20-F 1 g14471e20vf.htm PROTHERICS PLC Protherics PLC
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
     
o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
— OR —
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended March 31, 2008
— OR —
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from                      to                     
— OR —
     
o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                     
Commission File Number: 000-51463
PROTHERICS PLC
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
England and Wales
(Jurisdiction of incorporation or organization)
The Heath Business & Technical Park, Runcorn, Cheshire, WA7 4QX England
(Address of principal executive office)
Mr. Rolf Soderstrom, Group Finance Director,
Protherics PLC, The Heath Business & Technical Park, Runcorn, Cheshire, WA7 4QX, England.
Tel: +44 1928 518000, Fax: +44 1928 518002

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:
     
Title of Each Class   Name of Each Exchange On Which Registered
Ordinary Shares of 2 Pence Each   The NASDAQ Stock Market, LLC
     
American Depositary Shares, as
evidenced by American Depositary
Receipts, each representing ten
(10) Ordinary Shares
   
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock
as of the close of the period covered by this Annual Report:
340,319,609 ordinary shares of 2p each as of March 31, 2008
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:
o Yes     þ No
     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:     o Yes     þ No
      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
þ Yes     o No
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
         
Large accelerated filer o   Accelerated filer þ    Non-accelerated filer o
     Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
         
o     U.S. GAAP   þ     International Financial Reporting Standards as issued
by the International Accounting Standards Board
  o     Other
     If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
     o Item 17     o Item 18
     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o Yes     þ No
 
 

 


 

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 EX-1.1 Articles of Association of Protherics PLC, as amended on July 22, 2008*
 EX-4.14 First Amendment to License Agreement
 EX-4.15 Supply and Distribution Agreement
 EX-4.18 THE PROTHERICS PLC 1996 UNAPPROVED SHARE OPTION SCHEME
 EX-4.26 Protherics PLC 2008
 EX-4.29 EXECUTIVE SERVICE AGREEMEMENT ROLF SODERSTROM
 EX-8.1 List of Subsidiaries
 EX-31.1 Section 302 Certification of the CEO
 EX-31.2 Section 302 Certification of the CFO
 EX-32.1 Section 906 Certification of the CEO and CFO


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CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
     Certain statements contained in this report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, certain statements included herein under “Item 3. Key Information” and “Item 5. Operating and Financial Review and Prospects,” including without limitation, those concerning the Company’s strategy and competitive strengths, the Company’s expectations and plans, the Company’s collaborative revenues, research and development and general and administrative expenses, contain certain forward-looking statements concerning the Company’s operations, performance and financial condition. Such statements may generally, but not always, be identified by their use of words such as “anticipates,” “expects,” or “believes.” Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove in hindsight correct. Many important factors could cause actual results to differ materially from such expectations including, among others, those set forth in “Item 3. Key Information—Risk Factors” and “Item 4. Information on the Company—Government Regulation” (collectively, the “Risk Factors”). All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified by the Risk Factors. Other relevant risks may be detailed from time to time in the Company’s press releases and filings with the Securities and Exchange Commission. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this report.

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GLOSSARY OF SCIENTIFIC AND TECHNICAL TERMS
     The discussion herein regarding the Company’s product candidates and technologies includes certain scientific and technical terms and abbreviations. These terms include:
     
adjuvant
  a pharmacological agent added to a drug to increase or aid its effect
 
   
angiotensin
  the term used to describe a family of peptide hormones that are involved in the control of blood pressure and body fluid levels
 
   
antibody
  substance produced by cells of the immune system which bind to parts of other substances in a highly specific way to neutralize their effect
 
   
antiserum(a)
  serum from an animal which has been injected with an immunogen
 
   
assay
  a quantitative or qualitative process used to measure or detect a particular substance
 
   
ATV
  angiotensin therapeutic vaccine
 
   
B-cell
  A type of lymphocyte (white blood cell)
 
   
B-Cell Chronic Lymphocytic Leukemia or (B-CLL)
  A type of cancer in which B-cells over-accumulate
 
   
BLA
  U.S. Biological License Application
 
   
bovine spongiform encephalopathy
  the abnormal prion protein disease of the brain in cattle
 
   
CHMP
  European Committee for Medicinal Products for Human Use
 
   
clinical development
  the stage of pharmaceutical research and development in which potential drugs are studied in human clinical trials (or in the target species for animal health drugs)
 
   
CMSs
  the Concerned Member States, nominated by the applicant, to whom the approval decision for marketing approval is circulated by the RMS under the MRP
 
   
CP
  the centralized procedure for registering pharmaceutical products in order to obtain marketing authorization, for which there is a single application, evaluation and authorization within the E.U.
 
   
cytokine
  a cellular messenger, typically of the immune system
 
   
cytotoxic
  a molecule or drug that is toxic to cells
 
   
diagnostic test
  an assay used for the diagnosis of disease typically carried out on body fluids or tissues
 
   
Digoxin
  a widely prescribed drug for the treatment of cardiac conditions
 
   
Digoxin Immune Fab
  a polyclonal antibody fragment for the treatment of digoxin toxicity or overdose

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DP
  the decentralized procedure method of registering pharmaceutical products in order to obtain marketing authorization, intended for products that have not yet received authorization in any E.U. country
 
   
EMEA
  European Medicines Evaluation Agency, formerly the European Agency for the Evaluation of Medicinal Products
 
   
encephalopathies
  diseases of the brain which interfere with its normal functioning
 
   
enzymes
  proteins that promote changes in other molecules (e.g., in other proteins, sugars or fatty substances)
 
   
epitope
  the part or parts of the target molecule which react with an antibody
 
   
fab fragment
  the fragment produced by cleavage of an antibody with a proteolytic enzyme that binds to the antibody target molecule (antigen)
 
   
FDA
  U.S. Food and Drug Administration
 
   
fragment
  part of an antibody molecule which can be split from the whole molecule and which still retains biological activity
 
   
glioblastoma multiforme (“GBM”)
  the most common malignant primary brain tumor
 
   
good manufacturing practice or GMP
  measures needed to ensure that drug substance will be consistently produced and controlled to appropriate quality standards as required by any marketing authorisation
 
   
high blood pressure or hypertension
  blood pressure that is above medically defined limits and which is associated with increased risks of stroke and heart disease
 
   
immune system
  the cells and structures in the body that are capable of producing antibodies and other components of the immune response
 
   
immunogen
  any substance which can elicit the formation of specific antibodies
 
   
immunotherapeutics
  medicines that act on or through the immune system (e.g., vaccines)
 
   
in vitro
  experimental biological processes made to occur in isolation from the whole organism
 
   
MAA
  Marketing Authorisation Application
 
   
MHRA
  Medicines and Healthcare Products Regulatory Agency
 
   
MRP
  the mutual recognition procedure for registering pharmaceutical products in order to obtain marketing authorization, which involves submission of a marketing authorization application to one national regulatory authority, with secondary approval from other E.U. member states subsequent to the approval of the first application
 
   
named patient basis
  this refers to a form of limited regulatory approval for certain drugs used in the treatment of human injuries or conditions for which no satisfactory therapies exist, or for which other drugs are unavailable, cause adverse effects or are in short supply
 
   
NCI
  National Cancer Institute

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NICE
  National Institute for Clinical Effectiveness
 
   
oncology
  the study of cancer
 
   
orphan drug status
  status granted by the FDA which provides certain development, registration and marketing incentives, for development of treatments of small (fewer than 200,000 per annum in the United States) incidence conditions
 
   
PCT
  Patent Cooperation Treaty (Washington, 1970), as amended, and the regulations and administrative instructions thereunder
 
   
phase 1 clinical study/trial
  the initial clinical assessment of the safety of a biologically active substance or assessment of the safety and pharmacokinetics of a drug candidate in human subjects
 
   
phase 1/2 clinical study/trial
  a phase 1 clinical study conducted in patients
 
   
phase 2 clinical study/trial
  the assessment in patients of a drug to determine dose range and preliminary efficacy. A phase 2a study is to examine the pharmacological effect of the drug and a phase 2b is to evaluate the appropriate dose for phase 3
 
   
phase 3 clinical study/trial
  the assessment of the efficacy and safety of a drug, usually in comparison with a marketed product or a placebo, in the patient population for which it is intended
 
   
polyclonal antibody
  a population of antibodies directed to multiple epitopes on the target molecule
 
   
pre-clinical development
  the research and development stage immediately prior to clinical trials, which usually lasts 12-18 months
 
   
pre-eclampsia
  hypertension which arises in pregnancy in association with significant protein in the urine and can lead to seizures and death
 
   
prion protein
  the protein that assumes an abnormal structure in bovine spongiform encephalopathy and related diseases and which is believed to be capable of transmitting bovine spongiform encephalopathy and related diseases
 
   
prodrug
  an inert chemical which can be activated within the body to an active drug
 
   
proof of concept and optimization studies
  studies in animals to demonstrate the (expected) action of the drug and to define the most effective form of the drug
 
   
purification of polyclonal antibodies
  the process of removal of extraneous foreign proteins, viruses and other biological materials associated with manufacturing of product
 
   
®
  means a trademark has been registered in the United States Patent and Trademark Office
 
   
RMS
  the Reference Member State to whom the initial application for marketing authorization is submitted under the MRP
 
   
scrapie
  a fatal, degenerative disease that affects the nervous systems of sheep and goats.

