Final Results

Synairgen plc
27 September 2005


27 September 2005
                                 Synairgen plc
              Preliminary Results for the year ended 30 June 2005

Synairgen plc ('Synairgen' or the 'Company'), the drug discovery company focused
on identifying the underlying causes of, and discovering new treatments for,
asthma and chronic obstructive pulmonary disease ('COPD'), today announces its
Preliminary Results for the year ended 30 June 2005.

Financial highlights

 • Successful flotation in October 2004 on the Alternative Investment
   Market which raised £10.0 million for the Company (£9.0 million net of 
   expenses)
 • Turnover was £202k (55 weeks ended 30 June 2004: £82k)
 • Retained loss for the year was £610k (55 weeks ended 30 June 2004:
   loss of £153k)
 • Cash at 30 June 2005 of £8.7 million (30 June 2004: £0.4 million)


Operational highlights

 • Lead proprietary programme (inhaled interferon beta) on track for
   commencement of initial clinical trial in final quarter of 2005
 • Patent applications for growth factor (September 2004) and barrier
   function screening assays (post year-end) filed by University of Southampton 
   and exclusively licensed to Synairgen
 • New collaborations with an undisclosed North American biotechnology
   company and Centocor (part of J&J)
 • Scale-up of Biobank activity

Commenting on the results Simon Shaw, Chairman of Synairgen, said:
'Synairgen's first period as a public company has been successful with an
increase in collaborative partnerships and good progress being made on our
proprietary programmes. We enter the new financial year with the technical and
financial resources both to pursue our current exciting programmes and to
generate new opportunities from our proprietary research engine.'

                                     -Ends-

For further information please call:

Synairgen                                Tel: [phone]
Simon Shaw, Chairman
Richard Marsden, Managing Director

Hogarth Partnership                      Tel: [phone]
Melanie Toyne-Sewell / Charlie Field

CHAIRMAN'S STATEMENT

Overview
This is Synairgen's first set of Preliminary Results following its initial
public offering ('IPO') on the Alternative Investment Market ('AIM') of the
London Stock Exchange on 26 October 2004. The IPO raised £10 million for the
Company (£9.0 million net of expenses) and we are using these funds to enhance
our research capabilities, invest in our proprietary programmes and develop our
Biobank of disease-relevant samples.

Synairgen is a drug discovery company focused on identifying and out-licensing
new pharmaceutical products which address the underlying causes of asthma and
chronic obstructive pulmonary disease ('COPD'). There are a limited number of
therapies currently available to treat the very significant target markets of
severe asthma and COPD. Since asthma and COPD are diseases in which there is a
genetic predisposition, our research focuses on the use of disease-derived human
tissue in complex in vitro models. Thus, unlike traditional animal-based models,
these models enable us to replicate important aspects of the actual human
disease in the laboratory as a basis for research.

We are progressing a portfolio of programmes, some collaboratively, which we
believe will generate intellectual property and offer out-licensing
opportunities. It is our intention to out-license this intellectual property at
an early stage rather than committing significant capital resources to
late-stage clinical trials.

During the year we have made significant progress in developing our lead
proprietary programme for inhaled interferon beta ('IFN-BETA'), which seeks to
protect severe asthmatics from the debilitating attacks and frequent
hospitalisations induced by the common cold virus (rhinovirus). We have also
entered into a number of new collaborations with pharmaceutical and
biotechnology companies.

Based as it is on the world class respiratory research capabilities at the
University of Southampton, Synairgen is not short of opportunities to
collaborate with significant academic institutions and commercial organisations
on interesting research opportunities. During this first period as a public
company with reasonable capital to invest, your Board has created a system of
review which is designed to ensure that Synairgen selects only those
opportunities which have the potential to impact significantly upon the
treatment of our target lung diseases and which will, if successful, create
significant value for shareholders and partners alike.

Revenue for the year ended 30 June 2005 amounted to £202,000 (2004: £82,000) and
the retained loss was £610,000 (2004: loss of £153,000). Our cash outflow before
financing was £704,000 (2004: outflow of £216,000) and we ended the year with
cash balances of £8.7 million.

Board
In October 2004, we welcomed John Ward as Finance Director of Synairgen. He
joined us from Profile Therapeutics plc where he was Chief Financial Officer. We
have also started the process to recruit a new non-executive director to provide
an additional independent view to the Board.

