS FROM STAGE TWO OF PHASE II TRIAL IN PANCREATIC CANCER

Preliminaryresultshaveshowndiseasestabilisationin50%ofevaluablepatients.Patientsurvivalisdifficulttointerpretforthisheterogeneouspatientgroupbuthasrangedfromfourtoalmost110weeks.Mediansurvivalfortheevaluablepatientsis26weeks.

DEFINE OPTIMAL DOSE OF CYCLOPHOSPHAMIDE FROM STAGE TWO OF PHASE II TRIAL

Fivedoselevelsofcyclophosphamidehavebeenevaluatedandadditionalpatientsarebeingrecruitedatthemaximumtolerated(optimal)dosetoestablishmoreefficacydatainthispatientgroup.

START DISCUSSIONS WITH PRINCIPAL INVESTIGATORS AND REGULATORY AUTHORITIES TO DETERMINE ROUTE TO REGISTRATION IN PANCREATIC CANCER

Wehavediscussedthenextdevelopmentstepsinternallyandwithourclinicaladvisors.However,wehavedecidedtocollaboratewithanindustrypartnerforfurtherdevelopmentandcommercialisationofMetXia.

PROGRESS COMMERCIAL DISCUSSIONS

WehaveinitiatedsomediscussionswithprospectivepartnersbutweintendtobroadenourbusinessdevelopmenteffortsfollowingsuccessfulcompletionofthePhaseIItrial.


RETINOSTATCOMMENCE MANUFACTURING SCALE-UP OF CLINICAL MATERIAL

In2007,weinitiatedtheprocessforclinicalscale-up.WehavecommissionedGMPproductionofakeycomponentofRetinoStatandweaimtohavefinalclinicalmaterialbytheendof2008.

SUBMIT INVESTIGATIONAL NEW DRUG (IND) APPLICATION TO THE FDA FOR START OF CLINICAL TRIALS IN USA

During2007,ourinternalresourcesforLentiVector-basedprogrammeswereprioritisedtoProSavin,whichhasextendedourtimetableforclinicaldevelopmentofRetinoStat.WeexpecttosubmittheINDinearly2009.

5T4-TARGETED ANTIBODY THERAPY

WYETH TO CONTINUE ITS EVALUATION OF 5T4-TARGETED ANTIBODY THERAPY IN PRECLINICAL MODELS

Wyeth’sevaluationisongoing.Itaimstostartclinicaltrialsofits5T4-targetedantibodytherapyinsolidcancersifwarrantedbythedata.

TROVAx-VET

LEADING ANIMAL HEALTH PARTNER TO START FIELD TRIALS IN DOGS

Followingthesanofi-aventiscollaborationforTroVaxinhumancancers,OxfordBioMedicahasdecidedoncommercialgroundsnottorenewthecollaborationforTroVax-Vet.

TECHNOLOGY LICENSING

SIGN ADDITIONAL TECHNOLOGY LICENSING DEALS WITH BLUE-CHIP COMPANIES

InJuly2007,amajorUS-basedbiotechnologycompanylicensedourLentiVectortechnologyforresearchactivities.

ExPAND ExISTING RELATIONSHIPS TO ESTABLISH MORE SIGNIFICANT COLLABORATIONS

InJanuary2008,wegainedexclusiverightstotherapeuticRNAitechnologyusingourLentiVectorsystem.ManyofourexistingtechnologylicenseesuseLentiVector-RNAiinresearch.TheselicencescouldbebroadenedtotherapeuticRNAiapplications.


TROVAx®

Developmentofourleadproductcandidate,TroVax,isprogressinginmultiplecancertypes.Theproductisoneofthemostadvancedtherapeuticcancervaccinesindevelopment.Therapeuticvaccineshavethepotentialtoplayasignificantroleincancertherapyasadditivetreatmentoptionsforpatients.WebelievethatTroVaxcouldbeoneofthefirstregisteredproductsinthisfield.

SANOFI-AVENTIS COLLABORATIONInMarch2007,wesecuredalicensingagreementwithsanofi-aventisfortheglobaldevelopmentandcommercialisationofTroVax.Theagreementisoneofthelargestalliancesinthefieldofcancerimmunotherapy.

OxfordBioMedicareceivedpaymentsfromsanofi-aventistotalling€38millionin2007,comprisinganinitialpaymentof€29millionandanearlydevelopmentmilestonepaymentof€9million.Afurthermilestonepaymentof€10millionwastriggeredinFebruary2008followingthethirdsuccessfulinterimanalysisoftheTRISTstudybytheDataSafetyMonitoringBoard.Furtherdevelopmentandregulatorymilestonepaymentscouldyieldupto€470millionifTroVaxisapprovedforasmallnumberofdefinedcancertypes.OxfordBioMedicaisentitledtoadditional

milestonepaymentsforothercancertypes,commercialmilestonepaymentswhensalesreachcertaintargetsandtieredescalatingroyaltyincomeonglobalsales.

ThePhaseIIITRISTstudyofTroVaxinrenalcancerisbeingmanagedbyOxfordBioMedicaandco-fundedwithsanofi-aventis.AllotherTroVaxactivities,includingdevelopment,registrationandcommercialisation,willbefundedbysanofi-aventis.Aspartoftheagreement,sanofi-aventisiscommittedtotherapidinitiationofaPhaseIIItrialincolorectalcancer.Intermsofcommercialisation,OxfordBioMedicaretainsanoptiontoparticipateinthepromotionofTroVaxintheUSAandtheEuropeanUnion.

PHASE III TRIST STUDY PROGRESSThePhaseIIITRIST(TroVaxRenalImmunotherapySurvivalTrial)study,isprogressingwell.Weareapproachingfullrecruitementof700patients.Therateofrecruitmenthasbeenencouraging.Over100centresareparticipatingintheUSA,WesternEuropeandEasternEurope.Itisrareforsuchalargetrialtorecruittoplan.Onefactorthataffectstherateofrecruitment,butisdifficulttopredictattheoutsetofamulti-centretrial,isclinicians’enthusiasmfortheproduct.Clinicianshavebeenhighlysupportiveofthe

trial,whichreflectsTroVax’sexcellentsafetyprofileandpotentialtoimprovepatients’survivalandqualityoflife.

Thetrialhasbeenrecruitingatarateofabout50patientspermonth.ThisiscomparabletotherecruitmentrateforthePhaseIIItrialofPfizer’sSutent®(sunitinib),whichwasoneoftherecentlylaunchedtargetedagentsforrenalcancerthathashadrapiduptakeintermsofcommercialsales.InJanuary2007,theUKNationalCancerResearchNetwork(NCRN),whichprovidestheUKNationalHealthService(NHS)withtheinfrastructuretosupportcancerclinicaltrials,agreedtoadoptthetrial.TheNCRN’sadoptionofTRISTmeansthatmultipleNHScentresareparticipatinginthestudy.InreachingitsdecisiontoadopttheTRISTtrial,theRenalCancerClinicalStudiesGroupoftheNCRNevaluatedTroVaxandthetrialdesignandconcludedthattheproductofferspotentialimprovementincareforpatientswithintheNHS.

Thestudyisbeingconductedinpatientswithlocallyadvancedormetastaticclearcellrenalcarcinoma.Itisarandomised,placebo-controlled,two-armstudycomparingTroVaxincombinationwithstandardofcaretoplacebowithstandardofcare.Thestandardofcaretherapycanbesunitinib,interferon-alphaorinterleukin-2.Theprotocolstratifiestreatmentbetweenthethreestandards

KEY HIGHLIGHTS • Global development and commercialisation deal with sanofi-aventis

• Achieved two development milestones under sanofi-aventis agreement

• Three successful DSMB reviews of Phase III TRIST study in renal cancer

• Further Phase II results in renal cancer confirm therapeutic potential

KEY OBJECTIVES • Complete recruitment and continue to manage the Phase III TRIST study

• Sanofi-aventis to initiate Phase III trial in metastatic colorectal cancer

• QuASAR to initiate Phase III trial in early-stage colorectal cancer

• Support sanofi-aventis in preparation for licensure and pre-marketing

Business Review: Operational ReviewAdvanced Candidates

Advanced Candidates


ofcaretoensurethattheallocationofTroVaxandplaceboisrigorouslybalanced.Theprimaryendpointforthetrialisoverallsurvival;secondaryendpointsincludethepercentofpatientswithprogression-freesurvivalatweek26,tumourresponseratesandquality-of-lifescores.ThetrialisbeingconductedunderaSpecialProtocolAssessment(SPA)agreementfromtheFDA.TheSPAspecifiesthedesign,conduct,analysisandendpointsofthetrial.Withthisinplace,thissinglecomparativetrialmaybeusedtosupportanefficacyclaiminaregulatorysubmissiontotheFDA.

TheindependentDSMBfortheTRISTstudyhascompletedthreescheduledinterimanalyses,themostrecentonebeinginFebruary2008.Followingeachreview,theDSMBconcludedthatthetrialshouldcontinueasplannedwithoutmodification.TheroleoftheDSMBistoevaluateunblindeddatafromtheongoingtrialtodeterminewhethertherearesafetyorefficacyissuesthatwouldwarrantmodificationoftheprotocolorearlyterminationofthestudy.TheDSMBisindependentofOxfordBioMedicaandsanofi-aventis.Topreservethestudyblinding,theDSMBprovidesnoadditionalinformationotherthanitsrecommendation.

Basedonthecurrentprogress,weexpectthetrialtoreachitsprimaryendpointinthefirsthalfof2009,whichisalignedwithourexpectationsattheoutsetofthestudy.Iftheprimaryendpointisachieved,sanofi-aventiscouldfileitsfirstregulatorysubmissionforregistrationofTroVaxinrenalcancerwithinafewmonthsofthetrialresults.WithPriority

ReviewfromtheFDA,theregulatoryreviewperiodcouldbesixmonthsfromsubmission.

COLORECTAL CANCER PHASE III TRIALS STARTINGSanofi-aventisisstartinganinternational,randomised,placebo-controlledPhaseIIItrialofTroVaxincolorectalcancer.ThePhaseIIItrial,whichhasbeennamedFLAMENCO,isdesignedtoassessTroVaxasafirstlinetreatmentofpatientswithStageIVmetastaticcolorectalcancer.Itisexpectedtoenrolapproximately1,300patients.ThetrialdesignissimilartotheTRISTstudy,inthatitwillevaluateTroVaxincombinationwithfirstlinestandardofcareversusplaceboplusfirstlinestandardofcare.


Sanofi-aventis Collaboration

Sanofi-aventisisoneoftheworld’sleadingpharmaceuticalcompaniesandnumberoneinEurope.Itisactiveinmanytherapeuticareasandhasabroadfranchiseinthefieldofcancerwithtwooftheworld’stopfivesellingcancertreatments.Sanofi-aventisispresentin100countriesthroughoutthefivecontinents.Itsvaccinesdivision,

SanofiPasteur,isaworldleaderintheindustry,offeringanextensiverangeofvaccines.