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sepsis
  the name given to a spectrum of disorders caused by the body’s exaggerated response to infection or injury. The defining characteristics are inflammation, abnormal vital signs and failure of one or more major organ systems. The condition may progress to multiple organ failure
 
   
serum
  the component of blood excluding the red and white blood cells and fibrinogen
 
   
specificity
  the degree to which an antibody binds to antigens other than that to which it is primarily directed
 
   
therapeutic
  pharmaceutical product targeted to treat a specific disease
 
   
  means that a trademark is being registered or an application for a trademark is being made in one or more countries
 
   
TNFa
  tumor necrosis factor alpha, a cytokine, involved in the body’s inflammatory process
 
   
transmissible spongiform encephalopathy
  a degenerative condition of the nervous system believed to be caused by the accumulation of an abnormal form of the prion protein
 
   
vaccine
  a formulation used to stimulate an immune response

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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
     Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
     Not applicable.
ITEM 3. KEY INFORMATION
Selected Financial Data
     The 2008, 2007, 2006 and 2005 selected consolidated financial data presented below is in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and International Financial Reporting Standards as adopted by the European Union (collectively and subsequently referred to throughout this document as “IFRS”) and has been derived from our audited consolidated financial statements, including the related Notes, included in “Item 17. Financial Statements” of this report.
IFRS Financial Record
                                 
    Year ended March 31,  
    2008     2007     2006     2005  
    £’000     £’000     £’000     £’000  
Consolidated Income Statement Information:
                               
Revenue
    26,067       31,119       17,709       18,839  
Operating (loss)
    (19,218 )     (4,354 )     (9,533 )     (1,658 )
Net (loss)
    (16,742 )     (3,357 )     (9,488 )     (1,781 )
Net (loss) per ordinary share (basic and fully diluted)
    (4.9p )     (1.2p )     (3.8p )     (0.8p )
Net (loss) per ADS(1) (basic and fully diluted)
    (49.3p )     (11.8p )     (38.4p )     (7.9p )
 
                               
Consolidated Balance Sheet Data:
                               
Total assets (fixed assets plus current assets)
    94,816       107,265       60,136       41,352  
Net assets
    61,552       76,471       26,352       25,969  
Non-current liabilities
    12,494       15,390       16,988       5,896  
Total equity
    61,552       76,471       26,352       25,969  
Number of equity shares outstanding (in thousands of shares)
    340,320       339,129       259,287       242,204  
IAS 32 and IAS 39 were adopted on April 1, 2005.
 
(1)   Each American Depositary Share represents ten ordinary shares.
     No dividends have been paid by the Company in the periods illustrated above.
Currencies And Exchange Rates
     The Company publishes its consolidated financial statements in sterling. In this Annual Report, references to “sterling” or “£” are to U.K. currency and references to “U.S. dollars” or “$” are to U.S. currency. Solely for informational purposes, this Annual Report contains translations of certain sterling amounts into or from U.S. dollars at a specified rate. These translations should not be construed as representations that the sterling amounts actually represent such U.S. dollar amounts or could be converted into or from U.S. dollars at the rate indicated or at any other rate. Unless otherwise stated

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herein, the translations of sterling into or from U.S. dollars have been made at £1.00 to $1.9855, the Noon Buying Rate on March 31, 2008.
     The following tables set forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate for sterling expressed in U.S. dollars per £1.00. The period average data set forth below is the average of the Noon Buying Rate on the last day of each full month during the period. On June 30, 2008, the Noon Buying Rate was £1.00 to $1.9906.
                 
2008 Month Ended   High   Low
January 31
  $ 1.9895     $ 1.9515  
February 29
    1.9923       1.9405  
March 31
    2.0311       1.9823  
April 30
    1.9994       1.9627  
May 31
    1.9818       1.9451  
June 30
    1.9938       1.9467  
         
Year ended March 31,   Average
2004
  $ 1.6926  
2005
    1.8459  
2006
    1.7863  
2007
    1.8932  
2008
    2.0079  
Risk Factors
     In addition to the other information contained in this Annual Report, the following factors should be carefully considered in evaluating the Company and its business. If any of the following risks actually occur, the Company’s business, financial condition or results of future operations could be materially adversely affected. The information contained in the following risk factors concerning the Company’s financial results of operations is based on and assumes presentation in accordance with IFRS for the years ended March 31, 2008, 2007 and 2006.
Our revenues are largely dependent on sales of CroFab® and DigiFab® and payments received under third party collaboration agreements may vary from year to year.
     Sales of CroFab® and DigiFab® accounted for 87% of our total product sales and 79% of our total revenues in fiscal year 2008. Our revenues will continue to be largely dependent on sales of CroFab® and DigiFab®. Any unexpected negative development with respect to such products (for example, manufacturing or supply delays, sudden loss of inventory, an unexpected safety or efficacy concern or competition from more effective or less costly new alternative therapies) that affects sales of CroFab® or DigiFab® would have a material adverse effect on our financial condition and results of operations.
     Much of the potential revenue from our existing and future collaborations will consist of contingent payments, such as payments for achieving development milestones and royalties payable on sales of products developed using our technologies or capabilities. The milestone and royalty revenues that we may receive under these collaborations will depend on the parties’ ability to successfully develop, market and sell new products. Milestone payments under our collaboration agreement with AstraZeneca relating to CytoFab® accounted for a significant portion of our cash receipts for fiscal years 2006 and 2008, and we anticipate that AstraZeneca milestone payments will provide significant revenues in future years. Milestone payments may not be payable under the licensing agreement in each fiscal year, however, if at all. The timing and amount of future milestone payments are dictated by the AstraZeneca licensing agreement and are subject to the ability of AstraZeneca and the Company to achieve certain development targets, regulatory goals and other objectives set forth in the agreement or to modifications to the development plan or the agreement as may be mutually agreed by Protherics and AstraZeneca.

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If the Company is unable to generate sufficient revenues from operations, it will require additional financing. This financing may not be available at all or, if available, may be on terms that dilute shareholders’ interests.
     The Company will require significant revenue from product sales, collaborative and licensing arrangements and strategic alliances to fund its ongoing operations. If the Company is unsuccessful in generating this revenue or this revenue is insufficient to fund proposed projects, then the Company will require additional financing. Additional financing may not be available to the Company on favorable terms or at all. If the Company has insufficient funds or is unable to raise additional funds, it may be required to delay, reduce or cease certain of its programs and may be unable to continue its operations at its current level, if at all.
     Future financings may result in the substantial dilution of shareholders’ interests and may result in future investors being granted rights superior to those of existing shareholders. For a discussion of the Company’s liquidity, see “Item 5. Operating and Financial Review and Prospects.”
If the Company fails to obtain adequate intellectual property rights for its products and product candidates, competitors may be able to take advantage of the Company’s research and development efforts. The Company may also be subject to claims of intellectual property infringement by third parties.
     The Company’s success will depend, in large part, on its ability to obtain and maintain patent or other proprietary protection for its technologies, products and processes. If the Company is not able to obtain patent protection for certain of its products or to secure patents that are sufficiently broad in their scope, competitors may be able to take advantage of the Company’s research and development efforts. Legal standards relating to the validity of patents covering pharmaceutical or biotechnological inventions and the scope of claims made under such patents are still developing. There is no consistent policy regarding the breadth of claims allowed in biotechnology patents. The patent position of a biotechnology company is highly uncertain and involves complex legal and factual questions.
     There can be no assurance that competitors will not develop substantially equivalent techniques or otherwise gain access to the Company’s technologies. The Company may have to initiate litigation to enforce its patent and license rights. If the Company’s competitors file patent applications that claim technology also claimed by it, the Company may have to participate in interference or opposition proceedings to determine the priority of invention. An adverse outcome could subject the Company to significant liabilities to third parties and require it to cease using technology owned by, or to license disputed rights from, third parties.
     The Company’s success also depends on its ability to operate without infringing the proprietary rights of third parties with respect to products that facilitate the Company’s ability to develop and exploit its own products. If infringement occurs, the Company may have to develop an alternative technology or reach an agreement for the license of the necessary rights from the third party. Should this be necessary, the Company cannot assure that it can obtain or develop those technologies or obtain those licenses, and as a result, may be unable to develop and market its product candidate.
     The cost to the Company of any litigation or proceeding relating to intellectual property rights, even if resolved in the Company’s favor, could be substantial. Some of the Company’s competitors may be able to sustain the costs of litigation more effectively than the Company because of their substantially greater resources.
Products in the Company’s development pipeline may fail to generate sufficient revenues to fund operations.
     The Company’s product launches have not generated sufficient revenues to cover all of the Company’s costs and may not do so in the future. In addition to the products launched, the Company has a variety of product candidates in various stages of development and will need to undertake substantial

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additional research and development and pre-clinical and clinical testing of the Company’s product candidates. These efforts may not result in the development of any further commercially successful products, in which case the Company may not be able to generate sufficient revenues to fund operations as currently budgeted, or may be required to scale back operations or specific projects.
     The Company may fail to successfully develop a product candidate for many reasons, including:
    a product candidate fails in pre-clinical studies;
 
    a potential product is not shown to be safe and effective in clinical trials;
 
    the Company fails to obtain regulatory approval for the product;
 
    the Company fails to produce a product in commercial quantities at an acceptable cost; or
 
    a product does not gain market acceptance.
Exchange rate fluctuations may adversely affect the Company’s results of operations and financial position.
     Approximately 82% of the Company’s revenues for the year ended March 31, 2008 were derived from U.S. customers and are denominated in U.S. dollars, although this proportion has been substantially higher in previous years. Since the majority of the Company’s expenses are denominated in British pounds sterling and Australian dollars, the results of operations and financial condition, as reported in pounds sterling, will be affected by fluctuations in exchange rates.
     The Company enters into hedging agreements to protect against currency exchange risk. However, this policy may not in all cases be able to manage all the currency transaction risks, particularly given the volatility of exchange rates and the continued weakness of the U.S. dollar.
The Company has a history of operating losses and may not be profitable on a sustainable basis.
     For the fiscal years ended March 31, 2008, 2007 and 2006, the Company had IFRS losses for the year of £16,742,000, £3,357,000 and £9,488,000, respectively. The underlying losses resulted principally from costs associated with the manufacture of pharmaceutical products, and the research, development and clinical testing activities of product candidates. Profitability will depend on the Company’s ability to generate sufficient revenues from existing product sales, product candidates that are currently under development and entering into new partnerships for the licensing of its product candidates, while maintaining existing partnerships. In future years, the Company anticipates increasing its expenditures relating to the establishment of a sales force, fulfilling its obligations to AstraZeneca with respect to its CytoFab® program, other manufacturing based projects, and increasing levels of research and development expenditure on its other products. See “Item 5. Operating and Financial Review and Prospects — C. Research and Development, Patents and Licenses, etc.”
If the Company is unable to maintain existing or enter into new collaborative arrangements, its ability to develop and market product candidates will suffer and it may be unable to sustain its business.
     One of the Company’s primary focuses is on the research and development of new pharmaceutical products, and, therefore, it will be dependent on its existing alliances and new alliances with third parties to provide development, manufacturing, marketing and sales capabilities. The Company’s ability to obtain new agreements will depend, in part, on the success of its clinical trials. Collaborators and licensees have significant discretion over the resources they devote to these efforts. The Company’s success, therefore, will depend on whether these third parties perform their

