Cyprotex PLC AR 2004 - ADME-Tox CRO

Partnering PharmacokineticTechnology

Cyprotex PLCAnnual Report & Accounts 2004

Cyprotex AR cover artwork 4/4/05 3:30 pm Page 3

Cyprotex Report & Accounts 2004

Pharmacokinetics is the study of the concentration of a compound in the body over time and is a fundamentalaspect of drug discovery and development. A poorpharmacokinetic profile can prevent a compound from being an effective therapy or even cause a compound to reach toxic levels in the body.

Cyprotex was founded in 1999 and listed on the AlternativeInvestment Market of the London Stock Exchange in 2002. It has now established Partnerships with over 30 Pharmaceuticaland Biotechnology companies worldwide to help themselect, prioritise and improve their drug candidates.

01 Partnering pharmacokineticsFinancial highlights

02 About pharmacokinetics and toxicity04 Driving the pharmacokinetic market06 Chairman and CEO’s review10 Financial review11 Board of directors12 Report of the directors15 Report on directors’ remuneration 17 Statement of directors’ responsibilities 18 Independent auditors’ report 19 Consolidated profit and loss account

Consolidated statement of total recognised gains and losses20 Balance sheets 21 Consolidated cash flow statement 23 Notes to the accounts 35 Notice of annual general meeting

IBC Shareholder informationDirectors and advisors

Cyprotex AR Proof 10 artwork 4/4/05 2:12 pm Page 2


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Partnering pharmacokineticsOur computational and experimental technologies andexpertise are enabling our Biotechnology and PharmaceuticalPartners to understand and address the issues that affecthow their compounds are processed by the body. Our aim isto enable drug discovery researchers to improve the qualityof their compounds from the earliest stages of drug discovery.

Financial highlights• Revenue for the year was £2.12 million, against £1.05 million for the comparable

period in 2003, representing more than a 100% year-on-year increase.

• Gross profits more than doubled to £1.7 million, up from £0.8 million in 2003. Gross margins rose to 80%, compared with 76%.

• The loss on ordinary activity after taxation was £1.3 million, down from a loss of £1.9 million in 2003, representing a reduction of more than 30% year-on-year.

• A rapidly expanding customer base has ensured the Group does not have a high dependence on any single client, the largest of which contributed less than 14% of total revenues in 2004.

Key achievements in the year• Acceptance and rapid uptake of Cloe Screen® service offerings.

• Market acceptance of Cloe PK® as a valuable tool in drug discovery.

• Major expansion of the customer base with additional Pharmaceutical and Biotechnology companies utilising Cloe Screen® and Cloe PK® technology and services.

• Expansion of Cloe Screen® services with investment in people and equipment to meet increased demand and expand portfolio of services.

Turnover£’000

CompoundScreens000’s

Capitalinvestment£’000

02*

648

1,053

2,117

03 04 02*

3

20

59

03 04 02*

1,180

4

545

03 04*14 month period


About pharmacokinetics and toxicityHow a compound is absorbed, distributed, metabolised and excreted from thebody will collectively determine its time course in the major tissues, organs andblood – its pharmacokinetic profile. Undesirable (toxic) drug side effectsencompass a wide range of problems that can potentially expose patients todangers or discomfort as a result of taking medication. Each of these components(known as ADMET) can be assessed using computational and experimentaltechnologies at Cyprotex.

A

D

M

E

Two major questions asked by drug researchers during thediscovery and development of new drugs are:

Will my compound be biologically effective and safe when given to a patient?

and

If my compound isn’t biologically effective or is potentially toxic, whatshould I do next?

Cyprotex is focused on providing technology and services that enableour Partners to evaluate their compounds during early drug discovery –where there is greatest opportunity for improving the potential of theircompounds and eradicating undesirable side effects.

Toxicity testing at CyprotexDrugs can cause adverse reactions in patients for a variety of reasons.For example, some drugs prevent liver enzymes from processing otherco-administered drugs properly - leading to adverse drug reactionswhen a patient takes more than one drug at a time. Other drugs caninduce arrhythmia because they impair the proper function of animportant ion channel in the heart. These examples head the list ofcommon toxicity issues that prevent a drug development program frombeing successful or require already marketed drugs to be withdrawn.These toxic effects can be identified in the very earliest stages ofresearch in partnership with Cyprotex.

ExcretionMetabolismDistributionAbsorptionPassage of compoundthrough the gastro-intestinal tract. Ability topermeate the gut walldiffers from compound to compound and cangovern its success as an oral medication.

Rate and extent of acompound’s passage into and out of the majortissues, organs and bloodcomponents. How acompound distributesthrough the body willaffect its efficacy.

How a compound isbroken down in the body – predominantly by the liver.

How a compound iscleared from the body.The speed of excretion is a determinant of howlong a compound residesin the body.

ToxicityUndesirable side effectsleading to patient non-compliance or evendeath. A wide variety ofcauses require a large numberof specialised screens toidentify toxicity issues.


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Products and TechnologyCyprotex’s Cloe technologies enable drug discovery scientists to determine the likely outcome of administering compounds to humans or animals andtherefore whether they have the combination of properties needed to make a successful drug.

Cloe – Cyprotex Lead Optimisation Engine A suite of services and technologies to support the early evaluation ofpharmacokinetics and toxicology for drug discovery.

Cloe PK® Cloe Screen® Cloe Partnerships®

Cloe PK® is an innovative software product that enables drug discovery scientists to predict the level and duration of a drug in the body.

• Provides quick and easy understanding of pharmacokinetics to guide drug design, selectionand optimisation.

• Integrates ADME experimental data and therebyenables better informed decision-making than individual data alone.

• Supports productivity improvements and cost savings by identifying problematic issues early.

• Provides detailed understanding of the issues that govern drug exposure levels – something which is not feasible in animal studies.

Cloe Screen® is a cost-effective, fast turnaround experimental service that delivers critical information on the absorption, distribution,metabolism, excretion, toxicity and chemical properties of pharmaceutical compounds.

• Highly reproducible, accurate data – validated and used by AstraZeneca, Solvay,Roche, and over 30 other Pharmaceutical and Biotechnology companies.

• Delivered within 10 working days to fit in with the make-test timelines in drug discovery.

• Highly cost effective due to our emphasis on high throughput engineering.

• Attention to good quality customer care, with PhD-trained Principal Scientists on hand to explain results and suggest the most appropriateexperimental strategy.

Combining Cloe technologies to support the selection and optimisation of compounds for Biotechnology and Pharmaceutical Partners.

• Using Cyprotex experimental and computational technologies and expertise to address particular project issues.

• Includes Cloe Screen® experimental service with opportunity to adapt experimental protocols or develop new assays that are tailored to Partner’s specific project needs.

• May also incorporate Cloe PK® for integrating and interpreting experimental ADME data.


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Driving the Pharmacokinetic MarketThe drug discovery industry recognises a need to eradicate problem compoundsearlier in the drug discovery process. Estimates range from $800M to $1.2BN asthe cost of bringing a new drug to the market – and a large part of this cost isdown to late stage failures in clinical trials. Technologies that can identify problemsbefore significant time and money has been spent will be critical in the industry’sdrive towards improved productivity. If problems are identified as early as thedrug design and optimisation stages, a larger range of options exists foreradicating them.

Cloe Screen®/Cloe PK®PartnershipOur Partner subscribes to Cloe PK® which isinstalled at their premises. In addition, Cyprotexdelivers Cloe Screen® data on a monthly basison compounds from different drug discoveryprograms within the Partner organisation.

Cyprotex delivers data on 7 key properties fora monthly batch of Partner compounds fromits Cloe Screen® service.

Data is delivered within 2 weeks from the receiptof compounds in a format that is compatiblewith Cloe PK®.

A PhD-trained Cyprotex Project Manager deliversCloe Screen® data along with a summary andinterpretation of the results, highlighting anyissues that may have been identified and is onhand to discuss results. Partner drug researchersuse Cloe PK® to perform problem-solvingsimulations and compound ranking using thedata obtained from Cyprotex's Cloe Screen®

service. Regular program meetings betweenPartner and Cyprotex ensure that Partnerresearchers remain satisfied with the servicethey receive and provide input into Cyprotex'songoing product development.

ResultPartner receives comprehensive informationon every compound in its lead optimisationprocess that allows compound prioritisationand guides their next round of chemistrydesign and synthesis.

Current Cyprotex Partnerships

Tailored Project SupportCyprotex has become the preferredADME/Pharmacokinetics Partner for this Partner.Cyprotex provides a range of Cloe Screen®

services and develops new assays that adhereto the Partner’s preferred protocols.

Partner requires the flexibility to vary the numberof compounds and the type and number of Cloe Screen® services that it requires on amonthly basis.

The assigned PhD-trained Project Manager at Cyprotex is the first point of contact fordiscussion of results and for schedulingexperimental services.

Cyprotex has developed a new assay for thePartner using the Partner’s preferred protocol.The assay reproducibility and accuracy wasvalidated on a set of known drugs beforeapplying it to the Partner's discovery compounds.This assay is now part of the regular portfolioof evaluations that the Partner requires for theircompounds.

ResultThe Partner receives a cost-effective,responsive and flexible ADME evaluationservice through its close relationship with Cyprotex.

Our uniqueness lies in our combination of complementaryexperimental and computational technologies which enable our Partners to obtain detailed information on their compoundsand to integrate and interpret the data. Examples of Partnershipsthat are ongoing at Cyprotex are shown below.

Cloe Screen® PartnershipCyprotex’s Cloe Screen® service is used byPartner to evaluate compounds from 3therapeutic areas. Up to 90 compounds arescreened for their absorption and metabolismprofiles every 6-weeks.

