Lipoxen innovation in drug delivery Financial Results for the 12 months ended 31 December 2007

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Financial Results for the 12 months ended 31 December 2007

26 June 2008

London, UK, 26 June, 2008 - Lipoxen PLC (AIM:LPX), a bio-pharmaceutical company specialising in the development of high value differentiated biologicals, vaccines and oncology drugs, announces today its consolidated financial results for the twelve months ended 31 December 2007.

The Annual Report and Accounts for the year ended 31 December 2007 has been sent to shareholders. Copies are available on the Company's website (www.lipoxen.com) or by contacting the Company on Lipoxen PLC, London Bioscience Innovation Centre, 2 Royal College Street, London, NW1 0NH, United Kingdom.

The Annual General Meeting will be held at 21 Arlington Street, London SW1 1RN on Wednesday 23^rd July at12 noon. The Notice of Annual General Meeting, which has been sent to shareholders today, will shortly be available on the Company's website.

Highlights

- Through 2007 and early 2008 Lipoxen's pipeline has taken significant steps forward, with candidates now in the clinic and the announcement of positive Phase I results

- The first Phase I trial of ErepoXen®, a long-acting EPO has shown the product candidate was well tolerated and has the potential to be administered on a once monthly basis. Current EPO therapies are generally administered between once and three times a week and have an overall global market value worth $9 billion

- SuliXen®, a long-acting insulin, successfully completed toxicology studies and in early 2008 became the second product to enter the clinic. Initial results showed that the formulation may be progressing towards a superior formulation as compared to Lantus (which generates annual sales of $3 billion)

- Entered into an exclusive worldwide development and licence agreement with Intervet (Schering Plough) (September 2007), the world's leading animal health company, to develop a long-acting insulin for the veterinary health market

- A majority of cash-settled expenses went into research and development activities and R&D expense increased year-on-year by circa 48% compared to 2006

- Net operating cash outflow in the period saw a reduction of 47% to £1.2 million from £2.2 million in 2006

- Lipoxen had net cash at the period end of £2.4 million (2006: £2.7 million)

- Lipoxen continues to strengthen its IP portfolio with the allowance of two key patents in the US relating to DNA vaccine delivery

- Colin Hill was appointed Finance Director in June 2007. Mr Hill took on this executive appointment in order to provide Lipoxen with the financial expertise and resource needed to support the Company's goal of becoming a leading bio-pharmaceutical company based on its unique delivery technologies

Enquiries

Lipoxen PLC
M. Scott Maguire, Chief Executive Officer	+44 (0)20 7691 3583

Landsbanki Securities (UK) Limited (nominated adviser)
Shaun Dobson / Claes Spång	+44 (0)20 7426 9000

Citigate Dewe Rogerson
David Dible / Heather Keohane	+44 (0)20 7638 9571

Notes to Editors

Further information on Lipoxen

Lipoxen PLC (AIM:LPX) is a biopharmaceutical company specializing in the development of high value differentiated biologicals, vaccines and oncology drugs. Products currently under development include improved formulations of important biologicals such as erythropoietin (EPO), G-CSF, insulin and Interferon-alpha. Lipoxen has two products in clinical development SuliXen, a long-acting human insulin and ErepoXen®, long-acting EPO. These novel products, which are based on Lipoxen's proprietary PolyXen® technology, each address markets in excess of US$1 billion.

Lipoxen's technology is designed to improve the stability, biological half-life and immunologic characteristics of therapeutic proteins naturally. Lipoxen has two further naturally-derived proprietary delivery technologies, ImuXen® and a related liposomal technology for the formulation of cytotoxic oncology drugs, which are being developed to enhance the efficacy and safety of various vaccines such as a multivalent Hepatitis B-E and pneumococcal vaccines, as well as a number of anti-cancer agents like paclitaxel. The Company's proprietary delivery technologies are attracting significant interest and Lipoxen is currently co-developing products with the Serum Institute of India Limited (one of the world's leading vaccine companies, India's largest biotech company and a major shareholder in Lipoxen) and has license agreements in place with Baxter International and InterVet, a leading animal health company.

Lipoxen was admitted to trading on the AIM Market of the London Stock Exchange in January 2006.

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

LIPOXEN PLC ANNUAL REPORT FOR THE YEAR ENDED 31st DECEMBER 2007

Company Registration Number 3213174

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31st DECEMBER 2007

Dear Shareholder,

It gives me great pleasure to update you on a period when Lipoxen has taken a transforming step forward by generating our first human clinical data that has shown that our platform technology has the capability of enhancing the clinical and commercial potential of some of the most commercially successful biotherapeutics on the market today and of those to be developed in the future. These positive initial results give me great confidence in Lipoxen's ability to deliver on our goal of becoming a leader in the delivery of biotherapeutics and vaccines.

The Company made significant progress in the period by continuing to execute its two-pronged strategy, which, through leveraging the Company's novel delivery technologies, focuses on establishing revenue-generating licence agreements and establishing the Company's proprietary product pipeline. This partnership strategy not only allows Lipoxen to focus its human and capital resources on its internal research and development operations, but also enables partners to improve their proprietary products and to more effectively manage their product lifecycles.

Throughout the period, our three core proprietary patented delivery technologies, PolyXen, ImuXen and VesicAll continued to drive the establishment of a broad product pipeline.

- PolyXen® is a versatile enabling technology that uses the biopolymer polysialic acid to prolong the active life and improve the pharmacokinetics of therapeutic peptides and proteins, as well as conventional small molecule drugs

- ImuXen® is an advanced enabling technology that uses liposome-based constructs to boost the effectiveness of DNA, protein and polysaccharide vaccines. ImuXen® is designed to achieve protective immunity in a single dose

- VesicALL® is a highly efficient enabling technology for the formulation of anti-cancer treatments and other drugs using liposomal entrapment.

Progress with Collaborations

Establishing collaborations continues to be a key element of Lipoxen's growth strategy as it aims to achieve the broad adoption of our drug and vaccine delivery technologies, whilst also creating a sustainable revenue base for the Company.

During the period, we focused on delivering the milestones associated with the Company's established collaborations with the Serum Institute of India ("SIIL"), Baxter and Schering Plough.

Lipoxen's collaboration with SIIL is a strategic partnership covering the development of drug candidates as well as a manufacturing agreement. Currently, there are twelve drug and vaccine candidates at various stages of development. The most advanced candidate is ErepoXen®, a long-acting EPO targeting treatment of anaemia in patients on renal dialysis. The compound completed toxicology studies in 2007 and entered the clinic in February 2008. In April 2008, following Phase 1 trials in India, positive results were announced with the candidate being shown to be safe and well tolerated. The study also demonstrated that this long-acting EPO, which has been formulated using our proprietary PolyXen® technology, has the potential to be administered on a once monthly basis. This could be a key competitive advantage for ErepoXen® as there is a clear demand from patients for improved forms of EPO, which have, in particular, less frequent dosing and more patient convenience. In 2007, the overall global market for EPO was worth $9 billion for a one to three times per week dosage.