Outlook
Over the next year, we anticipate:

   •completing our first, and commencing the second, safety study on our
    IFN-BETA asthma programme;
   •completing our in vitro evaluation of IFN-BETA for treatment of
    rhinovirus-induced COPD exacerbations; and
   •progressing our ongoing collaborative programmes.

This will be an important year for Synairgen and we enter it with the technical
and financial resources not only to do justice to the existing opportunities we
have created so far, but also to identify new targets out of our proprietary
research engine.

Simon Shaw
Chairman

SCIENTIFIC REVIEW

Asthma and COPD - the current unmet need
In the developed world there are some 80 million asthma sufferers. Over 5
million people in the UK have asthma, which in 10% of cases is severe and not
controlled by standard anti-asthma drugs, such as steroids and BETA2-agonists.
These patients contribute to the majority of the 1,400 deaths due to asthma in
the UK every year and 70,000 hospital admissions. Asthma costs the NHS around
£900 million per year, with severe and unpredictable worsening of the disease
('exacerbations') consuming a large proportion of these costs. The
unpredictability and severity of exacerbations is the major concern of patients
that they liken to 'living on a knife edge'.

Chronic obstructive lung disease (COPD) is another very common lung disorder
linked to chronic exposure to tobacco smoke. The disease passes through several
phases to a state of total incapacitation. As in asthma, approximately 10% of
COPD patients have severe disease. In COPD, this may be progressive and can
account for substantial mortality and morbidity in the winter months. Pressure
on medical beds in the NHS during the winter is largely due to COPD and related
lung disease precipitated by virus infection. Globally, COPD is the fourth most
common cause of death and in the UK is on the increase, especially in women.

For the last three decades the main focus of research into asthma has been upon
the treatment of symptoms rather than underlying causes. This has resulted in a
range of therapies which adequately address mild and moderate asthma. However,
apart from anti-IgE for the allergic component of severe disease, none of the
existing therapies address the unmet needs of the severe asthma patient. In the
case of COPD there have been no significant new developments other than
improvement of existing therapies.

Our approach
I believe that a major part of the reason why there have not been the necessary
drug breakthroughs in asthma and COPD is that small animal models consistently
fail to reproduce the diseases as they occur in humans, especially their
chronicity and exacerbations. In applying tissue engineering to airway cells
obtained from real patients with well characterised asthma or COPD, Synairgen
has been able to develop a whole new way of identifying drug targets and rapidly
evaluating potential therapies in the test tube.

Based on 15 years' research at the University of Southampton and elsewhere, it
has been established that respiratory virus infections are the major cause of
severe worsening of asthma that lead to the hospitalisation of both children and
adults. Of these viruses, the common cold virus (rhinovirus) is detectable in
over 60% of cases. Most people can tolerate cold virus infections with only
upper airway symptoms (such as a runny nose and a sore throat), but in asthma
the situation is very different. Within two to three days of developing a cold,
the virus moves to the chest to cause an exacerbation that is poorly responsive
to steroid treatment and may last up to three or four weeks. This aspect of
asthma represents a real unmet clinical need which is especially apparent at the
severe end of the disease spectrum.

Building on our clinical research, we have shown that the lining cells
(epithelial cells) of asthmatic airways lack the ability to generate
interferon-BETA ('IFN-BETA'), a small protein that is highly effective at
triggering elimination of virally infected cells before the virus can replicate
and spread. This may explain why asthmatics are more susceptible to the effects
of the common cold. The importance of this study has been strengthened by
showing that the addition of IFN-BETA to asthmatic epithelial cells restores
their ability to limit replication of common cold viruses. Additionally we are
investigating early observations that patients with COPD may also have a related
defect in their response to respiratory virus infection and this may lead to a
potential therapy in this disease area.

Having revealed such an important role for IFN-BETA in protecting the lung from
respiratory viruses, we are in an excellent position to move this forward into
clinical trial especially since we have a seamless interface between our basic
and clinical science. Further discoveries are emerging from our disease-related
in vitro cell cultures, including a defect in the lung's natural 'barrier'
function that we are already evaluating with potential 'repair' therapies.
Synairgen is well positioned to develop further these novel discoveries into a
new class of therapeutic for asthma and COPD that increases the airway
epithelial resistance to environmental insults, rather than waiting for
inflammation and symptoms to occur and then trying to reverse them.