In2007,sanofi-aventissignedanexclusivegloballicenseagreementwithOxfordBioMedicatodevelopandcommercialiseTroVax,forthetreatmentandpreventionofcancer.

MarcCluzel,SeniorVicePresidentResearchandDevelopment,sanofi-aventis,said:“Weareveryexcitedabouttheopportunitytobeassociatedwiththisinnovativetherapeuticvaccine.Sanofi-aventisiscommittedtothedevelopmentofnovelanti-canceragentsthatprovidesaferandmoreeffectivetherapeuticoptionsforcancerpatients.Weconsiderthattherapeuticvaccineshaveanimportantroletoplayinthetreatmentofcancer,andtheinitialclinicaldataforTroVaxsuggestthatitisoneofthemostpromisingcandidatesinthefield.

OurcollaborationcombinesOxfordBioMedica’sexpertiseincancerimmunotherapywiththeexperienceofsanofi-aventisinclinicaldevelopmentandcommercialisationofoncologyproducts.Thecollaborationisworkingwell.ThePhaseIIITRISTstudyofTroVaxinrenalcancerison-trackandwewillshortlybestartingPhaseIIItrialsincolorectalcancer.Giventhebroaddistributionofthetargetedtumourantigen,5T4,TroVaxcouldbeevaluatedinvarioussolidtumoursandstagesofdisease.

WelookforwardtoourcontinuingpartnershipwithOxfordBioMedicatoadvancethedevelopmentandcommercialisationofTroVaxand,importantly,toprovidecancerpatientswithnewtreatmentoptions.”

TroVax

Stratified Randomisation

Placebo

BASELINE

Selected Standard of Care

26 65

17 13 1 3 6 9 25 21 33 41 49 57 65

CT Scan CT Scan

Vaccination Time Points (weeks)

TRIST trial design


Marc Cluzel, Senior Vice President Research and Development, sanofi-aventis.

ThestandardtreatmentwillbechemotherapywithorwithoutAvastin®(bevacizumab),whichwillbestratifiedbetweenthetwoarmsofthestudy.Theprimaryendpointwillbeoverallsurvivalandthetrialwillincludeaninterimanalysistoevaluatetimetodiseaseprogression.ThetrialwillbeconductedunderaSPAwiththeFDAandpatientrecruitmentisexpectedtostartinmid-2008.Resultsfromtheinterimanalysisareanticipatedin2010.

InadditiontothePhaseIIItrialinmetastaticcolorectalcancer,theUKclinicaltrialsnetworkQUASARisstartingatrialofTroVaxinearly-stagecolorectalcancer.Thistrialissupportedbybothsanofi-aventisandOxfordBioMedica.Sanofi-aventiswillactastheUSregulatoryagentforthetrial,whichhasbeensubmittedtotheUSandUKregulatoryauthorities.ThetrialwillassessTroVaxinpatientswithStageII/IIIcolorectalcancerwhohavehadsurgicalresectionoftheirprimarytumoursandbeentreatedwithadjuvantchemotherapy.Itisexpectedtoenrolapproximately3,000patientsandhasbeendesignedwithaprimaryendpointofthree-yeardisease-freesurvival.ThefundingoftheQUASARtrialderivesfromavarietyof

sources,includingtheUKMedicalResearchCouncilandtheDepartmentofHealthaswellasOxfordBioMedicaandsanofi-aventis.Patientrecruitmentisexpectedtocommenceinmid-2008.

UPDATE ON US-SPONSORED BREAST CANCER TRIALOverthelasttwoyears,wehavebeenliaisingwiththeSouthWestOncologyGroup(SWOG),whichisoneofthelargestcancerclinicaltrialscooperativegroupsintheUSA,fundedbyresearchgrantsfromtheUSNationalCancerInstitute,partoftheNationalInstitutesofHealth.SWOGwasplanningtoconductaPhaseIItrialofTroVaxinpatientswithadvancedbreastcancer.SinceTroVaxisbeingevaluatedinamajorPhaseIIIprogramme,SWOG,OxfordBioMedicaandsanofi-aventishavenowconcludedthatanopen-labelPhaseIIstudyofTroVaxtoevaluatesafetyandimmunologyinthispatientgroupisnolongernecessary.SWOGremainscommittedtotheTroVaxprogramme,andweareworkingwiththeorganisationtodesignalargerstudyofTroVaxinbreastcancer.

ENCOURAGING RESULTS FROM PHASE II TRIALS IN RENAL CANCER AttheAnnualMeetingoftheAmericanSocietyofClinicalOncology(ASCO)inJune2007,newdatawerereportedfromtwoPhaseIItrialsofTroVaxinrenalcancer.TroVaxwaswelltoleratedwithnoseriousadverseeventsattributabletothetreatmentandtheproductinducedanti-5T4antibodyresponsesin91%ofpatients.Twenty-fourof35evaluablepatientswithclearcellrenalcarcinoma(68%)showeddiseasecontrol.Twopatientshadcompleteresponses(i.e.theirtumourswerecompletelyeradicated),

threehadpartialresponses(i.e.tumourshrinkage)and19hadstablediseaseforperiodsexceedingthreemonths,includingthreepatientsthatwerestableformorethan17months.Preliminaryanalysisofclinicalbenefitshowedastatisticallysignificantrelationshipbetweenreductionintumourburdeninpatientswithclearcellrenalcarcinomaandpatients’anti-5T4antibodyresponses(p=0.028).Theseencouragingnewdatasupportthehypothesisthatthe5T4-specificimmuneresponseinducedbyTroVaxhastherapeuticbenefit.


Award TECHMARK AWARD FOR ‘ACHIEVEMENT OF THE YEAR’ – NOVEMBER 2007

The techMARK awards recognise the

achievements and reward the successes

of technology companies listed on AIM

and the London Stock Exchange. This

award was extremely wide ranging,

recognising exceptional achievement by

an individual or company, for example a

major contract or joint venture.

Award TECHMARK MEDISCIENCE AWARD FOR ‘BREAKTHROUGH OF THE YEAR’ – JUNE 2007

The techMARK Mediscience awards

recognise and reward excellence of

within the quoted life-sciences sector.

As winners of this award we were

recognised as the company which

made the most significant breakthrough

between 1 April 2006 and 31 March 2007.


PRESENTATION OF FINAL PHASE II RESULTS Togetherwithsanofi-aventis,weaimtopresentfinaldatafromallfouropen-labelPhaseIItrialsofTroVaxinrenalcanceratASCOinMay/June2008.ThetrialsevaluatedTroVaxasasingleagentandincombinationwithhigh-doseinterleukin-2,low-doseinterleukin-2orinterferon-alpha.

Separately,weplantoreportresultsfromthecompletedPhaseIItrialofTroVaxinprostatecancerattheTargetedAnticancerTherapiesmeeting,20-22March2008,intheUSA.Thetrial,in27patientswithhormone-refractoryprostatecancer,evaluatedTroVaxasasingleagentandincombinationwiththestandardtherapy,granulocyte-macrophagecolony-stimulatingfactor(GM-CSF).PreliminarydatafromthistrialwerepreviouslyreportedinApril2007attheAnnualMeetingoftheAmericanAssociationforCancerResearch,showingthatTroVaxwaswelltoleratedandallpatientsdevelopedanti-5T4antibodyresponses.

PRE-COMMERCIALISATION PLANThepresentationofclinicaldataatupcomingconferencesispartofthepre-commercialisationplanforTroVaxaheadofthePhaseIIITRISTstudyresultsandpotentialregistrationin2009.Sanofi-aventisisimplementingacommunicationsinitiativetoinformandeducatetheoncologycommunityregardingTroVaxaheadofitspotentiallaunch.

Thecompanieshavesecuredmanufacturingforcommerciallaunch,togetherwithmaterialforthePhaseIIItrialsincolorectalcancer.Discussionsareongoingwithsanofi-aventisandourcontractmanufacturerregardinglonger-termsupply.Sanofi-aventisisevaluatingitsmanufacturingstrategy,whichmayincludeanin-housemanufacturingfacilityforTroVax.

SUMMARYWearedelightedbytheprogressoftheTroVaxprogrammeandbythecommitmentofourpartner,sanofi-aventis.BycombiningOxfordBioMedica’sexpertiseincancerimmunotherapyandtheexperienceofsanofi-aventisinclinicaldevelopmentandcommercialisationofoncologyproducts,wehopetobeabletobringthisinnovativeandpotentiallyvaluablemedicinetopatientsassoonaspossible.


Award SCRIP AWARD FOR ‘LICENSING DEAL OF THE YEAR’ – DECEMBER 2007

The Scrip awards recognise the

pharmaceutical industry’s achievements

and contributions to science and the

advancement of healthcare, and are

testament to the hard work that goes on

behind the scenes of drug development.

In choosing the winner of this award, the

judges considered not just the monetary

value of each deal but also its strategic

value to both the licensor and the

licensee, the geographic spread and how

it complemented the licensees’ existing

product pipeline.

Deal Wins Awards The monetary and strategic value of our global licensing deal for TroVax with sanofi-aventis has been widely recognised by the industry and the financial community, with Oxford BioMedica receiving three prestigious awards during 2007. This was particularly gratifying, given the number of significant achievements in the sector as a whole over the year. Andrew Umbers, Chief Executive of Evolution Securities, which sponsored the techMARK mediscience awards summed this up by saying: “An obvious highlight [of 2007], which is reflected by this year’s award nominees, has been the announcement of major product licensing deals by UK biotechnology firms.” John Davis, Editor of Scrip commented on the awards: “The number and more importantly the quality of this year’s entries was outstanding, and we feel this is a testament to the exciting and innovative work that the pharmaceutical and biotech industries continue to deliver.”


PROSAVIN®

ThefirstclinicaltrialofProSavininParkinson’sdiseaseisunderwayinFrance.ItisthefirsttrialusingourproprietaryLentiVectortechnologyand,assuch,representsamajoreventforOxfordBioMedicaandthefutureofthepipelineofproductsthatusethesametechnology.ThesuperiorefficacyofProSavincombinedwiththeabsenceofsideeffectsinpreclinicalstudiessuggestthatProSavincouldbeusedtoreplacestandardL-DOPAtherapyinpatientswithmoderatetolate-stageParkinson’sdisease.FollowingourdiscussionswiththeregulatoryagencyinFrance,wehavestartedpreparationstomovefromthisPhaseI/IItrialdirectlyintoaPhaseIIItrial,whichcouldstartattheendof2009orearly2010.

