Chiroscience Group plc Interim Results For The Six Months to August 31, 1998; Notice of Conference Call.

LONDON--(BW HealthWire)--Sept. 24, 1998--

REMINDER: CONFERENCE CALL TODAY AT 11:00 AM (EASTERN). The

dial-in number is 800-289-0436. Please call Taylor Rafferty

Associates at [phone] for replay information.

Chiroscience Group plc, the emerging pharmaceutical company, announced its interim results for the six months to August 31, 1998 after a period of further significant progress.

Highlights:

- Revenues increase - to (pound)11.4 million ($19.2 million(a))

(6 months to 8.31.97: (pound)9.2 million)

- Losses reduce - by 21% to (pound)11.4 million ($19.2 million)

(8.31.97: (pound) 14.4 million) as external R&D spend diminishes

- Chirocaine marketing position complete - Zeneca have worldwide

rights, excluding Japan; Maruishi licensed to develop and market

the product in Japan

- Chirocaine regulatory progress - Final negotiations ongoing with

Swedish authorities. Application for other European licenses via

the mutual recognition process will follow Swedish approval and

should begin in the 4th quarter of this year

- ChiroTech - manufacturing position secured through sale of 30% of

ChiroTech to Ascot plc for (pound)30 million and agreement for

future manufacturing at Mitchell Cotts. Increased first half

performance and excellent prospects for the second half,

particularly from (-) lactam sales

- R&D Progress - further details of progress in drug discovery and

the development pipeline to be given on September 29, 1998

- Strong cash position - (pound)28.8 million ($48.4 million) in

cash at period end and a further (pound)30 million received from

Ascot on September 1, 1998. Reduced cashburn as development

expenditures are assumed by partners

(a) US dollar equivalents are provided for reader convenience at the

August 31, 1998 exchange rate of (pound)1 = US $1.68.

Dr. John Padfield, chief executive of Chiroscience, commented:

"The period has once again resulted in significant achievements. In particular we concluded our strategic reviews for the marketing of Chirocaine and for the realisation of shareholder value in ChiroTech. Zeneca and Maruishi have been appointed to market Chirocainnd we raised (pound)30 million from the sale of 30% of ChiroTech.

With the success of our commercial partnerships with the leading world players in their fields, namely Zeneca, Bristol-Myers Squibb and Schering-Plough, and the forthcoming regulatory approval for Chirocaine we are very optimistic for the future of the Group. In addition, our reduced cash burn and secure cash position ensure that we are well placed to capitalize on opportunities to secure the future of the Group."

Notes For Editors:

Chiroscience Group plc

Chiroscience Group plc is an emerging pharmaceutical company which uses its diverse technology platform to discover, develop and bring to market novel medicines for improved healthcare. It has three businesses: Chiroscience R&D, Rapigene and ChiroTech.

Chiroscience R&D's focus is on innovative small molecule drugs and related diagnostics in the therapeutic areas of inflammatory disease, pain, osteoporosis, cancer and autoimmune diseases. Its technology platform allows the conception and development of receptor-based and enzyme-inhibiting small molecule drugs with high selectivity of action. Rapigene is involved in the creation of genomic technologies and services, which it provides to Chiroscience R&D and partner companies' drug discovery programs. ChiroTech provides chiral technology services to pharmaceutical and related industries, including Chiroscience R&D.

Chiroscience Group plc is listed on the London Stock Exchange and is based in Cambridge and Stevenage, UK, and Seattle, Washington, USA.

Additional information on Chiroscience can be accessed on the company's home page: http://www.chiroscience.com.

OPERATING & FINANCIAL REVIEW Overview

Chiroscience has demonstrated further significant progress in the last six months. The Group has secured its financial position through Chirocaine licensing deals with Zeneca in March and Maruishi in September, raising (pound)18 million, and the sale of a 30% stake in its ChiroTech business which raised a further (pound)30 million, effective September 1, 1998. The Group's cash position is very strong with (pound)59 million in its reserves at a time when a return to the markets for additional funding would be both unwelcome and highly dilutive.

Results

The Group achieved revenues of (pound)11.4 million in the first half of 1998 (6 months to 8.31.97: (pound)9.2 million, year to 2.28.98: (pound)26.2 million). Of these (pound)6.8 million were earned by ChiroTech (8.31.97: (pound)5.9 million), (pound)4.5 million by Chiroscience R&D's operations (8.31.97: (pound)3.3 million) and Rapigene recognized its first revenues of (pound)0.1 million. The revenues of the R&D operations related primarily to development funding from partners such as Schering-Plough, Bristol-Myers Squibb and Zeneca.