This announcement was a major milestone for Lipoxen's business as it was the first human data showing that potentially we can use our PolyXen® technology to improve the delivery of hundreds of biological drugs.

We continue to optimise the Factor VIII Baxter product, PolyXen-FactorVIII. (Factor VIII was a $1Billion drug in 2007.) Substantial progress has been made on this collaboration with the next milestone expected to be the nomination of a product candidate by Baxter. This product declaration, expected in 2008, will result in the Company receiving a further material payment from Baxter. This would be the second such payment under the $75 million (plus royalties on sales) payable under the development, clinical and sales milestone Licence Agreement exercised in December 2006.

During the period we also looked to develop new collaborations and on 24th September 2007 Lipoxen entered into an exclusive worldwide development and licence agreement with Intervet (Schering Plough), the world's leading animal health company, to develop a long-acting insulin for the veterinary health market. Intervet signed the agreement to access your Company's unique PolyXen® drug delivery technology and in March 2008 the technology transfer was completed. This is the third exclusive licence agreement we have put in place with large biopharmaceutical companies seeking to access our proprietary protein delivery technology. We continue to believe that we are very well positioned to leverage our technology further through additional agreements in the pharmaceutical sector.

As part of its development and manufacturing agreement, SIIL has been investing in the infrastructure necessary to manufacture polysialic acid ("PSA") - being the key component of Lipoxen's PolyXen® protein drug delivery technology such that the material:-

(a) has been approved by international regulators for application in man and,

(b) can be supplied to Lipoxen and its collaborative and licence partners for ongoing and future clinical trials purposes now production scale-up has been achieved.

Drug Pipeline

The Company's current R&D portfolio includes twelve pre-clinical and clinical programmes across a range of therapeutics and vaccines. Through 2007 and early 2008 Lipoxen's pipeline has taken significant steps forward, with candidates now in the clinic and the announcement of the first set of positive Phase I results with ErepoXen®.

Lipoxen's proprietary pipeline is composed of SuliXen®, a long-acting insulin for Types 1 and 2 diabetes. In 2007, SuliXen® successfully completed toxicology studies and in early 2008 became the second product to enter the clinic. We are delighted to have announced highly successful initial results from the Phase I trials of SuliXen in Russia where, as compared to Lantus (a $3 billion drug), the trials have demonstrated that Lipoxen may be progressing towards a superior formulation. We expect to further advance this candidate through the clinic during 2008.

With the World Health Organization expecting there to be over 300m Type 1 diabetes sufferers worldwide by 2025, there is a clear market need for alternative insulin formulations such as SuliXen.

Financial Review

The financial results for the Group in the period under review were:

	2007	2006
	£'000	£'000

Turnover	905	1,219
Total pre-tax losses for period	3,291	1,824
Non-cash component of total pre-tax loss	1,455	959
Net cash at 31st December	2,446	2,690
Net asset value as 31st December	6,336	7,883

	p	p

Loss per share - basic and fully diluted	2.78	1.80
Net asset value per share - basic	5.30	6.83
Net asset value per share - fully diluted	5.01	6.40

Non-cash component of total pre-tax losses:

	2007	2006
	£'000	£'000

Depreciation of owned assets	263	57
R&D costs - equity settled	520	395
Share option expense - equity settled	672	507
	------------	------------
Total principal non-cash items	1,455	959
	============	============

Further analysis of the total administrative expenses included within the income statement reveals not only that a majority of the cash-settled expenses went into research and development activities, but that R&D expense increased year-on-year by circa 48% compared to 2006. This reflects the increasing level of commitment to R&D which has yielded such positive results in the year under review

	2007	2007	2006	2006
	£'000	%	£'000	%

Research and development - cash settled	1,836	63.4	1,242	56.9
Other expenses - cash settled	1,058	36.6	940	43.1
	------------	-------------	------------	------------
Total expenses - cash settled	2,894	100.0	2,182	100.0
Total non-cash items	1,455	=====	959	====
	------------		------------
Total administrative expenses	4,349		3,141
	============		============

Other administrative expenses, while being 12.6% higher than in the previous year, remain closely controlled and, as a proportion of the total cash-settled expenditure incurred in the period, show a significant decrease compared to the previous year.

Net operating cash outflow in the period - as reported in the consolidated cash flow statement (post) - was £1,157,085 compared to £2,164,559 in 2006. The significance of a virtual halving of the net cash "burn" is notable not just in an absolute sense but in particular because in neither period did the Company have "contracted" income "on the books" at the commencement of the financial year. Rather, and as was true in both years, the nature of the development of the Company's business has required it to initiate income streams from both feasibility studies with potential collaborative partners as well as carrying out paid-for development work for existing partners. The imperative to establish (and maintain) such business development initiatives remains true as we look to the future and I am confident that the Company will rise to this commercial challenge going forward.

Intellectual Property

Lipoxen continues to strengthen its IP portfolio with the allowance of two key patents in the US relating to DNA vaccine delivery. Realising that a strong intellectual property position is key to our future success, the allowance of these patents further strengthens the Company's position as a leader in the development of DNA vaccine delivery technology. The intellectual property portfolio we are continually developing in this area should enable Lipoxen to carve out an important position in the development of novel vaccines.

Board appointments

Colin Hill was appointed Finance Director in June 2007. Mr Hill took on this executive appointment in order to provide Lipoxen with the financial expertise and resource needed to support the Company's goal of becoming a leading bio-pharmaceutical company based on its unique delivery technologies.

Also in June 2007, Lipoxen announced the appointment of Firdaus Jal Dastoor as a Non-executive Director. Mr Dastoor is a Group Director of the Poonawalla Group of companies of which SIIL is a member and was appointed to the Board as their representative.

Outlook

The last fifteen months have been a transforming period for Lipoxen as our products completed toxicology studies, entered the clinic and generated highly promising initial clinical data.

With two high-value differentiated biologicals under development and a portfolio of delivery technologies which is attracting interest from a growing list of potential partners, I believe that Lipoxen is well positioned to generate significant shareholder value over the remainder of 2008 and beyond.

The Directors and I would like to thank all of the management and staff for their substantial contribution to our successes in the last year and I look forward to their continuing commitment in the future.