PHASE I/II TRIAL INITIATED InDecember2007,weopenedthePhaseI/IItrialofProSavin,havingreceivedregulatoryclearancefromtheFrenchHealthProductsSafetyAgency(AFSSAPS)forourClinicalTrialApplication(CTA).TheCTAwassubmittedinJuly2007.PatientrecruitmentisunderwayattheHenriMondorHospitalinParis,whichisaEuropeancentreofexcellenceforneurosurgeryandamemberoftheAssistancePubliqueHôpitauxdeParis(APHP)inFrance.SeveralpatientsareundergoingdetailedevaluationoftheirbaselineParkinsonianstatuspriortosurgicaladministrationofProSavin.Treatmentofthefirstpatientisimminent.

TheprimaryobjectivesofthetrialaretoassessthesafetyandefficacyofProSavin.Theanalysesofpatientswillincludetheapplicationofadvancednon-invasiveneuro-imagingtechniques.

PHASE I/II TRIAL DESIGNPatientsinthetrialwillhavebeendiagnosedwithParkinson’sdiseaseandwillbefailingoncurrenttreatmentwithL-DOPAbuttheywillnothaveprogressedtoexperiencingdrug-inducedmovementdisorders(dyskinesias).Itisatwo-stagestudy.Thefirststageisanopen-labeldoseescalationtoevaluatetwodoselevelsofProSavinincohortsofthreepatientseach.Inthesecondstageofthetrial,afurther12patientswillberecruited.Fourofthe12patientswillactasacontrolgroupandonlyreceive“sham”surgery.

ProSavinisadministeredlocallytothebrain,convertingthetargetcellsintoadopaminefactory,thusreplacingthepatient’sownlostsourceoftheneurotransmitter.ThesurgicalprocedureforadministrationofProSavinentailsstereotacticbilateralinjectionintothestriatumofthebrainundergeneralanaesthesiausingMRI-imagingandmapping.Theprocedureisdesignedtobenon-destructivetotissueanddoesnotleaveanydeviceinthebrain.

TheefficacyofProSavinwillbeassessedusingtheUnifiedParkinson’sDiseaseRatingScore(UPDRS).Patientswillbemonitoredatregularintervals,withtheprimaryendpointbeinganefficacyassessmentatsixmonths

aftertreatment.Thesecondaryobjectiveofthetrialistoassestheextenttowhichpatients’currenttherapy(L-DOPA)canbereducedorremovedfollowingadministrationofProSavin.

SUSTAINED EFFICACY IN PRECLINICAL STUDIESWecontinuetoassessthelong-termefficacydataofProSavininapreclinicalsetting.Intheindustry-standardpreclinicalmodelofParkinson’sdisease,knownastheMPTPmodel,ProSavininducesalmostcompleterecoveryofmovementfunctionandotherbehaviouralmeasurementsfollowingasingleadministration.Inthismodel,themostrecenttimepointshowsthatthetherapeuticeffectofProSavinhasbeenmaintainedforover27monthswithnodiminution.EfficacywassimilartothatexpectedwithstandarddailytreatmentwithL-DOPAbutwithnoevidenceofthedyskinesiasassociatedwithprolongedL-DOPAtreatment.

PHASE III PREPARATIONSIfthesafetyandefficacyobservedinpreclinicalstudiesofProSavinisreplicatedinthePhaseI/IItrial,thenwewouldaimtomovedirectlytoaPhaseIIItrial.BasedonouranticipatedtimelinesforthePhaseI/IItrialandforscaling-upthemanufactureofProSavinforPhaseIIIandcommercialisation,thePhaseIIItrialcouldstartinlate2009orearly2010.Thetrialcouldbecompletedwithintwoyears,supportingfirstproductregistrationin2012-13.

KEY HIGHLIGHTS • Initiated Phase I/II trial in moderate to late-stage Parkinson’s disease

• Efficacy in ongoing preclinical studies exceeds 27 months

KEY OBJECTIVES • Publish preclinical results in scientific journal

• Report preliminary results from first cohort of patients in Phase I/II trial





SUMMARYCurrentstandardtherapyforParkinson’sdiseaseisonlypartiallyeffectiveinthemidtolatestageofdiseaseandcaninducedebilitatingsideeffectsafterlong-termuse.ProSavinhasthepotentialtoaddressthisunmetmedicalneed,offeringlong-lastingbenefitfromasingleadministrationwithanexcellentsafetyprofile.WearepleasedtohavestartedourfirstclinicaltrialofthispotentiallyimportantnewtreatmentapproachforParkinson’sdisease.TheproductcouldsignificantlyexpandtheworldwidemarketforParkinson’sdiseasetherapies,whichareestimatedtogeneratesalesinexcessofUS$3billion,byreducingthesocialcareburdenassociatedwiththemidtolate-stageofdisease.

TheLentiVectorsystemusedwithinProSaviniscommontomultiplepreclinicalcandidatesinourpipeline.TheinfrastructureforProSavinthatrelatestomanufacturingscale-upandsafetytestingcanbeappliedacrossthisportfolio.Hence,thetimeinvestedintheProSavinprogrammeshouldbenefitourotherLentiVector-basedprogrammes.

Independent assessment of ProSavin

ProSavin potentially has a unique profile and position in the treatment of Parkinson’s disease. In 2007, a leading consulting group (Datamonitor) undertook an assessment of the opportunity for ProSavin based on responses from key opinion leaders and other stakeholders in the field of neurology. The key findings from this analysis are summarised below:

• Theproblemscausedbylong-termdopaminetherapyare notaddressedbycurrenttreatmentsforParkinson’sdisease

• MoreinvasivetherapyusedearlierinParkinson’sdiseasewill allowbettertreatmentofpatients

• Physiciansseegenetherapy,particularlyProSavin,as oneofthemostpromisingnewtreatmentoptionsfor Parkinson’sdisease

• PhysicianswereimpressedwiththeprofileofProSavinin termsofpotentialefficacy,sideeffectsanddurationofaction

• Patientswithmid-stageorHoehnandYahrStageIIIParkinson’s diseasewouldbethelargestgroupreferredforProSavin, followedbylate-stageorStageIVpatients.StageIIIandIV patientsrepresentapproximately40%ofthetotalprevalence.

• PhysicianssuggestearlieruseofProSavinthaninStagesIII andIVofdiseasewouldbepossibledependingonthe surgicalrisksandcost/benefitoftreatment

• ProSavinisexpectedtocompetewithcurrenttreatments suchasdeepbrainstimulationaswellasotherfuturegene orcelltherapy,whileneuroprotectantsareunlikelytocompete directlywithProSavin

• PhysiciansindicatedthatthesurgicalprocedureforProSavin iseasiertoperformthandeepbrainstimulationandwould thereforehavenonegativeimpactonpatientswhencompared tocurrentsurgery

• Allpayersareexpectingahighlevelofreimbursementfor ProSavinifitsefficacyandsafetyaredemonstrated

• Usingbaselineassumptions,Datamonitorforecastsannual peaksalesofProSavinofapproximately$US900millionin theUSAandtopfiveEuropeancountries

HI-8® MELHi-8MELisatherapeuticvaccineformetastaticmelanoma,whichwasaddedtothepipelinefollowingtheCompany’sacquisitionofOxxonTherapeuticsinMarch2007.OxxonTherapeuticshadpreviouslyevaluatedHi-8MELintwoclinicaltrials.ThesetrialsshowedthatthevaccinewaswelltoleratedandproducedstrongkillerT-cellimmuneresponsesagainstthecancerouscellsatcertaindoselevels.Theproducthasthepotentialtoreducemortalityinpatientswithadvanceddisease,andcanbeusedalongsidestandardtherapywithoutaddingsignificanttoxicity.Hi-8MELisbasedonthesameMVAvectortechnologyasTroVax,togetherwithaDNA-basedconfigurationofthevaccine.Ifmelanomaistreatedearlyitcanbecuredbysurgicalresection.However,halfofthosewithmetastaticmelanomadieofthediseasewithinfiveyears.Amelanomavaccinewouldoffernewhopetosuchpatients.

ENCOURAGING UPDATE ON PHASE II TRIAL IN MELANOMAUpdatedresultsfromaPhaseIItrialwerepresentedattheAmericanAssociationofImmunologistsAnnualMeetinginMay2007.Thetrial,in41patientswithStageIII/IVmelanoma,wasdesignedtoevaluatetheimmuneandclinicalresponseselicitedbyHi-8MEL.Theproductwashighlyimmunogenicwith91%ofpatientsthatreceivedtheoptimaldoseshowinganantigen-specificimmuneresponse.Eight

patients(20%)showedperiodsofdiseasecontrol.Thepresentationincludedfollow-upofonepatientthatexhibitedasustainedpartialresponseformorethantwoyears.Themediansurvivalforimmuneresponderswas100weeksversus37weeksfornon-responders(p<0.001).

STRATEGY FOR FUTURE DEVELOPMENTTheCompanybelievesinformationgarneredfromtheongoingTroVaxstudieswillprovideadditionalusefulinformationonhowbesttodevelopHi-8MEL,whichisaMVA-basedtumourvaccine,likeTroVax.WearereviewingthecurrentformulationanddatageneratedbyOxxontoensurethatHi-8MELisreadyforfulldevelopmentpendingsuccessfulcompletionofthePhaseIIITRISTstudyofTroVax.

SUMMARYMelanomaisoneofonlyafewcancersinwhichtheimmunesystemappearstoplayaprominentrole.The5T4antigen,thatisthebasisofTroVax,isnotfoundonmelanomacells.Hence,Hi-8MELisanidealcomplementtothepotentialapplicationsofTroVaxinsolidtumours.ThroughourexperiencewithTroVax,wehavesubstantialexpertiseincancer.WewillapplythisknowledgetothefurtherdevelopmentofHi-8MEL.

KEY HIGHLIGHTS • Acquisition of Oxxon Therapeutics included Hi-8 MEL melanoma vaccine

• Phase II follow-up confirms survival advantage in immune responders

KEY OBJECTIVES • Prepare strategy for future development


0

Responders Non-responders

20

40

60

80

100

120

Wee

ks

Median survival for immune responders versus non-responders in Phase II trial of Hi-8 MEL in Stage III/IV melanoma


METxIA®

MetXiaispotentiallyusefulinthetreatmentofanumberofsolidtumoursandtheirmetastases,particularlythosewherecyclophosphamideiscommonlyusedasatreatment.TheproductisbeingevaluatedinaPhaseIItrialinpancreaticcancer.Thetrialisadose-escalationstudytoidentifytheoptimaldoselevelsforMetXiaandcyclophosphamide.In2007,weinitiatedcommercialdiscussionswithpotentialpartnersforbothMetXiaandourassociatedtechnologyforGene-DirectedEnzymeProdrugTherapy(GDEPT).

