Final Results

For immediate release: FINAL VALIRX PLC ("ValiRx" or the "Company") DIRECTORS REPORT AND FINANCIAL STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006 ValiRx Plc (AIM: VAL), the cancer therapeutics company, today announces its audited results for the year ended 31st December 2006. CHAIRMAN'S REPORT For the Period Ended 31 December 2006 In the short term in which the Company traded as ValiRx Plc, advancements were made in projects and developments with the capacity to deliver significant shareholder value. These will be covered in greater depth by in the Chief Executive Officer's report. Outside of the Company's own activity, ValiRx's position is being further strengthened as the medical industry moves towards a greater recognition of epigenomics and associated early screening diagnostic or prognostic approaches. The interest and support the Company is receiving is very much reflected by the joining of leading academics to the Company's Scientific Advisory Board - Drs Tom Brown, David Fell, Nick Lemoine and Robert Weinzel having joined during the period under review. I am likewise pleased to welcome post year ended 31st December 2006 Nicholas Thorniley to the Board as a non-executive director. His extensive career in corporate broking and his instrumental role in the Company's re-admission to AIM will be a valuable asset as we look to target further acquisition, collaborations and investment opportunities going forward. In short, I am pleased to report the Company continues to make good progress, delivering on the milestones we set ourselves at the time of the IPO, whilst maintaining our focus on the development of our product pipeline and enhancement of our intellectual property. The Board looks forward to another successful year of achievement in 2007. Tony Moore, Chairman 25th June 2007 CHIEF EXECUTIVE OFFICER'S REPORT For the Period Ended 31 December 2006 The Company acquired ValiRx Limited in October 2006. ValiRx Limited is a biopharmaceutical development company, which was incorporated on 1 June 2006 with the intention of exploiting opportunities in the future healthcare, life sciences and biopharmaceutical industries. As such there are three closely inter-related strands to our business: * A core science focus - where we look to acquire and develop new and innovative R&D programmes in the epigenomic and diagnostic fields * A disease and diagnostic focus on oncology - where we look to partner with organisations in the field to test or develop our products * A stem cell product and development and diagnostic focus - where we acquire positions in businesses that are complementary to our disease and science focus. I am pleased to report that during the period ended 31st December 2006 and post period, the business has developed strongly across all its chosen fields of activity. Science In December 2006, our subsidiary, Cronos Therapeutics, announced that it received the granting of a European patent for its grounding-breaking GeneICE cancer technology. This was crucial as we have now moved on to the next step of product development program with Cancer Research Technology UK (`CRT') and the patent protects our disease-modifying approach to treating cancer, adding long-term value to our shareholders. Cronos likewise holds an extensive portfolio of pending and granted patents in the areas of gene regulation and epigenetic diagnostic technologies. Cronos is now actively pursuing further collaborations for its two main technologies: GeneICE and HyperGenomics. Since the balance sheet date: * A collaborative agreement was signed with the University of Surrey's Post-Graduate Medical School to co-develop prostate and bladder cancer diagnostics based on the Hypergenomics technology. * Cronos and Physiomics started to work on a programme directed at development of new GeneICE products. * Cronos and ATDBio Ltd completed their initial experiments involving GeneICE. This was significant as it confirmed that the GeneICE drug currently in development with Cancer Research Technology Limited binds to its predicted genetic target under model physiological conditions. * A GeneICE US patent was granted. Disease Focus With regards our specific disease focus on oncology, In February 2007, post period-end, ValiRx announced that it has put in place an agreement with Physiomics Plc - the European systems biology simulation company - to use its In Silico simulation of cellular processes to reduce the development time and costs associated in identifying new therapeutic compounds for the treatment of cancers. The primary concentration of the initial programme is to investigate the process of Apoptosis (the natural process of programmed cell death and turnover) - a process that is frequently disrupted in Cancers. In addition, through the agreement with the University of Surrey Post-graduate Medical School, led