The net loss for the six months was (pound)11.4 million (8.31.97: (pound) 14.4 million, year to 2.28.98: (pound)23.3 million) and was comprised of the following: -0-

                              6 months to   6 months to
                              8.31.98            8.31.97
                              (pound)m            (pound)m

ChiroTech                            2.5          2.3
Drug discovery &                  (11.2)       (16.4)
development
Rapigene                         (  1.0)        ( - )
Central activities                 (  2.9)     (        1.7 )
                            ------------  -----------
Operating loss                          (12.6)      (15.8 )
Interest income                     1.2         1.4
                            ------------  -----------
Net loss                          (11.4)       (14.4)
                            ------------  -----------

ChiroTech's profits in the first half do not fully reflect the potential for that business for the remainder of this year. As at 8.31.98 ChiroTech had sales orders on hand in excess of (pound)35 million, much of which is scheduled to be filled this financial year. Accordingly, the business is expected to show a profit for the year well in excess of the (pound)7.1 million achieved in the year to 2.28.98.

Chiroscience R&D's operations are showing the anticipated decline in expenses as a result of the Chirocaine clinical and regulatory program coming to a close and the adoption of development costs on the MMP and PDE4 programs by our partners. The Rapigene business was only separately identified this year and these costs reflect the work undertaken to bring the technologies from prototypes to commercially viable systems.

The central activities expense increased this half year largely as a result of the (pound)1.4 million exceptional costs arising from the settlement of the dispute with Dr. Stebbing, a former director of the company. Settlement with Dr. Stebbing was reached at (pound)3.2 million and was funded through a cash payment of (pound)1.2 million and the transfer of 800,000 shares from the Group's ESOP. The charge to the current year's profits in this respect, after taking into account the costs of the litigation and provisions made in prior years, was (pound)1.4 million.

On September 1 the sale to Ascot plc of 30% of ChiroTech was completed for (pound)30 million in cash. The costs of this transaction were (pound)1 million and as a result the Group will record net proceeds of (pound)29 million and an accounting gain of (pound)28 million in the second half of the year. Following this transaction, the Group had cash reserves of (pound)59 million. The net cashflow in the six months to 8.31.98 was an inflow of (pound)2 million, being receipts of (pound)15.4 million from the issue of shares ((pound)15 million from Zeneca and (pound)0.4 million on the exercise of share options) and net expenditure of (pound)13.3 million including capital expenditure of (pound)3.1 million (8.31.97: (pound)0.9 million). The issued share capital increased from 107.6 million at March 1, 1998 to 111.8 million shares at 8.31.98 as a result of issuing 3.5 million shares to Zeneca and share option exercises.

Chirocaine

Chiroscience will be one of the first of the UK biotechnology companies to have developed a major product and brought it to full registration. Chirocaine, the long-acting local anaesthetic which was licensed to Zeneca earlier this year, should be launched by them later this year. The registration of the product throughout the European member states through the mutual recognition procedure will progress under the sponsorship of the Swedish authorities who are in the final stages of the product review and should grant the first registration shortly. The US regulatory authority, the FDA, is reviewing the application to register the drug for that market and the timing of this process remains on track for product approval in 1999.

Chiroscience will earn significant royalties on all sales of Chirocaine by Zeneca throughout the territory of the license, which is worldwide, excluding Japan. The Japanese rights to the product were licensed to Maruishi Pharmaceutical Co Ltd earlier this month. Maruishi will pay (pound)3 million in upfront license fees together with further, undisclosed, milestone payments. Thereafter Chiroscience will earn a royalty on sales of Chirocaine in Japan by Maruishi, who will fund and conduct all further development work.

Development Programs

The Group is conducting various development programs with a series of collaborative partners. The development of a needleless, painfree lignocaine anaesthetic injector product with PowderJect is progressing well with clinical trials underway. The program to research and develop inhibitors of the MMP families of enzymes for cancer in collaboration with Bristol-Myers Squibb is in clinical trials and shows great promise. The program to develop oral treatments for asthma through inhibitors of the PDE4 enzymes with our partner Schering-Plough continues to meet its targets, with the discovery of compounds from which a development candidate could be selected later this year. Medeva plan to file a regulatory submission for d-threo-methylphenidate for Attention Deficit Disorder at the end of 1999.

As the workload on Chirocaine diminishes, Chiroscience is actively seeking new niche development programs, originated in-house or in-licensed from other parties. This will enhance the current pipeline and ensure our skilled development scientists continue to be used to their maximum capability.