Brian Richards, CBE

Non-Executive Chairman

London: 24th June 2008

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31st DECEMBER 2007

			2007	2006
		Note	£	£



REVENUE		3	905,273	1,218,839
			------------	------------
ADMINISTRATIVE EXPENSES
Research and development expenditure			2,355,616	1,636,675
Administrative expenses			1,993,140	1,504,696
			------------	------------
Total			4,348,756	3,141,371

			------------	------------
OPERATING LOSS		4	(3,443,483)	(1,922,532)

Finance income			152,751	108,479
Finance costs			-	(9,719)
			------------	------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION			(3,290,732)	(1,823,772)

Income tax expense		7	-	(49,096)

			------------	------------
LOSS FOR THE FINANCIAL YEAR			(3,290,732)	(1,872,868)
			============	============

Loss per share (pence) - basic and fully diluted	9		(2.78)p	(1.80)p
			============	============

All of the activities of the Group are classed as continuing.

The Company has elected to take the exemption under section 230 of the Companies Act 1985 to not present the parent company profit and loss account.

CONSOLIDATED BALANCE SHEET

FOR THE YEAR ENDED 31st DECEMBER 2007

		2007		2006
	Note	£	£	£

NON-CURRENT ASSETS
Property, plant and equipment	10		866,552	970,665
Goodwill	11		1,061,476	1,061,476
Other receivables	13		500,000	1,370,000
			------------	------------
			2,428,028	3,402,141
				------------
CURRENT ASSETS
Trade and other receivables	13	1,755,640		2,058,584
Cash and cash equivalents		2,445,936		2,690,222
		------------		------------
		4,201,576		4,748,806
CURRENT LIABILITIES
Trade and other payables	14	293,733		268,120
		------------		------------
NET CURRENT ASSETS			3,907,843	4,480,686
			------------	------------
NET ASSETS			6,335,871	7,882,827
			============	============


CAPITAL AND RESERVES ATTRIBUTABLE
TO THE COMPANY'S EQUITY HOLDERS
Share capital	15		2,231,468	2,210,718
Share premium account			22,508,165	21,456,915
Reverse acquisition reserve			(8,252,127)	(8,252,127)
Retained earnings			(10,151,635)	(7,532,679)
			------------	------------
TOTAL EQUITY			6,335,871	7,882,827
			============	============

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31st DECEMBER 2007

		2007	2006
	Note	£	£

Cash flows from operating activities	17	(1,309,836)	(2,310,348)
Interest paid		-	(9,719)
Interest received		152,751	108,479
Taxation received		-	47,029
		------------	------------
Net cash outflow from operating activities		(1,157,085)	(2,164,559)
		-------------	------------
Cash flows from investing activities
Cash balance of parent company acquired		-	142,613
Purchase of property, plant and equipment		(159,201)	(1,002,752)
		-------------	----------
Net cash used in investing activities		(159,201)	(860,139)
		-------------	----------
Cash flows from financing activities
Issue of equity share capital		1,072,000	5,681,468
		-------------	------------

Net (decrease)/increase in cash and cash equivalents		(244,286)	2,656,770

Cash and cash equivalents at beginning of year		2,690,222	33,452
		--------------	------------
Cash and cash equivalents at end of year		2,445,936	2,690,222
		============	============

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31st DECEMBER 2007

	Share capital	Share premium	Capital reserve	Reverse acquisition reserve	Retained earnings	Total
	£	£	£	£	£	£

At 1st January 2006	491,432	6,247,402	1,874,704	-	(6,166,349)	2,447,189
Loss for year	-	-	-	-	(1,872,868)	(1,872,868)
Cost of acquisition of parent company	61,183	1,059,317	-	-	-	1,120,500
Reverse acquisition reserve adjustment	1,455,718	8,671,113	(1,874,704)	(8,252,127)	-	-
Shares issued for cash	202,385	6,346,474	-	-	-	6,548,859
Share issue expenses	-	(867,391)	-	-	-	(867,391)
Share-based payments	-	-	-	-	506,538	506,538
	_	_	_	_	_	_
At 31st December 2006	2,210,718	21,456,915	-	(8,252,127)	(7,532,679)	7,882,827
Loss for year	-	-	-	-	(3,290,732)	(3,290,732)
Shares issued for cash	20,750	1,051,250	-	-	-	1,072,000
Share-based payments	-	-	-	-	671,776	671,776
	_	_	_	_	_	_
At 31st December 2007	2,231,468	22,508,165	-	(8,252,127)	(10,151,635)	6,335,871
	=======	=======	=======	=======	=======	=======

The reverse acquisition reserve arises on the restatement of the equity structure shown in the consolidated financial statements from that of Lipoxen Technologies Limited immediately after the deemed acquisition of Lipoxen Plc, as described in Note 2, to reflect the equity structure of the legal parent company.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31st DECEMBER 2007

1. ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as issued by the International Accounting Standards Board.

The Company and the Group have adopted IFRS for the first time in the financial statements for the year ended 31st December 2007. The date of transition to IFRS is therefore 1st January 2006. Previously the Company and the Group had reported under United Kingdom Generally Accepted Accounting Principles ("UK GAAP").

The transition from UK GAAP to IFRS has been made in accordance with IFRS 1: First-time Adoption of International Financial Reporting Standards. This has resulted in changes to the Group's accounting policies in the following areas that have affected the amounts reported in the current or prior years:

(i) IFRS 3: Business combinations; and

(ii) IAS 38: Intangible assets

The effect of these changes is described in detail in Note 20 to the financial statements.

2. ACCOUNTING POLICIES

Fundamental accounting concept - going concern

As an early-stage development life sciences business, the Company has incurred operating losses in the period under review, notwithstanding that substantial clinical and technical progress was also made in the continuing successful development of its proprietary technologies; consequently, the Company was a net consumer of cash.

In order to maintain the level of scientific effort required to develop the Company's technologies and to commercialise them to such degree as will be necessary to become a cash-generative business, the Company will need to access new cash in addition to that available to it at the period end; such new cash will either be generated internally from, as yet, non-contractual feasibility and licensing sources and/or from the raising of new capital.

The Directors have prepared a financial forecast for the period through to 31st December 2009. The forecast includes assumptions that the Group will generate cash inflows in this period from:

(a) the ongoing roll-out and licensing of the Company's technologies with its existing collaborative partners;

(b) the roll-out and licensing of the Company's technologies with new collaborative partners;

(c) the contracting of feasibility studies with new partners, based on the successful outcomes of Phase 1 trials in both insulin and EPO; and

(d) the raising of new capital.

The above are, variously, dependent upon the timelines related to the successful execution of concomitant pre-clinical and clinical trials pivotal to the successful continuing development of the Group's technology platforms and the ability to raise finance is dependent upon market conditions.

While considering that platform technology applications to known and marketed drugs confer lower commercial risks than in new drug development, the Directors recognise that there are uncertainties surrounding these core issues. If the Group was to prove unable to generate these additional cash inflows, the cash balance of circa £2.4 million as at 31st December 2007 would be insufficient to fund the Group's activities at their current level for a period of twelve months from the date of approval of these financial statements.