For the last ten years the Southampton team has been at the forefront of the
changing approach to research into respiratory disease. Synairgen is leading the
implementation of the new approach which is directly linked to studying the
disease in humans. Synairgen's scientific team, comprising both scientists and
practising chest specialists, fundamentally believes that the future management
tools for chronic lung disease will come out of this novel approach. We have
recorded some early successes which show genuine promise in areas of great unmet
need.

Professor Stephen Holgate
Founder and non-executive director

MANAGING DIRECTOR'S REPORT

With our IPO, the progression of our proprietary programmes, the execution of
four collaborative contracts and the scaling-up of our operations, this has been
a very busy year for the Company. This report outlines the operational and
financial progress we have made during this period.

Proprietary Programmes

   • Interferon Beta ('IFN-BETA')

Synairgen is investigating a novel application of inhaled IFN-BETA to reduce
cold virus-induced asthma exacerbations. This virus is a major trigger for the
worsening of asthma symptoms, with eight out of ten exacerbations in children
and six out of ten in adults being associated with these viral infections.
Currently there are no satisfactory treatments available to address this
significant unmet need.

Since flotation, we are delighted with the progress of our IFN-BETA programme.
Following the patent filing in March last year, describing a novel use for
IFN-BETA in protecting severe asthmatics from exacerbations induced by the
common cold virus, Professor Donna Davies (one of Synairgen's founders) and her
team published data in the Journal of Experimental Medicine in March 2005. A
copy of the paper is available via the Journal of Experimental Medicine website:
http://www.jem.org.

The clinical team has completed the necessary regulatory processes and has
received UK Clinical Trial Authorisation for the initial clinical trial of
IFN-BETA which will commence in the final quarter of 2005. We have selected a
formulation of IFN-BETA suitable for inhalation and an appropriate aerosol
delivery system for these early stage trials. The outcome of this initial trial
will be important as it will dictate the extent of safety studies required ahead
of the proof of concept clinical trial.

In July of this year, we hosted our inaugural advisory panel meeting of world
experts on asthma and rhinovirus as a cause of asthma exacerbations, comprising
Professors Jim Gern (Wisconsin, USA), Sebastian Johnston (London, UK), Peter
Sterk (Leiden, The Netherlands) and Ratko Djukanovic (Southampton, UK). The
panel members will assist us in our IFN-BETA programme, increasing our
understanding of rhinovirus infections in asthma, and it is intended that their
institutions will also participate as trial sites in due course.

The Company is also exploring the use of IFN-BETA for the treatment of COPD, for
which early laboratory data appear very encouraging.

   • Growth Factor

Synairgen believes that severe asthma can be regarded as a chronic 'wound' of
the conducting airways in which there is an increased susceptibility of the
lining of the asthmatic airway (the 'epithelium') to injury and a delayed or
impaired epithelial repair response. In September last year, initial research
was completed and, as a result, the University of Southampton filed a patent
describing a novel growth factor with potential utility to help the asthmatic
lung repair itself and rebuild the barrier that protects the lung from damaging
environmental factors. This has been exclusively licensed to Synairgen. Since
this time, we have identified another growth factor with potential utility and
we are currently advancing our understanding of the way these factors work in
our in vitro models.

   • Barrier Function

Epithelial barrier function has been shown to be lower in asthma. In September
2005, after period-end, we have in-licensed from the University of Southampton a
North American patent which describes an in vitro model assay (test) which can
be used to screen compounds capable of normalising barrier function in asthma.
In the first instance we are using this assay to test the utility of the
aforementioned growth factors.

Collaborations
Synairgen started the year with two collaboration agreements: the first with
Cambridge Antibody Technology Limited ('CAT') and the second with Merck Frosst
Canada & Co. In July 2004, we embarked upon a potentially significant
collaboration agreement with a major unnamed US biotechnology company, and in
March 2005, we announced a new collaboration with Centocor, Inc., part of the
Johnson & Johnson group of companies.

