Interim Results

Alliance Pharma PLC
22 October 2004



For Release at 7:00AM 22 October 2004

                         ALLIANCE PHARMA PLC (AIM: APH)
                         ('Alliance' or 'the Company')
              INTERIM RESULTS FOR THE HALF YEAR TO 31 AUGUST 2004

Financial Highlights

   • Turnover increased 13% to £5.6 million - 9% like-for-like and 4% for new
     brand acquisitions (2003: £4.9 million)
   • Gross Profit up 26% to £2.9 million (2003: £2.3 million)
   • Gross margin up to 52.3% (2003: 47.6%)
   • Basic EPS of -0.35p (2003: 0.28p)
   • Adjusted EPS 0.29p (2003: 1.00p)
   • 13% Increase in cash generation at operational level to £941,974 (2003:
     832,678)

Operational Highlights

   • Continued strong growth in sales of Symmetrel (Parkinson's Disease) and
     Nu-Seals (Cardiovascular disease prevention)
   • Board strengthened with highly experienced non-executive chairman and
     non-executive director
   • Successful acquisition of Dermapharm Ltd and four dermatology brands
   • Misoprostrol (for induction of labour) and Melatonin (for sleep
     disorders) expected to commence human clinical trials towards end of 2004

John Dawson, CEO of Alliance Pharma commented: 'We are delighted with our
performance for the first six months of the year. We have achieved an increase
in our sales and margins from our branded products and we are very excited by
the prospect of Misoprostrol (for induction of labour) and Melatonin (for sleep
disorders) entering human clinical trials towards the end of the year.'

For further information contact:
John Dawson, Alliance Pharma Plc 01249 466 966
David Poutney, Numis Securities Ltd 020 7776 1500
Mike Wort/John Moriarty, Beattie Financial 020 7398 3300

ALLIANCE PHARMA PLC

Interim report for the six months ended 31 August 2004

Chairman's Statement

Our results for the half year to 31 August 2004 have been very encouraging and
have continued the progress shown in our last year's trading.

Sales for the period of £5,568,333, represent an increase of some 13% over the
same period last year of which 9% was due to organic growth while acquisitions
accounted for 4%. The two principal promoted brands - Nu-Seals (prevention of
cardiovascular events) and Symmetrel (Parkinson's disease) - showed strong
growth; our branded range of dermatology products (including the recently
acquired Dermapharm brands) began to establish itself; and overall, our other
brands performed steadily.

Gross profit rose by 24% to £2,910,285 which represents a margin of 52.3% of
sales, compared with £2,349,044 and 47.6% in the same period in 2003. This
encouraging trend is a result of the increasing proportion of our sales
contributed by the high growth, high margin brands we are actively marketing.

Marketing and Administration expenses have gone up significantly in line with
our budget as we increase the promotional spend on our high margin growth
products. This combined with the increased costs we are incurring on our new
development products has led to an overall loss position. This is in line with
our strategy to promote more of our brands and develop our new generation of
products. We are confident that this will result in increased sales and profit,
and is our investment in the future of the Company. Operating profit (pre
exceptional items) consequently reduced to £512,834 with an overall loss for the
period of £391,239. If one excludes the amortisation of intangibles, which in
effect are not suffering any impairment, then post-interest profits before
amortisation and exceptional items are £316,013.

We continue to make good progress on our two development projects. For APL 202,
our intravaginal misoprostol project for labour induction, we have finalised the
formulation for the human clinical trials which are on target to commence before
the end of the year. We would anticipate the trials lasting for up to six months
depending upon the rate of recruitment. For APL 510, our melatonin product for
treating sleep disorders, after the very successful phase 1 trial for our
formulation, we will be commencing registration trials, and again we are on
target to commence those trials before the end of the year. We expect these
trials will take longer than the trials for APL 202, but we would still
anticipate the product being ready for registration in 2006.

The company remains acquisitive, as evidenced by the announcement that has been
issued and accompanies this statement. During the period we incurred an
exceptional cost of £109,504 as a result of an aborted transaction where the
final price paid in a competitive auction was at a level we could not justify.

Looking at the year as a whole, we expect sales of existing brands to continue
to make good progress. In addition, resources will be increasingly deployed to
progress the development of our two important in-house projects - misoprostol
(for induction of labour) and melatonin (for sleep disorders) - where, in both
cases, we expect to commence human clinical trials towards the end of the year.