However, the Directors have a reasonable expectation that these uncertainties can be managed to successful outcomes, and that, based on such assessment, the Group will have adequate resources to continue in operational existence for the foreseeable future. They have therefore prepared the financial information contained herein on a going concern basis.

The financial statements do not reflect any adjustments that would be required to be made if they were to be prepared on a basis other than the going concern basis.

Basis of consolidation

The group financial statements incorporate the financial statements of the parent company and all of its subsidiary undertakings. The results of subsidiary undertakings acquired or disposed of during the year are included in the group financial statements from, or up to, the date of acquisition or disposal.

On 16th January 2006, the Company acquired Lipoxen Technologies Limited ("LTL") for a consideration satisfied by the issue of 66,666,662 shares to the vendors. Under the AIM rules and IFRS this transaction meets the criteria of a Reverse Takeover. The consolidated financial statements have therefore been prepared under the reverse acquisition accounting method set out in IFRS 3: Business Combinations with LTL treated as the accounting acquirer of the Company. As a consequence of this, the consolidated results for the period ended 31st December 2006 comprise the results of LTL from 1st January 2006 plus those of Lipoxen Plc from the date of the reverse acquisition.

Under reverse acquisition accounting, the cost of the business combination is deemed to have been incurred by LTL in the form of equity instruments issued to the owners of Lipoxen Plc. LTL shares were not listed prior to the acquisition and consequently the acquisition price has been based on the entire value of the Lipoxen Plc shares in issue immediately before the reverse acquisition.

The assets and liabilities of LTL are recognised and measured in the consolidated financial statements at their pre-combination carrying amounts. The retained earnings and other equity balances recognised in the consolidated financial statements are those of LTL immediately before the business combination. The amount recognised as issued equity instruments is determined by adding the cost of the business combination to the issued equity of LTL immediately before the business combination.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of the reverse acquisition over the net assets of Lipoxen Plc at the date of the business combination. Goodwill is recognised as an asset and is reviewed for impairment at least annually. Any impairment is recognised immediately through the income statement and is not reversed.

Revenue

Revenue shown in the income statement represents the value of services provided during the year, exclusive of Value Added Tax. For contracts in progress at the balance sheet date, revenue is recognised based on the degree of completion of the project and the agreed fee for the total project. Milestone payments receivable for which the Group has no further contractual duty to perform any future services are recognised on the date that they are contractually receivable.

Intangible fixed assets

Intangible assets acquired are capitalised at cost. Intangible assets (excluding development costs) created within the business are not capitalised and such expenditure is charged in the income statement in the year in which it is incurred.

Property, plant and equipment

Depreciation is provided to write off the cost less the estimated residual value of property, plant and equipment on a straight line basis over their estimated useful economic lives as follows:

Laboratory equipment	-	4 years
Plant and machinery	-	4 years
Computer equipment	-	4 years
Manufacturing plant	-	5 years

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a contractual party to the instrument.

Financial assets other than hedging instruments can be divided into the following categories: loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Group's loans and receivables comprise 'trade debtors and other receivables' and 'cash and cash equivalents' in the balance sheet. The Group has no other financial assets.

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group, other than equity-settled share-based payments which are described below, are recorded at the proceeds received net of direct issue costs.

Trade receivables

Trade receivables are measured at initial recognition at fair value and are subsequently measured at fair value less impairment losses. Appropriate amounts for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances and deposits repayable on demand.

Operating lease agreements

Operating lease rentals are charged in the income statement on a straight line basis over the lease term.

Research and development costs

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

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rate ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating loss.

Pension costs

Company contributions to personal pension schemes are written off to the income statement as incurred.

Share based payments

Share options granted to employees are valued at the date of grant using the Black-Scholes option pricing model and are charged to the income statement over the vesting period of the option. A corresponding credit is recognised in the retained earnings reserve.

Equity

Share capital is determined using the nominal value of shares that have been issued.

The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issue of shares are deducted from the share premium account, net of any related income tax benefits.

The reverse acquisition reserve arises on the restatement of the equity structure shown in the consolidated financial statements from that of Lipoxen Technologies Limited immediately after the deemed acquisition of Lipoxen Plc, as described above, to reflect the equity structure of the legal parent company.

Taxation

The tax expense recognised in the income statement represents the sum of the tax currently payable or receivable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Tax receivable arises from the UK legislation regarding the treatment of certain qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.

Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the Group's accounting policies, management makes estimates and assumptions that have an effect on the amounts recognised in the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are those relating to:

a) the future recoverability of goodwill, and the corresponding review of goodwill for impairment (see Note 11);

b) the percentage of completion by FDS Pharma of its obligations under the agreement of October 2005 for the provision of manufacturing and clinical development services (see Note 13); and

c) the expense recognised in the income statement in respect of share options granted to employees (see Note 16).

New standards

The following new standards, amendments, and interpretations have been issued but are not yet effective and have not been adopted early by the Group:

- IFRS 8: Operating segments

This is mandatory for accounts periods beginning on or after 1st January 2009 but has not yet been endorsed by the European Union. This standard will replace IAS 14 and is essentially identical to US Standard SFAS 132. IFRS 8 will require an entity to adopt a 'management approach' to report on the financial performance of its operating segments. The information to be reported would be what management uses internally for allocating resources to operating segments. This is not expected to affect reported net assets or profits.

The following new standards, amendments and interpretations have been issued but are not yet effective and are not expected to be relevant to the Group's operations:

- IFRIC 11: Group and treasury share transactions;

- IFRIC 12: Service concession arrangements;

- IFRIC 13: Customer loyalty programmes;

- IFRIC 14: The limit on a defined benefit asset, minimum funding requirements and their

interaction.

3. SEGMENTAL ANALYSIS

The revenue and loss before tax are attributable to the one principal activity of the group. The net assets of the Group at 31st December 2007 and 31st December 2006 are wholly attributable to the principal activity. The Group comprises one primary business segment for reporting purposes. There is no secondary reporting segment.

An analysis of turnover (by location of customer) is given below:

	2007	2006
	£	£
United States	745,165	1,117,836
Europe	160,108	95,753
India	-	5,250
	------------	------------
	905,273	1,218,839
	===========	============

4. OPERATING LOSS

Operating loss is stated after charging:

	2007	2006
	£	£

Depreciation of owned property, plant and equipment	263,314	57,283
Operating lease costs:
- land and buildings	1,517	50,241
Net loss on foreign currency translation	13,765	4,558
Research and development costs - cash settled	1,835,579	1,241,563
Research and development costs - equity settled	520,037	395,112
Share option expense - equity settled	671,776	506,538
	===========	===========

5. AUDITOR'S REMUNERATION

Services provided by the company's auditor

	2007	2006
	£	£

Fees payable to the company's auditor for the audit of the parent company and consolidated financial statements	3,000	4,000
Fees payable to the company's auditor and its associates for other services:
- audit of the company's subsidiary pursuant to legislation	19,000	21,000
- other services pursuant to legislation	6,000	-
- corporate finance services	-	60,197
	========	=======

Corporate finance services fees relate to the share placing on the AIM market and the acquisition of Lipoxen Technologies Limited on 16th January 2006.