The CAT collaboration is now completed, as scheduled. Work with Merck Frosst
Canada & Co, the major unnamed US biotechnology company and Centocor, Inc.
continues in line with our expectations. Synairgen continues to consider and
pursue potential projects with both existing and new partners. We look forward
to commencing new projects when it is appropriate to do so, given the resource
requirements of our proprietary programmes.

Biobank
In order to recreate features of the asthmatic and COPD lung in the laboratory
for research purposes (as described in the Scientific Review), we have been
building a Biobank comprising samples of tissue, blood and sputum from
volunteers with varying degrees of asthma and COPD, as well as healthy
volunteers to act as experimental controls. The ability of Synairgen to call
upon stocks of samples for experiments is an attractive proposition for
collaborative partnerships and our own proprietary research programmes as it
saves substantial time in the experimental process.

The extent of work on the Biobank - collecting and storing samples and
developing further our in vitro models using disease-derived cells - has
increased significantly, with the recruitment of additional staff and we will
shortly begin to collaborate with further sites in the UK and in continental
Europe to extend the Biobank capability.

Intellectual Property
It is fundamental for the Company to protect its technology platform through the
use of patents. Therefore, we are pleased to report that both our proprietary
programmes' (IFN-BETA and Growth Factor) patents, which are exclusively licensed
from the University of Southampton, have proceeded to the Patent Cooperation
Treaty ('PCT') stage.

In addition, as described above, Synairgen has recently licensed a patent from
the University of Southampton which protects some of the in vitro models used as
screening assays.

Financial Review

Introduction
The financial information comprises the consolidated results of the Company and
Synairgen Research Limited (together the 'Group'), prepared in accordance with
UK Generally Accepted Accounting Principles ('GAAP').

In order to effect the IPO, a technical restructuring was required with the
formation of a new holding company. This group reconstruction has been accounted
for using merger accounting principles and accordingly proforma financial
information has been prepared to show the position as if the Company had been in
existence and the parent of Synairgen Research Limited throughout the current
and prior periods.

The IPO on 26 October 2004 raised £10 million (£9.0 million after expenses)
through the issue of 7,692,308 shares at a placing price of 130p. 400,000 shares
were also placed on behalf of Southampton Asset Management Limited to meet
institutional demand for the shares.

Profit and loss account
Revenue for the year ended 30 June 2005 was £202k (55 weeks ended 30 June 2004:
£82k) and was generated from four contracts. The operating loss for the year was
£908k (2004: loss of £166k), in line with our expectations. Research and
development expenditure increased from £123k to £557k as the Group built its
research and clinical teams up to a total of 10 staff and progressed a wider
portfolio of research projects, including the regulatory preparation for the
IFN-BETA clinical trial programme. The increase in other administrative costs
from £107k to £418k reflects the recruitment of additional senior management
personnel and the scaling-up of the Group's activities, including the ongoing
costs of being a quoted company. Interest receivable increased from £13k to
£298k on account of the flotation funds raised. The Group considers that it is
entitled to claim research and development tax credits in respect of the year
ended 30 June 2005. As this is the Group's first claim, it will be recognised in
the profit and loss account when it has been agreed with HM Revenue & Customs.
The retained loss for the year was £610k (2004: loss of £153k) and the loss per
share was 3.26p (2004: loss of 1.52p).

Balance sheet and cash flow
At 30 June 2005, net assets amounted to £8.8 million (30 June 2004: £0.5
million) including cash and deposit balances of £8.7 million (2004: £0.4
million).

The principal elements of the £8.3 million increase in cash and deposit balances
were:

   •share issues (net of expenses) £8,980k (2004: £623k)
   •operating cash outflow of £840k (2004: £78k outflow);
   •capital expenditure of £60k (2004: £151k); and
   •interest received of £196k (2004: £13k).

Capital expenditure comprised investment of £42k in laboratory and IT equipment
and £18k on patent and licence costs.

Adoption of International Financial Reporting Standards ('IFRS')
The Company is considering the impact of the adoption of IFRS on its financial
reporting, however it is likely that the Company will take advantage of the
exemptions granted to AIM-quoted companies in deferring full adoption until
accounting practice under certain standards has become clearer and custom and
practice amongst smaller quoted companies in respect of the adoption of IFRS has
emerged.