by Professor Pandha - a leading scientist in the field of oncology - Cronos' proprietary HyperGenomics technology is now to be used alongside the data being generated by Professor Pandha's research base to potentially create a diagnostic platform for the early stage detection of prostate cancer. Stem Cell Product & Development On 4th December 2006, ValiRx announced that it has provided $375,000 in development funding to its affiliate, Morphogenesis Inc and in addition, that it had subscribed to 250,000 share warrants. Morphogenesis is currently developing a portfolio of cell therapy products for the treatment of chronic disorders. Its most advanced product, ImmumeFX is currently undergoing pre-clinical trials, potentially providing cancer vaccine solutions that target tumours in both humans and pets. The US canine market alone is worth in excess of $200 million a year. So far, the tests have provided promising initial feedback. Since 31st December 2007, I have been appointed to the Board. This appointment forms part of a strategic move by Morphogenesis to migrate key parts of its early stage technology research to Britain. We believe this move will likewise prove highlight complementary to the R&D of Cronos. Strategic Summary In summary, the progress made indicates the potential of our pipeline of products. We have put in place a range of strategic agreements and collaborations in the short period since we have come onto AIM across all our fields of operation. Furthermore, we remain highly encouraged by the feedback we have received from the trials completed to date on our technologies. Financial Overview The loss after minority interest for the nine months ended 31st December 2006 was £286,957. The loss was in line with expectations. Net cash as 31st December was £810,639 and turnover from consultancy was less than £10,000. As planned, research & development costs were £60,000 and other administrative expenses for the year were £213,000. The Company is very confident in its prospects for the future and to deliver shareholder value. Satu Vainikka CEO 25th June 2007 FINANCIALS CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006 Nine Year Months ended ended 31 31 March December 2006 2006 Notes £ £ Revenue 2 9,577 - Administrative expenses (273,292) (65,922) Other operating income - 1,750 ─────── ─────── Operating loss 3 (263,715) (64,172) Loss on deemed disposal of shares in (60,133) - subsidiary ─────── ─────── Loss on ordinary activities (323,848) (64,172) before interest Other interest receivable 7,828 576 and similar income Interest payable and (49) - similar charges ─────── ─────── Loss on ordinary activities (316,069) (63,596) before taxation Tax on loss on ordinary - - activities ─────── ─────── Loss on ordinary activities (316,069) (63,596) after taxation Minority interest 29,112 - ─────── ─────── Loss for the period (286,957) (63,596) ═══════ ═══════ Loss per share - basic and 4 (0.11)p (0.09)p diluted ═══════ ═══════ The profit and loss account has been prepared on the basis that all operations are continuing operations. There are no recognised gains and losses other than those passing through the profit and loss account. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 31 December 2006 31 March 2006 Notes £ £ £ £ ASSETS Non current assets Intangible assets 488,027 59,796 Property, plant and 4,833 1,118 equipment Financial assets: 1,333,770 - available-for-sale investments ──────── ──────── 1,826,630 60,914 ──────── ──────── Current assets Trade and other receivables 6 154,479 75,220 Cash and cash equivalents 810,639 33,835 ──────── ──────── 965,118 109,055 LIABILITIES Current liabilities Trade and other payables 7 (105,422) (8,772) ──────── ──────── Net current assets 859,696 100,283 ──────── ──────── Total assets less current liabilities 2,686,326 161,197 ════════ ════════ SHAREHOLDERS' EQUITY Called up share capital 11,153,055 6,270,555 Share premium 6,979,770 9,881,216 Merger reserve 637,500 - Reverse acquisition reserve (15,760,591) (15,923,102) Profit and loss account (354,429) (67,472) ──────── ──────── Total shareholders' equity 2,655,305 161,197 Minority interest 31,021 - ──────── ──────── 2,686,326 161,197 ════════ ════════ Approved by the Board and authorised for issue on 22 June 2007 S Vainikka G Desler Director Director CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2006 Nine Year Months ended ended 31 31 March December 2006 2006 Note £ £ £ £ Cash outflows from operating 1 (53,545) (54,884) activities Investing activities Interest received 7,828 576 Interest paid (49) - Payments to acquire intangible (7,868) (39,941) assets Payments to acquire tangible (5,025) (1,166) assets Payments to acquire investments (190,770) - Purchase of subsidiary 2 1,290,767 - undertakings, net of cash acquired ─────── ─────── Net cash generated from/(used 1,094,883 (40,531) in) investing