Preliminary Results

EpiStem Holdings plc
10 October 2007


Preliminary Results to 30th June 2007

Epistem Holdings Plc (LSE: EHP), the UK epithelial stem cell company, announced 
today its preliminary results for the period to 30th June 2007.

A Year of Progress for Epistem

A strong turnover that positions us well for the future

The 2006/07 financial year saw Epistem's transition from a biotechnology
start-up to an AIM-listed plc company with outstanding opportunities in its
chosen field. The maiden results for the Company were also impressive with
year-on-year turnover up 50%. Epistem's shares were well received in the market
with the stock post flotation showing a 20% premium on the admission price.

The forecast outlook for 2007/08 anticipates strong advances in Epistem's
revenue. These forecasts are based on growing demand for Epistem's stem cell
technology based products and services, an experienced management team, and the
increased number of commercial opportunities now beginning to emerge. This
confluence of activities will define Epistem as one of the foremost and exciting
companies in the biotechnology sector.

Highlights

  • Admitted to AIM; £3m funds raised
  • 50% increase in revenues
  • Strengthened Management Team
  • New biomarker development programme with AstraZeneca plc
  • Radiation Damage Models for Intestinal Stem Cells chosen for the US
    National Institute of Health bio-defence programme and successful completion
    of the initial series of tests
  • Commenced manufacture of 250 candidate therapeutic proteins
  • Novel Therapies division enters its first out-licensing agreement
  • Protocol finalised and tested for plucked human hair model for use as a
    non-invasive bio-marker in oncology



For further details please contact:

Matthew Walls
Chief Executive Officer - EpiStem Ltd           [phone]

Thilo Hoffmann
Landsbanki Securities (UK) Limited              [phone]

Mike Wort, Anna Dunphy
MC Bio-Communications Limited                   [phone]



The Chairman's Statement:

Dear Shareholder,

I am delighted to present the maiden annual report for the Company following its
admission to AIM on 4 April 2007.

The overall report has been designed to provide a summary of the year's progress
and to explain the background and opportunity behind our scientific and
commercial plans for the exploitation of our unparalleled knowledge of adult
epithelial stem cells.

The financial results for the Group as presented in this report are prepared
using merger accounting, thus reflecting the results for the Group's sole
subsidiary for the year to 30 June 2007 and for  the comparative period to 30
June 2006.

Fuller details of the results for the period are covered in the CEO's review
but, operationally and financially, the year to 30 June 2007 saw the Company
generate revenues of £1.4m (2006: £0.9m). With a net CRO contribution of £0.25m
(2006: £0.2m), and research and other operating costs of £1.5m (2006: £1.2m),
the after tax loss reported for the year was £1.0m (2006: £0.9m).

Cash held in the company at the end of June 2007 was £2.3m.

During the year, the Group made significant progress on a number of key fronts:

•         Contract Research revenues grew by 50% to £1.4m (2006: £0.9m)
underpinned by a three-year contract signed with the University of Maryland as
part of a US government bio-defence initiative.

•         The first biomarker contracts were signed with both a large pharma and
an emerging US biotech company. The rate of commercial progress has been rapid
and the key risks lie in the technical execution and the validation of the
underlying hypothesis that mRNA analysis of the plucked hair is a surrogate for
what is happening to epithelial stem cells in the small intestine.

•         The first commercial contract for the exploitation of one of Epistem's
identified proteins was signed with an early stage UK biotechnology company.
Whilst the initial sums of money are not significant, it has demonstrated
initial proof of principle, that even for a new use for a well known drug,
Epistem can commercialise its output from its Novel Therapies division. This
augurs well for the future.

•         Management was significantly strengthened through the appointment of
Matthew Walls as CEO, who brings a welcome blend of experience, energy and
commitment to the Group.

•         In April, Epistem achieved a successful flotation on the LSE AIM
Market, one of the few biotech companies to do this during 2007 in the UK, and
this was achieved through a dedicated team effort. Allied to the move to AIM,
the Company strengthened its Board in July 2007 with the appointment of Dr Roger
Lloyd as a non-executive director. Roger's wealth of experience as Head of
Licencing at Astra Zeneca will be invaluable to the Group as it moves forward
its discussions with large pharma for the commercial exploitation of its protein
therapeutic targets.

Current Trading

Trading in the first three months of the new financial year has been buoyant and
is at least 30% ahead of the comparative period last year.

The outlook for Epistem is very positive, although we remain vigilant of the key
challenges ahead. This positive outlook is driven, in particular, by the
progress made with the biomarker programme and the substantial level of interest
now being generated. The biomarker interest has also created a complementary
platform to help support discussions around our Novel Therapies development
programme. The Board recognises that the development of its novel protein
therapies will require the support and participation of like-minded drug
development companies to partner closely with Epistem to achieve our therapeutic
goals.