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responsibilities and devote sufficient resources to collaborations with the Company. The Company cannot guarantee that:
    it will be able to establish additional collaborative arrangements or license agreements;
 
    any collaborative arrangement or agreement will be on favorable terms;
 
    any existing or future collaborative arrangement or agreement will result in a successful product and/or generate sufficient revenue; or
 
    the Company’s collaborative partners will satisfactorily perform their obligations under the collaborative arrangements.
     In addition, there can be no assurance that the Company’s current or potential collaborators and licensees will not pursue alternative technologies either on their own or in collaboration with others, including the Company’s competitors.
If the livestock from which the Company obtains antisera or the reptiles from which the Company obtains venom develop diseases, the Company may be unable to meet its current or future production requirements.
     The Company currently supplies all of the antisera required for the production of its polyclonal antibody products from its own flocks of sheep in South Australia. The Company takes stringent precautions to minimize the risk of animal diseases, including scrapie and other blood-borne pathogens, which could affect its sheep or the safety of its products. All of the sheep used by the Company to produce its antisera are located in Australia, where the office of the Australian Chief Veterinary Officer has acknowledged Australian flocks to be free from scrapie and certain other transmissible diseases. However, in the event animal diseases affect the Company’s flocks, the Company may be unable to produce the antisera necessary to manufacture its antibody products.
     The Company currently sources, in part, two of the four venoms used in the production of its treatment for rattlesnake bites (CroFab®) from specimens in captive colonies maintained by third parties in Kentucky and Florida in the United States. The fourth venom is obtained from the Company’s own captive colony in Utah. The Company takes stringent precautions by quarantine, by testing and by veterinary clinical care to maintain captive specimens free of reptile diseases as certified by consulting veterinarians. However, reptile diseases could adversely affect captive specimens and the ability to obtain timely supplies of venom.
If the Company is not able to obtain adequate quantities of raw materials from its existing suppliers or services from external contractors, the Company may not be able to access alternative sources of supply or services within a reasonable amount of time or at commercially reasonable rates.
     The Company requires supplies of certain raw materials, such as crotalid snake venom, digoxin and TNFa, for use in the development and manufacture of its products and product candidates. Disruptions in supplies, including delays due to the inability of the Company’s suppliers, or the Company, to procure raw materials would have a material adverse effect on the Company’s business. The Company also relies on third party contractors to provide critical services such as the filling and freeze-drying of product into vials. Problems at contractors’ facilities in the past have caused delays and disruptions in supplies of the Company’s marketed products and there can be no assurance the Company will not experience similar delays in the future.
     Regulatory requirements for pharmaceutical products tend to make the substitution of suppliers and contractors costly and time-consuming. The unavailability of adequate commercial quantities, the inability to develop alternative sources, a reduction or interruption in supply of contracted services, or a

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significant increase in the price of materials or services could have a material adverse effect on the Company’s ability to manufacture and market its products or to fill orders from its distributors, which in turn would have an adverse impact on the Company’s cash flows.
If the Company is unable to comply with stringent regulatory quality controls, there may be delays in the production and manufacture of the Company’s products.
     Production of the Company’s products involves a highly complex manufacturing process. The Company, in conjunction with the U.S. Food and Drug Administration (“FDA”) and other regulatory authorities, such as the European Medicines Evaluation Agency (“EMEA”) or the Medicines and Healthcare Products Regulatory Agency (“MHRA”), applies very stringent quality controls to this manufacturing process. If any step in the production and manufacturing process fails the quality control tests, there could be delays in sales of the Company’s products, resulting in a material adverse effect on the Company’s business.
Regulation by government agencies imposes significant costs and restrictions on the Company’s business activities.
     The production and sale of pharmaceutical products is highly regulated. The Company’s ability and the ability of its partners to secure regulatory approval for the Company’s products and to continue to satisfy regulatory requirements will determine its future success. The Company may not receive required regulatory approvals for its products or receive approvals in a timely manner. In particular, the FDA and comparable agencies in foreign countries, including the EMEA and the MHRA in the U.K., must approve human immunotherapeutic and preventive products before they are marketed. This approval process typically involves lengthy and detailed laboratory and clinical testing, sampling activities and other costly and time-consuming procedures. While the time required to obtain approval varies, it can take several years. During the approval process, regulators may require the submission of additional information or data, which could necessitate further clinical testing or analysis, or changes to the manufacturing process or facilities, all of which could make the approval process lengthier and more costly than initially estimated, or even result in abandonment of an application for approval. Delays in obtaining or the failure to obtain regulatory approvals or the restriction, suspension or revocation of regulatory approvals could adversely affect the marketing of products and the Company’s ability to receive product revenues or royalties. The Company cannot guarantee that it will be able to obtain the necessary marketing approvals for any products that it may develop.
     The Company is currently seeking marketing approval from the FDA and the EMEA for its Voraxaze® product. Applications were submitted to both agencies and subsequently withdrawn following requests for additional manufacturing data and data regarding the interaction of Voraxaze® with leucovorin. The Company is currently undertaking the work necessary to generate the additional data needed prior to resubmitting its application to the FDA as a rolling submission, starting in the second half of 2008. Following feedback from the EMEA, the Company is investigating the availability of a suitable non-clinical model to support the benefit of Voraxaze® in order that extra data can be generated to support the resubmission of the MAA in Europe. If either the FDA or EMEA does not accept the Company’s resubmitted applications, the Company could be required to conduct further clinical trials or modify its manufacturing processes, which could significantly delay marketing approvals for the product and require substantial additional expense which the Company may not be able to finance easily, if at all. See “Item 4. Information on the Company — Products.”
     The Company is also subject to ongoing regulatory review. Discovery of previously unknown problems with a product, manufacturer or facility or other violations of regulatory requirements may result in suspensions of regulatory approvals, product recalls, fines and criminal prosecution. For further discussion of regulations and potential penalties, see “Item 4. Information on the Company—Government Regulation.”

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Announcements, developments and/or regulatory changes in the biotechnology sector may cause the Company’s share price to fluctuate.
     The market price of the Company’s ordinary shares may be affected by announcements from or about other companies in the biotechnology sector. Factors that could cause the Company’s stock price to fluctuate in the future may include:
    announcements by other biotechnology companies of clinical trial results and other product developments;
 
    adverse developments in the protection of intellectual property or other legal matters;
 
    announcements in the scientific and research community;
 
    changes in treatment recommendations or guidelines by private health organizations or science foundations;
 
    regulatory changes that affect the Company’s products; and
 
    changes in third-party reimbursement policies or in medical practices.
     Bills are currently pending in both houses of the United States Congress to provide for a regulatory pathway for FDA approval of so-called “follow-on biologics.” Follow-on biologics refer to alternative formulations of innovator biologic drugs. Proponents of the legislation argue that these alternative drugs will promote cost-savings and more choices for patients (similar to the use of generic versions of small-molecule drugs today). Biotechnology companies caution that any such legislation must include measures to ensure patient safety and demonstrated effectiveness, and must instruct the FDA to issue guidance for labeling and interchangeability of products. If new legislation is ultimately adopted authorizing the FDA to approve follow-on biologics, innovator biotechnology companies such as the Company could face increased competition from lower cost products targeted to similar health indications and patient populations as the innovator’s products.
The Company’s competitors may have greater resources for developing product, and, as a result, may be able to develop products that are superior to, or less costly to manufacture than, the Company’s products or product candidates or launch competing products before it does.
     The pharmaceutical industry is highly competitive. The Company competes with pharmaceutical companies in the United States, the United Kingdom, Europe and elsewhere for both its existing products and those currently under development. Many of these companies have research, development, marketing, financial and personnel resources greater than the Company’s. Competitors may develop and receive regulatory approval for a marketable product before the Company does. Competitors may also develop a product that is more effective or less costly to manufacture than the Company’s products or product candidates, rendering the Company’s products or product candidates obsolete. The Company anticipates that it will face increased competition in the future as new companies enter its markets and alternative drugs and technologies become available.
Third-party reimbursement and health care cost containment initiatives may constrain the Company’s future revenues.
     The Company’s ability to market successfully any product it may develop will depend in part on the level of reimbursement that government health administration authorities, private health coverage insurers and other organizations provide for the cost of the Company’s products and related treatments. The Company may not be able to sell the Company’s products profitably if reimbursement is unavailable or limited in scope. Increasingly, third-party payers, including governmental agencies, are attempting to