activities Financing activities Issue of ordinary share capital 127,500 125,000 Cost of share issue (392,034) - ─────── ─────── Net cash (used in)/generated (264,534) 125,000 from financing activities ─────── ─────── Net increase in cash and cash 776,804 29,585 equivalents Cash and cash equivalents at beginning of period 33,835 4,250 ─────── ─────── Cash and cash equivalents at end of period 810,639 33,835 ═══════ ═══════ NOTES TO THE CASH FLOW STATEMENT 1 Cash flows from operating activities Nine Year Months ended ended 31 31 March December 2006 2006 £ £ Operating loss (263,715) (64,172) Depreciation of tangible assets 1,310 48 Amortisation of intangible assets 3,211 2,290 Increase in debtors (176,191) (115) Increase in creditors within one year 381,840 7,065 ─────── ─────── Cash flows from operating activities (53,545) (54,884) ═══════ ═══════ 2 Purchase of subsidiary undertakings Nine Year Months ended ended 31 31 March December 2006 2006 £ £ Cash and cash equivalents in subsidiaries acquired 1,322,937 - Cash outflow on acquisition (32,170) - ─────── ─────── 1,290,767 - ═══════ ═══════ KEY NOTES TO THE FINANCIAL STATEMENTS 1 Summary of significant accounting policies 1.1 Basis of preparation Valirx Plc (formerly Azure Holdings Plc) is a company incorporated in the United Kingdom under the Companies Act 1985. The group financial statements consolidate those of the company and its subsidiaries ('the group'). The group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations that have been adopted for use in the European Union, the Companies Act 1985 and Article 4 of the IAS Regulation. The group financial statements have been prepared under the historical cost convention or fair value where appropriate. 1.2 First-time adoption of International Financial Reporting Standards ('IFRS') In preparing these consolidated financial statements, the group has elected to apply certain exemptions available under IFRS 1 'First-time Adoption of International Reporting Standards'. These are set out in note 21. In accordance with IFRS 1, the group has taken the exemption not to restate the comparatives for IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement.' Comparative information in respect of these items is presented on a UK GAAP basis as previously reported. 1.3 Basis of consolidation The group financial statements consolidate the financial statements of the company and all its subsidiaries. Subsidiaries include all entities over which the group has the power to govern financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are consolidated from the date on which control commences until the date that control ceases. Intra-group balances and any unrealised gains and losses on income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. On 3 October 2006, Valirx Bioinnovations Limited ('Bioinnovations') acquired 60.28% of the issued share capital of Cronos Therapeutics Limited ('Cronos') in exchange for shares in Bioinnovations. Concurrently, the Company, then called Azure Holdings plc ("Azure"), acquired the entire issued share capital of Bioinnovations in a share for share transaction. As a result of these transactions, the former shareholders of Cronos became the majority shareholders in Azure. Accordingly, the substance of the transaction was that Cronos acquired Azure in a reverse acquisition. As part of the business combination, Azure changed its name to Valirx Plc ("Valirx"). Under IFRS 3 'Business Combinations', the acquisition of Cronos has been accounted for as a reverse acquisition. As a consequence of applying reverse acquisition accounting, the results for the period ended 31 December 2006 comprise those of Cronos plus those of Valirx and Bioinnovations from 3 October 2006. The comparative figures are those of Cronos for the year ended 31 March 2006. The consolidated balance sheet comprises the combined balances of Cronos, Valirx and Bioinnovations at 31 December 2006. The comparative consolidated balance sheet is that of Cronos at 31 March 2006. 1.4 Sources of estimation uncertainty The preparation of the financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. The group believes that the most significant critical judgement area in the application of its accounting policies is the carrying value of the financial assets - available-for-sale investments and goodwill. 1.5 Goodwill Goodwill on acquisition of subsidiaries represents the excess of the cost of acquisition over the fair value of the group's share of the net identifiable net assets and contingent liabilities acquired. Identifiable assets are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but tested annually for impairment or when trigger events occur, and is carried at cost less accumulated impairment losses. 1.6 Other intangible assets Acquired licences, trademarks and patents are capitalised at cost and are amortised on a straight-line basis over their useful life. Patents are amortised over 16 years. 