Staff
This year has been one of step change for the Company. We have continued to
develop a strong relationship with the University of Southampton. This has
allowed us to retain our 'lean' philosophy, with our headcount increasing during
the period to 13 staff. I would like to thank all staff for their time and
commitment to Synairgen's exciting programmes and the collective effort shown to
develop our business.

Richard Marsden
Managing Director


Consolidated Profit and Loss Account
for the year ended 30 June 2005

                                                         Proforma    Proforma
                                                             Year    55 weeks
                                                            ended       ended
                                                          30 June     30 June
                                                             2005        2004
                                               Notes         £000        £000

Turnover                                                      202          82
Cost of sales                                                (135)        (18)
                                                          ---------     -------
Gross profit                                                   67          64
                                                          ---------     -------

Administrative expenses
-----------------------                                   ---------     -------
Research and development expenditure                         (557)       (123)
Other                                                        (418)       (107)
-----------------------                                   ---------     -------
                                       Total                 (975)       (230)
                                                          ---------     -------
Operating loss                                               (908)       (166)
Bank interest receivable                                      298          13
                                                          ---------     -------

Loss on ordinary activities before taxation                  (610)       (153)
Tax on loss on ordinary activities                              -           -
                                                          ---------     -------
Loss on ordinary activities after taxation and
retained loss for the year                                   (610)       (153)
                                                          =========     =======

Loss per ordinary share
Basic and diluted loss per share (pence)            3       (3.26)p     (1.52)p
                                                          =========     =======

During the year the Group carried out a corporate restructuring including the
introduction of a new holding company. The profit and loss account has been
prepared using merger accounting and is presented on a proforma basis as if the
new holding company had been in existence throughout both the current and prior
periods. Further information is given in Note 1.

There are no recognised gains and losses other than the loss above and therefore
no separate statement of total recognised gains and losses has been presented.

All amounts relate to continuing activities.


Consolidated Balance Sheet
as at 30 June 2005
                                                                      Proforma
                                                         30 June       30 June
                                                            2005          2004
                                                Notes       £000          £000
Fixed assets
Intangible assets                                             21             4
Tangible assets                                              154           145
                                                         ---------     ---------
                                                             175           149
Current assets
Stocks                                                        55             -
Debtors                                                      325            77
Investments: short-term deposits                           8,605           350
Cash at bank and in hand                                      78            57
                                                         ---------     ---------
                                                           9,063           484
Creditors: amounts falling due within one year              (398)         (163)
                                                         ---------     ---------
Net current assets                                         8,665           321
                                                         ---------     ---------

Total assets less current liabilities                      8,840           470
                                                         =========     =========

Capital and reserves
Called up share capital                                      217           113
Share premium account                                      8,903             -
Merger reserve                                               483           510
Profit and loss account                                     (763)         (153)
                                                         ---------     ---------
Equity shareholders' funds                           4     8,840           470
                                                         =========     =========



Consolidated Cash Flow Statement
for the year ended 30 June 2005
                                                           Proforma   Proforma
                                                               Year   55 weeks
                                                              ended      ended
                                                            30 June    30 June
                                                               2005       2004
                                                   Notes       £000       £000

Net cash outflow from operating activities             5       (840)       (78)

Returns on investments and servicing of finance
Interest received                                               196         13

Capital expenditure and financial investment
Purchase of intangible fixed assets                             (18)        (4)
Purchase of tangible fixed assets                               (42)      (147)
                                                             --------    -------
Net cash outflow from capital expenditure                       (60)      (151)
                                                             --------    -------

Net cash outflow before management of liquid
resources and                                                  (704)      (216)
financing

Management of liquid resources
Increase in short-term deposits                              (8,255)      (350)

Financing
Issues of ordinary share capital                                 77          1
Share premium received on share issues                        9,923        649
Share issue costs                                            (1,020)       (27)
                                                             --------    -------
Cash inflow from financing                                    8,980        623
                                                             --------    -------

Increase in cash                                                 21         57
                                                             ========    =======


Notes

1. Corporate restructuring
Synairgen plc was incorporated on 16 September 2004 and 2 ordinary shares of 1p
each were issued. On 11 October 2004 Synairgen plc acquired the entire issued
share capital of Synairgen Research Limited by issuing 13,999,998 ordinary
shares of 1p each on the basis of issuing 100 shares for each ordinary share of
1p each held in Synairgen Research Limited. The directors have accounted for
this group reconstruction using the merger accounting principles as set out in
Financial Reporting Standard 6. Accordingly proforma financial information has
been prepared to show the position as if Synairgen plc had been in existence and
the parent of Synairgen Research Limited throughout the current and prior
periods. The proforma information has been compiled by taking the results of
Synairgen Research Limited before the restructuring and adjusting for the
capital structure of the new group.