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contain health care costs in ways that are likely to impact the Company’s development of products, including:
    challenging the prices charged for health care products;
 
    limiting both coverage and the amount of reimbursement for new therapeutic products;
 
    denying or limiting coverage for products that are approved by the regulatory agencies but are considered experimental or investigational by third-party payors; and
 
    refusing to provide coverage when an approved product is used in a way that has not received regulatory marketing approval.
The Company faces product liability and other operational risks and may not be able to obtain adequate insurance.
     The testing, marketing and sale of the Company’s products involve significant product liability risks. The Company may be held liable for damages for product failures or adverse reactions resulting from the use of the Company’s products. Although the Company maintains product liability coverage, this insurance may not provide adequate coverage against all product liability claims. Furthermore, in the future, the Company may not be able to obtain insurance on acceptable terms against product liability and other operational risks such as property damage and business interruption, and any insurance the Company does obtain may not provide adequate coverage against any asserted claims or other losses.
ITEM 4. INFORMATION ON THE COMPANY
History and Development of the Company
     Protherics PLC (the “Company”), a company incorporated under the laws of England and Wales, is a biopharmaceutical company engaged in the development, manufacture and sale of pharmaceutical products largely for the treatment of human diseases. The Company is the result of the September 1999 merger of Proteus International PLC and Therapeutic Antibodies Inc. Therapeutic Antibodies Inc. was incorporated in Delaware in 1984 with its headquarters in Nashville, Tennessee. Proteus International PLC was originally founded in 1987 and was incorporated in England and Wales under the Companies Act 1985 on January 12, 1990. The Company’s ordinary shares are listed on the London Stock Exchange (LSE:PTI.L) and its American Depositary Shares are listed on the NASDAQ Stock Market (NASDAQ:PTIL).
     In June 2003, the Company acquired Enact Pharma PLC, which provided the Company with both a potential high margin late stage product and earlier stage research projects. Several of the non-core research projects were subsequently out-licensed.
     In January 2007, the Company acquired MacroMed, Inc., a Utah corporation based in Salt Lake City, Utah, in order to access its lead product candidate OncoGel® which was undertaking clinical trials and studies in the treatment of esophageal cancer and pre-clinical studies in the treatment of brain cancer.
     The Company’s registered office is The Heath Business & Technical Park, Runcorn, Cheshire, WA7 4QX England. Its telephone number is 011-44-1928-518-000. The Company’s address in the U.S. is 5214 Maryland Way, Suite 405, Brentwood, Tennessee 37027. Its U.S. telephone number is (615) 327-1027.
Business Overview
     The Company’s core technology is focused on immunotherapeutics and oncology. Immunotherapeutics encompasses the use of antibodies to combat the effects of disease or poisoning.

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This can be done either actively through vaccines or passively by administration of pre-formed antibodies.
     Therapeutic vaccines are an example of active immunotherapy. Unlike traditional vaccines, which stimulate the body’s immune system to produce antibodies against a potential external infection, therapeutic vaccines involve immunizing a patient so as to cause the immune system to produce antibodies against an internal disease-causing substance, thereby treating the patient’s existing condition. In comparison to other therapeutic approaches, this potentially has significant benefits, such as specificity of action, avoidance of side effects and long duration of action between booster doses.
     Passive immunotherapeutics include the immediate use of previously produced antibodies in the treatment of acute-poisoning situations, such as envenomation or drug overdose. There are two general classes of antibodies for use as immunotherapeutic agents. The first is polyclonal antibodies, which contain a variety of antibodies directed to different sites, known as epitopes, on the target molecule. The second type, monoclonal antibodies, consists of a population of identical antibodies all directed to a single epitope. Protherics’ technology is based on the former, which may have advantages over monoclonal antibodies in acute-poisoning situations.
     The acquisition of Enact Pharma in June 2003 provided the Company with a broader research and development pipeline and technology platforms, particularly in the area of oncology, with one product (Voraxaze®) being prepared for filing with the regulatory authorities and currently generating revenues on a named-patient basis and through cost recovery under a Treatment Protocol in the U.S., and another product (Prolarix™) currently in clinical trials. These products are treatments for patients with cancer. Voraxaze® can reduce some of the toxic effects of a drug (methotrexate) widely used in cancer therapy, while Prolarix™ is a potential targeted treatment for solid tumors.
     In December 2005, the Company entered into an agreement with AstraZeneca UK Limited for the development and commercialization of CytoFab® as a treatment for the initial indication of severe sepsis. Under the agreement, the Company received an initial payment of £16.3 million. In addition, AstraZeneca made a £7.5 million equity investment in Protherics’ ordinary shares at 68.24p per share, a 30% premium to the average mid-market closing price over the three months prior to the agreement, representing 4.3% of the Company’s issued share capital following the transaction.
     The Company has subsequently received a further £10 million in milestone payments from AstraZeneca and could receive up to £161 million on the achievement of further milestones and will also receive royalties on global product sales of 20% of net sales for a minimum of 10 years in each country in which CytoFab® is sold, along with payments in return for the commercial supply of bulk drug substance and drug product. AstraZeneca is responsible for clinical development and sales and marketing of CytoFab®. The Company is primarily responsible for drug product manufacturing, including clinical trial material.
     The Company has four products generating revenues from sales, one outlicensed technology generating a royalty revenue stream, the licensing agreement with AstraZeneca outlined above, and several product candidates in various stages of development.
Operations
     The Company has GMP compliant manufacturing facilities in Wales, Australia and Salt Lake City, Utah. The Company also has administrative, clinical development, commercial and regulatory affairs facilities in Runcorn, Cheshire in the U.K. and in Nashville, Tennessee, U.S.A. The Company maintains a corporate office in London.

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Corporate Partnerships, Collaborations and Joint Ventures
     Historically, the Company has entered into licensing and collaborative agreements with pharmaceutical companies and other entities with established distribution capabilities to market and develop its products. See “Item 10. Additional Information — Material Contracts.”
Products
The following table lists the Company’s products currently commercially available or under development:
                 
            Distribution   Next Significant
Product   Principal uses   Status   Partner / Licensee   Milestone(1)
 
Products Commercially Available            
 
CroFab®

Crotalidae
Polyvalent Immune
Fab (Ovine)
  Minimal to moderate North American crotalid (pit viper) envenomation   Launched (U.S.)

Sold on named patient basis within E.U.

Sold in Canada under Special Access Programme
  Nycomed (acquired Altana) (U.S.)

Swedish Orphan (Scandinavia and Baltic countries)
 
 
DigiFab®
  Treatment of life-threatening digoxin toxicity or overdose   Launched (U.S.)

U.K. marketing authorization application submitted August 2004

Sold on named patient basis where there is no approved therapy
  Nycomed (acquired Altana) (U.S.)

Beacon Pharmaceuticals (Europe excluding Scandinavia and Germany)

Mayne Pharma (Australia/SE Asia)
  Outcome of U.K. marketing application expected 2008(2)
 
Voraxaze®
  Adjunctive treatment for patients at risk of methotrexate toxicity   Orphan Drug designation in E.U. and U.S.

Sold on named patient basis within Europe and supplied under a Treatment Protocol in the U.S. with cost recovery and in Canada under a Special Access Programme
  IDIS (European named patient sales)

Swedish Orphan (Nordic region named patient sales)

AAIPharma Inc. (U.S. treatment protocol distribution)

McKesson (Canada)
  Re-submission of marketing application to the FDA planned on a rolling basis starting 2008 and, should Priority Review be granted, approval could be received in 2010.(3)
 
ViperaTAb™
  Vipera berus (common adder snake) envenomation —Northern Europe   Sold on a named
patient basis
  Swedish Orphan
(Nordic region)
 
 
Enfer TSE Kit
  Detection of Bovine Spongiform Encephalopathy (BSE) in carcasses   Out-licensed and generating revenues   Licensed to Enfer Scientific Limited and Abbott Laboratories, via Enfer  
 

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            Distribution   Next Significant
Product   Principal uses   Status   Partner / Licensee   Milestone(1)
 
Products in Development            
 
CytoFab®
  Treatment of severe sepsis   Process scale-up to provide product for phase 2 and 3 studies now completed.

First study in expanded phase 2 program, being performed by partner, ongoing in U.S.
  AstraZeneca   Results from first study in expanded phase 2 program expected at end of 2008/early 2009.
 
Prolarix™ (formerly
NQO2)
  Cancer therapy   Phase 1 study sponsored by Cancer Research UK (CRUK) in the U.K. clinically complete     Phase 2a study in primary liver cancer due to commence 2008 and report 2009
 
Angiotensin
Therapeutic Vaccine
(ATV)
  Hypertension   Manufacture of adjuvant and vaccine for phase 2a clinical study now complete

Phase 2a clinical trial ongoing in U.K.
    Initial results from Phase 2a clinical trial expected in first half of 2009
 
Digoxin Immune Fab
  Pre-eclampsia   Phase 2b study in severe pre-eclampsia in the U.S. reported   Licensed from
Glenveigh
Pharmaceuticals LLC
  Outcome of evaluation by GSK under Research Agreement
 
OncoGel®
  Esophageal and primary brain cancers   Phase 2b study in esophageal cancer ongoing in U.S., E.U. and India

Initial cohort enrolled into Phase 1/2 study in brain cancer ongoing in the U.S.
  Diatos S.A. has exclusive rights outside North America, excluding Korea   Initial results from phase 2b study in esophageal cancer expected in 2010.

Dose escalation in phase 1/2 study in primary brain cancer expected in first half of 2009.
 
Acadra™
  B-cell chronic
lymphocytic
leukemia (B-CLL)
  Phase 1/2 study ongoing in Belgium, France and Spain   Co-development with
Advancell
  Part 1 of study expected to be completed 2009
 
(1)   Each of the dates of next significant milestones represents the Board of Protherics’ expectations based on progress to date. There can be no assurance, however, that any of these dates or milestones will be achieved.
 
(2)   See discussion of DigiFab® marketing approvals below.
 