Finally I would like to thank both the Group's employees for their passion and
commitment in ensuring Epistem's continued progress and you as shareholders
whose support has underpinned a year of marked achievement.

David Evans
Chairman




The Chief Executive's Review:

Over the past year, Epistem has taken significant technical and commercial steps
in developing itself as a globally-recognised drug discovery and early-stage
development company, focused in the areas of cancer, gastrointestinal (GI) and
other epithelial diseases.

There have been a number of notable milestones in 2007, including a 50%
year-on-year growth in company revenues, the commencement of our bio-defence
collaboration with the US government, feasibility studies for a new proprietary
plucked hair biomarker, signed heads of terms for the out-licencing of our first
proprietary therapeutic and our recent well-received admission to AIM and £3.0m
fundraising.

Each of the Company's divisions has developed strongly over the past year and I
am pleased to report that these developments have met fully with our 2007
business plan.

Combined business model

Epistem operates a combined business model that offers significant out-licencing
opportunities from its drug and biomarker developments (Novel Therapies
division), in addition to lower-risk activities providing drug testing services
for third parties (Contract Research Services division).

This combined business model also enables the Company to integrate its
divisional expertise to produce a drug discovery and testing house for its own,
proprietary novel protein therapeutics.

Financial Review

The Company reports turnover of £1.4m (2006: £0.9m) for the year ended 30 June
2007. This revenue figure is drawn almost entirely from the Contract Research
Services division where increased demand for the Company's efficacy testing
assays was the prime driver for the year-on-year growth.

Revenues for the Company were mainly generated across the UK and US markets,
with mainland Europe beginning to generate revenues resulting from new dedicated
business development support for this territory.

On a standalone basis, Contract Research Services' contribution increased year
on year by 28% to £0.25m. Investment in our Novel Therapies (including
Biomarkers) and central administration increased year on year by £0.3m, to
£1.5m, due to increased headcount in senior management and production cost
investment in our protein therapeutics. The loss reported for the financial year
(net of a £0.2m R&D tax credit) was £1.0m (2006: £0.9m). Headcount in the
Company is now 30 (2006: 29).

The Company was admitted to the UK LSE: AIM market on 4 April 2007 raising £3.0m
(2.5m net of listing expenses) at a listing price of £1.24. Demand for the
Company's stock has remained firm and the stock has subsequently out-performed
the market indices. Cash balances at the June 2007 financial Year End were
£2.3m.

The Company annual Audit was completed in October 2007 by HW, Chartered
Accountants, and their Audit report is included in the annual accounts.

Contract Research Services

The Contract Research Services division provides specialist epithelial testing
for companies wishing to evaluate their cancer, GI and dermatological drugs
against a wide range of both normal and diseased epithelial tissues including
lung, colon, breast, prostate and skin, all of which have been well
characterised, over many years, by the Company.

The Contract Research Services team has built an enviable record of working with
major international pharmaceutical and biotechnology companies.

During 2007, the Contract Research Services team saw the initiation of the
Company's first major contract with the US National Institute of Health (NIH) to
test treatments for radiation sickness following a nuclear terrorist attack.
Epistem is the major provider of these services, which identify novel drugs that
can improve the repair of the GI tract following exposure to radiation. There
are currently no medications approved by the FDA to treat this condition.
Epistem is an established provider of similar GI services for oncology
supportive care. The contract with the US NIH is expected to develop further
over the forthcoming year.

The tests performed by Epistem are also likely to identify agents with oncology
supportive care applications. These agents will reduce mucositis - severe
ulceration and diarrhoea experienced by patients during radio- and chemotherapy.

Product development remains a vital part of our specialist assay service and the
Company is currently developing novel stem cell services for drug efficacy
testing. The division is also extending its Inflammatory Bowel Disease portfolio
of assays to meet with increased customer demand.

The 2007 year saw greater visibility and awareness of the Company's assays and
services, which resulted in an increase in the number of contractual service
agreements with our pharmaceutical and biotechnology partner companies.
Increased awareness of the Company's core expertise and know-how is still
unfolding and customer numbers are set to grow further in 2008.

Biomarkers

The Company's biomarker technology is based on gene expression profiles which
measure how a single plucked hair can provide a means of evaluating how
effectively a drug is targeting a particular gene or set of genes in a signal
pathway. Epistem's biomarker technology is at the forefront of cancer drug
development and provides an innovative approach to quickly assessing cell and
tissue exposure to a drug. Epistem commenced its first biomarker feasibility
studies during 2007 with a number of pharmaceutical partners.  Biomarker demand
continues to build and this has been further buoyed by the US FDA's efforts to
find effective biomarkers for cancer therapeutic development.