1.7 Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at the following rates per annum to write off the cost of property, plant and equipment, less estimated residual value, on a straight line basis from the date on which they are brought into use: Computer equipment 33% per annum straight line 1.8 Impairment of assets The carrying value of property, plant and equipment and intangibles is reviewed for impairment when events or changes in circumstances indicate the carrying value may be impaired. An impairment loss is recognised in the income statement for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. 1.9 Investments The group classifies its investments as available-for-sale financial assets in accordance with IAS 39. Available-for-sale financial investments are non-derivative assets. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. After initial recognition available-for-sale assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is de-recognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the income statement. If a fair value for an investment cannot be reliably measured that investment will be carried at cost. An impairment test is performed annually on the carrying value of each investment. If an available-for-sale asset is impaired, an amount comprising the difference between its carrying value and its cost and its fair value is transferred from equity to the income statement. 1.10 Trade and other receivables Trade and other receivables are recognised and carried at the lower of their original amount less an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no longer considered possible. 1.11 Equity-settled share-based payment The group makes equity-settled share-based payments to its employees and directors. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured based on the Black-Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the company revises its estimate of the number of options that are expected to become exercisable. The group has taken advantage of the transitional provisions of IFRS2 'Share Based Payments' in respect of equity-settled share-based payments and has applied IFRS2 only to equity-settled awards granted after 7 November 2002 that had not vested on 31 March 2005. 1.12 Taxation Taxation expense represents the sum of current tax and deferred tax. The tax currently payable is based on the taxable loss for the period using the tax rates that have been enacted or substantially enacted by the balance sheet date. Taxable loss differs from the net loss 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. Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. 1.13 Turnover Revenue represents sales and services to third party customers in the health sector, stated net of any applicable value added tax. Revenue is recognised when the services are provided. 1.14 New standards and interpretations During the period the International Accounting Standards Board ('IASB') and International Financial Reporting Interpretations Committee ('IFRIC') issued the following standards and interpretations which are effective for annual accounting periods beginning on or after the stated effective date. These standards and interpretations are not effective for and have not been applied in the preparation of this financial information. Effective date International Accounting Standards (IFRS/IAS) IFRS 7 Financial instruments: Disclosures 1 January 2007 IFRS 8 Operating Segments 1 January 2009 IAS 1 Amendment - Presentation of Financial 1 January 2007 Statements: Capital Disclosures IFRIC interpretations IFRIC 7 Applying the Restatement Approach under IAS 1 March 2006 29 - Financing Reporting in Hyperinflationary Economies - IFRIC 8 Scope of IFRS 2 1 May 2006 IFRIC 9 Reassessment of Embedded Derivatives 1 June 2006 IFRIC 10 Interim Financial Reporting and Impairment 1 November 2006 IFRIC 11 Group and Treasury Share Transactions 1 March 2007 IFRIC 12 Service Concessions Arrangements 1 January 2008 The group does not anticipate that the adoption of these standards and interpretations will have a material impact on the group's financial statements on adoption. 2 Revenue The total revenue of the group for the period has been derived from its principal activity wholly undertaken in the United Kingdom. 3 Operating loss Nine Year Months ended ended 31 31 March December 2006 2006 £ £ Operating loss is stated after charging: Amortisation of intangible assets 3,211 2,290 Depreciation of tangible assets 1,310 48 Auditors' remuneration - parent company 10,000 - Auditors' remuneration - subsidiary undertakings 10,000 5,000 Auditors' remuneration - previous firm 5,525 - ═══════ ═══════ 4 Earnings per ordinary share The earnings and number of shares used in the calculation of earnings per ordinary share are set out below: Nine Months Year ended ended 31 December 31 March 2006 2006 Basic: Loss for the financial period 286,957 63,596 Weighted average number of shares 264,684,539 67,500,414 Loss per share 0.11p 0.09p ═════════ ═════════ There was no dilutive effect from the share options outstanding during the year (note 14). 