MICHAEL GATENBY - CHAIRMAN
Consolidated Summarised Profit and loss account

                                      6 months        6 months   12 months to 29
                                                                      Feb 2004
                                 to 31 Aug 2004  to 31 Aug 2003
                                     Unaudited       Unaudited         Audited
                          Note               £               £               £

Turnover                             5,568,333       4,933,149      10,416,036

Cost of sales                       (2,658,048)     (2,584,044)     (5,377,179)

Gross profit                         2,910,285       2,349,105       5,038,857

Operating expenses
Administrative and
marketing expenses                  (1,799,703)       (875,107)     (2,584,611)
Amortisation of goodwill
and intangible assets                 (597,748)       (524,036)       (907,074)
Exceptional items            1        (109,504)              -        (843,171)

                                    (2,506,955)     (1,399,143)     (4,334,856)
     -------------------- ------      ----------      ----------      ----------
Operating profit
Pre exceptional items                  512,834         949,962       1,547,172
Exceptional items                     (109,504)              -        (843,171)
                  Total                403,330         949,962         704,001
     -------------------- ------      ----------      ----------      ----------

Net interest payable and
similar charges
Net interest and similar
charges                               (717,880)       (745,330)     (1,502,058)
Other finance charges                  (76,689)              -          (9,268)
Other exceptional finance
charges                                      -               -       (1,345,181)
                                      (794,569)       (745,330)     (2,856,507)

(Loss)/profit on ordinary
activities before                     (391,239)        204,632      (2,152,506)
taxation

Tax on loss on ordinary
activities                             -               -               197,856

(Loss)/profit for the
financial period                      (391,239)        204,632      (1,954,650)

(Loss)/earnings per
share
Basic (pence)                2           (0.35)           0.28           (2.44)
Adjusted (pence)             2            0.29            1.00            1.18

Consolidated summarised Balance sheet

                                      6 Months        6 Months   12 Months to 29
                                                                     Feb. 2004
                                 to 31 Aug. 2004 to 31 Aug. 2003

                                     Unaudited       Unaudited         Audited
                          Note               £               £               £
Fixed assets
Intangible assets                   17,564,803      16,634,253      17,987,603
Tangible assets                        201,352         182,307         147,853

                                    17,766,155      16,816,560      18,135,456

Current assets
Stocks                               1,847,401       1,644,737       1,739,516
Debtors                              1,752,514       1,927,628       1,984,093
Cash at bank and in hand             3,679,696       -               4,579,197

                                     7,279,611       3,572,365       8,302,806
Creditors: amounts
falling due within one
year                                (5,518,532)     (5,463,907)     (5,462,778)

Net current assets                   1,761,079       (1,891,542)     2,840,028

Total assets less current
liabilities                         19,527,234      14,925,018      20,975,484

Creditors: amounts
falling due after more
than one year                      (17,687,244)    (14,715,669)    (18,751,378)

Provisions for
liabilities & charges
(deferred tax)                               -       (197,856)              -
                                     1,839,990          11,493       2,224,106

Capital and reserves
Called up share capital              1,107,939         281,182       1,107,939
Share premium account                5,221,761           6,818       5,214,638
Other reserves                        (329,349)              -        (329,349)
Profit and loss account             (4,160,361)     (276,507)       (3,769,122)

Shareholders' funds                  1,839,990          11,493       2,224,106



CONSOLIDATED CASH FLOW STATEMENT

                                          6 months    6 months   12 months to 29
                                                                      Feb 2004
                                     to 31 Aug 2004  to 31 Aug
                                                          2003
                                         Unaudited   Unaudited         Audited
                              Note               £           £               £

Net cash inflow from
operating activities             3       941,974         832,678     2,112,318

Returns on investments and
servicing of finance
Interest received                          101,703       1,039          35,446
Interest paid and similar
charges                                   (543,341)   (744,946)     (1,562,879)
Loan redemption premiums
paid                                             -           -      (1,185,181)
Finance issue costs paid                   (53,549)          -        (416,125)
Other finance charges paid                       -           -        (160,000)
Hire purchase interest
paid                                        (1,607)     (1,607)         (2,848)
Net cash (outflow)/inflow
for returns on investments
and servicing of finance                (496,794)       87,347      (3,291,587)

Taxation                                         -           -               -

Capital expenditure and                                                      -
financial investment
Purchase of intangible
fixed assets                              (170,572)   (320,836)       (928,155)
Purchase of tangible fixed
assets                                     (69,190)       (846)        (16,694)
Net cash outflow for
capital expenditure                       (239,762)    (321,682)      (944,849)

Acquisitions
Purchase of subsidiary
undertakings                         (112,401)              -       (1,233,435)
Net cash acquired with
subsidiary undertakings                  -                  -        2,213,664
Net cash (outflow)/inflow
from acquisitions                    (112,401)              -          980,229

Financing
Issue of shares                             -               -        3,309,514
Warrant buy-back                            -               -      (1,333,333)
                                 ---
Receipt from borrowings                     -                -       9,960,000
Repayment of loan                    (978,526)        (813,491)     (6,393,312)
Capital element of hire
purchase contracts                     (13,992)        (12,982)       (25,965)
Net cash (outflow)/inflow
from financing                       (992,518)         (826,473)     5,516,904

(Decrease)/increase in
cash                                 (899,501)       (1,060,808)     4,373,015