There are inevitable risks in the development of this technology as it is
positioned to measure the effectiveness of cancer therapeutic agents, but we are
confident, based on recent developments, that we will pioneer a new approach to
help guide oncology-based drug development. We expect to see the first
preclinical and clinical results of our efforts in the fourth quarter 2007.

We also forecast an increased revenue contribution for the forthcoming financial
year arising from our developments and collaborations in this new business area.

Novel Therapies

Epistem is focused on the discovery of novel protein therapeutics to control the
production of epithelial cells. The Company has focused its high resolution gene
expression technology on the discovery and development of novel therapeutics
which regulate cell production, including inhibition. The development of these
protein cell regulators will initially target the disease areas of oncology,
oncology supportive care (mucositis), GI and other epithelial disorders such as
wound healing.

During the year, the Company identified and selected a core group of 250
proteins from which to find those responsible for controlling cell production.
These proteins have advanced through development and the initial subset has now
been selected for testing through the Company's established disease efficacy
models.

Over the next few months, the Company expects to identify a number of emerging
lead candidates with activity and efficacy relevant to our targeted disease
areas. It is expected that these leads, the Company's discovery programme and
our high resolution gene expression platform will form part of a partnership
collaboration to identify and develop protein therapeutics targeting cancer stem
cells.

There are risks associated with our therapeutic discovery programme, primarily
in relation to an extended timescale for the identification of robust protein
therapeutic activities. To mitigate these risks, the Company has undertaken to
identify and develop the 250 proteins via a number of routes to maximise the
probability of its success. It will also seek to minimise any development
timescale exposure by identifying complementary pharmaceutical or biotechnology
partners to co-develop its protein regulators and other elements of its novel
therapeutic programme.

Epistem's protein therapeutic discovery strategy is to develop its protein leads
to late stage preclinical validation and then license and/or co-develop these
novel therapeutics with its pharmaceutical and biotechnology partner companies.

During 2007, the Company entered its first out-licencing agreement, including
milestone payments, for a small molecule in the area of GI and oncology
supportive care.

Intellectual Property

Traditionally, Epistem has provided its know-how and expertise on a
fee-for-service basis.

The biomarker technology is proprietary to the Company and any intellectual
property emerging in relation to this technology will be secured, as
appropriate, by the Company. Provision for control over biomarker intellectual
property arising out of biomarker commercial contracts will also be secured by
the Company.

With a pipeline of novel proteins now emerging, the Company will also secure its
valuable intellectual property rights in relation to these proteins as they
advance through development on a case-by-case basis. The company's protection of
normal mucosal tissues patent in relation to its first out-licence is currently
undergoing patent examination.

Outlook

Epistem is developing its technology, lead therapies and contract services
whilst rapidly growing its revenues and expertise.  This requires a careful
management approach, good communication and a close relationship with our
investor base.  We have a globally recognised and experienced management team
with strengthening commercial expertise. We are confident that the year ahead
will see a substantial increase in our forecast revenues, supported by our
Contract Research Services and Biomarker growth alongside our Novel Therapies'
emerging lead candidates.

The Company will also consider other complementary technology acquisitions and
in-licensing where appropriate to underpin its growth ambitions.

Finally, I would like to thank the Board, management and employees for their
continued commitment in building the success of Epistem, as well as both our
established and new investors for their continued close support of our exciting
company. It has been my privilege to join the board of Epistem and it is our
ambition to significantly build shareholder value by providing the next
generation of cancer and GI therapies, by exploiting our know-how and expertise
in epithelial stem cells.

Matthew H Walls
Chief Executive Officer


Consolidated Income Account
For the year ended 30 June 2007
                                                                                     2007             2006
                                                                                     £000             £000

Revenue                                                                             1,357              901

Contract research costs                                                           (1,112)            (711)
Discovery and development costs                                                   (1,034)            (823)
General administrative costs                                                        (452)            (410)

Operating loss                                                                    (1,241)          (1,043)

Interest receivable                                                                    49               50
Interest payable and similar charges                                                  (5)              (5)

Loss on ordinary activities before taxation                                       (1,197)            (998)

Tax credit on loss on ordinary activities                                           (160)            (130)

Loss for the financial year                                                       (1,037)            (868)

Earnings per share (pence)                                                          (22)p            (22)p



Consolidated Balance Sheet
As at 30 June 2007

                                                               2007          2007       2006         2006
                                                               £000          £000       £000         £000
Non-current Assets
Intangible assets                                                              59                      63
Plant and equipment                                                           368                     292
                                                                              427                     355

Current Assets
Trade and other receivables                                     357                      323
Tax receivables                                                 160                      131
Cash and cash equivalents                                     2,395                      681
                                                              2,912                    1,135