5 Acquisitions On 3 October 2006, Valirx Bioinnovations Limited ('Bioinnovations') acquired 60.28% of the issued share capital of Cronos Therapeutics Limited ('Cronos') by means of a share-for-share exchange. Concurrently, Valirx acquired the entire share capital of Bioinnovations by means of a share-for-share exchange. As a result of these transactions, the former shareholders of Cronos became the majority shareholders of Valirx. In accordance with IFRS 3 'Business Combinations', these transactions have been accounted for as a reverse acquisition. The key features of this basis of consolidation are: - The consolidated IFRS financial statement is a continuation of the financial statement of Cronos and the retained earnings recognised are a continuation of those of Cronos immediately before the business combination. - The consolidated income statement for the nine months ended 31 December 2006 includes the results of Cronos for the nine months ended 31 December 2006 and of Valirx and Bioinnovations from 3 October 2006, the date of the reverse acquisition. - The assets and liabilities of Cronos are measured based on their pre-combination carrying amounts. - The equity structure appearing in the consolidated financial statement reflects the equity structure of the legal parent, Valirx. - Valirx and Bioinnovations have been consolidated from the date of the reverse acquisition using the fair value of their assets and liabilities at that date, with the exception of the financial assets in Bioinnovations where the investment is stated at historical cost (note 10). The recognised value of assets purchased were as follows. There was no difference between the recognised value and the fair value of the assets acquired. Valirx Bioinnovations Valirx Plc Limited £ £ Financial assets - 1,143,000 Receivables 20,387 26 Cash and cash equivalents 1,322,937 - Payables (248,032) - ─────── ─────── Net assets acquired 1,095,292 1,143,026 Goodwill 394,613 28,961 ─────── ─────── Consideration satisfied by shares 1,489,905 1,171,987 ═══════ ═══════ The company has entered into a Call Option Agreement ('the Agreement') with the minority shareholders of Cronos. Under the terms of the Agreement, the company has the right to acquire the remaining 39.72% of the ordinary shares in Cronos. The agreement runs for a period of two years from the date of re-admission to the AIM market. The consideration payable will either be the issue of 195,000,000 new ordinary shares in the company or the payment of £ 2.6 million. 6 Trade and other receivables 31 31 March December 2006 2006 £ £ Trade receivables 9,458 - Called up share capital not paid - 75,000 Other receivables 136,065 220 Prepayments and accrued income 8,956 - ─────── ─────── 154,479 75,220 ═══════ ═══════ 7 Trade and other payables 31 31 March December 2006 2006 £ £ Trade payables 39,712 - Other payables - 250 Accruals and deferred income 65,710 8,522 ─────── ─────── 105,422 8,772 ═══════ ═══════ 8 Related party transactions During the period, Cronos paid consultancy fees to Cronos Ventures Limited amounting to £16,835 (year ended 31 March 2006 - £28,000), a company in which both J Micallef and S Vainikka are directors and shareholders. During the period, Cronos carried out business with Imperial College Innovations Limited on normal commercial terms amounting to £nil (Year ended 31 March 2006 - £46,773). Imperial College Innovations Limited is a shareholder of Valirx. 9 Post balance sheet events Since the balance sheet date: 1 A collaborative agreement was signed with the University of Surrey's Post-graduate Medical School to co-develop prostate and bladder cancer diagnostics based on the Hypergenomics technology. 2 Cronos and Physiomics started to work on a programme directed at development of new GeneICE products. 3 Cronos and ATDBio Ltd completed their initial experiments involving GeneICE. This was significant as it confirmed that the GeneICE drug currently in development with Cancer Research Technology Limited binds to its predicted genetic target under model physiological conditions. 4 A GeneICE US patent was granted. Copies of the accounts have been despatched to shareholders. Additional copies are available from the company's registered office at 24 Greenville Street, London, EC1N 8SS and their website www.valirx.com For Further Information, please contact: ValiRx Plc WH Ireland GTH Communications Dr Satu Vainikka David Youngman Toby Hall / Jade Mamarbachi +44 (0) 203 008 4416 +44 (0) 161 832 2174 +44 (0) 20 7153 8035

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