6. PARTICULARS OF EMPLOYEES

The average number of staff employed by the group during the financial year was:

	2007	2006
	No	No
Office and management	6	6
Research	16	12
	---------------	---------------
	22	18
	=======	=======

The aggregate payroll costs of the above (excluding the share option expense) were:

Group:	2007	2006
	£	£
Wages and salaries	981,367	607,295
Social security costs	162,191	43,986
Other pension costs	55,737	32,975
	------------	------------
	1,199,295	684,256
	====	====

Company:	2007	2006
	£	£
Wages and salaries	68,250	39,094
Social security costs	-	1,685
Other pension costs	4,500	-
	------------	------------
	72,750	40,779
	=====	===

Key management personnel received compensation as follows:

Group:	2007	2006
	£	£
Salaries and short-term employment benefits	516,322	248,523
Post-employment benefits	28,400	11,847
Share-based payments	572,171	477,179
	------------	------------
	1,116,893	737,549
	====	====

Company:	2007	2006
	£	£
Salaries and short-term employment benefits	68,250	34,500
Post-employment benefits	-	-
	------------	------------
	68,250	34,500
	======	====

Key management comprises the directors of the Company together with those Directors of the subsidiary who are not also Directors of the parent company.

The directors' aggregate emoluments in respect of qualifying services were:

	2007	2006
	£	£
Salaries and short-term employment benefits	391,322	248,523
Aggregate gains made on the exercise of share options	367,500	-
Company pension contributions to money purchase schemes	18,400	11,847
	------------	------------
	777,222	260,370
	=========	========

Emoluments of highest paid director:	2007	2006
	£	£
Salary and short-term employment benefits	240,752	133,366
Aggregate gains made on the exercise of share options	367,500	-
Company pension contributions to money purchase schemes	18,400	10,514
	------------	------------
	626,652	143,880
	=======	======

The number of Directors who exercised share options during the year was 1 (2006 - nil).

The number of Directors who accrued benefits under company pension schemes was as follows:

	2007	2006
	No	No
Money purchase schemes	1	2
	=======	=======

In addition to the above, the group was charged the following amounts by directors or by companies controlled by Directors for the provision of consultancy services:

	2007	2006
	£	£
Sir Brian Richards	72,500	30,000
Professor Gregory Gregoriadis	-	15,740
Dr Dmitry Genkin	3,000	-
Dr Tatiana Zhuravskaya	49,500	32,750
Dr Giap Wang Chong	8,000	21,500
	========	======

7. INCOME TAX EXPENSE

(a) Analysis of charge in the period

		2007	2006
		£	£
Current tax:

	UK corporation tax based on the results for the year at 30% (2006 - 30%)	-	-
	Adjustment in respect of prior periods	-	49,096
		------------	------------
Total current tax		-	49,096
		=======	======

(b) Factors affecting the tax charge for the year

The tax assessed for the year does not reflect a credit equivalent to the loss on ordinary activities multiplied by the standard rate of corporation tax of 30% (2006 - 30%).

	2007	2006
	£	£

Loss on ordinary activities before tax	(3,290,732)	(1,823,772)
	========	========

Loss on ordinary activities multiplied by the standard rate of corporation tax of 30%	(987,220)	(547,132)
Effects of:
Expenses not deductible for tax purposes	1,816	15,831
Fixed asset timing differences	44,087	(13,066)
Share options timing differences	91,283	84,811
Unrelieved tax losses arising in the year	850,034	459,556
Adjustment in respect of prior periods	-	49,096
	------------	------------
Current tax for the period	-	49,096
	======	------------

The Group has corporation tax losses available for offset against future profits of the same trade of £11,280,000 (2006 - £8,250,000). The deferred taxation asset not provided for in the accounts due to the uncertainty that future taxable profits will be available to allow recovery of the asset is approximately £3,000,000 (2006 - £2,300,000).

8. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY

The loss dealt with in the accounts of the parent company was £428,284 (2006 - £289,191).

9. EARNINGS PER SHARE

The calculation of loss per share is based on the loss of £3,290,732 (2006 - £1,872,868) and on the number of shares in issue, being the weighted average number of shares in issue during the period of 118,370,247 ordinary 0.5p shares (2006 - 103,920,859 ordinary 0.5p shares). There is no dilutive effect of share options on the basic loss per share.

10. PROPERTY, PLANT AND EQUIPMENT

Group	Plant	Laboratory equipment	Computer equipment	Total
	£	£	£	£
COST
At 1st January 2006	-	102,560	14,651	117,211
Additions	800,000	187,203	15,549	1,002,752
	------------	------------	------------	------------
At 1st January 2007	800,000	289,763	30,200	1,119,963
Additions	-	145,072	14,129	159,201
	------------	------------	------------	------------
At 31st December 2007	800,000	434,835	44,329	1,279,164
	========	=======	=======	======

DEPRECIATION
At 1st January 2006	-	79,417	12,598	92,015
Charge for the year	-	52,290	4,993	57,283
	------------	------------	------------	------------
At 1st January 2007	-	131,707	17,591	149,298
Charge for the year	160,000	95,275	8,039	263,314
	------------	------------	------------	------------
At 31st December 2007	160,000	226,982	25,630	412,612
	=====	======	======	======

NET BOOK VALUE
At 31st December 2007	640,000	207,853	18,699	866,552
	=====	=====	=====	======
At 31st December 2006	800,000	158,056	12,609	970,665
	====	=====	=====	======

Company	Plant	Laboratory equipment	Computer equipment	Total
	£	£	£	£
COST
At 1st January 2006	-	-	-	-
Additions	800,000	-	-	800,000
	------------	------------	------------	------------
At 1st January 2007	800,000	-	-	800,000
Additions	-	-	-	-
	------------	------------	------------	------------
At 31st December 2007	800,000	-	-	800,000
	====	=====	=====	=====

DEPRECIATION
At 1st January 2006	-	-	-	-
Charge for the year	-	-	-	-
	------------	------------	------------	------------
At 1st January 2007	-	-	-	-
Charge for the year	160,000	-	-	160,000
	------------	------------	------------	------------
At 31st December 2007	160,000	-	-	160,000
	====	=====	====	=====
NET BOOK VALUE
At 31st December 2007	640,000	-	-	640,000
	====	=====	====	=====
At 31st December 2006	800,000	-	-	800,000
	=====	====	====	====

11. GOODWILL

Group
			£
COST
At 1st January 2006			-
Acquisition of parent company			1,061,476
			------------
At 1st January 2007 and 31st December 2007			1,061,476
			====

Goodwill arising on consolidation represents the excess of the cost of the reverse acquisition over the net assets of Lipoxen Plc at the date of the business combination.