PATIENT RECRUITMENT PROGRESSING IN PHASE II TRIALWeinitiatedthePhaseIItrialofMetXiain2004inpatientswithnon-resectablepancreatictumours.Therecruitmentofpatientshasbeenpurposefullystagedsinceeachpatientneedstobecarefullyreviewedfortheirresponsetotherapypriortotreatmentofsubsequentpatients.However,therateofenrolmentinthistrialhasbeenproblematicduetothestrictcriteriaforpatientsuitabilityandthepoorhealthofthemajorityofpatientspresentingforsurgery.Thepatientsareatanadvancedstageoftheirdisease,andmosthavepreviouslyfailedtorespondtoothertherapies.

Todate,23patientshavebeentreatedinthestudy,inwhichMetXiaandcyclophosphamidearedelivereddirectlyto

thepancreatictumourviaacatheterinsertedthroughanartery.TwodoselevelsofMetXiaandfivedoselevelsofcyclophosphamidehavebeenevaluatedtoassesstheefficiencyofP450genetransferandtodeterminethemaximumtolerateddoseoftheprodrug.

PRELIMINARY PROOF OF CONCEPT RESULTS IN PHASE II TRIALPatientswhoreceivedtheoptimaldoseofMetXiaandhigherdosesofcyclophosphamidearestillbeingassessed.PreliminaryresultssuggestthatMetXiainducesgeneexpressionofP450enzymeatthetumoursiteandthattherehavebeennounexpectedadverseeventswhenMetXiaandcyclophosphamideareusedtogetherinthismanner.

Todate,diseasestabilisationhasbeenevidentinsixof12evaluablepatients(50%).Patientsurvivalisdifficulttointerpretforthisheterogeneouspatientgroupbuthasrangedfromfourtoalmost110weeks.Mediansurvivalfortheevaluablepatientsis26weeks.Additionalpatientsarebeingrecruitedatthemaximumtolerateddosetoestablishmoreefficacydatainthispatientgroup.Weplantoreportfurtherdatafromthistrialduring2008.

INITIATED COMMERCIAL DISCUSSIONSFollowingourstrategicreviewin2007,weinitiateddiscussionswithpotential

partnersforfurtherdevelopmentandcommercialisationofMetXia.Thiswillenableustofocusourresourcesonhigherdevelopmentprioritieswithinthepipeline.MetXiaisthemostadvancedproductcandidatetoderivefromourproprietaryGDEPTtechnology.TomaximisethecommercialopportunityforMetXiaandourGDEPTtechnology,weareseekingindustrypartnerstoprovideadditionalresourcesandexpertise.

SUMMARYPreliminarydatafromthePhaseIItrialinnon-resectablepancreaticcancerareencouraginganddemonstrateproofofconceptforourGDEPTtechnology.Thisplatformtechnologyhasthepotentialforbroadapplication.Withappropriateinvestment,MetXiacouldbethefirstofmultipleGDEPT-basedproductsdevelopedforthetreatmentoflocalised,accessibletumours.

KEY HIGHLIGHTS • Recruitment progressing in Phase II trial

• Preliminary Phase II results confirm gene transfer

KEY OBJECTIVES • Report further clinical data from the Phase II trial in pancreatic cancer

• Advance collaboration discussions for MetXia and the GDEPT technology



RETINOSTAT®

RetinoStatisdesignedtoprovidelong-terminhibitionofaberrantbloodvesselgrowthintheretinaforthetreatmentofvisionlosscausedbyconditionssuchaswetage-relatedmaculardegeneration(AMD)anddiabeticretinopathy(DR).WehaveidentifiedRetinoStatasournextLentiVector-basedprogrammeforclinicaldevelopment,behindProSavin.OuraimistoconductaninitialclinicaltrialintheUSA,sincetheprogrammeissupportedbyUSorganisations,namelyJohnsHopkinsUniversityandtheFoundationFightingBlindnesswithitssupportorganisation,theNationalNeurovisionResearchInstitute.

NEW PROOF OF CONCEPT PRECLINICAL RESULTSInMay2007,OxfordBioMedicaandourcollaboratorsatJohnsHopkinsUniversityinBaltimorepresentedencouragingpreclinicaldatawithRetinoStatattheAssociationforResearchinVisionandOphthalmologyAnnualMeeting.Thepresentationincludedpreclinicalproofofprincipleinanindustry-standardmodelofneovascularAMD.

ONGOING CLINICAL PREPARATIONS Wehaveinitiatedthescale-upprocessformanufacturingclinicalmaterial.WehavecommissionedGoodManufacturingPractice(GMP)productionofakeycomponentof

RetinoStatandweaimtohavefinalclinicalmaterialwithinthenext12months.WithourUScollaborators,weareconductingadditionalnon-clinicalstudieswithRetinoStatthatarerequiredforourregulatorysubmissiontostartclinicaltrials.During2007,ourinternalresourcesforLentiVector-basedprogrammeswereprioritisedtoProSavin,whichhasextendedouranticipatedtimelinesforRetinoStat.However,thedevelopmentofRetinoStatshouldbenefitconsiderablyfromourinvestmentinthemanufacturingofProSavin.WeexpecttosubmitanInvestigationalNewDrug(IND)applicationtotheFDAforthestartoftrialsinpatientswithwetAMDduring2009.

SUMMARYWehavehadinitialdiscussionswithpotentialpartnersforfurtherdevelopmentandcommercialisationofRetinoStat.Theindustryisclearlyinterestedinnewanti-angiogenictreatmentstrategiesforwetAMD,whichhavepotentialforsuperiorefficacyandalowerinjectionfrequencythanthecurrentstandardtherapy,whichisNovartis’Lucentis®.TreatmentwithLucentisrequiresinjectionsintotheeyeeveryonetotwomonths.Giventhelong-termgeneexpressioncapabilitiesofourLentiVectortechnology,asingleadministrationofRetinoStatcouldbeeffectiveforoverayear.

KEY HIGHLIGHTS • Preclinical results confirm proof of concept

KEY OBJECTIVES • Prepare regulatory submission for clinical development



Wehaveestablishedadiverseearly-stagepipelinethatcompriseseightpreclinicalproductcandidates.Thein-houseprogrammesareallgene-basedtherapiesthatutiliseourLentiVectortechnology.In2007,severaloftheseprogrammesbenefitedfromfinancialsupportprovidedbydisease-focusedcharitableorganisationsthroughdirectfundingofstudiesorgrants.During2007,weinitiatedanewanti-cancerprogramme,EndoAngio-GT,andpresentedpreclinicalproof-of-conceptresultswithStarGeninStargardt’sdisease.

INITIATED ENDOANGIO-GT ANTI-CANCER PROGRAMMEInJuly2007,wesecuredalicencefromChildren’sHospitalBostontotheanti-angiogenicgenesthatareutilisedinourRetinoStatvisionlossprogrammeforthetreatmentofcancer.Thisnewanti-cancerprogramme,EndoAngio-GT,isbasedonasimilarconstructtoRetinoStat.In2007,weinitiatedpreclinicaloptimisationoftheproduct.

PRESENTATION OF STARGENTM PRECLINICAL RESULTSStarGenisdesignedtodeliveranormalfunctionalgenetotreataninheritedocularcondition,Stargardt’sdisease.TheprogrammeisfundedbytheFoundationFightingBlindness,theNationalNeurovision

ResearchInstituteandaconsortiumofassociatedinvestors.AttheAssociationforResearchinVisionandOphthalmologyAnnualMeetinginMay2007,wepresentedpreclinicaldatawithStarGen,showingefficacyinanindustry-standardmodelofthedisease.AdditionalpreclinicalstudiesareunderwayatColumbiaUniversityinNewYork,whichcouldsupportadvancementtoclinicaldevelopmentinthisnichecommercialmarket.

InadditiontoourrelationshiparoundStarGenandRetinoStat,weareexploringacommercialcollaborationwiththeFoundationFightingBlindnesstodevelopLentiVector-basedtherapeuticapproachesforotheroculardiseases.

KEY HIGHLIGHTS • Preclinical results with StarGen in model of

Stargardt’s disease

• Initiated EndoAngio-GT anti-cancer programme

KEY OBJECTIVES • Identify next programme for clinical development

Business Review: Operational ReviewEarly-stage Candidates

Early-stage Candidates


Ourtechnologylicensingactivitiesexploitthepotentialofoursuiteofgenedeliverytechnologiesbyprovidingthird-partyaccessforresearchorspecificdevelopmentapplications.WehaveaddedtwonewindustrypartnerstoourlistoflicensedLentiVectorusersandweenteredthefieldofRNAinterferenceusingourLentiVectorsystemforgeneticdelivery.Inaddition,oneofourpartnersannouncedthestartofaPhaseIIItrialwithaproductthatusesanotherofourtechnologies,whichtriggeredamilestonepayment.

NEW LENTIVECTOR LICENSING AGREEMENTInJuly2007,anothermajorUS-basedbiotechnologycompanylicensedtheLentiVectorgenedeliverytechnologyforresearchactivitiesinajointagreementwithSigma-Aldrich.Sigma-AldrichisourstrategicpartnerandexclusivelicenseeforthecommercialisationoftheLentiVectortechnologyforresearchuse.Inaddition,inMarch2008,aspartofapatentdisputesettlement,OpenBiosystemsacquiredcertainrightsforuseofourLentiVectortechnologyinresearchactivities.

ExPANDING INTO THERAPEUTIC RNA INTERFERENCEInJanuary2008,wesignedalicenseagreementwiththeCarnegieInstitutionofWashingtonandtheUniversityofMassachusettsMedicalSchoolthatgrantsOxfordBioMedicarightstokeyRNAinterference(RNAi)technologyinventedbyNobelPrize-winningscientistsAndrewZ.Fire,PhD,andCraigC.Mello,PhD.ThelicenceisexclusivefortherapeuticRNAistrategiesusingourLentiVectortechnology.RNAirepresentsapotentialnewstrategyfortreatingdiseasesbygenesilencing.WeplantodevelopLentiVector-basedRNAitherapiesindependently,butalsoofferthistechnologytoourexistingLentiVectorlicenseesandotherindustryplayersaspartofourtechnologylicensingactivities.

MOLMED INITIATES PHASE III TRIALAlsoinJanuary2008,oneofourpartners,MolMed,receivedregulatoryapprovaltostartaPhaseIIItrialofitsTKtherapy.ThePhaseIIItrialisbeingconductedinItalyinpatientswithhighriskacuteleukaemiawhoarereceivinghaematopoieticstemcelltransplantation.Theproductisacell/gene-basedtherapythatisdesignedtocontrolthe

complicationsofgraftversushostdiseaseassociatedwiththesetransplantations.Theproductemploysourex vivoretroviralgenedeliverytechnology.ThestartofthisPhaseIIItrialtriggeredamilestonepaymenttoOxfordBioMedicaunderthetermsofouragreement.