(3)   See discussion of Voraxaze® marketing approvals below.
Products Commercially Available
     CroFab® (Crotalidae Polyvalent Immune Fab (Ovine)) is a polyclonal antibody fragment for the management of minimal to moderate envenomations from North American crotalids (pit vipers, which includes rattlesnakes, Copperheads and Water Moccasins). It is intended for the treatment of bites early in the course of poisoning to prevent them from developing into more severe cases. CroFab® was approved by the U.S. Food and Drug Administration (“FDA”) in 2000 and was launched in the U.S. in 2001. It is currently distributed by Fougera, a division of Nycomed, and is the only product marketed for

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pit viper bites in the U.S. A Mexico-based company is developing a F(ab)2 product derived from horse serum targeted to crotalinae envenomation and has recently begun recruiting patients into a U.S. phase 3 clinical trial, including a comparative study with CroFab®. This product would compete with CroFab® in the future if it obtains regulatory approval in the U.S.
     The Company is modifying the manufacturing process which, subject to FDA approval, anticipated in 2010, is anticipated to improve yields from this product.
     DigiFab® (Digoxin Immune Fab (Ovine)) is a polyclonal antibody fragment for the treatment of life-threatening digoxin toxicity or overdose. Digoxin is a widely prescribed drug for the treatment of cardiac conditions but its effective dose is close to its toxic dose (i.e., it has a narrow therapeutic window). DigiFab® was approved by the FDA in 2001 and launched in the U.S. in 2002; it is distributed by Fougera, a division of Nycomed. There is one similar product on the U.S. market, Digibind® (GlaxoSmithKline).
     A U.K. marketing authorization application was submitted in August 2004 and discussions have taken place with the MHRA to resolve outstanding issues regarding the basis for approval and the final response is expected to be submitted in 2008. Assuming the additional information that is provided is considered satisfactory, approval is anticipated in the second half of 2008 with subsequent approvals in Europe over the following six to twelve months. In January 2007, the Company submitted a New Drug Submission to the Health Products and Food Branch of Health Canada for DigiFab®. Marketing approval in Canada is expected in late 2008 or early 2009. DigiFab® is currently being sold on a named patient basis in certain European and other countries following the transfer of the marketing rights for Roche’s Digitalis Antidot® in November 2006.
     ViperaTAb™ is a polyclonal antibody fragment sold on a named patient basis for the treatment of envenomations from the European common adder (Vipera berus). It is currently distributed in Sweden, Norway, Finland, Denmark and the Baltic countries by Swedish Orphan AB. The Company has also supplied ViperaTAbto the U.S. Department of Defense.
     Voraxaze® (glucarpidase, previously known as carboxypeptidase G2 or CPG2) has been developed as an adjunctive treatment for patients experiencing or at risk of toxicity following administration of high doses (> 1 g/m2) of methotrexate. Methotrexate is an established drug in cancer therapy which can cause serious and sometimes life-threatening toxicity if its elimination from the body is delayed. Voraxaze® is an enzyme which rapidly breaks down methotrexate thereby reducing the time that the patient is exposed to potentially toxic concentrations. The Company is not aware of any other drug therapies available that can achieve this. Voraxaze® was granted orphan drug status in the E.U. in February 2003 and the U.S. in August 2003.
     In September 2006, the Company submitted a Biological License Application (“BLA”) for Voraxaze® to the FDA in the U.S. This application was withdrawn in November 2006 following a request for additional manufacturing-related information. Following discussions with the FDA, the Company agreed to perform the additional manufacturing and analytical work required and three consecutive consistency batches will be manufactured in the second half of 2008 by our manufacturing partners, Eurogentec (drug substance) and Cangene (drug product).
     Discussions were also held with the FDA regarding the interaction of Voraxaze® with leucovorin, the standard supportive therapy given with high dose methotrexate therapy. The Company is undertaking a small clinical study to further characterize a drug-drug interaction between Voraxaze® and leucovorin.
     The FDA has granted Voraxaze® a Fast Track Designation for the rapid and sustained reduction in toxic methotrexate levels in patients with impaired renal function. The FDA has also agreed to the Company resubmitting its application as a rolling submission. This will enable the FDA to review sections of the application while the Company collects the additional manufacturing and clinical data although it is not obligated to do so. The Company plans to begin submitting a rolling BLA in the second

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half of 2008, leading to a potential marketing approval in the U.S. in the first half of 2010 if Priority Review is granted by the FDA.
     In May 2007, the FDA granted the Company permission to supply Voraxaze® in the U.S. under a Treatment Protocol, prior to marketing authorization being granted, and to charge for its supply, providing for recovery of some of the costs associated with the development and supply of Voraxaze®. Revenues from this cost recovery program are anticipated to continue until the approval of the BLA in the U.S. AAIPharma Inc. is the Company’s distributor for Voraxaze® in the U.S. Voraxaze® was previously available for use in the U.S. under a protocol sponsored by the National Cancer Institute (“NCI”).
     Named patient sales of Voraxaze® commenced in Europe and elsewhere outside the U.S. in January 2004 and are distributed principally by IDIS, although alternative distributors cover certain territories.
     A Marketing Authorisation Application (“MAA”) for the use of Voraxaze® as an intervention treatment, for patients experiencing or at risk of methotrexate toxicity from delayed elimination, was submitted in the E.U. in July 2005. The EMEA requested additional manufacturing data, similar to that requested by the FDA, and further data regarding the interaction between Voraxaze® and leucovorin. As these data could not be provided within the timeframe available under the Centralized Procedure, the MAA was withdrawn in May 2007. Following feedback from the EMEA, the Company is investigating the availability of a suitable non-clinical model to support the clinical benefit of Voraxaze® in order that extra data can be generated to support the resubmission of the MAA in Europe.
     Protherics will continue to supply Voraxaze® in the E.U. on a named patient basis for intervention use in patients at risk of severe or life-threatening methotrexate toxicity due to delayed elimination of methotrexate following high dose methotrexate therapy.
     The company has initiated two small investigator-led clinical studies to investigate the safety and efficacy of Voraxaze® when it is used in a planned way with successive cycles of high dose methotrexate therapy; in previous studies, Voraxaze® has been given with only a single cycle of methotrexate. If these studies are successful, the data from them will be used to develop a clinical program to expand the indications for Voraxaze® into the potentially much larger repeated planned use market.
     Enfer TSE Assay (BSE Diagnostic Test). There is a significant public concern in Europe and North America with respect to bovine spongiform encephalopathy (“BSE”), colloquially known as “mad cow disease.” The Company licensed its intellectual property in transmissible spongiform encephalopathy (“TSE”) diagnosis in animals to Enfer Scientific Limited in 1997 and Enfer developed a post-mortem kit to test carcasses for BSE. The test received approval in the E.U. in 2001. Enfer uses the kit itself to test carcasses in Ireland and also sells it to third parties. In 2001 Enfer entered into an agreement with Abbott Laboratories to market the test in other territories and in April 2004 Abbott received approval from the U.S. Department of Agriculture (“USDA”) to sell the test kit in the U.S., although the USDA does not, as yet, require routine testing of cattle. In February 2005, Enfer received approval in the E.U. for an improved version of its test kit. Enfer’s test kit is now one of at least 12 rapid tests approved in the E.U. for monitoring of BSE in bovine animals and one of at least eight approved for the monitoring of ovine and caprine animals.
Products in Development or Research
     CytoFab® is based on the same polyclonal antibody technology as CroFab® and DigiFab® and binds TNFa, a cytokine involved in inflammation. It has been developed to treat sepsis, a disease that affects about 750,000 people per year in the U.S. and which has a mortality rate in excess of 30%. There is only one product approved for the treatment of sepsis, Eli Lilly’s Xigris®, but, because of its safety profile, its use is restricted to a subset of sepsis patients.

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     A phase 2b study with CytoFab® has been completed by the Company with significant reductions observed in the time patients spent in the intensive care unit and on mechanical ventilation relative to placebo, with a trend to improved survival. Protherics has held two end-of-phase 2 meetings with the FDA, one in September 2003 to discuss the phase 3 program and the other, in October 2003, to discuss the manufacture of the product.
     In December 2005, the Company announced the signing of a licensing agreement with AstraZeneca for the global development and commercialization of CytoFab®. Under the terms of the agreement, AstraZeneca will undertake all clinical development work for the product and Protherics will be primarily responsible for bulk drug manufacturing, including the supply of clinical trial material. On signing, AstraZeneca made an initial payment of £16.3 million to Protherics along with a £7.5 million equity investment in Protherics. The Company has subsequently successfully scaled up the CytoFab® manufacture to a 600 liter batch size and shown batch to batch consistency, which triggered a £10.0 million milestone in March 2007. The process has now been scaled up to 3,000 liters. The agreement with AstraZeneca has a potential total value to Protherics, based on up-front and milestone payments alone, of approximately £186 million. Protherics will also receive royalties on global product sales of 20% of net sales, during the period of the license, in addition to payments in return for the commercial supply of bulk drug substance and drug product.
     In November 2006, following consultations with regulators in the U.S. and E.U., AstraZeneca announced its intention to expand the clinical development plan for CytoFab® in severe sepsis, with the addition of a phase 2 program which will consist of two separate studies in patients with severe sepsis. The first study, which is underway, is designed to assess the safety, tolerability, pharmacokinetics and pharmadynamics of CytoFab® produced by the new manufacturing process. It will enroll up to 70 patients across multiple sites in the U.S. and is expected to report towards the end of the year or early in 2009. Following the successful completion of this study, AstraZeneca intends to begin a second study to assess both the safety and efficacy of CytoFab® in a much larger patient group. The Company will receive its next milestone payment of £10 million from AstraZeneca upon the start of a phase 3 study which is anticipated in 2010.
     ProlarixTM (formerly NQO2) was also acquired by the Company when it acquired Enact Pharma. It is a small molecule-based chemotherapy involving the coadministration of a prodrug, tretazicar (formerly CB 1954) with a cosubstrate, caricotamide (formerly EP-0152R). The enzyme NQO2 has elevated activity in certain tumors, in particular primary liver cancer (hepatocellular carcinoma or HCC), offering a potentially selective therapeutic effect. HCC is a devastating cancer which kills around 500,000 patients each year globally and, despite recent approvals of Sorafenib (Nexavar®, Onyx/Bayer), life expectancy for HCC patients remains less than twelve months from diagnosis. ProlarixTM may also have a role in the treatment of other solid tumors, such as ovarian cancer and melanoma, providing a wider potential market opportunity for the drug.
     A phase 1 study in patients with solid tumors, designed to identify the doses of both tretazicar and caricotamide to take forward into phase 2 based on safety and pharmacokinetics, has been completed in the U.K. under the auspices of Cancer Research UK and the Company is awaiting the final study report. The dose of caricotamide was fixed early in the study and the Company announced in July 2007 that the maximum tolerated dose tretazicar has been reached. The anticipated reductions in the levels of tretazicar in the blood have been observed in the presence, but not the absence, of caricotamide, providing some evidence that it is being converted to the active cytotoxic agent by NQO2.
     The Company plans to start a phase 2 program shortly to investigate tumor responses in the lead indication of HCC. This phase 2 program will comprise an open-label run-in phase 2a study to a larger controlled study in which ProlarixTM will be added to Sorafenib and compared to Sorafenib alone. The open-label study should provide an early indication of potential efficacy in HCC patients and results are expected from this study in early 2009.