Partner collates all compounds from the differenttherapeutic area programs, and ships a singlebatch to Cyprotex on a mutually agreed schedule.

Cyprotex performs the Cloe Screen® serviceand an assigned PhD-trained Project Managerreturns detailed compound results and interpretation guidelines to each of thetherapeutic teams and follows up with adiscussion of the results.

ResultCyprotex has built a trusted relationshipwith our Partner which has deliveredvaluable information to guide their leadoptimisation efforts. As a result, the Partnerhas expanded their initial relationship toinclude larger numbers of compounds on abroader portfolio of Cloe Screen® assays.



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Cyprotex the preferred partnerCyprotex has established a loyal customer base thatincludes large Pharmaceutical and small Biotechnologycompanies. We have continued to work with Partnersestablished in 2002/3 as a result of our high qualityservice that has demonstrated value and effectiveness.Many of our new Partners have expanded their relationshipwith a wider collection of Cloe Screen and Cloe PK® services.

Cyprotex renewed long-term contractswith Roche, AstraZeneca, Solvay andAltana and added 27 new Biotechnologyand Pharmaceutical Partners for our Cloe Screen® and Cloe PK® technology and services.

Experimental scientists High throughput screening



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Chairman and CEO’s review2004 was a watershed year for Cyprotex.

In the course of just one year the company has moved from a position of recognising the true scope and potential of its market, to being able to grasp opportunities at the commercial, intellectual and operational forefront of its sector.

2004 was a watershed year for CyprotexIn the course of just one year the company has moved from a positionof recognising the true scope and potential of its market, to being ableto grasp opportunities at the commercial, intellectual and operationalforefront of its sector.

The immediate task for 2004 was to allow the Group to secure theseopportunities by completing its transition into high throughput Cloe Screen® assays, gaining market acceptance of its predictivecomputational capabilities and to significantly expand its customer basewhilst carefully guarding cash resources. With the support, loyalty anddrive of its staff, all were achieved.

A year of major investmentCyprotex was rewarded with more than a doubling of its core clientbase having opened a sales office in North America, started a directdrive into Japan and strengthened its European marketing. Withmomentum building strongly, detailed planning ensured scalability of allGroup activities. The seamless expansion of its leading-edge laboratorycapabilities which began in the second half, is expected to guaranteethe operational capacity, execution and reliability demanded by majorcustomers beyond 2006. This was entirely financed through existingcash resources. Capital requirements are expected to fall significantly in 2005.

The first rewards from the Group’s high commitment for Research andDevelopment have also been seen. This is demonstrated, by the abilityto repeatedly service some of the world’s most demanding customers,ranging from the largest global pharmaceutical companies to thesmallest biotechnology company, in a suitably economical, timely andsophisticated manner. Moreover, the uptake of its ‘virtual human’pharmacokinetic technology clearly places Cyprotex at the intellectualforefront of its sector. Relative Research and Development investmentcosts will diminish in 2005.

2005 has started stronglyRecognising the continued expansion of its core customer base and theextent of repeat/longer-term contracts, Cyprotex expects to significantlyoutpace the underlying growth of its sector again in 2005.

Despite a major expansion of its operational facilities during 2004,management has continued to carefully guard its cash resources.Cyprotex expects to find itself moving cash flow positive, on a monthlybasis, in 2005. Existing operations are now considered to havesufficient resources to fund their own expansion going forward.

R Morrisson AtwaterChairman & Chief Executive Officer

Key objectives• Move to a cash flow positive position on a monthly basis

in 2005

• Outpace market sector growth

• Add new technologies to Cyprotex's products throughacquisition or organically

• Secure significant downstream value from integrated drug discovery collaborations

• Achieve a significant increase in contribution from the US market

• Gain a foothold in the Japanese market



07

Move towards profitability in sight2005 has started strongly. With continued expansion of its core customer base Cyprotex expects to significantlyoutpace the underlying growth of its sector again in 2005.

Cyprotex expects to find itself moving cash flow positive,on a monthly basis, in 2005.

Cyprotex is in a period of rapid growthfollowing acceptance of its services and technology by the Biotechnology and Pharmaceutical Industry.

Cloe PK® Partnerships New Cloe Screen® assays



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Product DevelopmentCyprotex has significantly increased the robustness and automation of its Cloe Screen® assays, through a transition into high throughputscreening without any loss of ‘classical laboratory’ quality. Extensivecommercial and scientific validation has been rewarded by strengtheningcustomer relations and obtaining repeat business.

Cyprotex’s product offering was expanded further to areas whereadditional revenue can rapidly be generated; one such developmentbeing the Cloe Screen® hERG channel inhibition assay, which wasvalidated earlier this year. In addition, a restructuring of metaboliteprofiling and identification offerings is underway, with a view to efficientlyleveraging new laboratory facilities, whilst new offerings for in-vitrosafety toxicology have also been prioritised.

Good acceptance has been registered for the Group’s integratedproducts, that combine experimental screening with ‘virtual human’predictive modelling in order to forecast the pharmacokinetics of drugcandidates. The first long term contract for Cloe PK® has provided theopportunity for further refinement of this offering. Evaluation projectsand subscription discussions are continuing with a series of globalpharmaceutical companies for similar contracts.

The Group also continued to invest heavily in the next generation ofpredictive modelling systems. The rapid evolution of these products willallow progressive offering of propriety ‘in-silico’ technologies, as afurther step to offering its customers a ‘one-stop-shop’ in discoveryADMET/PK.

Customer DevelopmentCyprotex’s marketing drive during 2004 was rewarded with more than adoubling of its core customer base. Revenue generating contracts weresecured during the period from a very wide range of customers, includingglobal names such as, Roche, Serono, Solvay, ALTANA, AstraZeneca,Elan, Shire, Novo Nordisk and Johnson & Johnson.

In recognition that the single largest market opportunity for Cyprotex’stechnology remains in North America, a sales office was opened on theEast Coast during 2004. The Group has already closed significant dealsand identified major new customer opportunities in the area. Furtherrepresentation on the West Coast will be considered during 2005.Recognising also Japan as a further area to benefit from a direct saleseffort, late in 2004 the Group began a marketing drive into the region.

The Group actively participated in a large number of global conferences,seminars and workshops during 2004, such as the World PharmaceuticalCongress and Drug Discovery Technology World Congress. Promotional

activity in the current year will also include the further raising ofCyprotex’s technological profile through publication of scientific papers,the activity of our Scientific Advisory Board and market-focusededitorials and news releases.

Laboratory ExpansionDetailed planning has ensured the scalability of the Group’s uniquelaboratory operations. In commissioning a series of new ‘state-of-theart’ instruments (mass spectrometer, automated planar-patch clamp for hERG channel inhibition, high-throughput liquid handling robot, etc.)in its highly automated environment, Cyprotex has anticipated thecapacity, turnaround and reliability requirements of its expandingcustomer base beyond 2006.

Without anticipating any deterioration of the exceptional gross marginenjoyed by the Group’s in-vitro facilities, Cyprotex remains confident of its ability to continue to significantly outpace its own expandingmarket place.

Operational PremisesCyprotex’s operational headquarters in Macclesfield, which house all of the Group’s laboratory and UK administration offices, were offered for sale on the open market during 2004.

The management carefully considered the economic and shareholderbenefits of tendering for the building’s purchase. The property in BeechLane was subsequently secured, on 17 January 2005, at a discount to its valuation for vacant possession.

The Group is now freed from historical obligations derived from theterms of its ‘full repairing’ lease whilst approximately halving its annualcost of occupation. Additional benefits include added security for staff,significant scope to expand operational space on the half-acre site andthe medium-term development potential of this town centre location.The property was financed with existing cash resources and an 80%mortgage arranged through our principal bankers.

Robert Morrisson AtwaterChairman and Chief Executive Officer9 March 2005

Financial highlights 2004• Revenue for the year ended 31st December 2004 was £2,117,321,

against £1,052,953 for the comparable period in 2003, representingmore than a 100% year-on-year increase.

• Gross profit more than doubled for the year to £1,684,880, up from £803,101 in 2003.

• Gross margins rose to 80%, compared with 76%.

• The loss on ordinary activity after taxation, for the year was £1,299,107, down from a loss of £1,860,145 in 2003, representing a reduction of more than 30% year-on-year.

• Cash resources were carefully guarded. Year-end net cash amounted to £1.84m, despite significant capital investment in new laboratory capabilities.

• A rapidly expanding customer base has ensured the Group does not have a high dependence on any single client, the largest of which contributed less than 14% of total revenues in 2004.



09

Investing in the futureWe have added PhD and BSc trained scientists to ourtalented laboratory team and established a US-basedbusiness development manager to expand our presencein the growing US market. We acquired additional massspectrometer analysis equipment and the latest technologyfor cardiovascular toxicity screening to expand anddevelop our Cloe Screen® service.

We have expanded our capacity within our Cloe Screen® facilities and extendedour services in high demand areas oftoxicity and metabolism. In addition, wehave further developed our predictiontechnologies with the aim of becoming anintegrated partner in drug discovery.

Predicting drug properties Cardiotoxicity screening



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Financial reviewThe year has seen Cyprotex transformed from principally a research anddevelopment company to one which generates revenues from commercialrelationships and partnerships.

Capital StructureAs at 31 December 2004, shareholders’ funds were £3,048,730 (2003 £1,223,239) and cash amounted to £1,839,800 (2003 £491,230).Total debt at 31 December 2004 was £nil (2003 £8,360). Shortly afterthe year end the Group acquired its operational premises inMacclesfield for £842,400, including stamp duty at 4%. The acquisitionwas partially financed by a loan secured on the property of £704,000.