Notes to the interim report

1  Exceptional items

Exceptional items comprise the following:
                                 6 months        6 months        12 months to 29
                                                                      Feb 2004
                            to 31 Aug 2004      to 31 Aug
                                                     2003
                                        £               £                    £
Professional costs in
relation to unsuccessful
acquisition                       109,504               -                    -
Impairment of reverse
takeover goodwill                       -               -              843,171
                                  109,504               -              843,171


2  EARNINGS / (Loss) per share

The basic loss per share is based on equity losses of £391,239 (31 August 2003:
profit of £204,632; 29 February 2004: loss of £1,954,650) and 110,793,903 (31
August 2003: 72,916,667; 29 February 2004: 79,973,248) ordinary shares of 1p
each, being the average number of shares in issue during the period.
The weighted average number of ordinary shares for the six months ended 31
August 2003 and the year ended 29 February 2004 assumes that the 72,916,667
ordinary shares issued in relation to the reverse acquisition of Alliance Pharma
plc (formerly Peerless Technology Group plc) existed for the entire period.
Alliance Pharma plc shares have been included since 23 December 2003, the date
of the reverse takeover, and all other shares have been included in the
computation based on the weighted average number of days since issuance.

There is no dilutive effect of share options on the basic loss per share.
An adjusted earnings per share has been disclosed in order to show performance
undistorted by amortisation, costs incurred on an unsuccessful acquisition,
one-off finance charges and a reversal of deferred tax. The adjusted earnings
per share is based on equity earnings of £316,013 (31 August 2003: £728,668; 29
February 2004: 942,920).

3  Net cash inflow from operating activities

                               31 Aug. 2004   31 Aug. 2003      29 Feb.2004
                                          £                 £                £
Operating profit                    403,330           949,962          704,001
Amortisation                        597,747           524,036        1,750,245
Depreciation                         43,691            32,948           83,250
(Increase)/decrease in stocks      (107,885)          283,443          213,361
Decrease/(increase) in debtors      238,702          (297,981)        (260,649)
Decrease in creditors              (233,611)         (659,730)        (377,890)
Net cash inflow from operating
activities                          941,974           832,678        2,112,318


4  reconciliation of net cash flow to movement in net debt

                                    31 Aug. 2004   31 Aug. 2003    29 Feb.2004
                                               £               £             £
(Decrease)/increase in cash in
the period                              (899,501)     (1,060,808)    4,373,015
Net cash outflow/(inflow) from
financing                                978,526         813,491    (3,566,688)
Cash outflow from loan issue
costs paid                                     -               -       416,125
Cash outflow in respect of
finance leases & hire purchase            13,992          12,982        25,965
Change in net debt resulting from
cash flows                                93,017        (234,335)    1,248,417
Non-cash movements                       (23,442)              -       158,955
Movement in net debt in the
period                                    69,575        (234,335)    1,407,372
Net debt at 1 March 2004             (16,002,224)    (17,409,596)  (17,409,596)
Net debt at 31 August 2004           (15,932,649)    (17,643,931)  (16,002,224)

5 analysis of changes in net debt

               At 1 Mar. 2004    Cash flows   Other changes   At 31 Aug. 2004
                             £            £               £                  £
Net cash:
Cash at bank
and in hand         4,579,197      (899,501)             -           3,679,696
Debt
Bank loans
within one
year              (2,002,300)      (81,050)              -         (2,083,350)
Bank loans due
after one year   (11,460,568)    1,059,576          25,365        (10,375,627)
Convertible
unsecured loan
stock due
after one year    (7,090,810)           -         (20,807)        (7,111,617)
Finance leases
and hire
purchase
agreements             (27,743)      13,992         (28,000)           (41,751)
                   (20,581,421)     992,518         (23,442)       (19,612,345)
Net debt           (16,002,224)      93,017         (23,442)       (15,932,649)

6 Publication of non-statutory accounts

The financial information set out above does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. The figures for the
period ended 29 February 2004 have been extracted from the statutory financial
statements, which have been filed with the Registrar of Companies. The auditors'
report on those financial statements was unqualified.
INDEPENDENT REVIEW report to ALLIANCE PHARMA PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 August 2004, which comprises the consolidated summarised
profit and loss account, the consolidated summarised balance sheet, the
consolidated summarised cash flow statement and notes 1 to 6. We have read the
other information contained in the interim report, which comprises only the
chairman's statement and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information. Our
responsibilities do not extend to any other information.

This report is made solely to the company, in accordance with guidance contained
in APB bulletin 1999/4 'Review of Interim Financial Information'. Our review
work has been undertaken so that we might state to the company those matters we
are required to state to it in a review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company, for our review work, for this report or for the
conclusions we have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. They are
responsible for preparing the interim report and ensuring that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 August 2004.

GRANT THORNTON UK LLP
CHARTERED ACCOUNTANTS



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