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     Angiotensin Therapeutic Vaccine (“ATV”) is being developed by the Company for the treatment of high blood pressure (hypertension). Although hypertension can be treated with oral therapies, because people with mild to moderate hypertension generally feel well, compliance with such treatments is very poor. It is estimated that 70% of patients fail to take their medication as prescribed. As hypertension is a major factor in stroke and heart disease, failure to control blood pressure can have serious consequences. The Company is developing a vaccine designed to maintain control of blood pressure with only periodic injections. The vaccine produces antibodies to angiotensin, one of the hormones involved in the regulation of blood pressure.
     ATV has been evaluated in a series of studies and effects on the renin-angiotensin system, but not blood pressure, have been observed in patients with hypertension. In order to stimulate the immune system to produce more antibodies to angiotensin, which is expected to result in a reduction in blood pressure, several different formulations of the vaccine, containing novel adjuvants, have been investigated.
     One of the formulations, containing a proprietary adjuvant developed by CoVaccine BV, increased the antibody response in animals by about 10-fold relative to the formulation used in the previous clinical study which contained alhydrogel as adjuvant. In June 2006, the Company acquired the adjuvant from CoVaccine BV. The Company has completed the non-clinical safety testing and manufacturing scale up of the CoVaccine HT™ adjuvant required to support a phase 2 clinical study.
     The Company began a phase 2a study in June 2008 with the new formulation of ATV with CoVaccine HT. The goal of this study is to confirm that the new formulation increases levels of anti-angiotensin antibody response sufficiently to cause a reduction in blood pressure in hypertensive patients. With proof of concept data at the end of this phase 2a study, the Company intends to out-license the program to a pharmaceutical company with a franchise in the global anti-hypertensive market, currently estimated at more than $30 billion annually. Additionally, the adjuvant is attracting interest from several possible partners for other programs.
     One other company (Cytos Biotechnology AG, Switzerland) is known to be developing a vaccine for hypertension that would compete directly with the Company’s ATV and reported recently that its angiotensin vaccine, CYT006-AngQb, caused a statistically significant reduction in blood pressure and was well tolerated when three injections were administered. Cytos is now evaluating the safety of five injections in an additional clinical study.
     OncoGel® is a novel, locally administered, sustained-release injectable formulation of paclitaxel, an established chemotherapeutic for the treatment of solid tumors. It is designed for local administration to a tumor, where it is able to deliver high concentrations of paclitaxel for up to six weeks. OncoGel® is being investigated in two lead indications, esophageal and primary brain cancers.
     A major goal of current therapy in esophageal cancer is to control loco-regional disease as such control has been shown to improve overall survival of patients who subsequently undergo a potentially curative surgery. Patients currently receive pre-operative chemo-radiotherapy to help control spread of the tumor but, despite this, there remains a large unmet need for a more effective therapy.
     A phase 2a study in inoperable esophageal cancer in which OncoGel® was given with external beam radiation for the treatment of dysphagia has been completed in Europe and the U.S. In this study, OncoGel® was injected directly into the primary tumor; it reduced tumor bulk in the majority of patients. In future studies this may allow more patients to become candidates for surgical resection, in addition to improving the management of the cancer. In January 2008, the Company initiated a randomized multinational phase 2b study to evaluate OncoGel® administered in combination with pre-operative chemo-radiotherapy compared to pre-operative chemo-radiotherapy alone in 124 patients with esophageal cancer. The primary endpoint of the study is a blinded assessment of tumor response, with overall

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survival a secondary endpoint. The Company expects to have data available from the phase 2b study in 2010.
     Treating brain cancer is extremely challenging due to the inability of most chemotherapeutic agents to cross the blood-brain barrier. Where feasible, the primary therapy for patients with primary brain tumors is surgical debulking. OncoGel® is being developed for the treatment of primary brain cancers, such as glioblastoma multiforme (“GBM”).
     OncoGel® has demonstrated encouraging dose-dependent activity in non-clinical models of brain cancer. A phase 1/2 study of OncoGel® in recurrent GBM is ongoing. The aim of the study is to investigate the safety and tolerability of OncoGel® when administered into the cavity produced after a tumor is surgically removed. Data from this study will determine the dose to be used in future studies of patients with GBM. Following observations of fluid accumulation in the three patients dosed in the first cohort to be treated, patients treated in the next cohort in the study will receive a lower dose volume and will have a drain surgically inserted to allow the easy removal of any fluid that accumulates in the brain. The FDA has requested additional non-clinical safety data prior to further dose escalation in the study. These data are expected to be available in the first half of 2009.
     AcadraTM (formerly Acadesine) is a nucleoside analogue that could be a promising new therapy for the treatment of B-cell chronic lymphocytic leukemia (B-CLL), a hematological cancer where B-cells accumulate due to their increased survival. Unlike existing chemotherapies for B-CLL, AcadraTM has been shown ex-vivo to selectively kill B-cells, while having only minimal toxicity to T-cells. This selectivity for B-cells means that AcadraTM has the potential to reduce the risk of serious infection and other side effects seen with current chemotherapies.
     B-CLL is the most frequently occurring type of leukemia in the western world and accounts for about 40% of all leukemias in those over 65 years of age. It is very rare in those below the age of 30 years and it follows an extremely variable course with overall survival times ranging from months to decades. B-CLL is considered incurable but temporary remission can be achieved with chemotherapies such as chlorambucil (Leukeran®, GSK), fludarabine (Fludara®, Bayer) or cladrabine (Leustatin®, Ortho Biotech) and the monoclonal antibodies, alemtuzumab (Campath®, Genzyme and MabCampath®, Bayer) or rituximab (MabThera®, Roche), either given alone or in combination.
     AcadraTM was well tolerated when previously studied in 2,000 patients for an unrelated indication. The Company and its co-development partner, Advancell, have initiated a phase 1/2 study of AcadraTM in patients with recurrent or refactory B-CLL. The study is being undertaken in Belgium, France and Spain and will enroll up to 30 B-CLL patients. Part 1 of the study is an open-label assessment of the safety and tolerability of escalating single doses of AcadraTM followed, in part 2, by an assessment of up to five repeated doses. Part 1 of the study is expected to be completed in 2009, with the intention of providing initial evidence of a potential selective effect.
     Pre-eclampsia Indication/Digoxin Immune Fabs, such as the Company’s DigiFab® and GlaxoSmithKline’s Digibind®, may have potential in the treatment of pre-eclampsia. Pre-eclampsia is a life-threatening complication that occurs in about 5-8% of pregnancies in the U.S. Pre-eclampsia is generally characterized by high blood pressure and if left unmanaged, can lead to renal failure, eclampsia and death of the mother. It can also result in early delivery of the baby, resulting in development abnormalities or death of the baby. It is a major cause of admissions to neonatal intensive care units. There are no approved therapies available and few products in development to specifically treat pre-eclampsia.
     The cause of pre-eclampsia has not been conclusively identified. However, several vasoactive substances called endogenous digoxin-like factors (EDLFs) have been found in the blood and placenta of women with pre-eclampsia. These EDLFs rapidly disappear following the delivery of the baby, coincident with the disappearance of the symptoms of pre-eclampsia. Digoxin Immune Fabs have been

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found to bind to known EDLFs in vitro and may therefore have potential application in the treatment of pre-eclampsia through their neutralization and removal from the body.
     In April 2008, the Company reported the headline results from the phase 2b (“DEEP”) study which investigated the use of Digibind® in 51 patients with severe pre-eclampsia. In this small study, one of the two primary endpoints was met when the deterioration in kidney function during the 24-48 hours period of treatment was found to be significantly less (p<0.05) in patients receiving Digibind® than in patients receiving placebo. However, there was no significant difference for the other primary endpoint, the use of anti-hypertensive drugs, in this study.
     The clear effect on kidney function seen in the DEEP study provides support for Digibind® having a pharmacological effect in a serious condition for which there is no approved therapy. The Company is in discussion with the other stakeholders in the program, including GlaxoSmithKline, to decide the potential next steps.
Principal Markets
     The Company operates in the United Kingdom, the United States and Australia, and its revenues are largely attributable to its core technology of immunotherapeutics and Voraxaze® named patient sales and Cost Recovery revenues. In fiscal year ended March 31, 2008, revenue of £2,075,000 (2007: £2,213,000, 2006: £701,000) was recognized, under the Company’s revenue recognition policy, from the initial £16,300,000 payment received from the license agreement with AstraZeneca. In fiscal year ended March 31, 2007 a £10,000,000 development milestone was also recognized in relation to this contract. The table below shows a breakdown of revenues, under IFRS, by geographical market for each of the last three fiscal years.
                         