Full details of the changes in the share structure of the company can befound in note 15 on pages 30 and 31.

Turnover and pre tax lossThe Group achieved turnover in the year of £2,117,321, an increase ofover 100% from the year ended 31 December 2003.

The operating loss for the year was £1,570,224 (2003 £2,035,122).Whilst the Group continued to invest in products, facilities and people,smoothing workflow from an enlarged base of revenues reduced itslosses. Emphasis continued to be placed on developing the company’sscience whilst building its international standing.

The Group made a loss before tax of £1,464,289 in the financial year(2003 £2,049,401), however with the Research and Development taxcredit of £165,182 for the period, the loss after tax was £1,299,107(2003 £1,860,145).

The loss per share was 1.04p (2003 2.05p).

Treasury policies and financial riskSurplus funds are intended to support the Group’s short-term workingcapital requirements. These funds are invested through the use ofshort-term and period deposits, with a policy of maximising fixedinterest returns as well as providing the flexibility required to fund on-going operations. It is not a Group policy to invest in financial derivatives.

Although the financial risks are considered to be minimal at present,future interest rates, liquidity and foreign currency risk could arise andthe Board will review its existing policies in the coming period.

Interest rate riskApart from using short-term and period deposits, interest rate risks are

limited to the fixed element of hire purchase agreements that Cyprotexhas occasionally used in the past. Typically, the Group uses hirepurchase for fixed periods of up to 5 years to finance purchase ofassets where it is considered to be a more effective use of funds.

Liquidity riskSurplus funds are invested on a short-term basis at money market rates and therefore such funds are available at short notice.

Foreign Currency riskThe Group has only minor trade related debtors and creditors, againstwhich any currency rate movement has no material impact.

R Morrisson AtwaterChairman and Chief Executive Officer9 March 2005



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Board of Directors

1. Robert Morrisson Atwater (Age 41)Chairman and Chief Executive Officer Robert Morrisson Atwater's career to date has spanned many yearsworking in the bio-pharmaceutical industry, as well as financial services.Robert joined Cyprotex from San Francisco-based Thalassa CapitalManagement LLC, an asset management firm which he co-founded,which concentrates on bio-pharmaceutical opportunities worldwide.Prior to Thalassa, Robert worked in business development Europe andAsia for BioChem Pharma Inc., a Canadian bio-pharmaceutical company,which was subsequently acquired by Shire Pharmaceuticals Group plc.Robert has also worked for a number of prominent financial servicescompanies. He studied at L’Universite de Neuchatel in Switzerland andis a graduate of the University of Massachusetts at Amherst.

2. Dr David Leahy (Age 50) Chief Scientific Officer & FounderDavid Leahy joined ICI Pharmaceuticals (which subsequently becameknown as Zeneca) in 1983 to work on computer models of drug actionwith a particular interest in absorption and other pharmacokineticproperties. He was heavily involved in the implementation of data miningapproaches as well as ‘virtual human’ simulation models for the predictionof drug action in the whole animal. He was responsible for establishinghigher throughput pharmacokinetic screening and prediction approachesand led international multi-disciplinary teams developing strategies for theimprovement of R&D productivity through technology innovation andprocess improvements. During his 15 years at ICI and Zeneca, Davidgained a detailed understanding of the drug discovery process. Davidfounded Cyprotex as Chief Scientific Officer. He is responsible for thescience & technology of the company.

3. Minhaz Manji (Age 43) Non-executive DirectorMinhaz Manji is the Managing Director of Monteacute House Limitedwhich builds limited service hotels under the name of Express byHoliday Inn (a franchise) of InterContinental Hotels Group. The companyhas a development agreement to build 15 hotels. Minhaz currentlyserves as the elected Chairman of Express Owners in the UK, currentlynumbering 80 hotels - an investment of over £600m. He also serves asa director on the advisory board of the newly formed InterContinentalGroup and serves on the Ethnic Minority Board of HRH Prince CharlesYouth Business Trust.

4. Dr Martial Lacroix (Age 54) Non-executive DirectorMartial Lacroix is the Vice President of GeneChem, a Montreal-basedventure capital group with close to Canadian $250 million undermanagement and investments in 31 companies located in Canada, theUSA and the UK. Dr Lacroix was a co-founder of BioChem Pharma Inc.and previously held a number of positions with BioChemImmunoSystems Inc., including Director, Research and Development andDirector, Quality Control. Between 1981 and 1986, Dr. Lacroix was aProfessor in the Department of Virology at Institut Armand-Frappier. Dr. Lacroix received a B.Sc. and a M.Sc. in biochemistry from Universityof Montreal and a Ph.D. from the University of Toronto. He has authored33 scientific publications and holds eight issued patents. Currently Dr. Lacroix is a Director on the Board of five privately held companies.

5. David Evans (Age 38)Non-executive DirectorDavid is a member of the intellectual property group at Genentech, Inc.,one of the world's leading biotherapeutics companies. David hasworked with cutting edge biopharmaceutical companies for the past 14years, including BioChem Pharma, Allelix Biopharmaceuticals whichwas acquired by NPS Pharmaceuticals, and currently Genentech, Inc.of South San Francisco. David holds a Bachelor of Science degree fromthe University of Toronto in chemistry and biology and began his careerin intellectual property at the Canadian Patent Office in 1991.

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CyprotexReport & Accounts 2004

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The Directors of Cyprotex PLC present their report to the shareholders, together with the audited financial statements, for the year ended 31 December 2004.

Principal activities and trading reviewCyprotex PLC is a holding company and its primary subsidiary is Cyprotex Discovery Limited. The principal activities of the Group are that ofproviding in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity/Pharmacokinetic) information to thepharmaceutical industry.

A review of the Group’s business and activities and its future prospects is contained in the Chairman and Chief Executive’s Statement set out onpages 6 to 8.

Results and dividendsThe loss for the year, after taxation, was £1,299,107 (2003 loss £1,860,145) and an equivalent amount has been transferred from reserves. The Directors do not propose the payment of any ordinary dividend. The accumulated deficit carried forward is £6,823,373 (2003 deficit £5,544,532).

A financial review of the results is included on page 10.

Going concernThe Directors have reviewed the budget, cash flow and other relevant information and believe that the Group has adequate resources to continuein operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis for the preparation ofthe financial statements.

Placing of sharesOn 16 January 2004 the Group convened an Extraordinary General Meeting to approve the Placing of 30,000,000 ordinary shares of 0.1p each inthe capital of the Company. All resolutions put to the meeting were duly passed by members of the Company and the Company raised£3,000,000 (£2,942,076 net of expenses).

Post balance sheet eventOn 17 January 2005 the Group purchased a freehold interest in its operating premises in Macclesfield for £842,400, including stamp duty at 4%.The purchase was funded principally by a property loan of £704,000 from The Royal Bank of Scotland plc. The property loan is repayable over 20 years and subject to interest at a rate of 1.75% over bank base rate.

DirectorsThe Directors of the Company who served during the year were as follows:

Mr R Morrisson AtwaterDr D E LeahyMr M Manji appointed 16 January 2004Dr M Lacroix appointed 22 January 2004Mr D W Evans appointed 20 April 2004Mr J A Nicholson resigned 21 January 2004

In accordance with the Company’s articles of association Dr M Lacroix and Mr M Manji now retire as Directors and, being eligible, offer themselvesfor re-election at the Annual General Meeting.

All Directors are subject to re-election at intervals of no more than three years.

Further details of the Directors, their service agreements and their interests in the Company’s shares are set out on pages 15 and 16.

Corporate governanceThe Company has applied the principles of governance as appropriate to a Group of this size.

The BoardThe Board comprises two Executive Directors and three Non-executive Directors, including the Chairman, with a clear division of duties. The Boardmeets regularly throughout the year to direct and control the strategy and operating performance of the Group.

Report of the directors

The following Committees deal with specific aspects of the Group’s affairs:

• Audit Committee – comprises one Executive Director and one Non-executive Director, Mr M Manji, as Chairman. The Auditors attend themeetings and report as appropriate. The Committee reviews the Group’s accounting policies, financial reporting, internal control and riskmanagement processes. It also considers the appointment and fees of the External Auditors and ensures that auditor independence has notbeen compromised.

• Remuneration Committee – comprises two Non-executive Directors with Mr M Manji as Chairman. It recommends to the Board the policy forexecutive remuneration and it determines on behalf of the Board, the terms and conditions of service of each Executive Director. The Report onDirectors’ Remuneration is set out on pages 15 and 16.

Internal controlThe Board is responsible for establishing and maintaining the Group’s system of internal control, which is designed to meet the particular needs ofthe Group and the risks to which it is exposed. Such a system is designed to manage these risks, to provide reasonable but not absoluteassurance against material misstatement or loss and to maintain proper accounting records to ensure the integrity of financial information usedwithin the business and for external publication.

The Board has reviewed the effectiveness of its systems of internal controls as it operated during the period. The Board has considered whetherthe Group’s internal control processes would be significantly enhanced by an Internal Audit Function and has taken the view that at the Group’scurrent stage of development, this is not required. The Board will review this matter each year.

The key procedures that the Board has established include the following:

• clearly defined authorisation limits and procedures.• budgets are reviewed and approved by the Board, and regularly monitored against monthly performance and forecasts.• the Group’s financial and operating performance is closely monitored at regular Board meetings with formal Board reports from each Executive

Director covering their areas of business responsibility.