VIRAGEN STREAMLINES ITS RESEARCHAnotherpartner,Viragen,whichlicensedourLentiVectortechnologyforthedevelopmentofanaviantransgenicbiomanufacturingsystem,reportedfurtherprogresswiththetechnologyandpublishedresultsinaleadingmedicaljournalinJanuary2007.However,inJune2007,Viragenhalteddevelopmentaspartofitseffortstocutcostsandhassubsequentlysoughtbankruptcyprotection.WiththeRoslinInstitute,whichwascollaboratingwithViragenonthisprogramme,weareexploringalternativewaystoadvanceandcommercialisetheaviantransgenictechnology.

KEY HIGHLIGHTS • LentiVector technology licensing agreement with major uS

biotechnology company

• Secured rights to therapeutic RNAi technology using LentiVector system

• Partner, MolMed, starts Phase III trial of product using ex vivo technology

KEY OBJECTIVES • Explore collaborations to exploit therapeutic

LentiVector-RNAi opportunities

Business Review: Operational ReviewTechnology Licensing

Technology Licensing


21 June 2007

TechnologyLentiVectortechnologylicensingagreementwithmajorUSbiotechnologycompany

Ourintellectualpropertyestateisfundamentaltoourbusinesstoensurethatwecontrolandprotectourproductsindevelopmentandourtechnologies.In2007,webolsteredourproprietarypositioninimmunotherapythroughtheacquisitionofOxxonTherapeutics.Attheendof2007,ourestatecomprised46USand20Europeanissuedpatentscomparedto39and12,respectively,inthepreviousyear.During2007,weweregrantedfivepatentsintheUSAandfiveinEurope.Wehaveafurther76patentsissuedinotherjurisdictions,withfourofthesebeinggrantedin2007.Intotal,198patentapplicationsarecurrentlypending.Another24patentfamilies,coveringkeytechnologies,arelicensedfromthirdparties.

In2007andearly2008,respectively,weannouncedtwosignificantin-licensingdealsofintellectualproperty.Firstly,weextendedourrightstousetwoanti-angiogenicgenesforthetreatmentofcancer.Secondly,wesecuredexclusiverightsinthefieldofRNAinterferenceforthedevelopmentoftherapeuticsusingourLentiVectortechnology.Furthermore,inMarch2008,OxfordBioMedica,ourpartner,Sigma-Aldrich,andOpenBiosystemssettledapatentdisputeoveruseofourLentiVectortechnologyinresearchreagents.

OxxON ACQUISITION ADDS IMMUNOTHERAPY IPOuracquisitionofOxxonTherapeuticsinMarch2007hasaddedintellectualpropertyinimmunotherapytoourestate.ItsHi-8®PrimeBoosttechnologyisapioneeringmethodforproducingapotentandspecificT-cellimmuneresponseagainstdiseasedcells.Thisplatformhaspotentialapplicationsindevelopingprophylacticaswellastherapeuticvaccines.OxxonownedorhadexclusivelylicensedanumberofpatentfamiliescoveringthePrimeBoosttechnologyandthesepatentsandlicencesarenowpartofOxfordBioMedica’sestate.

ExTENDED RIGHTS TO ANTI-ANGIOGENIC GENESInJuly2007,wesignedalicenseagreementwithChildren’sHospitalBostontoextendourexistingrightsfortheanti-angiogenicgenes,endostatinandangiostatin,forthetreatmentofcancer.Thishasenabledustoinitiateanewanti-cancerdevelopmentprogramme,EndoAngio-GT.Wepreviouslylicensedrightstothesegenessolelyforthetreatmentofoculardiseases,andthegenesarebeingsuccessfullyemployedinRetinoStat.WeexpectthedevelopmentofEndoAngio-GTtobenefitfromsynergieswithRetinoStat.

NEW RIGHTS IN THERAPEUTIC RNA INTERFERENCEInJanuary2008,(asdescribedinTechnologyLicensingabove)welicensedNobelprize-winningRNAinterference(RNAi)technologyfromtheCarnegieInstitutionofWashingtonandtheUniversityofMassachusettsMedicalSchool.ThisagreementprovidesexclusiverightstouseourLentiVectortechnologyfortherapeuticRNAiapplications.WeplantodevelopLentiVector-basedRNAitherapies,bothindependentlyandthroughcollaborations.

KEY HIGHLIGHTS • Acquisition of Oxxon Therapeutics adds immunotherapy IP

• Extended rights to anti-angiogenic genes for treatment of cancer

• Secured rights to therapeutic RNAi technology using LentiVector system

Business Review: Operational ReviewIntellectual Property

Intellectual Property

USA

39

46

66

76

12

20

Europe Rest of World

2006

2007

10

20

30

40

50

60

70

80

0

Issued patents

Nu

mb

er o

f is

sued

pat

ents


06 July 2007

EndoAngio-GTLicencesecuredfromChildren’sHospitalBostontoanti-angiogenicgenesforcancer

Financial Review

FINANCIAL OVERVIEWTheTroVaxcollaborationwithsanofi-aventishastransformedtheGroup’sfinances.Atotalof£25.8millioncashwasreceivedin2007fromsanofi-aventis.Ofthisamount,£7.0millionwasrecognisedasrevenuein2007and£18.8millionisclassifiedasdeferredincome.Inaddition,theacquisitionofOxxonTherapeuticsLimited(Oxxon)inMarch2007for£16.0million,whichwassatisfiedbyOxfordBioMedicashares,broughtwithitcashandcashequivalentsof£3.8million.Overall,therewasanetincreaseincash,cashequivalentsandcurrentassetinvestmentsintheyearof£9.6million.

REVENUE £7,219,000 (2006: £760,000) Analysis of revenue

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

TroVaxandother5T4-basedcollaborationsGenedeliverylicencesLentiVectorlicencefortransgenicsOtherrevenue

6,970249

--

-51619153

-679145

-

-19221793

287-

5631

Total revenue 7,219 760 824 502 374

TheTroVaxcollaborationwithsanofi-aventisaccountsforthemajorityofrevenuein2007.Atotalof£25.8millioncashwasreceivedin2007,comprisinganinitialpaymentof£19.7million(#29million)oncommencementinMarch2007andthefirstdevelopmentmilestonepaymentof£6.1million(#9million)inSeptember2007.Revenuefromthesepaymentsisbeingrecognisedonastraight-linebasisovertheperiodtocertainclinicalevents,whichareanticipatedin2009and2010.£7.0millionwasrecognisedasrevenueinthe2007incomestatement.Theremaining£18.8millionisclassifiedasdeferredincome.

Revenuefromtechnologylicensingin2007amountedto£0.2millioncomparedto£0.8millioninthepreviousyear.Licencesthatprovideaccesstoourtechnologyforresearchusegenerateminimalrevenuebutpotentiallyfacilitatecollaborationsforproductdevelopment.SeveralleadingpharmaceuticalandbiotechnologycompaniesareusingourLentiVectortechnologyforresearch.Duringtheyear,OxfordBioMedicaandourpartner,Sigma-Aldrich,securedanothermajorcompanyasaresearchlicenseetoourLentiVectortechnology.Alsoin2007,ourcollaborationwithVirageninthefieldofaviantransgenicswasterminated,asViragenstreamlineditsexpenditure,andthereforenorevenuewasrecognisedfromthiscollaboration(2006:£0.2million).

Business Review: Operational ReviewFinancial Review

KEY HIGHLIGHTS • Revenue £7.2 million (2006: £0.8 million)

• Research & development costs increased 13% to £22.1 million (2006: £19.5 million)

• Loss for the year decreased 13% to £15.3 million (2006: £17.6 million)

• Positive operational cash flow £5.9 million (2006: Cash burn £15.9 million)

• year end cash, cash equivalents and current asset investments £38.1 million (2006: £28.5 million)


COST OF SALES £449,000 (2006: £80,000 INCLUDED IN OPERATING ExPENSES)

Cost of sales

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

Royaltypayableonthirdpartylicences 449 - - - -

Wehavelicensedanumberofthird-partytechnologiestoexpandouractivitiesandtoensurethatwehavefreedomtooperate.Mostlicencesincluderoyaltiespayableonsales,andsomeincluderoyaltiespayableonlicensingincome,includingup-frontandmilestoneincome.In2007,£0.4millionofroyaltieswererecognisedincostofsalesintheGroup’sincomestatement.Theamountsofroyaltypayableonrevenueinpreviousyearswerelower,andwereincludedinoperatingexpenses.

OPERATING ExPENSES £26,759,000 (2006: £22,222,000) Operating expenses

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

ResearchanddevelopmentcostsAdministrationexpensesexcludingreorganisationExceptionaladministrationexpenses

22,1424,282

335

19,5232,699

-

9,3272,865

-

9,0132,7911,568

10,7732,922

-

Total operating expenses 26,759 22,222 12,192 13,372 13,695

Operatingexpensesincreasedby20%in2007to£26.8million,reflectingincreasedemployeecosts,theacquisitionofOxxonandhigherlegalandprofessionalexpensesassociatedwithourpatentestateandthelicensingofTroVax.

RESEARCH & DEVELOPMENT COSTS £22,142,000 (2006: £19,523,000)

Research and development costs

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

Externalpreclinical&clinicalcostsIn-houseR&DcostsUKIn-houseR&DcostsUSA

11,8339,848

461

11,1537,983

387

1,7307,310287

1,9616,647

405

2,3866,3572,030

Total research & development cost 22,142 19,523 9,327 9,013 10,773

R&Dcostsincreasedby13%in2007to£22.1million.OurR&Dexpenditurecomprisesin-housecosts(staff,R&Dconsumables,intellectualproperty,facilitiesanddepreciationofR&Dassets)andexternalcosts(preclinicalstudies,GMPmanufacturing,regulatoryaffairs,andclinicaltrials).In2007,asin2006,externalpreclinicalandclinicalcostswerethelargestcontributorstoR&Dspend.Theyearwasalsoimpactedbytheadditionof£0.3millioninR&DcostsassociatedwithOxxon.



ADMINISTRATIVE ExPENSES £4,617,000 (2006: £2,699,000) Administrative expenses

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

AdministrativeexpensesbeforeexceptionalexpensesExceptionaladministrativeexpenses

4,282335

2,699-

2,865-

2,7911,568

2,922-

Total administrative expenses 4,617 2,699 2,865 4,359 2,922

Administrativeexpenseswere£4.6million,comparedto£2.7millionin2006.TheincreasewaspartlyduetotheacquisitionofOxxonandincreasedlegalandprofessionalcosts.In2007,therewasachargeof£0.3millionforexceptionalclosureandreorganisationofOxxon,and£0.1millionfornon-exceptionaladministrativeexpensesduringtheclose-downperiod.Legalandprofessionalcostsrelatedtothecollaborationwithsanofi-aventisandothernegotiationswere£0.4million.