	£

Fair value of Lipoxen Technologies Limited shares deemed to have been issued on acquisition	1,120,500
Incidental costs of the business combination	45,030
	_________
	1,165,530
Net assets of parent company acquired	(104, 054)
	_________
Goodwill acquired	1,061,476
	========

The reverse acquisition of Lipoxen Plc provided Lipoxen Technologies Limited with access to the AIM market to enable it to raise funds to finance the ongoing development of its technology. This access to capital markets does not satisfy the criteria for separate recognition as an intangible asset as set out in IAS 38: Intangible assets, and is therefore treated as goodwill in these financial statements.

The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired. The impairment review has been carried out on the Group as a whole.

As primarily a research and development Group, the use of discounted cash flow or similar tools is not appropriate given the inherent risks and uncertainties in the sector and the long time spans involved. Instead the Board look at longer term indicators of impairment.

The reverse acquisition and simultaneous fundraising took place with a view to the long term revenue generating capacity of the underlying technology. Since then, the Group has made substantial progress in developing this technology and the revenue generating capacity has been enhanced through this progress.

Consequently, it is the view of the Board that no impairment of the carrying value of the Group's goodwill or other assets has occurred during the year.

12. INVESTMENTS

	Company	Group companies
		£
	COST
	At 1st January 2006	-
	Additions	9,045,030
		------------
	At 1st January 2007 and 31st December 2007	9,045,030
		====

The Company owns the whole of the issued share capital of Lipoxen Technologies Limited, a company incorporated in England and Wales engaged in research into drug delivery systems.

The cost of investment comprises:

	£

Fair value of Lipoxen Plc shares issued on acquisition	9,000,000
Incidental costs of the business combination	45,030
	------------
	9,045,030
	========

13. TRADE AND OTHER RECEIVABLES

	Group		Company
	2007	2006	2007	2006
	£	£	£	£
Due in more than one year:
Prepayments	500,000	1,370,000	-	-
Receivables from subsidiaries	-	-	3,158,356	-
	------------	------------	------------	------------
	500,000	1,370,000	3,158,356	-
	=====	=====	======	====
Due within one year:
Trade receivables	111,523	807,987	-	-
Provision for impairment of trade receivables	(11,902)	(95,893)	-	-
	------------	------------	------------	------------
	99,621	712,094	-	-
Receivables from subsidiaries	-	-	-	2,043,931
Other receivables	43,788	93,662	2,468	19,516
Prepayments	1,612,231	1,252,828	7,384	-
	------------	------------	------------	-------------
	1,755,640	2,058,584	9,852	2,063,447
	====	====	=====	====

In October 2005, Lipoxen Technologies Limited entered into an agreement with its then major shareholder, FDS Pharma Ass, under which 15,000,000 ordinary shares were allotted in consideration for the provision by FDS of manufacturing and clinical development services. As per a Novation Agreement between FDS Pharma Ass, Lipoxen Technologies Limited and the Company dated 16th January 2006, the agreement provides for the allotment of up to 10,174,340 ordinary shares in Lipoxen Plc upon achievement of certain future milestones to the financial value of US$2,670,764 as approved by shareholders at the Extraordinary General Meeting of the Company held on 16th January 2006. An amount of £520,037 (2006 -£395,112) has been written off to the income statement in the year in respect of services provided in the year by FDS. An amount of £2,084,851 (2006 - £2,604,888) is included in the balance sheet under prepayments in respect of services still to be provided under the agreement, of which £500,000 (2006 - £1,370,000) is expected to be provided in more than one year from the balance sheet date.

The carrying amount of the trade receivables is denominated in currencies as follows:

	2007	2006
	£	£
Pounds sterling	5,131	-
US dollars	94,490	712,094
	------------	------------
	99,621	712,094
	====	====

Trade receivables are considered to be impaired if they are more than three months overdue at the date of approval of the financial statements. At 31st December 2007 trade receivables of £11,902 (2006 - £190,388) were impaired and provided against. Movements on the provision for impairment of trade receivables are as follows:

	2007	2006
	£	£
At 1st January 2007	95,893	-
Provided in the year	-	95,893
Unused amount reversed	(83,991)	-
	------------	------------
At 31st December 2007	11,902	95,893
	====	=====

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security. The Directors consider that the carrying value of each class of receivable approximates to its fair value.

14. TRADE AND OTHER PAYABLES

	Group		Company
	2007	2006	2007	2006
	£	£	£	£
Trade payables	117,020	131,343	5,934	14,215
Social security and other taxes	36,873	23,736	-	-
Other payables	9,319	3,056	-	-
Accrued expenses	130,521	109,985	75,865	25,766
	------------	------------	------------	------------
	293,733	268,120	81,799	39,981
	===	=====	=====	====

15. SHARE CAPITAL

Authorised share capital:

				2007	2006
				£	£
673,300,000 Ordinary shares of 0.5p each				3,366,500	3,366,500
16,335,000,000 Deferred shares of 0.01p each				1,633,500	1,633,500
				------------	------------
				5,000,000	5,000,000
				=====	====
Allotted, called up and fully paid:
	2007		2006
	No	£	No		£
Ordinary shares of 0.5p each	119,593,552	597,968	115,443,552		577,218
Deferred shares of 0.01p each	16,335,000,000	1,633,500	16,335,000,000		1,633,500
		------------			------------
		2,231,468			2,210,718
		=====			=====

On 22nd January 2007, under the terms of a warrant granted in December 2005, 500,000 ordinary shares of 0.5p each were issued for cash of £67,500.

In May 2007, under the terms of a warrant agreement entered into in August 2006, Serum Institute of India Limited subscribed for 2,700,000 ordinary shares of 0.5p each for cash of £945,000, and exercised options over 200,000 ordinary shares of 0.5p each for cash of £52,000.

In June 2007, Scott Maguire exercised options over 750,000 ordinary shares of 0.5p each for cash of £7,500.

The rights attached to the deferred shares are as follows:

(a) no entitlement to any dividend;

(b) on a winding-up, an entitlement to receive an amount equal to the nominal value of each share, but only after an amount of £50,000,000 per share has been paid to the holders of the issued and fully paid ordinary 0.5p shares;

(d) an obligation to permit the Company to transfer the shares to such person as the Company may determine, without receiving any payment.