The Directors intend to conduct ongoing reviews of the internal control systems and the newly established business processes to ensure that theyremain appropriate to the needs of the Group.

Relations with shareholdersThe Board recognises the importance of continual communications with shareholders and will maintain a programme of institutional dialogue,including presentations following the Company’s announcements of its preliminary full year figures and of the half-year results.

There is also an opportunity, at the Company’s Annual General Meeting, for individual shareholders to raise general business matters with the fullBoard and notice of the Company’s Annual General Meeting is circulated to all shareholders at least twenty-one working days before suchmeeting.

The annual report is to be published on the Company’s website, www.cyprotex.com, which also includes press releases and other announcementsduring the year.

Policy in respect of supplier paymentsThe Company and its principal subsidiary undertakings agree terms and conditions for transactions with suppliers and pay suppliers within theagreed terms, provided that suppliers comply with those terms and conditions. At 31 December 2004, the Company had an average of 47 dayspurchases (2003 49 days) outstanding in trade creditors.

Charitable and political contributionsCharitable contributions amounted to £1,828 (2003 £nil). During the period the Group made no political contributions (2003 £nil).

Employee involvementThe Group recognises and seeks to encourage the involvement of its employees, with the aim being the recruitment, motivation and retention ofquality employees throughout the Group. An unapproved share option scheme is in place operated within the Enterprise Management IncentiveScheme where applicable.

The Group’s employment policies, including the commitment to equal opportunity, are designed to attract, retain and motivate employeesregardless of sex, race, religion or disability.

The Group is committed to ensuring and communicating the requirements for a safe and healthy working environment for all employees,consistent with health and safety legislation and, wherever practicable, gives full consideration to applications for employment from disabled persons.


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Employee share schemesEmployee involvement in financial performance is encouraged through participation in the Company’s share option schemes. At 31 December2004, 35 employees, including directors, held options over 24,657,400 ordinary shares in the Company under the unapproved share optionscheme (2003 26 employees: 15,454,254 ordinary shares). Further information on share options is shown in note 15 on pages 30 and 31.

Accounting standards and IFRSNo new accounting standards were adopted during the year.

International Financial Reporting Standards (‘IFRS’) were set to replace United Kingdom generally accepted accounting practice (‘UK GAAP’) forconsolidated reporting in 2005. However, on 7 October 2004 the London Stock Exchange announced following changes to existing AIM rules thatAIM companies can continue until financial periods commencing on or after 1 January 2007 to report in either UK GAAP or InternationalAccounting Standards (‘IAS’). These accounts have been prepared under UK GAAP. The Board will consider the impact of adopting IFRS in 2005.

Annual general meetingThe Annual General Meeting of the Company will be held at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED on 1 June 2005 at 10 a.m.The notice of the Annual General Meeting, together with notes on the resolutions, is on pages 35 and 36.

At the Annual General Meeting resolutions 1 to 4 will be ordinary business and resolution 5 and 6 will be special business. The ordinary businesscovers the approval of the financial statements, the appointment of Auditors and the re-election of Directors. The special business coversDirectors’ authority to allot shares, and the Directors’ authority to issue shares for cash other than to existing shareholders. The resolutions are setout in the notice to the Annual General Meeting on page 35. In the opinion of the Directors, the passing of the resolutions is in the best interest ofthe shareholders in order to help to drive the business forward.

Major interests in sharesAt 28 February 2005, the following persons held interests in excess of 3% of the ordinary share capital of the Company:

Number ofPercentage ordinary

holding shares

Nordan Holdings Ltd 21.30% 27,123,571Intercapital Private Group Ltd 16.51% 21,024,000Close Finsbury Asset Management 6.91% 8,800,000Artemis Fund Managers 6.09% 7,750,000C Lee 5.50% 7,000,000BNP Paribas 3.99% 5,082,000Deutsche Asset Management 3.06% 3,900,000

No other person has notified an interest in the ordinary shares of the Company required to be disclosed to the company in accordance withsections 198 to 208 of the Companies Act 1985.

AuditorsOn 1 July 2004, the Grant Thornton partnership transferred its business to a limited liability partnership, Grant Thornton UK LLP. Under section26(5) of the Companies Act 1989, the directors consented to extend the audit appointment to Grant Thornton UK LLP from 1 July 2004. Grant Thornton UK LLP offer themselves for reappointment as auditors in accordance with section 385 of the Companies Act 1985. A resolutionto confirm them as Auditors and to authorise the Directors to determine their remuneration will be proposed at the Annual General Meeting.

By order of the Board

Mark C WarburtonCompany Secretary9 March 2005

Report of the directors

Remuneration committeeThe Remuneration Committee comprises two Non-executive Directors with M Manji as Chairman. The Committee provides advice andrecommendations to the Board regarding the framework for executive remuneration and the individual remuneration package for each Executive Director.

Remuneration policyThe remuneration policy for Executive Directors is to provide competitive remuneration packages to attract, retain, and motivate high quality peoplein competition with comparable companies.

The main components of the remuneration of Executive Directors comprise:

• Service contracts – the Executive Directors each have service contracts with a notice period between six and twelve months to be given byeither the Director or the Company. The service contract of R Morrisson Atwater provides that in the event of a change of control in theownership of the Company the notice period increases from six months to twenty four months by either party. The Remuneration Committeeconsiders the circumstances of individual cases of early termination and determines compensation payments accordingly. Non-executiveDirectors do not have service contracts but do have agreements that are terminable upon a three months notice period by either themselves orby the Company. These agreements provide for the attendance at board meetings, an undertaking to advise the company in respect to themanagement and conduct of business and the attendance at meetings of the Audit and Remuneration Committees of the Board as required.The Executive Directors determine the remuneration of the Non-executive Directors without reference to the Remuneration Committee.

• Basic salary and benefits – basic salaries of Executive Directors are determined annually after a review of the performance of each individual.Benefits in kind principally comprise provision of car or car allowances with appropriate business related fuel rates and private healthcare, deathand disability in service cover.

• Bonuses – the Executive Directors are eligible for bonus payments at the discretion of the Remuneration Committee and such discretion will beexercised based upon the performance of the Group. A bonus of £50,000 was awarded to R Morrisson Atwater for the year ended 31December 2004 (2003 £nil).

• Share options – the Company has an unapproved share option scheme whereby options to acquire ordinary shares may be granted at thediscretion of the Board, with the approval of the Remuneration Committee to Directors and employees of the Company. Further details of theawards to Directors, are set out on page 16.

• Pensions – during the period, D E Leahy, R M Atwater and J A Nicholson have been beneficiaries of a defined contribution personal pensionscheme, the Company’s contributions are 10% of total pensionable earnings.

It is the intention of the Remuneration Committee to review the remuneration packages of the Executive Directors during the forthcoming financialyear and to make recommendations to the Board of Directors for the introduction of an appropriate bonus incentive scheme, linked to personaland Group targets for both Executive Directors and staff.

Directors’ remuneration

2004 2003 2004 2003Salary/fee Benefits Total Total Pension Pension

£ £ £ £ £ £Executive DirectorsR M Atwater 196,667 419 197,086 60,013 14,500 5,614D E Leahy 113,562 1,768 115,330 96,811 10,417 9,500J A Nicholson a 37,269 15,864 53,133 92,517 4,523 9,000M Egerton a – – – 102,036 – 9,167

Non-executive DirectorsM Manji a,b 4,590 – 4,590 – – –M Lacroix a,b 9,452 – 9,452 – – –D W Evans a,b 5,014 – 5,014 – – –C Picton – – – 18,701 – –R A L Drake – – – 9,000 – –J P Scudamore a – – – 1,570 – –

Total 366,554 18,051 384,605 380,648 29,440 33,281

a part year onlyb ongoing annual fee of £10,000

Report on directors’ remuneration


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16

Remuneration is from the dates of appointment listed on page 12. Included in the emoluments shown above:

(i) JA Nicholson received payments under the terms of a compromise agreement made upon his resignation from the Board on 21 January 2004 comprising a cash payment of £30,000 and a company car at an agreed market value of £15,000.

(ii) M Egerton received payments under the terms of a compromise agreement made upon his resignation from the Board on 1 September 2003 comprising cash payments of £27,500 and contributions to a defined contribution personal pension scheme of £2,500. The compromise agreement provided for payments to M Egerton throughout the unexpired portion of his service agreement to 30 November 2003.

(iii) C Picton received payments of £6,201 upon his resignation from the Board on 22 December 2003 in accordance with the terms of his engagement.

Directors’ share interestsAs at 31 December 2004, the Directors had the following beneficial interests in shares and share options:

Ordinaryshares Share

of 0.1p each options2004 2003 2004 2003

No. No. No. No.

D E Leahy 17,500 17,500 10,401,600 10,401,600R M Atwater 835,000 – 7,000,000 –M Manji – – 150,000 –M Lacroix – – 150,000 –D W Evans – – 150,000 –

(i) On 7 December 2001, DE Leahy had an EMI Option granted to him by Cyprotex Discovery Limited under the Cyprotex Discovery Limited EMI Plan to subscribe for 10,401,600 Ordinary Shares at a price of 0.175p per ordinary share; this option was subsequently replaced on 4 February 2002 in the name of Cyprotex PLC at the same price of 0.175p per ordinary share.

(ii) On 16 January 2004, the shareholders in General Meeting approved the grant of 7,000,000 share options to R Morrisson Atwater. Each of the options maybe exercised on or after the 16 January 2004 at 10p per share. The options are conditional on the option holder remaining a director of the Company at the relevant date of exercise of the options.