    2008     2007     2006  
    £’000     £’000     £’000  
United Kingdom
    2,126       1,983       1,202  
Rest of Europe
    1,097       277       554  
North America
    22,749       28,809       15,893  
Rest of the World
    95       50       60  
 
                 
 
    26,067       31,119       17,709  
Competition
     The pharmaceutical industry is highly competitive, as evidenced by the range of existing drug therapies. The Company competes with established pharmaceutical companies as well as biopharmaceutical companies acting independently or in collaboration with established pharmaceutical companies. In addition, public and private academic and research institutions and certain governmental agencies also compete with the Company in the research and development of therapeutic products and in recruiting qualified scientific personnel.
     Competition among products will be determined by, among other things, efficacy, safety, convenience, reliability, price, geographical location and patent position. Competing products or product candidates and their manufacturers are discussed in respect to each of the Company’s principal products under “Item 4. Information on the Company — Products.”
Seasonality
     Demand for the Company’s CroFab® rattlesnake antivenin product is subject to seasonal fluctuations. In the U.S., demand for snakebite antivenins peaks during the spring and summer months. Hospitals and clinics typically place orders in the first 3 months of the year in anticipation of the “biting

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season” and for the following 6 months which constitute the season. Orders for CroFab® rattlesnake antivenin product are usually highest during these months.
Sources and Availability of Supplies, Consumables and Raw Materials
     The Company currently supplies all of the antisera used in the manufacture of its products from its own flocks of sheep. In addition, the Company relies on certain outside suppliers of key raw materials and consumables. Specifically, the Company purchases a significant proportion of crotalid snake venom for use in the manufacture of its CroFab® product, Digoxin for the manufacture of its DigiFab® product and purification columns used in the manufacture of both CroFab® and DigiFab®. Certain supplies, consumables and raw materials are purchased from single sources. See “Item 3. Key Information — Risk Factors.”
Intellectual Property, Patents and Trademarks
     The Company’s policy is to protect and defend the intellectual property associated with its technology and products, principally through patent protection. Internally, the Company has implemented measures to protect its proprietary technology and trade secrets, such as requiring all employees, consultants and third party collaborators to execute confidentiality agreements and, where appropriate, assignments of rights to proprietary inventions arising out of the employment or consulting relationship.
     The Company has optimized the production and purification of polyclonal antibodies and has developed extensive proprietary knowledge in this area, combining scientific, veterinary and large-volume processing skills. The Company has been granted patents, and has applied for additional patents, in the United States, Europe and other relevant jurisdictions covering several aspects of its process techniques.
     The Company holds or licenses the rights to a number of U.S. and foreign patents and patent applications, the most material being:
    Transmissible Spongiform Encephalopathies — The Company has been granted patents for its transmissible spongiform encephalopathy diagnostic technology in the U.S., Europe (European Patent Office or “EPO”), South Africa, Australia and New Zealand. These patents will expire between 2012 and 2015. The European patent was granted in 1999 and underwent opposition, on which a recent appeal decision was issued in favor of the Company. The Canadian patent application has now been accepted and should proceed to grant shortly. Patent applications are pending in the U.S. (divisional) and Japan, claiming a priority date of December 3, 1991. The first U.S. divisional patent was granted on April 30, 2002.
 
      A further application directed towards new variant Creutzfeldt-Jacob Disease was filed in January 2004 and PCT, Argentine and Malaysian applications were filed in January 2005. The PCT application national phase was entered in 2006 and there are now also pending applications in Australia, Brazil, Canada, China, India, Japan, Republic of Korea, Mexico, New Zealand, Singapore, South Africa, the U.S. and Europe;
 
    Angiotensin vaccine — The Company has pending patent applications for angiotensin peptide analogues and vaccine uses in Canada, Japan, the U.S., and Argentina, all claiming a priority date of June 24, 1997. The New Zealand, Australian, United States and EPO (the parent application) patents have now been granted. A divisional patent application is pending in the EPO with further U.S. divisional applications in process or planned;
 
    Anti-TNFa antibodies — The Company has been granted U.K., U.S., Canadian, Japanese, EPO, New Zealand and Australian patents for use of Fab fragments of anti-TNFa antibodies

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      in medicine, particularly for the use in the treatment of sepsis. The EPO patent is being maintained in France, Germany, Italy and Spain. The majority of these patents expire in 2014, although the U.S. patent is due to expire in 2018;
 
    Mixed monospecific polyclonal antivenins — The Company has been granted EPO, United Kingdom, Australian, Japanese, Russian Federation, and United States patents on the use of mixed monospecific polyclonal antivenins. These patents are projected to expire on April 24, 2012, other than the Australian patent, which is expected to expire on April 24, 2008, and the United States patent, which is expected to expire on December 21, 2021;
 
    Fab polyclonal antivenins — The Company has also applied for a U.S. patent for the Fabantivenins, the prosecution of which is ongoing following a successful appeal to the U.S. Court of Appeals for the Federal Circuit district court in 2007;
 
    Prolarix™ (formerly NQO2) — The Company has filed patent applications in the EPO, U.S., Japan, Canada, U.K., and Hong Kong around using NQO2 to activate prodrugs in the presence of an added co-factor. The priority date for filing is June 1997 and the filing date is June 15, 1998; the expected expiry date for any patents is June 15, 2018. Patents have been granted in the U.K., the U.S., Hong Kong and the EPO. Divisional applications are pending in the U.S. and at the EPO;
 
    CoVaccine HT adjuvant — In June 2006, the Company acquired the patent applications and trademarks associated with CoVaccine HT adjuvant from CoVaccine B.V. The patent family includes Canada, China, Japan and the U.S. The effective date of filing of the PCT application is November 30, 2000, and this application claims priority from an earlier EPO application, filed on November 30, 1999. Patents are currently granted in Europe, China, New Zealand and Australia with remaining applications pending.
 
    OncoGel® — The Company has been granted patents for injectable formulations of paclitaxel in the U.S., EPO, Argentina, China, Australia, South Africa, Russian Federation, New Zealand, and Korea. These patents claim a priority dates of October 3, 1997 and October 1, 1998, and are projected to expire in 2017 and 2018. Applications involving this technology are currently pending in Japan, Israel, Europe, Brazil, Canada, Poland, and Norway.
 
    Treatment of Pre-eclampsia — The Company has patent applications directed to treatment of pre-eclampsia using digoxin antibodies (e.g., DigiFab®) which are pending in the U.S., EPO, Australia, Canada, China, Japan, Mexico, Norway, South Africa, and India. These applications claim priority of July 25, 2002. A continuation-in-part application was filed in the U.S. on December 23, 2005 claiming priority to a U.S. provisional application filed May 17, 2005, and a corresponding P.C.T. application was filed May 14, 2006.
 
    Acadra™ — In December 2006, the Company entered into a license to use patent applications associated with Acadra™. The patent family includes the principal territories of Europe, Canada, Japan and the U.S. and is maintained by the Company’s development partner, Advanced In Vitro Cell Technologies S.L.
     We rely on patent protection against use of our proprietary products and technologies by competitors. The patent positions of biotechnology firms generally are highly uncertain and involve complex legal and factual questions. There can be no assurance that our patents or licensed patents will afford sufficient legal protections against competitors or provide competitive advantages. Our patents could be held invalid or unenforceable by a court or infringed or circumvented by other parties, or others could obtain patents that we would need to license or circumvent. Competitors or potential competitors may have filed patent applications or received patents and may obtain patent protection and proprietary

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rights relating to biological compounds or processes competitive with ours. Competitors may also claim that their patent rights prevent us from commercializing our products in certain territories.
Third Party Patent Rights
     Rockefeller University had a European patent which could be construed to cover use of anti-TNFa antibodies which has now been revoked. Rockefeller University also holds patent rights related to this revoked European patent in the U.S., Australia and Japan. The Board believes that due to the precise nature of most of these patent rights in Australia and the U.S., commercial exploitation of CytoFab® in these territories will not infringe any valid claims of these patents. In any event, the Australian and Japanese patent rights were to have expired in August 2006, unless they were the subject of patent term extensions. The Company is aware of U.S. patents granted to Rockefeller University in October 2001 and July 2002 relating to a neutralizing antibody to a mediator substance which, if valid, could be used to restrict the Company’s development of anti-TNFa products, including CytoFab® in the U.S. The Company has an opinion from its U.S. patent attorney that CytoFab® does not infringe the claims of these patents. The Company has specific patents in the U.S. and other territories covering the use of Fab fragments of anti-TNFa antibodies, as summarized above.
     The Company is aware of two U.S. patents granted in August 1997 and August 1998 in the name of Genentech, Inc. (“Genentech”) that cover anti-TNFa antibodies. One patent relates to a TNFa antagonist comprising an antibody that neutralizes cytotoxic activity of human TNFa. There are also claims to Fab fragments of a variable region of the antibody. The second patent relates to a method of treatment of graft versus host reaction that comprises administering to a patient a therapeutically effective dose of a TNFa antagonist. If valid, these patents could be used to restrict the Company’s development of anti-TNFa products, including CytoFab®, in the U.S. and other territories in which equivalent rights exist. However, the Company has obtained opinion from a U.S. patent attorney that the claims of the former patent are invalid over the prior art, and that it is arguable that the claims of the latter are similarly invalid.
     The Company has identified a series of patents (e.g. European and Australian) that correspond to the Genentech anti-TNFa antibody patents, and a Dainippon European patent, relating to human recombinant TNFa. These patents contain claims to certain forms of recombinant human TNFa and consequently they could, if valid, be used to restrict the Company’s use of recombinant human TNFa (in the form claimed by the patents) to produce anti-TNFa antibodies in the territories in which the patent is maintained. The Company has taken steps to ensure that its supplier of TNFa is appropriately licensed under the patents. In any event, these patents have now expired. Supplementary Protection Certificates are in force in some European territories, but it is believed that these do not cover the Company’s use of TNFa.
     Additional patents and applications are in existence, which could limit the commercialization of CytoFab®. These include patents, or patent applications, in the names of Peptide Technology, Centocor, Kennedy Institute, Abbott (formerly Knoll) and Unisearch. The Company has taken advice from its patent attorneys, and the progress of the patent applications is being monitored. The Directors believe that, overall, these patents and applications will not inhibit the use of CytoFab® in the treatment of sepsis. The Company has opposed an Australian patent application and a European patent, both in the name of Abbott, which relate to the use of TNF antagonists to treat sepsis in patients with particular IL-6 levels, with a view to preventing the Australian application proceeding to grant and getting the European patent revoked. In response to the opposition, Abbott withdrew the Australian patent application. There has been no substantive response to the opposition by Abbott, and the U.K. part of the European patent has ceased.