16. SHARE OPTIONS AND WARRANTS

Movements in the number of share options in issue during the year were as follows:

	Number	Weighted average exercise price
At 1st January 2007	9,251,393	3.0637p
Granted	2,148,217	35.9154p
Exercised	(950,000)	6.2632p
Expired	(49,915)	240.9121p
	------------
At 31st December 2007	10,399,695	7.4197p
	====

The weighted average fair value of options granted, estimated using the Black-Scholes option-pricing model, was 14.60p. The estimated fair values are based on the following weighted average assumptions:

	2007

Share price	34.0340p
Exercise price	31.6592p
Expected volatility	52.29%
Expected life	2 to 3 years
Expected dividend yield	Nil
Risk free interest rate	4.00%
	=====

The expected volatility is determined by using as a base the share price movements recorded since the share placing on AIM on 16th January 2006.

Grants of options in the year included options over 374,844 ordinary shares granted to Scott Maguire at an exercise price of 1p per share and options over 400,000 ordinary shares granted to Colin Hill at an exercise price of 47.75p per share.

The weighted average share price at the dates the share options were exercised in the year was 50.4p.

Options outstanding at 31st December 2007 were exercisable as follows:

Effective date of grant	Number granted	Exercise price	Exercise period

17/01/06	135,658	0.7371p	Until 31/10/08
17/01/06	48,837	22.1145p	Until 23/12/11
17/01/06	71,904	41.7226p	Until 28/07/12
17/01/06	406,974	0.7371p	Until 25/05/14
17/01/06	888,559	0.7371p	Until 25/10/14
17/01/06	339,145	0.7371p	Between 18/03/08 and 17/03/15
17/01/06	101,743	0.7371p	Between 12/05/08 and 11/05/15
17/01/06	168,216	0.7371p	Between 30/09/08 and 29/09/15
17/01/06	6,200,250	1.0000p	Until 15/01/16
17/01/06	205,000	1.0000p	Until 17/01/16
15/02/06	158,333	24.5000p	Until 15/02/16
24/03/06	200,000	29.5000p	Until 16/01/16
24/03/06	200,000	29.5000p	Between 17/01/09 and 16/01/16
24/03/06	25,000	29.5000p	Until 29/02/16
24/03/06	25,000	29.5000p	Between 01/03/09 and 29/02/16
17/10/06	101,743	0.7371p	Until 17/10/16
15/03/07	105,000	35.0000p	Until 14/03/17
15/03/07	77,500	35.0000p	Between various dates in 2008 and 14/03/17
15/03/07	105,000	35.0000p	Between various dates in 2009 and 14/03/17
15/03/07	77,500	35.0000p	Between various dates in 2010 and 14/03/17
19/03/07	12,500	35.7500p	Between 19/09/08 and 18/03/17
19/03/07	12,500	35.7500p	Between 19/03/10 and 18/03/17
23/03/07	158,333	44.6500p	Until 22/03/17
26/03/07	12,500	44.6500p	Between 26/09/08 and 25/03/17
26/03/07	12,500	44.6500p	Between 26/03/10 and 25/03/17
31/07/07	200,000	47.7500p	Until 08/08/17
31/07/07	200,000	47.7500p	Between 31/07/08 and 08/08/17
09/08/07	62,500	46.6000p	Between various dates in 2008 and 08/08/17
09/08/07	12,500	46.6000p	Between various dates in 2009 and 08/08/17
09/08/07	75,000	46.6000p	Between various dates in 2010 and 08/08/17

	------------
	10,399,695
	========

17. RECONCILIATION OF LOSS BEFORE TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Group	2007	2006
	£	£
Loss before taxation	(3,290,732)	(1,823,772)
Adjustments for:
Equity-settled share options	671,776	506,538
Equity-settled research and development	520,037	395,112
Depreciation	263,314	57,283
Investment income	(152,751)	(108,479)
Interest expense	-	9,719
	------------	------------
	(1,988,356)	(963,599)
Decrease/(increase) in receivables	652,907	(592,695)
Increase/(decrease) in payables	25,613	(754,054)
	------------	------------
Net cash outflow from operating activities	(1,309,836)	(2,310,348)
	=====	======

Company	2007	2006
	£	£
Loss before taxation	(428,284)	(289,191)
Adjustments for:
Depreciation	160,000	-
Investment income	(147,216)	(105,390)
	------------	------------
	(415,500)	(394,581)
Decrease in receivables	9,664	63,420
Increase/(decrease) in payables	41,818	(81,514)
	------------	------------
Net cash outflow from operating activities	(364,018)	(412,675)
	=====	=====

18. FINANCIAL INSTRUMENTS

The Group is engaged in the development of drug delivery systems and proprietary products in the fields of protein drugs, vaccines and oncology. Whilst it is therefore exposed to some financial risk this is significantly less than a trading company which has significant receivables, payables and inventories.

Credit risk and foreign currency risk are considered in Note 13 with the following being relevant in respect of other financial risks.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with it will fluctuate due to changes in market interest rates.

The Group has financial assets in the form of trade receivables and cash and cash equivalents. These are considered to be short term liquid assets and as a result the exposure to interest rate risk is not considered to be significant.

On this basis no sensitivity analysis has been prepared on the grounds that there would not be a material impact on either the carrying values of the respective assets, the net loss for the year or the equity at the end of the period.

Liquidity risk

The Group maintains sufficient cash and cash equivalents. Management reviews cashflow forecasts to determine whether the Group has sufficient cash reserves to continue with its research and development activities.

The Group has no significant financial liabilities and no borrowings.

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to provide a means of attracting investors. The Group has no debt and does not therefore have a strategy in terms of maintaining a certain debt to equity ratio. Rather capital is managed with a view to generating further cash and cash equivalents which can be used in the furtherance of the Group's aims and objectives.

19. RELATED PARTY TRANSACTIONS

Serum Institute of India Limited ("SIIL") - substantial shareholder

FDS Pharma ("FDS") - substantial shareholder

In October 2005, Lipoxen Technologies Limited entered into an agreement with its then major shareholder, FDS Pharma Ass, under which 15,000,000 ordinary shares were allotted in consideration for the provision by FDS of manufacturing and clinical development services. The agreement provides for certain milestone payments which may be settled either by the issue of further shares in Lipoxen Plc or by specified cash amounts. An amount of £520,037 (2006 -£395,112) has been written off to the income statement in the year in respect of services provided in the year by FDS. An amount of £2,084,851 (2006 - £2,604,888) is included in the balance sheet under prepayments in respect of services still to be provided under the agreement, of which £500,000 (2006 - £1,370,000) is expected to be provided in more than one year from the balance sheet date.