(iii) Share options totalling 450,000 were granted to non-executive directors on 8 and 9 September 2004 with M Manji, M Lacroix and DW Evans each receiving 150,000. Each of the options may be exercised on or after the second anniversary of the date of grant at 11.0p per share. The options are conditional on the option holder remaining a director of the Company at the relevant date of exercise of the options.

During 2004 the high and low share prices were 25.25p and 7.0p. The share price at 31 December 2004 was 12.25p.

Former DirectorFollowing the resignation of JA Nicholson from the Company, he exercised 1,024,138 share options at a price of 9.25p on 18 February 2004. The share price on 18 February 2004 was 19.5p.

By order of the Board

Mark C WarburtonCompany Secretary9 March 2005

Report on directors’ remuneration


United Kingdom company law requires the Directors to prepare accounts for each financial year, which give a true and fair view of the state ofaffairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing those accounts, the Directors arerequired to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts;and

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

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position ofthe Group and to enable them to ensure that the accounts comply with the Companies Act. They are also responsible for safeguarding the assetsof the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The maintenance and integrity of the web site is the responsibility of the Directors; the work carried out by the Auditors does not involveconsideration of these matters and, accordingly, the Auditors accept no responsibility for any changes that may have occurred to the informationcontained in the financial statements since they were presented on the web site.

17

Statement of directors’ responsibilities


18

Report of the independent auditors’ to the members of Cyprotex PLCWe have audited the financial statements of Cyprotex PLC for the year ended 31 December 2004 which comprise the principal accountingpolicies, the consolidated profit and loss account, the balance sheets, the consolidated cash flow statement, the consolidated statement of totalrecognised gains and losses and notes 1 to 22. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s Members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work hasbeen undertaken so that we might state to the Company’s Members those matters we are required to state to them in an auditors’ report and forno other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and theCompany's Members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe Directors’ responsibilities for preparing the annual report, and the financial statements in accordance with United Kingdom law and accountingstandards are set out in the statement of Directors’ responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom auditingstandards.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have beenproperly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent withthe financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations werequire for our audit, or if information specified by law regarding Directors’ remuneration and transactions with the Group is not disclosed.

We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. This otherinformation comprises only the report of the directors, the Chairman and Chief Executive’s statement, the Financial review and the Report onDirectors’ remuneration. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencieswith the financial statements. Our responsibilities do not extend to any other information.

Basis of opinionWe conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policiesare appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide uswith sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financialstatements.

OpinionIn our opinion:

• the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2004 of the Group’sloss for the year then ended; and

• the financial statements have been properly prepared in accordance with the Companies Act 1985.

Grant Thornton UK LLPRegistered AuditorsChartered AccountantsManchester9 March 2005

Independent auditors’ report


2004 2003Continuing Activities Notes £ £

Turnover 2 2,117,321 1,052,953Cost of sales (432,441) (249,852)

Gross profit 1,684,880 803,101Administrative expenses (3,255,104) (2,838,223)

Operating loss 3 (1,570,224) (2,035,122)Interest receivable 5 107,697 38,875Interest payable 5 (1,762) (53,154)

Loss on ordinary activities before taxation (1,464,289) (2,049,401)Taxation 6 165,182 189,256

Loss for the period 16 (1,299,107) (1,860,145)

Loss per shareBasic 8 (1.04)p (2.05)p

The accompanying notes are an integral part of this consolidated profit & loss account.

Consolidated profit & loss accountfor the year ended 31 December 2004

Consolidated statement of total recognised gains & lossesfor the year ended 31 December 2004

2004 2003£ £

Loss for the financial period (1,299,107) (1,860,145)

Exchange difference on the re-translation of net assets of subsidiary undertaking 20,266 52,649

Total recognised gains and losses relating to the period (1,278,841) (1,807,496)

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20

Balance sheetsat 31 December 2004

Group Group Company CompanyNotes 2004 2003 2004 2003

£ £ £ £

Fixed assetsTangible assets 9 915,124 661,557 – –Investments 10 – – – –

915,124 661,557 – –

Current assetsStocks 11 86,028 67,766 – –Debtors 12 770,863 407,837 1,351,927 1,300,898Cash at bank and in hand 1,839,800 491,230 1,699,402 10,237

2,696,691 966,833 3,051,329 1,311,135

Creditors: amounts falling due within one year 13 (563,085) (405,151) – –

Net current assets 2,133,606 561,682 3,051,329 1,311,135

Net assets 3,048,730 1,223,239 3,051,329 1,311,135

Capital and ReservesCalled up share capital 15,16 127,312 94,914 127,312 94,914Share premium account 16 9,616,721 6,544,787 9,616,721 6,544,787Merger reserve 16 128,070 128,070 – –Profit and loss account 16 (6,823,373) (5,544,532) (6,692,704) (5,328,566)

Equity shareholders’ funds 16 3,048,730 1,223,239 3,051,329 1,311,135

The accompanying notes are an integral part of these balance sheets.

Approved by the Board on 9 March 2005

R Morrisson AtwaterChairman and Chief Executive Officer


2004 2003Notes £ £

Net cash outflow from operating activities 17(a) (1,487,748) (2,303,390)

Returns on investment and servicing of financeInterest received 107,697 38,875Interest paid (75) (51,407)Interest element of finance leases and hire purchase contracts (1,687) (1,747)

105,935 (14,279)

TaxationUK corporation tax received 163,141 179,460

Capital expenditure and financial investmentPayments to acquire tangible fixed assets (545,432) (3,812)Receipts from sales of tangible fixed assets 16,702 256,126

Net cash (outflow)/inflow from capital expenditure (528,730) 252,314

Net cash outflow before financing (1,747,402) (1,885,895)

Management of liquid resources (1,742,580) 330,000

FinancingIssue of ordinary share capital 3,104,332 769,500Net movement in short term borrowings – (166,315)Net movement in long term borrowings – (383,685)Repayment of finance leases and hire purchase contracts (8,360) (105,551)

Net cash inflow from financing 3,095,972 113,949

Decrease in cash 17(b) (394,010) (1,441,946)

The accompanying notes are an integral part of this consolidated cash flow statement.

Consolidated cash flow statementfor the year ended 31 December 2004

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22

2004 2003£ £

Reconciliation of net cash flow to movement in net fundsDecrease in cash during the period (394,010) (1,441,946)Cash outflow/(inflow) to short term deposits 1,742,580 (330,000)Cash outflow from decrease in short term loans – 166,315Cash outflow from decrease in long term loans – 383,685Repayment of finance leases and hire purchase contracts 8,360 105,551

Movement in net funds during the period 1,356,930 (1,116,395)Net funds at start of the period 482,870 1,599,265

Net funds at period end 1,839,800 482,870

The accompanying notes are an integral part of this consolidated cash flow statement.

Consolidated cash flow statementfor the year ended 31 December 2004


1. Accounting policiesBasis of preparationThe financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards.

The accounts are prepared on a going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future.

Basis of consolidation and presentation of financial statementsThe Group accounts comprise the accounts of Cyprotex PLC and all its subsidiary undertakings up to 31 December 2004. No profit and lossaccount is presented for Cyprotex PLC as permitted by section 230 of the Companies Act 1985.

DepreciationDepreciation is provided on all tangible fixed assets at rates calculated to write off the cost less estimated residual value by equal instalments overtheir estimated useful economic lives as follows:

Laboratory equipment – over 5 yearsOffice equipment – over 10 yearsComputers – over 3 years

The carrying values of fixed assets are revised for impairment in periods if events or changes in circumstances indicate the carrying value may notbe recoverable.

InvestmentsInvestments are included at cost less provision for impairment.

Turnover and revenue recognitionTurnover on the outright sale of services and software, where no supplier obligations remain, is recognised on delivery to the customer. Turnover onfixed contracts is recognised in accordance with the terms of the agreement with the customer. Profit is attributed to a financial period, while thecontract is in progress, having regard to the proportion of the total contract that has been completed at the balance sheet date and after makingprovision for all foreseeable future costs or losses. Revenue from licences is recognised over the period of the licence.

StocksStocks are stated at the lower of cost and net realisable value.

Research and developmentResearch and development expenditure is written off as incurred, except that development expenditure incurred on an individual project is carriedforward when its future recoverability can reasonably be regarded as assured. Any expenditure carried forward is amortised in line with the expectedfuture sales from the related project.

Leasing and hire purchase commitmentsAssets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to theGroup, and hire purchase contracts, are capitalised in the balance sheet and are depreciated over their useful lives. The capital elements of futureobligations under the leases and hire purchase contracts are included as liabilities in the balance sheet.

The interest elements of the rental obligations are charged in the profit and loss account over the periods of the leases and hire purchase contractsand represent a constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.

PensionsThe Group operates a defined contribution pension scheme. Contributions are charged in the profit and loss account as they become payable inaccordance with the rules of the scheme.

Notes to the accountsfor the year ended 31 December 2004

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1. Accounting policies (continued)Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is coveredby a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchangeruling at the balance sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account.

The financial statements of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. The exchangedifference arising on the retranslation of opening net assets is taken directly to reserves. All other translation differences are taken to the profit andloss account.

Deferred taxDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions orevents have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the followingexceptions:

– provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and gains on disposals of fixedassets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement todispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is morelikely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold;

– provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates and joint venturesonly to the extent that, at the balance sheet date, dividends have been accrued as receivable;

– deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxableprofits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse,based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Capital instrumentsShares are included in shareholders’ funds. Other instruments are classified as liabilities if they contain an obligation to transfer economic benefitsand if not they are included in shareholders’ funds. The finance cost recognised in the profit and loss account in respect of capital instruments otherthan equity shares is allocated to periods over the term of the instrument at a constant rate on the carrying amount.