HEADCOUNT Analysis of headcount

2007 Number

2006 Number

2005 Number

2004 Number

2003 Number

R&DheadcountUKatperiodendR&DheadcountUSAatperiodendAdministrationheadcountUK&USAatperiodend

672

13

612

10

592

10

551

10

436

12

Total headcount at period end 82 73 71 66 61

R&DheadcountUKaverageR&DheadcountUSAaverageAdministrationheadcountUK&USAaverage

662

12

602

10

581

10

502

10

451413

Total headcount average 80 72 69 62 72

Averageheadcountincreasedby11%in2007.Attheendoftheyearourtotalheadcountwas82.Themajorityofourstaffisbasedatourofficesandlaboratories,whicharelocatedatTheOxfordSciencePark,UK,andthreeemployeesarebasedattheofficesofourwhollyownedsubsidiary,BioMedicaInc,inSanDiego,USA.



FINANCE INCOME £2,087,000 (2006: £1,714,000) Finance income

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

Interestreceivable–bankOtherinterestreceivableInterestpayable–discountonprovisionsInterestpayableonoverduetax

2,1134

(30)-

1,743-

(29)-

95514

(20)(11)

1,171-

(13)-

711---

Total net finance income 2,087 1,714 938 1,158 711

AveragebalanceondepositintheyearAverageinterestondeposits

37,7315.58%

37,6894.62%

19,9554.77%

26,5704.40%

19,1183.62%

TheGroupplacesitscashinbankdepositsforperiodsofupto12monthsandgeneratesinterestonthosedeposits.Thematurityprofileofdepositsisintendedtomatchplannedpatternsofexpenditure.Theaveragebalanceondepositin2007wasapproximatelythesameasin2006at£37.7million.However,duetohigherinterestratesin2007,netinterestreceivablewasupby22%.

TheGrouphasnodebt,butisrecognisingasafinanceexpensethediscountonaleaseprovisionandadilapidationprovision.

TAxATION Tax credit

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

UKR&Dtaxcredit–currentyearUKR&Dtaxcredit–prioryearadjustmentOverseastaxpayable–currentyearOverseastaxpayable–prioryearadjustmentDeferredtax

2,526-

(60)(14)

-

1,70975

(38)16

-

1,175101(43)(23)

-

1,000(115)

(1)--

1,200(3)

--

6

Net tax credit 2,452 1,762 1,210 884 1,203

DebtorforR&Dtaxcredit 2,623 2,309 1,175 1,685 1,200

OurUKoperatingsubsidiariesareentitledtoclaimR&Dtaxcredit.Thecreditisbasedoncertaineligibleexpenses,towhicha50%mark-upandataxrateof16%areapplied.Undertheprevailingrules,theR&DtaxcreditcannotexceedthetotalamountofUKpayrolltax(IncomeTaxandNationalInsurance)paidintheyear.In2007,ourR&Dtaxcreditincreased48%to£2.5million,duetohigheremployeebenefitexpensesduringtheyear.Theyear-enddebtorforR&Dtaxcreditof£2.6millionrepresentstheestimatedtaxcreditforthecurrentyear,including£0.1millionthatisattributabletoOxxonintheperiodpriortoouracquisition.

TheGroup’sUSsubsidiarysuppliesservicestotheUKsubsidiarysubjecttoa5%mark-up,generatingalowleveloftaxableincomeintheUS.TheUStaxchargehasincreased,largelyduetoreducedaccesstocarry-forwardlosses.



LOSS FOR THE FINANCIAL YEAR £15,289,000 (2006: £17,626,000)TheGroup’slossfortheyearnarrowedto£15.3millionfrom£17.6milliondespitehigheroperatingexpensesin2007.

INTANGIBLE ASSETS £14,910,000 (2006: £1,665,000)TheOxxonacquisitionhasresultedinasignificantincreaseinintangibleassets.Theprincipalacquiredintangibleswerein-processresearchanddevelopmentonthemelanomavaccineHi-8MEL,andthePrimeBoostpatentportfolio.Thefairvalueoftheseassetswas£13.1million.Inaddition,purchasedintellectualpropertyrightsof£0.2millionwerecapitalised.

TRADE AND OTHER RECEIVABLES £4,672,000 (2006: £2,202,000) Trade and other receivables

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

TradereceivablesAccruedincomeOtherreceivablesPrepaidclinicaltrialexpensesPrepaymentsOthertaxreceivable(VAT)RentdepositonUSlease

9134

1,129969

1,917414118

241223765

-603220150

11993

676-

442242205

162-

619-

499124214

--

374-

442107263

Total trade and other receivables 4,672 2,202 1,777 1,618 1,186

Tradeandotherreceivables(debtors)were£2.5millionhigherin2007thaninthepreviousyear.Theincreaseinotherreceivablesisprincipallyduetohigherbankinterestfixed-termdeposits.Prepaidclinicaltrialexpensesarematerialsforclinicaltrialsnotyetshippedtosite,andadvancepaymentstoclinicalsites.

TRADE AND OTHER PAYABLES £9,557,000 (2006: £4,671,000) Trade and other payables

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

TradepayablesAccruals–clinical&preclinicalcostsAccruals–otherOthertaxationandsocialsecurity(mostlypayrolltaxes)

2,9483,5232,668

418

1,5791,782

995315

397721694263

351537553219

310483513195

Total trade and other payables 9,557 4,671 2,075 1,660 1,501

Therewasanincreaseintradeandotherpayables(creditors)in2007to£9.6millionfrom£4.7millioninthepreviousyear.Thisincreasewasprincipallyassociatedwithourexpandedclinicaldevelopmentactivities.



DEFERRED INCOME £18,913,000 (2006: £92,000) Deferred income

2007 £’000

2006 £’000

2005 £’000

2004 £’000

2003 £’000

TroVaxdeferredincome(current)Otherdeferredincome(current)TroVaxdeferredincome(non-current)

11,44090

7,383

-92

--

-105

-

-81

--

---

Total deferred income 18,913 92 105 81 -

TheGroup’sdeferredrevenueattheend2007wasboostedto£18.9million.Deferredrevenuereflectspaymentsreceivedunderourlicensingagreementsthatexceedtheamountofrecognisedrevenue.Receiptsin2007fromtheTroVaxcollaborationwithsanofi-aventisarebeingrecognisedasrevenueoveratwotothree-yearperiod.Theamountexpectedtoberecognisedasrevenuein2008is£11.4million.

SHARE ISSUESAttheendof2007,theGrouphad534,655,843sharesinissue.Duringtheyear,sharesissuedforcashraised£0.3millionbeforeexpensesfromtheexerciseofshareoptionsandothersubscriptions.Atotalof31,771,246shareswithavalueof£16.0millionwereissuedintheacquisitionofOxxon.

CASH AND DEPOSITS £38,147,000 (2006: £28,543,000)Thetotalofcash,cashequivalentsandcurrentassetinvestmentsattheendof2007was£38.1million,comparedto£28.5millioninthepreviousyear.

OPERATIONAL CASH GENERATED £5,883,000 (2006: CASH BURN £15,876,000)TheformatofthecashflowstatementunderIFRSdoesnotmakeiteasytoassesstheoveralllevelofoperationalcashflowsthathavetraditionallybeenakeyperformanceindicatorfordevelopment-stagebiotechnologycompanies.However,ausefulmeasurecanbecalculatedbytakingtheaggregateofcashfromoperatingactivities,proceedsofsaleofproperty,plantandequipmentandpurchasesofproperty,plantandequipmentandintangibleassets.Onthismeasure,therewasapositiveoperationalcashflowof£5.9millionin2007,incontrasttoa(negative)cashburnin2006of£15.9million.Thekeydifferencein2007wasthereceiptof£25.8millionfromsanofi-aventis.Inaddition,cashandcashequivalentsof£3.8millionwereacquiredwithOxxon.

FINANCIAL OUTLOOKIn2007,weconductedastrategicreviewofourdevelopmentpipelinetoenableustofocusinvestmentonopportunitiesthatcouldgeneratethegreatestvalue.Thepresentlevelofoperationalexpensesisexpectedtobemaintainedthrough2008basedonourcurrentandplanneddevelopmentactivities.Wereachedtheseconddevelopmentmilestoneinouragreementwithsanofi-aventisinFebruary2008,whichtriggeredapaymentof€10million.Wewillcontinuetomonitortheinvestmentrequirementsforeachofourprogrammesandwillexpandourinternaloperationsasrequiredtomeetourobjectives.Ourfinancialgoalistobeprofitablewithin12monthsofregistrationofourfirstproduct,whichcouldbein2009followingasuccessfuloutcomefromthePhaseIIITRISTstudyofTroVaxinrenalcancer.



Outlook

Withafocusedstrategyandastrongfinancialposition,wearewellplacedtodeliveronourobjectivesfor2008.Wearedelightedtohaverecentlytriggeredafurtherdevelopmentmilestonepaymentinourcollaborationwithsanofi-aventis,followingthethirdsuccessfulreviewofthePhaseIIITRISTstudybytheDSMB.Weexpectshortlytocompleterecruitmentforthistrial.Overthenextfewyears,sanofi-aventisisplanningasignificantinvestmentintheTroVaxprogramme.OurkeygoalsforTroVaxin2008includecontinuedmanagementoftheTRISTstudyinrenalcancer,andsupportforsanofi-aventisasitbroadensthePhaseIIIprogrammeintocolorectalcancerandpreparesforthecommercialisationoftheproduct.

ProSavin,ournoveltreatmentforParkinson’sdiseaseispotentiallythenextblockbusteropportunityinourpipeline.ThePhaseI/IItrialisunderwayandweaimtoreportpreliminarysafetyandefficacydatafromthestudyduringthisyear.Alsoin2008,weaimtakeRetinoStattowardsclinicaldevelopmentinwetAMD.

Aspartofourstrategy,wewillcontinuetopursuecollaborationopportunitiesforcertainprogrammes.In2008,weintendtomoveforwardwithourcollaborationdiscussionsforMetXiaanditsassociatedGDEPTtechnologyforlocalisedcancertherapy.Also,havingsecuredaproprietarypositioninthefieldoftherapeuticRNAinterference,weplantoexplorepartneringopportunitiesthatcouldprovideadditionalnear-termrevenue.

Insummary,wearelookingforwardtoanexcitingperiodforOxfordBioMedica,whichcouldseebothTroVaxandProSavinreachkeyinflexionpointsintheirdevelopment.Bothproductsaddresslargemarketsandpotentiallyprovidepatientswithnewsafeandeffectivetreatmentoptions.Hence,inourview,bothproductspresentsubstantialvaluepropositions.