Research Programs

The Group's research focus is on bone disease, inflammatory and auto-immune diseases. A considerable amount of work continues on the applications for MMP inhibitors which fall outside the BMS collaboration in cancer, in particular inflammatory bowel disease and rheumatoid arthritis. Further research targets will arise both from the gene-based discovery work in Seattle and from programs developed in Cambridge.

While Chiroscience has the capability to move from gene discovery to registration of drugs, it is inevitable that certain specialist skills will be accessed from external sources. In particular, some specialist biological target validation work will be accessed from third parties and the Group continues to build its network of collaborations with Universities, specialist medical research centers, sister biotechnology companies and major pharmaceutical companies.

ChiroTech

ChiroTech continues to establish itself as a leader in the provision of specialist chiral chemistry services and is expanding its range of products and customers. While pharmaceutical companies remain its major source of revenue, ChiroTech's market has expanded into biotechnology and flavors and fragrances businesses.

As presaged in the last interim and annual reports to shareholders, the Board of Chiroscience undertook a review of the optimal development and exploitation of ChiroTech. The aims of this review were three-fold; to secure a quality manufacturing partner for ChiroTech in order to facilitate its future growth; to secure financing for the Group as a whole; and to retain access to the current profits and cashflow of the business, enabling the Group to participate in its future growth. As a result, a 30% shareholding in ChiroTech was sold to Ascot plc, a UK-based business with interests in chemicals and engineering, for (pound)30 million. This transaction completed on September 1, 1998. Most importantly, Ascot own Mitchell Cotts Chemicals Ltd, a fine chemicals manufacturer based in Yorkshire, England. Mitchell Cotts have worked with ChiroTech for many years and in particular have been one of the manufacturers of (-) lactam, ChiroTech's leading product. Together with the investment, the parties have entered into a manufacturing alliance whereby Mitchell Cotts will be the manufacturer of choice for all new ChiroTech projects.

ChiroTech's business continues to flourish, led by the success of (-) lactam but bolstered by a growing range of new product groups and customers. The principal customer for (-) lactam is Glaxo Wellcome who are developing a new anti-viral drug, abacavir for which (-) lactam is a key intermediate. Abacavir is in fast-track registration with the regulatory authorities and approval and launch of the product is widely expected for later this year. As Glaxo Wellcome are preparing for the product launch they have placed significant orders for the product, already in excess of the (pound)25 million two-year supply agreement announced in May of this year. Sales of (-) lactam in the first six months were (pound)4.7 million out of the total (pound)6.8 million revenues and the business now has a current order book of (pound)35 million the majority of which should be filled in the next 6 months.

Rapigene

Rapigene was formed in order to exploit the commercial opportunities arising from the discovery and development of a number of genetic analysis technologies. Leading amongst these is the Group's proprietary cleavable mass-spec tag, or CMST, technology which, when coupled with appropriate HPLC and mass-spectrometry technologies, offers a quantum leap forward in the speed, accuracy and quality of DNA analysis systems. The detection of single-nucleotide polymorphisms (SNPs), single mutations in genes, is of very great significance in the discovery of new drug targets and in the creation of improved clinical trial and disease treatment protocols. Rapigene's systems are of interest to a number of potential commercial partners and it is likely that this interest will crystallize into one or more agreements later this year.

People

It was announced in August that Mr. Hugh Collum, Executive Vice-President and Chief Financial Officer of SmithKline Beecham, is to be appointed as the new Chairman of the Group with effect from October 1, 1998. He succeeds Lord Henry Chilver who has served the company as Chairman over the last three and a half years with considerable commitment. Hugh brings a wealth of experience and insight to Chiroscience to help it attain its goal of becoming a significant, world-class drug discovery company.

It was further announced in August that Dr. Bob Jackson has now taken overall responsibility for the Group's R&D operations, covering both the target discovery and drug and diagnostic development programs of the Group. This follows the resignation of Dr. David Galas as an Executive Director of Chiroscience in order to pursue a dual role: firstly as a scientific adviser to the Chiroscience R&D and Rapigene; and secondly to take up a prestigious academic appointment at a new post-graduate school in California. David's contribution to the development of Darwin Molecular prior to its acquisition by Chiroscience and to the integration of the enlarged Group's drug discovery operations cannot be underestimated and it is fortunate that his unique skills can continue to be accessed in an active advisory role.

---------------------FINANCIAL TABLES TO FOLLOW-----------------------