Liquid resourcesLiquid resources at 31 December 2004 and 31 December 2003 consisted of short term bank deposits.


2. Turnover and segmental analysisTurnover represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities and is stated netof value added tax and trade discounts.

The Group operates in one principal area of activity, that of providing in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism,Excretion, Toxicity/Pharmacokinetic) information to the pharmaceutical industry. The turnover and operating result for the periods are derived fromthe Group’s principal activity.

The geographical analysis of turnover by destination is as follows:

2004 2003£ £

United Kingdom 808,820 463,397Rest of Europe 1,183,168 553,646USA 125,333 35,910

2,117,321 1,052,953

The geographical analysis of turnover by source and the geographical analysis of operating loss and loss on ordinary activities before taxation are as follows:

SegmentalTurnover profit/(loss)

2004 2003 2004 2003£ £ £ £

United Kingdom 2,117,321 1,049,584 (1,570,224) (2,040,247)USA – 3,369 – 42,526

2,117,321 1,052,953 (1,570,224) (1,997,721)

Common costs – (37,401)

Operating loss (1,570,224) (2,035,122)Net interest receivable/(payable) 105,935 (14,279)

Loss on ordinary activities before taxation (1,464,289) (2,049,401)

The geographical analysis of net assets and liabilities is as follows:

United Total TotalKingdom USA 2004 2003

£ £ £ £

Net assets/(liabilities) – 2004 1,049,485 (5,737) 1,043,748

– 2003 601,494 (24,266) 577,228

The net assets/(liabilities) are reconciled to shareholders’ funds as follows:Cash at bank and in hand 1,839,800 491,230Corporation tax recoverable 165,182 163,141Obligations due under finance leases and hire purchase contracts – (8,360)

3,048,730 1,223,239

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3. Operating lossThis is stated after charging/(crediting):

2004 2003£ £

Auditors’ remuneration– audit services 15,000 15,000– tax services, compliance 3,500 3,500– tax services, advisory 2,000 2,000– non audit services, previous auditors – 14,919

Depreciation of owned assets 272,641 264,784Depreciation of assets under finance lease and hire purchase contracts – 5,000Loss/(profit) on disposal of tangible fixed assets 2,522 (42,606)Operating lease payments – land & buildings 95,000 95,000Research and development 783,683 779,366

£7,500 of audit fees and £3,000 of non audit fees relates to the Company (2003 £7,500 and £3,000)

4. Staff costs

2004 2003£ £

Wages and salaries 1,615,174 1,026,748Social security costs 168,451 154,311Other pension costs 122,046 94,458

1,905,671 1,275,517

The average monthly number of employees during the period was made up as follows:

2004 2003No. No.

Operations technical 6 3Development technical 19 18Administration 4 5Selling and Distribution 4 3

33 29

Directors’ remuneration

2004 2003 2004 2003Salary/fee Benefits Total Total Pension Pension

£ £ £ £ £ £Executive DirectorsR M Atwater 196,667 419 197,086 60,013 14,500 5,614D E Leahy 113,562 1,768 115,330 96,811 10,417 9,500J A Nicholson a 37,269 15,864 53,133 92,517 4,523 9,000M Egerton a – – – 102,036 – 9,167

Non-executive DirectorsM Manji a,b 4,590 – 4,590 – – –M Lacroix a,b 9,452 – 9,452 – – –D W Evans a,b 5,014 – 5,014 – – –C Picton – – – 18,701 – –R A L Drake – – – 9,000 – –J P Scudamore a – – – 1,570 – –

Total 366,554 18,051 384,605 380,648 29,440 33,281

a part year onlyb ongoing annual fee of £10,000


4. Staff costs (continued)Directors’ remuneration (continued)Remuneration is from the dates of appointment listed on page 12. Included in the emoluments shown above:

(i) JA Nicholson received payments under the terms of a compromise agreement made upon his resignation from the Board on 21 January 2004 comprising a cash payment of £30,000 and a company car at an agreed market value of £15,000.

(ii) M Egerton received payments under the terms of a compromise agreement made upon his resignation from the Board on 1 September 2003 comprising cash payments of £27,500 and contributions to a defined contribution personal pension scheme of £2,500. The compromise agreement provided for payments to M Egerton throughout the unexpired portion of his service agreement to 30 November 2003.

(iii) C Picton received payments of £6,201 upon his resignation from the Board on 22 December 2003 in accordance with the terms of his engagement.

5. Interest receivable and interest payable

2004 2003£ £

Interest receivable:Income from deposits 107,697 38,875

Interest payable:Bank overdraft 75 –Interest element of finance leases and hire purchase contracts 1,687 1,747Chattel mortgage – 51,407

1,762 53,154

6. Taxation

(a) Tax on loss on ordinary activitiesThe tax credit is made up as follows:

2004 2003£ £

Current tax:Corporation tax at 30% 165,182 163,141Adjustment in respect of prior year – 26,115

Tax on loss on ordinary activities 165,182 189,256

(b) Factors affecting current tax chargeThe current tax credited for the period is lower than the standard rate of corporation tax at 30% due to the differences explained below:

2004 2003£ £

Loss on ordinary activities before taxation (1,464,289) (2,049,401)

Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2003 30%) 439,287 614,820

Effects of: Expenses not allowable for tax purposes (4,680) (2,070)Capital allowances in excess of depreciation 42,874 (23,570)Short term timing differences (1,460) 2,168Tax losses current period (269,544) (387,422)Difference in tax rates on losses surrendered for research & development tax credit (41,295) (40,785)Adjustment to charge in respect of prior periods – 26,115

Current tax credit for the period 165,182 189,256

(c) Factors that may affect current and future tax chargesThe Group has tax losses arising of £4,453,857 (2003 £3,758,944) that are available for offset against future taxable profits. No provision has beenmade for deferred tax on losses carried forward in the subsidiary. These losses will only be available for offset when the subsidiary makes taxableprofits. As the timing of these profits is not certain it has been assumed the losses will not be recoverable in the foreseeable future.

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6. Taxation (continued)

(d) Deferred taxationThe unprovided deferred tax asset comprises the following amounts:

2004 2003£ £

Accelerated capital allowances 66,174 23,101Other timing differences (5,193) (3,733)Tax losses (1,397,139) (1,127,683)

(1,336,158) (1,108,315)

All amounts are calculated at 30% (2003 30%) using the liability method.

7. Loss attributable to members of the parent companyThe loss dealt with in the accounts of the parent company was £1,364,138 (2003 £1,719,600).

8. Loss per ordinary shareBasic loss per ordinary share is calculated based on the loss for the period of £1,299,107 (2003 £1,860,145) and on 125,338,821 ordinary shares (2003 90,623,382 ordinary shares), being the weighted average number of ordinary shares in issue during the period.

The loss for the period and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per share are thesame as for the basic earnings per share calculation. This is because the outstanding share options would have the effect of reducing the loss perordinary share and would therefore not be dilutive under the terms of Financial Reporting Standard No. 14 (‘FRS 14’).

9. Tangible fixed assetsMotor Office Computer Laboratory

vehicles equipment equipment equipment TotalGroup £ £ £ £ £Cost:At 1 January 2004 30,000 38,082 218,471 937,727 1,224,280Additions – 1,225 28,869 515,338 545,432Disposals (30,000) – (616) (20,000) (50,616)

At 31 December 2004 – 39,307 246,724 1,433,065 1,719,096

Depreciation:At 1 January 2004 10,833 8,297 149,343 394,250 562,723Provided during this period – 3,885 65,482 203,274 272,641Disposals (10,833) – (559) (20,000) (31,392)

At 31 December 2004 – 12,182 214,266 577,524 803,972

Net book value:At 31 December 2004 – 27,125 32,458 855,541 915,124

At 31 December 2003 19,167 29,785 69,128 543,477 661,557

Included in motor vehicles above were amounts under hire purchase contracts. The net book value of such assets was £nil (2003 £19,167) and thedepreciation charged in the year was £nil.


10. InvestmentsCompany £Cost:At 1 January 2004 and 31 December 2004 68,063

Provision for impairment: At 1 January 2004 and 31 December 2004 68,063

Carrying value of Investments:At 1 January 2004 and 31 December 2004 –

Full provision has been made against the investments in Cyprotex Discovery Limited and Cyprotex North America, Inc.

The following companies are wholly owned subsidiaries of Cyprotex PLC:

Subsidiary Country of Proportion held by Nature ofundertakings Registration Holding Company and Group business

Cyprotex Discovery Ltd England and Wales Ordinary shares 100% Provision of in vitro andin silico ADMET information

Cyprotex United States Ordinary shares 100% Non-tradingNorth America, Inc

11. StocksGroup Company

2004 2003 2004 2003£ £ £ £

Raw materials and consumables 86,028 67,766 – –

The difference between the replacement cost and the book value of stocks is not material.