Business Review: Operational ReviewOutlook


25 July 2007

TroVaxFirstsuccessfulDSMBreviewofPhaseIIITRISTstudyinrenalcancer

Business Review: Operational ReviewOutlook


Business Review: Governance and Responsibility

BuSINESS REVIEw

GOVERNANCE AND RESPONSIBILITy

11 September 2007

TroVaxFirstmilestoneundersanofi-aventisagreementachieved5


47

49

Corporate Governance Statement

Corporate Social Responsibility

PATRICE MAUREIN MAUREIN / CIANFAGLIONE & GRAVEREAUx ARCHITECTES

Corporate Governance Statement

APPLICATION OF THE PRINCIPLES IN THE FRC COMBINED CODE ON CORPORATE GOVERNANCEThepolicyoftheBoardistomanagetheaffairsofOxfordBioMedicatothehigheststandardsofcorporategovernanceandinaccordancewiththeprinciplesofgoodgovernanceandthecodeofbestpracticeassetoutintheFRCcombinedcodeoncorporategovernanceissuedinJune2006(the‘CombinedCode’(2006)).

TheBoardconsidersthatithascompliedthroughouttheyearwiththeprovisionsforcompaniessetoutinPart2oftheCombinedCode,unlessotherwiseindicatedbelow.

COMPLIANCE WITH THE PROVISIONS OF THE COMBINED CODETHE BOARDOxfordBioMedicaisledandcontrolledbyaBoardconsistingofthreeNon-ExecutiveDirectorsandsixExecutiveDirectors.Assetoutintheirbiographiesonpages53and54,theDirectorshavesignificantexperienceofthemanagementanddevelopmentofabiopharmaceuticalgroupandofpharmaceuticalresearchandthenewdrugdevelopmentprocess.Thereisacleardivisionofresponsibilities,setoutinwriting,betweentheChairmanandChiefExecutiveOfficer.TheBoardconsidersthattheNon-ExecutiveDirectors,includingtheChairman,areindependentofmanagement.ProvisionA2.2oftheCombinedCoderequiresthattheChairmanshouldmeetthe

independencecriteriaonappointment.TheChairmanwasgranted200,000shareoptionsshortlyafterhisappointmentasChairmanin2001,whichiscontrarytotherequirementsforindependencesetoutinprovisionA.3.1.TheBoarddoesnotconsiderthatthisaffectstheChairman’sindependence.ProvisionA.3.2oftheCombinedCoderequiresasmallcompanytohaveatleasttwoindependentNon-ExecutiveDirectors.TheCompanyhasfullymetthisrequirement.

TheBoardmeetsregularlyandatleasteighttimesperyear,withmeetingdatesagreedforeachyearinadvance.ThereisaformalscheduleofmattersreservedtotheBoardforitsdecision.Theschedulecoversseniorappointments,businessstrategyandbudgets,substantialtransactions,contractsandcommitments,financingtreasuryandriskpolicies,andtheapprovalofcertaindocumentsandannouncementsincludingtheAnnualReport.ThereisfrequentcontactbetweenExecutiveandNon-ExecutiveDirectors,andeachDirectorissuppliedonatimelybasiswithfinancialandoperationalinformationsufficientfortheBoardtodischargeitsduties.AllDirectorshaveaccess,asrequired,toindependentprofessionaladvice.During2007therewerenineboardmeetings.TheattendanceofindividualDirectorsatboardmeetingswas:MarkBerningersix;PeterJohnsonnine;AlanKingsmaneight;SusanKingsmansix;MikeMcDonaldseven;PeterNolansix;NickRodgersnine;AndrewWoodnine;NickWoolfnine.

Asappropriate,theBoardhasdelegatedcertainresponsibilitiestoboardcommittees,whichoperatewithindefinedtermsofreferenceandconstitution.ThereisaRemunerationCommittee,thereportandmembershipofwhichisonpages60to64.TheRemunerationCommitteemeteighttimesin2007.Allmeetingswereattendedbybothmembers.

ThereisalsoanAuditCommittee,whichconsistsoftwoNon-ExecutiveDirectors:DrPeterJohnson(chairman)andNickRodgers.ProvisionC.3.1oftheCombinedCoderequirestheAuditCommitteeofasmallcompanytohaveatleasttwomembers,bothofwhomareindependentNon-ExecutiveDirectors.TheBoardconsidersthisrequirementtohavebeenmet,eventhoughDrPeterJohnsonisalsoChairmanoftheCompany.WeconsiderthatbothmembersoftheAuditCommitteepossessrecentandrelevantfinancialexperience.TheAuditCommitteehaswrittentermsofreferencewhichhavebeenpublishedontheCompany’swebsite.ItmonitorstheintegrityofthefinancialstatementsofOxfordBioMedicaandanyformalannouncementsrelatingtotheCompany’sfinancialperformance,reviewingsignificantfinancialreportingjudgementscontainedinthem.Itreviewsourinternalfinancialcontrolsandtheinternalcontrolandriskmanagementsystems.ItmakesrecommendationstotheBoard,forittoputtoshareholdersfortheirapprovalingeneralmeeting,inrelationtotheappointment,re-appointmentandremovaloftheexternalauditors,andapprovestheremunerationandtermsofengagementoftheexternalauditors.

Theindependentauditorscontinuetooperateprocedurestosafeguardagainstthepossibilitythattheauditors’objectivityandindependencecouldbecompromised.Thisincludestheuseofqualityreviewpartners,useofatechnicalreviewboard(whereappropriate)andannualindependenceprocedures,includingconfirmationsbyallstaff.TheauditorsreporttotheAuditCommitteeonmattersincludingindependenceandnon-auditfeesonanannualbasis.Inaddition,theroleoftheauditpartnerisrotatedonaperiodicbasis.TheAuditCommitteereviewsandmonitorstheexternalauditors’independenceandobjectivityandtheeffectivenessoftheauditprocess,takingintoconsiderationrelevant

Business Review: Governance and Responsibility Corporate Governance Statement


UKprofessionalandregulatoryrequirements.TheAuditCommitteeapprovesallnonauditservicesprovidedbytheCompany’sauditor.Aspartofthisapprovalprocess,theAuditCommitteeensuresthattheprovisionofnonauditserviceswillnotimpacttheauditors’objectivityandindependence.ItreportstotheBoard,identifyingmattersinrespectofwhichitconsidersthatactionorimprovementisneeded,makingrecommendationsastothestepstobetaken.

OxfordBioMedicahasapublicinterestdisclosurepolicy,andtheAuditCommitteeisresponsibleforreviewingarrangementsbywhichourstaffofmayraiseconcernsaboutpossibleimproprieties.Italsoreviewsfromtimetotimetheneedforaninternalauditfunction.AttheCommittee’sinvitationorrequest,theChiefExecutiveOfficerandotherDirectorsmayattendmeetingsoftheAuditCommittee.TheAuditCommitteemettwicein2007.Bothmeetingswereattendedbybothmembers,withtheChiefFinancialOfficerpresentattheCommittee’sinvitation.

InDecember2007theBoardagreedtoformaNominationCommitteecomprisingNickRodgers(chairman),DrPeterJohnsonandMarkBerninger.Priortothattime,appointmentofDirectorswasconsideredbythewholeBoard.NonewBoardappointmentsweremadein2007.

Inaccordancewiththearticlesofassociation,ateachannualmeetinganyDirectorwhohasservedforthreeyears,andonethirdoftheotherDirectors(oriftheirnumberisnotamultipleofthreethenumbernearesttobutnotexceedingonethird)mustretirefromofficebyrotation.

InaccordancewithprovisionA.6oftheCombinedCode,theperformanceoftheBoardandthecommitteesisreviewedannually,throughtheuseofconfidentialquestionnairescompletedbyalltheDirectors.

TheBoardretainsoverallresponsibilityfor,andcontrolof,theCompany.Management

isconductedbytheChiefExecutiveOfficerandtheExecutiveDirectorswho,togetherwithotherseniormanagers,formtheseniormanagementteam.ExecutiveDirectorssitonthefollowingcommitteesandmanagementgroups:theseniormanagementgroup,theexecutiveresearchgroup,theclinicaldevelopmentgroup,thesafetycommittee,thecommercialdevelopmentcommittee,thequalitycommitteeandtheinternalpatentgroup.Bythismeans,adirectandongoinglinkexistsbetweenthedeterminationofstrategybytheBoardandtheexecutionoftheCompany’spoliciesbyouremployees.

SCIENTIFIC ADVISORY BOARDTheScientificAdvisoryBoard(SAB)isabodyofindependentexpertscomprisingamultidisciplinarygroupofleadinginternationalscientists.ItsroleistoassistOxfordBioMedicawiththeassessmentofourexistingandpotentialresearchanddevelopmentprojects.TheSABprovidesaccesstoalargeacademicandindustrialnetworktoaddvaluetoourprojects,throughcollaborationwhereappropriate,andbyevaluatingnewstrategiesandcompetitors.BiographicaldetailsoftheSABareonpage55.

RELATIONS WITH SHAREHOLDERSWeattachahighprioritytoeffectivecommunicationwithbothprivateandinstitutionalshareholders.TheAnnualReportcontainsadetailedBusinessReviewandadescriptionofourcandidateproductsandofourresearchanddevelopmentportfolio.AnInterimBusinessReviewisalsoprovidedwiththehalf-yearreportsenttoallshareholders.WiththesedocumentsandtheCompany’spressreleases,weseektopresentabalancedandunderstandableassessmentofOxfordBioMedica’spositionandprospects.Ourwebsite(www.oxfordbiomedica.co.uk)providesextensiveotherinformationabouttheCompany.

TheAnnualGeneralMeetingistheprincipalforumfordialoguewithprivateshareholders.AbusinesspresentationismadebytheChiefExecutiveOfficerandthereisanopportunityforshareholderstoputquestionstotheDirectors.Wemaintainregularcontactwithinstitutionalshareholdersthroughaprogrammeofone-to-onevisitsandbriefings.

INTERNAL CONTROLTheDirectorsareresponsibleforOxfordBioMedica’ssystemofinternalcontrolandforreviewingitseffectiveness.Suchasystemisdesignedtomanage,ratherthaneliminate,theriskoffailuretoachievebusinessobjectives,andcanonlyprovidereasonable,andnotabsolute,assuranceagainstmaterialmisstatementorloss.Asdescribedabove,theactiveinvolvementoftheExecutiveDirectorsintheourmanagementcommitteesallowstheBoardcontinuallytomonitorandassesssignificantbusiness,operational,financial,complianceandotherrisks,andtoreviewtheeffectivenessofinternalcontrol.ThisisreinforcedbytheprovisiontotheBoardbytheExecutiveDirectorsofregularanddetailedreportscovering,inter alia,financing,investorrelations,researchanddevelopment,clinicaldevelopment,financialperformance,commercialinteractionsandintellectualpropertymanagement.InadditiontheBoardannuallyreviewstheeffectivenessofallsignificantaspectsofinternalcontrol.Thereviewin2007didnothighlightanymattersthatrequirereportingtoshareholders.