Directors

The Group was charged the following amounts by directors or by companies controlled by directors for the provision of consultancy services:

	2007	2006
	£	£
Sir Brian Richards	72,500	30,000
Professor Gregory Gregoriadis	-	15,740
Dr Dmitry Genkin	3,000	-
Dr Tatiana Zhuravskaya	49,500	32,750
Dr Giap Wang Chong	8,000	21,500

Included in the above amounts are the following amounts borne by the Company:

	2007	2006
	£	£
Sir Brian Richards	72,500	30,000
Dr Dmitry Genkin	3,000	-
Dr Tatiana Zhuravskaya	3,000	-
Dr Giap Wang Chong	8,000	21,500

Lipoxen Technologies Limited - subsidiary

The Company charged a management charge of £70,000 (2006 - £nil) to the subsidiary during the year. The Company continued to advance monies to the subsidiary during the year to fund the ongoing development of the Group's technology. The balance receivable from the subsidiary at 31st December 2007 was £3,158,356 (2006 - £2,043,931).

20. RECONCILIATION OF COMPARATIVE EQUITY AND PROFIT FIGURES UNDER IFRS AND PREVIOUSLY PUBLISHED DATA (UK GAAP)

As stated in Note 1, these are the Group's first financial statements prepared in accordance with the Group's IFRS accounting policies. The comparative information for the year ended 31st December 2006, previously prepared under UK GAAP, has been restated under IFRS. The adjustments required are shown below:

	As at 31/12/06	As at 01/01/06
	£	£

Equity previously reported under UK GAAP	13,160,229	104,054

Adjustments required to implement the reverse acquisition accounting provisions of IFRS 3:

Restatement of opening equity balances to be those of LTL rather than Lipoxen Plc
Equity balances of Lipoxen Plc	(104,054)	(104,054)
Equity balances of LTL	2,447,189	2,447,189

Restatement of cost of acquisition
Fair value of Lipoxen Plc shares issued on acquisition of LTL	(9,000,000)	-
Fair value of LTL shares deemed to be issued to acquire Lipoxen Plc	1,120,500	-

LTL loss for the period prior to the acquisition as recognised in previously reported information	(58,815)	-

Other adjustments:

Reversal of amortisation of goodwill	317,778	-
	------------	------------

Equity as reported under IFRS	7,882,827	2,447,189
	======	=======

	Year ended 31/12/06
	£

Loss previously reported under UK GAAP	(2,131,831)

LTL loss for the period prior to the acquisition as recognised in previously reported information	(58,815)

Reversal of amortisation of goodwill	317,778
	------------

Loss as reported under IFRS	(1,872,868)
	=====

These adjustments do not affect the parent company balance sheets at 1st January 2006 or at 31st December 2006, and have no effect on the parent company income statement for the year ended 31st December 2006.

The effect of these adjustments on the consolidated balance sheets at 1st January 2006 and at 31st December 2006 is as follows:

At 1st January 2006	As previously reported	Adjustments	As restated under IFRS
	£	£	£
NON-CURRENT ASSETS
Property, plant and equipment	-	25,196	25,196
Other receivables	-	2,605,000	2,605,000
	----------------	------------	------------
	-	2,630,196	2,630,196
	------------	------------	------------
CURRENT ASSETS
Trade and other receivables	82,936	556,254	639,190
Cash and cash equivalents	142,613	(109,161)	33,452
	------------	------------	------------
	225,549	447,093	672,642
CURRENT LIABILITIES
Trade and other payables	(121,495)	(734,154)	(855,649)
	------------	------------	------------
NET CURRENT ASSETS/(LIABILITIES)	104,054	(287,061)	(183,007)
------------		------------	------------
NET ASSETS	104,054	2,343,135	2,447,189
	========	========	========
CAPITAL AND RESERVES
Share capital	1,675,000	(1,183,568)	491,432
Share premium account	7,311,165	(1,063,763)	6,247,402
Capital reserve	-	1,874,704	1,874,704
Retained earnings	(8,882,111)	2,715,762	(6,166,349)
	------------	------------	------------
TOTAL EQUITY	104,054	2,343,135	2,447,189
	=======	======	=====

At 31st December 2006	As previously reported	Adjustments	As restated under IFRS
	£	£	£
NON-CURRENT ASSETS
Property, plant and equipment	970,665	-	970,665
Goodwill	6,338,878	(5,277,402)	1,061,476
Other receivables	1,370,000	-	1,370,000
	------------	------------	------------
	8,679,543	(5,277,402)	3,402,141
	------------	------------	------------
CURRENT ASSETS
Trade and other receivables	2,058,584	-	2,058,584
Cash and cash equivalents	2,690,222	-	2,690,222
	------------	------------	------------
	4,748,806	-	4,748,806
CURRENT LIABILITIES
Trade and other payables	(268,120)	-	(268,120)
	------------	------------	------------
NET CURRENT ASSETS	4,480,686	-	4,480,686
------------		------------	------------
NET ASSETS	13,160,229	(5,277,402)	7,882,827
	=========	========	========
CAPITAL AND RESERVES
Share capital	2,210,718	-	2,210,718
Share premium account	21,456,915	-	21,456,915
Reverse acquisition reserve	-	(8,252,127)	(8,252,127)
Retained earnings	(10,507,404)	2,974,725	(7,532,679)
	------------	------------	------------
TOTAL EQUITY	13,160,229	(5,277,402)	7,882,827
	=====	=====	=====

The effect of the adjustments on the consolidated income statement for the year ended 31st December 2006 is as follows:

	As previously reported	Adjustments	As restated under IFRS
	£	£	£
REVENUE	1,218,839	-	1,218,839
	------------	------------	------------
ADMINISTRATIVE EXPENSES
Research and development expenditure	(1,715,212)	78,537	(1,636,675)
Administrative expenses	(1,743,937)	239,241	(1,504,696)
	------------	------------	------------
Total	(3,459,149)	317,778	(3,141,371)
	------------	------------	------------
OPERATING LOSS	(2,240,310)	317,778	(1,922,532)
Finance income	108,479	-	108,479
Finance costs	-	(9,719)	(9,719)
	------------	------------	------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION	(2,131,831)	308,059	(1,823,772)
Income tax expense	-	(49,096)	(49,096)
	------------	------------	------------
LOSS FOR THE FINANCIAL YEAR	(2,131,831)	258,963	(1,872,868)
	=========	=========	=========

21. GENERAL INFORMATION

Lipoxen Plc and its subsidiary, Lipoxen Technologies Limited, are principally engaged in the development of drug delivery systems and proprietary products in the fields of protein drugs, vaccines and oncology. Lipoxen Plc, a public limited company incorporated and domiciled in England and Wales, is the Group's ultimate parent company. The address of the registered office is 22 Melton Street, London NW1 2BW and the principal place of business is The London BioScience Innovation Centre, 2 Royal College Street, London NW1 0NH.