12. DebtorsGroup Company

2004 2003 2004 2003£ £ £ £

Trade debtors 356,854 132,597 – –Amounts owed by group undertakings – – 1,351,260 1,296,525Other debtors 2,790 4,373 – 4,373Corporation tax recoverable 165,182 163,141 – –VAT receivable 22,176 7,175 – –Prepayments and accrued income 223,861 100,551 667 –

770,863 407,837 1,351,927 1,300,898

13. Creditors: amounts falling due within one yearGroup Company

2004 2003 2004 2003£ £ £ £

Obligations under finance leasesand hire purchase contracts – 8,360 – –Trade creditors 134,291 27,429 – –Other taxes and social security costs 53,661 49,601 – –Other creditors 19,762 14,375 – –Accruals and deferred income 355,371 305,386 – –

563,085 405,151 – –

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14. Operating lease commitmentsAnnual commitments under non-cancellable operating leases are as follows:Group and Company Land & Buildings

2004 2003£ £

Operating leases which expire:Within one year – 95,000

15. Called up share capital2004 2003

No. £ No. £

Authorised:Ordinary shares of 0.1p each 200,000,000 200,000 160,000,000 160,000

2004 2003No. £ No. £

Allotted, called up and fully paid:Ordinary shares of 0.1p each 127,312,131 127,312 94,913,793 94,914

On 16 January 2004 the authorised share capital of the company was increased by 40,000,000 ordinary shares of 0.1p each to 200,000,000ordinary shares of 0.1p each.

On 16 January 2004 the company placed 30,000,000 new ordinary shares of 0.1p at a price of 10p per share raising £3,000,000 before expenses.The shares were admitted to AIM for trading on 21 January 2004.

On 4 February 2004 the company issued 799,200 ordinary shares of 0.1p at a price of 0.175p on the exercise of options by seven employees.

On 18 February 2004 the company issued 1,024,138 ordinary shares of 0.1p at a price of 9.25p to JA Nicholson a former director of the companyon the exercise of an option.

On 12 May 2004 the company issued 575,000 ordinary shares of 0.1p at a price of 11.5p in payment of professional services provided by twoinvestor relations companies.

Share optionsAt 31 December 2004, options over 24,657,400 (2003 15,454,254) ordinary shares were outstanding as shown below:

At At Date Exercise Earliest Date ofNotes 1 January Options Options Options 31 December granted price date of expiry

2004 granted exercised lapsed 2004 exerciseNumber Number Number Number Number

i b 10,401,600 - - - 10,401,600 07-12-01 0.175p 17-02-03 07-12-11ii b 1,101,600 - (799,200) - 302,400 07-12-01 0.175p 07-12-03 07-12-11iii b 2,048,276 - (1,024,138) (1,024,138) – 03-07-03 9.25piv a, b 1,000,000 - - (50,000) 950,000 13-05-03 1.113p 13-05-05 31-05-07v a, b 452,778 - - - 452,778 15-05-03 1.113p 21-08-04 31-08-06vi a, b 450,000 - - - 450,000 15-05-03 1.113p 09-12-04 31-12-06vii b - 7,000,000 - - 7,000,000 16-01-04 10.0p 16-01-04 12-12-13viii a - 200,000 - - 200,000 04-06-04 11.0p 04-06-06 30-06-08viii a, b - 3,725,622 - - 3,725,622 04-06-04 11.0p 04-06-06 30-06-08ix b - 450,000 - - 450,000 8&9-09-04 11.0p 8&9-09-06 7&8-09-14x a - 500,000 - - 500,000 03-11-04 11.0p 03-11-06 30-11-08x a, b - 225,000 - - 225,000 03-11-04 11.0p 03-11-06 30-11-08

15,454,254 12,100,622 (1,823,338) (1,074,138) 24,657,400

Notesa exercisable as follows:

-50% on second anniversary-2.085% each subsequent month for 22 months-remainder one month later

b ‘EMI’ - Enterprise Management Incentives

The share price at 31 December 2004 was 12.25p. During the year the high and low prices were 25.25p and 7.0p.


15. Called up share capital (continued)Share options (continued)

i) 10,401,600 options were granted to a director of the Company on 7 December 2001. Each of the options may be exercised on or after the17 February 2003 at 0.175p per share. The options are conditional on the optionholder remaining a director of the Company at the relevantdate of exercise of the options.

ii) 302,400 options remain of 1,101,600 which were granted to a number of employees of the Company on 7 December 2001. Each of theoptions may be exercised on or after the second anniversary of the date of grant at 0.175p per share. The options are conditional on theoptionholder remaining an employee of the company at the relevant date of exercise of the options.

iii) Options totalling 2,048,276 were granted to other directors on 7 February 2003 at the placing price of 29p. The right to exercise theseoptions was conditional upon admission to trading on the Alternative Investment Market and upon the achievement of performanceconditions relating to the growth in total shareholder return. On 3 July 2003 these options were surrendered and re-issued withoutperformance conditions at a price of 9.25p per share. Following the resignation of J A Nicholson, 1,024,138 options were exercised on 18 February 2004 and the remaining 1,024,138 options over ordinary shares lapsed. The share price on 18 February 2004 was 19.5p.

iv) Options totalling 1,000,000 were granted to a number of employees of the company on 13 May 2003. Each of the options may beexercised; 50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months and a final tranche forthe balance at 1.113p per share. The options are conditional on the option holder remaining an employee of the company at the relevantdate(s) of the exercise of the options.

v) Options totalling 452,778 were granted to a number of employees of the company on 21 August 2002. Each of the options may beexercised; 50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months and a final tranche forthe balance at 18p per share. The options are conditional on the optionholder remaining an employee of the company at the relevant date(s)of the exercise of the option. On 15 May 2003 these options were surrendered and re-issued at a price of 1.113p per share.

vi) Options, totalling 450,000 were granted to a number of employees on 9 December 2002. Each of the options may be exercised; 50% on orafter the second anniversary of the date of grant; 2.085% each month thereafter for 22 months and a final tranche for the balance at 18.5pper share. The options are conditional on the optionholder remaining an employee of the company at the relevant date(s) of the exercise ofthe options. On 15 May 2003 these options were surrendered and re-issued at a price of 1.113p per share.

vii) Following the approval of shareholders in General Meeting 7,000,000 options were granted to a director of the Company on 16 January2004. Each of the options maybe exercised on or after the 16 January 2004 at 10p per share. The options are conditional on the optionholder remaining a director of the Company at the relevant date of exercise of the options.

viii) Options totalling 3,925,622 were granted to a number of employees of the Company on 4 June 2004. Each of the options may beexercised: 50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months and a final tranche forthe balance at 11.0p per share. The options are conditional on the option holder remaining an employee of the Company at the relevantdate(s) of the exercise of the option.

ix) Options totalling 450,000 were granted to directors on 8 and 9 September 2004. Each of the options may be exercised on or after thesecond anniversary of the date of grant at 11.0p per share. The options are conditional on the option holder remaining a director of theCompany at the relevant date of exercise of the options.

x) Options totalling 725,000 were granted to a number of employees of the Company on 3 November 2004. Each of the options may beexercised: 50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months and a final tranche forthe balance at 11.0p per share. The options are conditional on the option holder remaining an employee of the Company at the relevantdate(s) of the exercise of the option.

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16. Reconciliation of shareholders’ funds and movements on reservesShare Share Merger Profit and 2004 2003

capital premium reserve loss account Total TotalGroup £ £ £ £ £ £

At 1 January 2004 94,914 6,544,787 128,070 (5,544,532) 1,223,239 2,261,235Issue of shares 32,398 3,129,858 – – 3,162,256 810,000Issue costs – (57,924) – – (57,924) (40,500)Loss for the year – – – (1,299,107) (1,299,107) (1,860,145)Exchange difference

on retranslationof net assets – – – 20,266 20,266 52,649

At 31 December 2004 127,312 9,616,721 128,070 (6,823,373) 3,048,730 1,223,239

The merger reserve arose on the acquisition of Cyprotex Discovery Ltd by the Company on 4 January 2002.

Share Share Profit and 2004 2003capital premium loss account Total Total

Company £ £ £ £ £

At 1 January 2004 94,914 6,544,787 (5,328,566) 1,311,135 2,261,235Issue of shares 32,398 3,129,858 – 3,162,256 810,000Issue costs – (57,924) – (57,924) (40,500)Loss for the year – – (1,364,138) (1,364,138) (1,719,600)

At 31 December 2004 127,312 9,616,721 (6,692,704) 3,051,329 1,311,135

17. Notes to the statement of cash flows

(a) Reconciliation of operating loss to net cash flow from operating activities

2004 2003£ £

Operating loss (1,570,224) (2,035,122)Depreciation of tangible fixed assets 272,641 269,784Loss/(profit) on sale of tangible fixed assets 2,522 (42,606)Increase in stocks (18,262) (16,983)(Increase)/decrease in operating debtors and prepayments (360,985) 5,908Increase/(decrease) in operating creditors and accruals 166,294 (495,562)Exchange rate differences 20,266 11,191

(1,487,748) (2,303,390)

(b) Analysis of movement in net fundsAt 1 January At 31 December

2004 Cash flow 2004£ £ £

Cash at bank and in hand 491,230 (394,010) 97,220

491,230 (394,010) 97,220Short term deposits – 1,742,580 1,742,580Finance leases (8,360) 8,360 –

482,870 1,356,930 1,839,800

Short term deposits are included with cash at bank and in hand in the balance sheet.


18. Financial instrumentsAn explanation of the Group’s objectives, policies and strategies for the role of derivatives and other financial instruments in creating and changingthe risks of the Group in its activities can be found on page 10.

The Group’s financial instruments include cash and short-term deposits and these financial instruments are used for the purpose of funding theGroup’s operations. It is not a Group policy to invest in financial derivatives.

As permitted by Financial Reporting Standard No. 13 (‘FRS 13’), the disclosures set out below exclude short-term debtors and creditors.

Interest rate risk profile of financial assetsThe interest rate risk profile of financial assets was confined to floating rate sterling assets.

Financialassets

Floating rate on whichfinancial no interest

assets is earned TotalAt 31 December 2004 £ £ £

US Dollar 44,573 9,502 54,075Sterling 1,698,007 87,718 1,785,725

1,742,580 97,220 1,839,800

At 31 December 2003Sterling 290,237 200,993 491,230

Floating rate financial assets comprise cash deposits on money market deposit at call.