OxfordBioMedicahasproceduresinplacewhichincorporatetherecommendationsoninternalcontrol:guidancefordirectorsontheCombinedCode(Turnbull).

INTERNAL AUDITWedonotconsiderthataninternalauditfunctionisappropriategiventhecurrentscaleandstructureofouroperations.AsrequiredbytheCombinedCode,theBoardreviewstheneedforaninternalauditfunctionfromtimetotime.

Business Review: Governance and ResponsibilityCorporate Governance Statement


CorporateSocialResponsibility(CSR)requiresconsiderationoftheeconomic,socialandenvironmentalimpactsofourbusinessactivities.TheBoardrecognisesthepotentialbenefitsofCSRforthecompetitivenessofOxfordBioMedicaandencouragesacultureofcontinuousimprovementinCSR-relatedissues.WehavesetspecificpoliciesandgoalsthatcoverkeyaspectsofCSRandwestrivetooperateatthehighestlevelofintegrity.

TheCSRreportdescribestheworkingpracticesadoptedbyOxfordBioMedicathatarerelevanttoouremployees,healthandsafetyintheworkplace,ourexternalrelationships,theenvironment,andthecommunity.Wehavealsohighlightedsignificantchangesandnewinitiativesthathavebeenimplementedin2007.

EMPLOYEESWerecognisetheimportanceofattracting,recruiting,motivatingandretainingahighlyskilledanddiverseworkforceandhaveemploymentpoliciesthataredesignedtofollowbestemploymentpracticesandthatrecognisetherightsofallemployees.Weaimtodevelopandmaintainamotivatedandprofessionalworkforcethroughcareerdevelopment,performanceevaluationandfeedback,trainingandpromotion.

Trainingisgiveninawidevarietyofwaysincludingon-the-jobcoachingandin-houseor

externalcoursestomeetcurrentandfuturejobrequirements.Ourstaffappraisalprocesscontinuestofunctionwell,byprovidingaformalprocessforsettingobjectivesinconsultationwitheachindividual,togetherwithregularperformancereviewsthroughouttheyear.Thisprocessenablesstaffatalllevelstoconsidertheirtrainingneedsandtodiscussnewopportunitieswiththeirmanager.

Ourorganisationalstructureisdesignedtopromoteinternalcommunicationthroughvariousforums.Research,clinicalandcorporateteamshaveregularmeetings,whichincludemembersofseniormanagement,enablingbroaddisseminationanddiscussionofrelevantissues.Variousteamandcompany-widesocialeventsandactivitiesareorganisedthroughouttheyearaspartofourteam-buildingprogramme.

WehavepoliciescoveringmaternityandpaternityconsistentwithstatutoryrequirementsintheUK.Employeesareeligibleforanumberofbenefitsaspartoftheiremployment,includingapersonalpensionplan,achildcarevoucherscheme,ahealthcashbenefitplanand,forcertainemployees,aperformance-relatedbonus.Weaimtoprovideanappropriatework/lifebalanceforemployees,includingflexibleworkingpractices,wherethisispracticalandconsistentwiththeCompany’sgoals.Inaddition,weoperateaShareOptionscheme,andusuallygrantoptionstoemployeeswhen

theyjoinandperiodicallythereafter.Inearly2008,weintroducedanewstaffdiscountschemeforallemployeesatawiderangeofretailers.

In2007,weexpandedourstaffcountto82from73.Femaleemployeesrepresent63%ofallemployees,and43%ofmanagement.Wecontinuetoaddtoourteam,astheCompanymovestowardscommercialisingourproductsandexpandingouractivities,toensurethatwehavetheappropriateskillbasetoaddressthesechallenges.Wearecommittedtoprovidingequalopportunitiesforallanddonotdiscriminateagainstemployeesonthegroundsofage,gender,sexualorientation,maritalstatus,race,colour,ethnicornationalorigins,religion,creedorbelief,responsibilitiesfordependants,disabilityoroffendingbackground.

HEALTH AND SAFETYEffectivehealthandsafetyisintegraltoourbusinessactivities.Wehavestrictpoliciestominimisetheriskofaccidentsintheworkplaceoremployment-relatedill-health.Thesepoliciescoverworkingpracticesfortheoperationofequipmentandhandlingofbiological,chemicalandradioactivehazardousmaterials.Therequirementsforinstructionandtraining,particularlyforlaboratory-basedpersonnelarecontinuouslyunderreview.InAugust2007,weinvitedanexternalHealthandSafetyAuditortoreviewthein-houseHealthandSafetyManagementSystem.The

KEY HIGHLIGHTS • Expanded staff count to 82 from 73

• Health and Safety Auditor concluded that our management system is robust

• MHRA GMP inspection identified no major or critical issues

KEY OBJECTIVES • Support initiative by The Oxford Science Park to gain ISO14001 certification

• Quantify the amount of cans and plastic bottles recycled

Business Review: Governance and Responsibility Corporate Social Responsibility

Corporate Social Responsibility


Business Review: Governance and ResponsibilityCorporate Social Responsibility

auditor’sreportconcludedthat,‘TheHealthandSafetyManagementSystemisrobustanddoesnotrequireanysignificantchanges’.WehaveanexcellentsafetyrecordandhaveneverbeenrequiredtoreportanaccidenttotheUKHealthandSafetyExecutiveoritsUSequivalent.GivenitsimportancetotheCompany,healthandsafetyissuesarerepresentedatBoardlevel.

Ourinternalhealthandsafetyrepresentativesattendmeetingsandworkshopsonaregularbasis,includingthoseorganisedbytheUKGovernment’sHealthandSafetyExecutive,toensurethatweremainuptodatewithchangestopoliciesandregulations.OurQualityManagementSystemensuresgoodpracticeforallofourlaboratory-basedactivities,includingresearch,developmentandmanufacturing.Aspartofthissystem,thelaboratoriesareauditedroutinely.ArecentMHRAGMPinspectionoftheCompanyidentifiednomajororcriticalissues.

ExTERNAL RELATIONSHIPSOurexternalstakeholdersincludesuppliers,advisors,shareholders,patients,healthcareprofessionals,partnersandlicensees.Theserelationshipsareafundamentalaspectofourbusinessactivities.Wearecommittedtointeractingwiththesethirdpartiesinanethicalmanner,andtoensuringthattherelationshipsaremaintainedataprofessionalandappropriatelevel.OurinternalproceduresfordealingwiththirdpartiesarereviewedannuallybytheCompany’sexternalauditors.

Wehaveapolicyforthemanagementofclinicaltrialstoensurecompliancewithappropriateguidelinesandlegislation.Ourwebsites(www.oxfordbiomedica.co.ukandwww.trovax.co.uk)provideinformationonourongoingclinicaltrials,andincludecontactdetailsforthecentresinvolved,anddetailsofclinicalresultsandscientificpublicationsthatrelatetoourproductsandtechnologies.WealsolistourUS-basedtrialsonaUSgovernment-sponsoredwebsite

(www.clinicaltrials.gov)thatprovidesinformationaboutfederallyandprivatelysupportedclinicalresearchinhumanvolunteers.

TheChiefExecutiveandExecutiveDirectorshaveprimaryresponsibilityforcommunicationwithshareholdersandrelatedstakeholders.Wealsousetheservicesofexternalfinancialandcorporatecommunicationsagencies.Thewebsiteincludesnewsannouncementsandfinancialandshare-relatedinformation.Weuseweb-castfacilitiestoprovidebroadaccesstorelevantpresentationssuchasanalystbriefingsandinvestorconferences.Weaimtodisseminateinformationinatimely,reliableandcomprehensivefashion,andcomplywiththerulesandguidelinesoftheUKListingAuthorityforacompanyontheOfficialListinrelationtothereleaseofprice-sensitivenewsandotherdisclosures.

ENVIRONMENTWearecommittedtotheprotectionoftheenvironment.Weregularlyreviewourenvironmentalpolicy,objectivesandguidelines,whichrangefromwaterandelectricityconsumptiontorecyclingandwastemanagement.In2008,weplantosupportaninitiativebyTheOxfordScienceParktogainISO14001certification.ISO14001isaninternationallyacceptedstandardthatspecifiestherequirementsforanorganisation’sEnvironmentalManagementSystem.Itsetsrequirementsforenvironmentalpolicy,implementationandoperation,checkingandcorrectiveaction,andmanagementreview.Again,givenitsimportancetotheCompany,environmentalissuesarerepresentedatBoardlevel.

Wehaveupdatedourtravelpolicywiththeaimofreducingourtravel-relatedcarbonfootprint.Undertherevisedpolicy,employeesareencouragedtousepublictransportratherthantheirownvehicleand,wherereasonablypracticable,touseweb-castsandvideoconferencingratherthantravellingtoexternalmeetings.

Intermsofrecycling,wecurrentlyrecyclethemajorityofourcardboardandover75%ofourofficepaper.In2007,werecycledapproximatelyfivetonnesofcardboardandfivetonnesofofficepaper.In2008,weaimtoquantifytheamountofcansandplasticbottlesrecycledaspartofTheOxfordSciencePark’sinitiativeforISO14001certification.Intermsofelectricityusage,ourpolicyencouragesemployeestoturnoffallnon-essentialequipmentattheendofeachworkingday.

Wecomplywithallcurrentregulationsinourprocessingoflaboratorywaste,whichincludesthedecontaminationofallbiologicalmaterialonsitetopreventaccidentalreleaseintotheenvironment.Weusequalifiedlicensedcontractorsforthecollectionanddisposalofchemicalandradioactivewasteanddecontaminatedbiologicalmaterials.Nolaboratorywastegoestolandfillsites.

Insummary,weregularlyreviewandupdateourpracticeswiththeaimofreducingtheCompany’senvironmentalimpact.Weadheretopublishedguidelinesforbestpractice,includingthosepublishedbytheUKGovernment’sDepartmentforEnvironment,FoodandRuralAffairs.

COMMUNITYWerecogniseourresponsibilitytoandthebenefitsfromsupportingandparticipatinginboththelocalandwidercommunities.

Weworkcloselywithseveralcharitableanddisease-specificpatientorganisationsthatarerelevanttoourdevelopmentprogrammes.Weuselocalsuppliers,wherepractical,formaintenance,repairsandotherservices.Weareanactivememberofthetenants’forumofTheOxfordSciencePark,andemployeesparticipateinsocialandleisureactivitieswithinTheOxfordScienceParkandthelocalcommunity.


10 December 2007

TroVaxSecondsuccessfulDSMBreviewofPhaseIIITRISTstudyinrenalcancer


Business Review: Governance and Responsibility Corporate Social Responsibility

strategy

Documents

uncertainties business

development efforts

whichisatargeted link

hybrid business model

collaborative research

proprietary technologies

inhouse investment

product sales