Liabilities
Current Liabilities
Trade and other payables                                        395                      214
Obligations under finance leases                                 81                       63
Bank overdrafts and loans                                       129                        5

Net current assets                                                          2,307                     853

Total assets less current liabilities                                       2,734                   1,208

Non-current liabilities
Obligations under finance leases                                            (137)                   (113)

Net Assets                                                                  2,597                   1,095

Capital and reserves
Called-up equity share capital                                                 98                       -
Share premium account                                                       7,402                   2,532
Share options reserve                                                         453                     399
Reverse acquisition reserve                                               (2,484)                       -
Profit and loss account                                                   (2,872)                 (1,836)

Total shareholders' equity                                                  2,597                   1,095



Consolidated Statement of Cash Flows
For the year ended 30 June 2007


                                                           2007         2007      2006         2006
                                                           £000         £000      £000         £000
Cash flows from operating activities
Loss for the year                                                    (1,241)                (1,043)
Depreciation, amortisation and impairment                                109                     74
Share based payment expense                                               55                    242
Operating profit before changes in working capital                   (1,077)                  (727)
and provisions
(Increase)/decrease in trade and other receivables                      (34)                      7
Increase/(Decrease) in trade and other payables                          181                  (155)
Net cash outflow from operations                                       (930)                  (875)
Interest paid                                               (5)                    (5)
Interest received                                            49                     50
Tax received                                                131                      7
                                                                         175                     52
Net cash (outflow) from operating activities                           (755)                  (823)

Cash flow from investing activities
Acquisition of fixed assets, net of lease                  (63)                   (82)
financing
Net cash (outflow) from investing activities                            (63)                   (82)

Cash flows from financing activities
Proceeds from issue of share capital                      3,091                    119
Expenses of share issue                                   (608)                   (33)
Repayment of borrowings                                    (75)                   (23)
Net cash inflow from financing activities                              2,408                     63

Net increase/(decrease) in cash equivalents                            1,590                  (841)
Cash and cash equivalents at beginning of period                         676                  1,517
Cash and cash equivalents at end of period                             2,266                    676

Analysis of Net Funds
Cash at bank and in hand                                               2,394                    681
Bank overdrafts                                                        (128)                    (5)
Net Funds                                                              2,266                    676



Notes to the Preliminary Results to 30 June 2007

1. A Summary of Accounting policies

Basis of accounting

The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of financial instruments and in
accordance with applicable accounting standards.

The consolidated financial statements consolidate those of the Company and its
subsidiary (together referred to as the 'Group').

The consolidated financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards as
adopted by the EU ('Adopted IFRSs').

Basis of consolidation

On 16 March 2007, Epistem Holdings Plc merged with Epistem Limited, and on that
date the shareholders of Epistem Limited exchanged their shares for equivalent
shares in Epistem Holdings Plc. As Epistem Holdings Plc was newly incorporated
at the time of the transaction under the terms of IFRS 3 'Business
Combinations', this transaction has been accounted for as a reverse acquisition,
on the basis that the shareholders of Epistem Limited gained a controlling
interest in the Group. The financial statements therefore represent a
continuation of the financial statements of Epistem Limited.

Impact of IFRS 2 - share based payments

The Group has adopted IFRS 2 from 1 July 2006 whereby the value of share options
based upon fair value at their grant date is calculated. As a result of the
adoption of IFRS 2 the results for the year ended 30 June 2006 have been
restated to reflect the fair value of share options and share warrants issued
but not vested at 1 July 2005.

Revenue recognition

The Company generally invoices and reports as sales, 50% of the value of a new
contract on signature. This policy is designed to recognise that, in negotiating
contracts for new studies, the Company performs specific pre-contract work to
establish the parameters of the study work. When the final report is issued to
the client the remainder of the contract is invoiced and recognised as income,
at that date. In other cases where the contract does not provide for income
recognition on signature, revenue is recognised as the work is invoiced.

Research and development

Research and development expenditure is written off in the year in which it is
incurred.

Amortisation

Amortisation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:

Intellectual property   -     5% straight line basis

Depreciation

Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:

Plant & machinery       -     25% reducing balance
Fixtures & fittings     -     25% reducing balance
Equipment               -     25% reducing balance

Taxation

Current tax is provided at amounts expected to be paid (or recovered) using the
tax rates and laws that have been enacted, or substantially enacted, by the
balance sheet date.

2. Loss per share

The basic loss per share is calculated by dividing the earnings attributable to
ordinary shareholders for the year by the weighted average number of ordinary
shares in issue during the year.

The weighted average number of shares in issue during the year was 4,635,934
(2006: 4,028,883)

For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares. Since the Group is loss-making there is not a dilutive impact.



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