Interest rate risk profile of financial liabilitiesWeighted average interest rate

Fixed rate financial liabilitiesWeighted

averageWeighted period for

average whichInterest rate rate is fixed

% Years

31 December 2004Sterling – –

31 December 2003Sterling 24.5 1.0

Fixed rate financial liabilities consist of finance leases and bank loan.

Borrowing facilitiesAs at 31 December 2004 the Group had no bank overdraft facility.

Fair values of financial assets and financial liabilitiesThe fair value, based upon the market value or discounted cash flows, of the financial instruments detailed above was not materially different fromthe book values.

19. Post balance sheet eventOn 17 January 2005 the Company purchased a freehold interest in its operating premises in Macclesfield for £842,400, including stamp duty at 4%.The purchase was funded principally by a property loan of £704,000 from The Royal Bank of Scotland plc. The property loan is repayable over 20years and subject to interest at a rate of 1.75% over bank rate.

20. Capital commitmentsAt 31 December 2004 the Group had outstanding capital commitments of £31,992 (2003 £nil). The Company had no capital commitments at 31 December 2004 or 31 December 2003.

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21. Related party transactionsDuring the year ended 31 December 2004, the Group entered into the following transactions, in the ordinary course of business, with the followingrelated parties:

Purchases PurchasesSales to from Sales to fromrelated related related related

party party party party2004 2004 2003 2003

Related party £ £ £ £

Aubach Capital Partners Limited – – – 31,250Mark Warburton – – – 10,300Paul Davidson – – (3,852) 111,625

There were no amounts owed to or from a related party at 31 December 2004 or 31 December 2003.

Aubach Capital Partners LimitedAubach Capital Partners Limited remains a shareholder of Nordan Holdings Limited, a major shareholder of Cyprotex PLC at 31 December 2004. The transactions represent consultancy services recharged between the parties in the ordinary course of business.

Mark WarburtonMark Warburton, an employee of the Group, remains a Director of Nordan Holdings Limited, a major shareholder at 31 December 2004. The transactions represent consultancy services recharged between the parties in the ordinary course of business.

Paul DavidsonPaul Davidson was a shareholder of Nordan Holdings Limited, a major shareholder of Cyprotex PLC at 31 December 2003. The transactionsrepresented rent and other related items recharged between the parties in the ordinary course of business.

22. Pension commitmentsThe Group’s principal subsidiary Cyprotex Discovery Limited operates a defined contribution scheme, The Cyprotex Group Stakeholder PensionScheme, for its directors and employees. The assets of the scheme are held separately from those of the Group in an independently administeredscheme. The unpaid contributions at 31 December 2004 are £11,853 (2003 £14,375).


Notice is hereby given that the Annual General Meeting of Cyprotex PLC (the “Company”) will be held at The Institute of Directors, 116 Pall Mall,London SW1Y 5ED on 1 June 2005 at 10 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, of whichresolutions 1 to 5 will be proposed as ordinary resolutions and resolution 6 will be proposed as a special resolution:

ORDINARY BUSINESS

Ordinary Resolutions

Resolution 1To receive the audited financial statements for the year ended 31 December 2004 and the Directors’ and Auditors’ reports thereon.

Resolution 2To confirm the appointment of Grant Thornton UK LLP as Auditors of the Company and authorise the Directors to determine the remuneration ofthe Auditors.

Resolution 3

To re-elect Martial Lacroix as a Director of the Company.

Resolution 4To re-elect Minhaz Manji as a Director of the Company.

SPECIAL BUSINESS

Ordinary Resolution

Resolution 5For the purposes of and pursuant to section 80(1) of the Companies Act 1985 (the "Act"), the directors of the Company be and they are herebyauthorised generally and unconditionally to exercise all powers of the Company to allot relevant securities (within the meaning of section 80(2) ofthe Act) up to an aggregate nominal amount of £42,193 to such persons at such times and upon such terms and conditions as they maydetermine (subject always to the articles of association of the Company) provided this authority and power shall, unless renewed, varied orrevoked, expire at the conclusion of the next annual general meeting of the Company or 15 months from the date of the passing of this resolution(whichever is the earlier) and provided further that the Company may before the expiry of such period make any offer, agreement or arrangementwhich would or might require relevant securities to be allotted after the expiry of such period and the directors of the Company may then allotrelevant securities pursuant to any such offer, agreement or arrangement as if the authority or power hereby conferred had not expired.

Special Resolution

Resolution 6For the purposes of and pursuant to section 95(1) of the Act, the directors of the Company be and they are hereby authorised and empowered toallot equity securities (within the meaning of section 94 of the Act) pursuant to the general authority and power conferred by resolution 5 in thisnotice of meeting as if section 89(1) of the Act did not apply to any such allotment provided that this authority and power shall, unless renewed,varied or revoked, expire at the conclusion of the next annual general meeting of the Company or 15 months from the date of the passing of thisresolution (whichever is the earlier) and provided further that this authority and power shall be limited:

(a) to the allotment of equity securities pursuant to a rights issue or similar offer to ordinary shareholders where the equity securitiesrespectively attributable to the interests of all ordinary shareholders are proportionate or as nearly as practical (and taking into account anyprohibitions against or difficulties concerning the making of an offer or allotment to shareholders whose registered address or place ofresidence is overseas and subject to such exclusions as the directors of the Company may deem necessary or expedient to deal withfractional entitlement or legal and practical difficulties under the laws of, or the requirements of any recognised regulatory body in, anyterritory) to the respective numbers of ordinary shares held by them; and

(b) to the allotment (otherwise than pursuant to paragraph (a) above) for cash of equity securities up to an aggregate nominal amount of£12,731 of the current issued share capital of the Company.

BY ORDER OF THE BOARD REGISTERED OFFICE:Mark C Warburton 100 Barbirolli SquareCompany Secretary Manchester M2 3AB9 March 2005

Notice of annual general meeting

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Notice of annual general meeting

Important notes for shareholders(1) A member of the Company may appoint one or more proxies to attend and, on a poll, to vote instead of the member. A proxy of a member

need not also be a member.

(2) The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copyof that power or authority must be deposited with the Company's registrars, Capita Registrars, Proxy Department, P O Box 25,Beckenham, Kent, BR3 4TU not less than 48 hours before the time for holding the meeting. A Form of Proxy accompanies this documentfor use by members.

(3) Completion of the Form of Proxy will not preclude a member from attending and voting in person.

(4) Any corporation which is a member of the Company may authorise a person (who need not be a member of the Company) to act as itsrepresentative to attend, speak and vote (on a show of hands or a poll) on its behalf.

(5) In the case of joint holders of a share the vote of the senior who tenders the vote whether in person or by proxy shall be accepted to theexclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand inthe statutory register of members in respect of the share.

(6) As permitted by Regulation 41 of the Uncertificated Securities Regulations 1995, only those holders of ordinary shares in the Company whoare registered on the Company’s share register as at 10 a.m. on 30 May 2005 shall be entitled to attend the Annual General Meeting andto vote in respect of the number of shares registered in their names at that time. Changes to entries on the share register after 10 a.m. on 30 May 2005 shall be disregarded in determining the rights of any person to attend and/or vote at the Annual General Meeting.

Financial informationThe trading results of the Group are normally published at the following times:

• Interim results for the six months to 30 June in September

• Final results for the year to 31 December in March

Annual general meetingThe Annual General Meeting will be held at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED on 1 June 2005 at 10 a.m.

The notice of the meeting is set out on pages 35 to 36 and an explanation of the special business to be transacted is given on page 14 of theReport of the Directors.

Share price informationThe Company’s share price is available from the web site of London Stock Exchange under CRX.

Company web site – www.cyprotex.comThe Company’s web site provides information on products, activities and financial information. It includes latest financial information and pressreleases and any other information that is relevant to the Company.

Shareholder enquiriesAny queries regarding individual shareholdings, transfers etc. should be directed to Capita Registrars.

Shareholders wishing to consolidate two or more individual certificates may do so by writing to Capita Registrars at the address given below,enclosing the certificates to be consolidated.

Where shareholders are receiving duplicate sets of accounts or mailings, as a result of inconsistencies in name or address details, they shouldadvise the registrars so that this can be corrected.

Other enquiries regarding the Group should be directed to the Company Secretary.

Shareholder information

DirectorsRobert Morrisson Atwater (Chairman and Chief Executive Officer)Dr David Leahy (Chief Scientific Officer)Minhaz Manji (Non-executive Director)Dr Martial Lacroix (Non-executive Director)David Evans (Non-executive Director)

SecretaryMark C Warburton

Auditors Nominated AdvisorsGrant Thornton UK LLP Code Securities LimitedHeron House 30 St James’s SquareAlbert Square London SW1Y 4ALManchester M60 8GT

Registrars Registered OfficeCapita Registrars 100 Barbirolli SquareNorthern House Manchester M2 3ABWoodsome ParkFenay Bridge Registered NumberHuddersfield HD8 0LA 4311107

Directors and advisors

Cyprotex15 Beech LaneMacclesfieldCheshireSK10 2DRUK

Tel: +44 (0) 1625 505100Fax: +44 (0) 1625 505199

[email protected]

CyprotexCambridge Innovation CenterOne BroadwayCambridgeMA 02142USA

Tel: +1 (617) 621 1509Fax: +1 (617) 621 1510

[email protected]

Cyprotex AR cover artwork 4/4/05 3:30 pm Page 2

Documents

Cyprotex PLC AR 2004 - ADME-Tox CRO