2. Basis of preparation
The financial information on the Group set out above does not constitute
'statutory accounts' within the meaning of section 240 of the Companies Act
1985. The financial information for the year ended 30 June 2005 has been
extracted from the Group's audited consolidated statutory accounts, which will
be delivered to the Registrar of Companies for England and Wales in due course.
The report of the auditors on these accounts was unqualified and did not contain
a statement under Section 237 (2) or (3) of the Companies Act 1985. Comparative
figures are for the 55 weeks ended 30 June 2004 on the basis set out in Note 1.

The annual report will be posted to shareholders in October 2005 and will be
laid before shareholders at the Annual General Meeting on 15 November 2005.

The accounts have been prepared in accordance with UK Generally Accepted
Accounting Principles.

3. Loss per ordinary share
                                                           Year      55 weeks
                                                          ended         ended
                                                        30 June       30 June
                                                           2005          2004

Loss on ordinary activities after taxation (£000)          (610)         (153)
Weighted average number of ordinary shares in issue  18,730,993    10,075,980

The loss attributable to ordinary shareholders and weighted average number of
ordinary shares for the purpose of calculating the diluted earnings per ordinary
share are identical to those used for basic earnings per share. This is because
the exercise of share options would have the effect of reducing the loss per
ordinary share and is therefore not dilutive under the terms of Financial
Reporting Standard 14. The comparative figures are proforma based on the number
of shares that would have been in issue had the capital structure of the new
parent company always been in place.
     
4.   Reconciliation of movements in reserves and shareholders' funds

         Share capital Share premium  Merger reserve Profit and loss Shareholders'
                             account                         account         funds
                  £000          £000            £000            £000          £000

At 10                -             -               -               -             -
June 2003
Issue of
ordinary
shares             113             -             510               -           623
Loss for
the                  -             -               -            (153)         (153)
period            ------       -------          ------        --------    ----------

At 30
June 2004          113             -             510            (153)          470
Issue of
ordinary
shares             104         9,923             (27)              -        10,000
Share
issue                -        (1,020)              -               -        (1,020)
costs
Loss for
the                  -             -               -            (610)         (610)
year              ------       -------          ------        --------    ----------
At 30
June               217         8,903             483            (763)        8,840
2005              ======       =======          ======        ========    ==========

The issue of 140,000 1p ordinary shares by Synairgen Research Limited prior to
its acquisition by Synairgen plc has been restated to reflect the 100 for 1
share for share exchange which was effected in October 2004. In accordance with
the principles of merger accounting the difference between the nominal value of
the shares issued in the share exchange and sum of the amounts standing to the
issued share capital and share premium accounts has been taken to a merger
reserve.

5. Reconciliation of operating loss to net cash outflow from operating
   activities

                                                           Year       55 weeks
                                                          ended          ended
                                                        30 June        30 June
                                                           2005           2004
                                                           £000           £000

Operating loss                                             (908)          (166)
Depreciation & amortisation                                  34              2
Increase in stocks                                          (55)             -
Increase in debtors                                        (146)           (77)
Increase in creditors                                       235            163
                                                        ---------      ---------
Net cash outflow from operating activities                 (840)           (78)
                                                        =========      =========

6. Reconciliation of net cash flow to movement in net funds
                                                               Year   55 weeks
                                                              ended      ended
                                                            30 June    30 June
                                                               2005       2004
                                                               £000       £000

Increase in cash in year                                         21         57
Increase in short-term deposits                               8,255        350
                                                            ---------   --------

Change in net funds resulting from cash flows and movement
in net funds                                                  8,276        407
Net funds at start of year                                      407          -
                                                            ---------   --------
Net funds at end of year                                      8,683        407
                                                            =========   ========





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