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Trademarks
     The Company has registered a number of active trademarks in various jurisdictions, the most material of which are specified below:
    CroFab® in the U.S.;
 
    CytoFab® in the United Kingdom, Europe and the U.S.;
 
    CytoTAb™ in the United Kingdom;
 
    DigiFab® in the U.S. and Europe;
 
    DigiTAb™ in the United Kingdom;
 
    ViperaTAb™ in the United Kingdom;
 
    Voraxaze® in the U.S. and Europe;
 
    OncoGel® in the U.S.;
 
    Prolarix® in Europe, Japan and Australasia;
 
    ReGel® in the U.S.
 
    Doloryn® in the U.S.; and
 
    CoVaccine™ in Europe
     In addition, applications to register the following active trademarks are currently pending:
    Prolarix™ in the U.S.; and
 
    Acadra™ in the U.S., Europe and Japan
GOVERNMENT REGULATION
General
     Regulation by government authorities in the U.S., Europe and other countries in which the Company operates is a significant consideration in the development, production, marketing, labeling and reimbursement of its products and in the continuation of its research and development activities.
     In the U.S., Europe and most other countries, in order to market and sell biological products, drugs, medical devices and diagnostic products, there is a requirement to obtain and to maintain an approval for the relevant product from the appropriate regulatory authority, referred to as a marketing authorization. The Company is also subject to various laws, regulations, policies, guidelines and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the protection of the environment. Furthermore, there has been a general trend towards greater regulation of the pharmaceutical industry and its products.
     The submission of a marketing authorization application to a regulatory authority does not guarantee that an authorization will be granted. Regulatory authorities require substantial data in connection with marketing authorization applications, resulting in a lengthy approval process. The time

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taken to obtain such approval varies depending upon the countries concerned and the nature of the product, but can take from a few months to several years following application and can involve substantial expenditure. This may be due to:
    the lack of necessary results/data required by regulatory authorities;
 
    the changing or adding of regulation; or
 
    new scientific standards or other scientific developments arising during the application process.
     Furthermore, regulatory authorities of different countries may impose differing requirements and may refuse to grant approval, or may require additional data before granting an approval, even though the product may have been approved by the regulatory authority of another country. Even if approval is obtained, failure to comply with present or future regulatory requirements, or the emergence of new information reflecting adversely upon the safety or effectiveness of the approved product, can lead the regulatory authority to suspend, vary or withdraw its approval to market the product.
     In the U.S., the principal regulatory agency is the FDA. Nearly all other countries have similar national regulatory authorities. The Company may have to satisfy different requirements from the FDA, European regulatory authorities and other national regulatory authorities. There is an ongoing initiative, the International Conference on Harmonization (“ICH”), among representatives from Japan, the United States and the E.U., to limit regulatory differences where possible. Considerable progress has been made through the ICH process, resulting in the issuance of a wide range of agreed pre-clinical and clinical guidelines.
     In Europe, the Company must take into consideration:
  (a)   the regulatory climate within the E.U., including the influence of the International Conference on Harmonization, and the approach of the European Medicines Evaluation Agency and European Commission, as well as
 
  (b)   the position of the national regulatory authorities in the E.U. member states.
     Recognizing global regulatory differences, wherever practical, the Company intends to design pre-clinical and clinical protocols which should generate sufficient data of a quality that will be acceptable to support applications for the same product in each country where it is intended to be marketed.
Price Regulation
     In some countries it is necessary to obtain approval for the price to be charged for a medicinal product or device. This is true in a number of E.U. member states. In the United Kingdom, the launch price of pharmaceuticals is set by the manufacturer but is subject to certain constraints including, in the case of branded pharmaceutical products sold to the United Kingdom National Health Service, the Pharmaceutical Price Regulation Scheme which limits price increases on those products.
     Governments may also influence the product price through the control of national healthcare systems and organizations which may bear the cost of supply of such products. In the United States, government-funded or private medical care plans can influence prices, and there are a variety of indirect controls.

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United States Regulation
     Regulatory Authorities — The production and marketing of the Company’s products and its research and development activities are subject to regulation by federal and state governmental authorities in the United States. Although most states maintain one or more agencies with power to regulate products, they commonly defer to the federal agencies discussed below in matters relating to the development, production, marketing, labeling and reimbursement of products.
     FDA Regulation — Biological products, drugs, medical devices and diagnostic products are subject to rigorous review by the FDA. The Federal Food, Drug and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations govern or influence the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of such products. Product development and approval within this regulatory framework takes a number of years, involves the expenditure of substantial resources and is commercially risky. Many products ultimately do not reach the market because of toxicity or lack of effectiveness as demonstrated by required testing. Total development time for successful compounds often exceeds 10 years. However, under the provisions of recent legislation, the FDA has committed to reduce the review time for applications. Although the agency has achieved some reductions, especially for high-priority medicines, the review process remains lengthy and complex. There has been little or no reduction in the testing required before applications are submitted, which consumes most of the time spent in developing new medicines for the United States market. In addition, there can be no assurance that this regulatory framework will not change or that additional regulations will not arise at any stage of product development that may affect approval, delay an application, or require additional expenditures.
     The steps required before a pharmaceutical product may be marketed in the United States include:
  (a)   pre-clinical laboratory testing;
 
  (b)   submission to the FDA of an investigational new drug application which must become effective before human clinical trials may be commenced;
 
  (c)   adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug;
 
  (d)   submission of a new drug application or biological license application to the FDA; and
 
  (e)   FDA approval of the new drug or biological license application prior to any commercial sale or shipment of the drug.
     Good Practice Standards — Various standards are applied either by law or custom to the activities of pharmaceutical companies. These include principally:
    Good Laboratory Practice, applied to studies performed during pre-clinical developments to identify the compound’s behavior and toxicity in animals;
 
    Good Clinical Practice, intended to ensure the quality and integrity of clinical data and to protect the rights and safety of human subjects in clinical trials; and
 
    Good Manufacturing Practice, intended to ensure the quality of drugs by setting minimum standards for all drug manufacturing facilities.
     The Company has used consulting firms in the United Kingdom and in the United States for advice on compliance with existing regulations and guidelines.

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     Clinical Testing — Clinical testing of new compounds in humans is designed to establish both safety and efficacy in treating a particular disease or condition. These studies are usually conducted in three phases of testing. The clinical trial process may take from two to six years or more to complete.
     Phase 1 trials are normally conducted in a small number of healthy human subjects or patients with the specific condition targeted. Their purpose is to provide a preliminary evaluation of the product candidate’s safety, toxicity and behavior when administered to humans.
     In phase 2 trials, the product candidate is assessed for its short-term safety and preliminary efficacy in a limited number of patients with the targeted disease or disorder. The appropriate dose ranges and regimens for Phase 3 are also determined during this phase.
     Phase 3 trials involve a comprehensive evaluation of safety, efficacy and toxicity that might not have been evident in smaller studies. The trials are carried out, typically on a multi-center basis, on a sufficient number of patients to obtain statistically significant results. All adverse reactions are investigated in detail, and special features of the product candidate are explored.
     Clinical trials for existing and future products seek to develop safety data as well as efficacy data and will require substantial time and significant funding. There is no assurance that clinical trials related to these products will be completed successfully within any specified time period, if at all. Furthermore, the FDA may suspend clinical trials at any time if it believes that the subjects participating in such trials are being exposed to unacceptable health risks.
     If the drug is considered by the FDA and by prospective users to provide an important benefit in the treatment of a serious disease, the applicant may be faced with demands from patient groups, sometimes endorsed by the FDA, for release of the drug for treatment during the investigative stage (prior to receipt of marketing approval by the FDA). The supply of such treatment is termed “treatment use.” Supplying drugs on this basis can involve significant expense and resource demands for the sponsor of the drug, which must administer the pre-approval release program. This may, in some situations, interfere with the ability to complete controlled clinical trials of the drug.
     Approval Procedures and Criteria — The FDA generally applies the same requirements for approval of all products:
    proof of safety and efficacy (efficacy must usually be demonstrated by two well-controlled clinical trials carried out in accordance with FDA regulations).;
 
    demonstration of adequate controls in the manufacturing process; and
 
    conformity with requirements for labeling.
     The FDA has discretion to determine whether the data submitted is adequate for approval. The time taken for this approval process is based on:
    the quality of the submission;
 
    the potential contribution of the compound in improving the treatment of the target disease; and
 
    the workload at the FDA.
     There can be no assurance that any new drug will successfully proceed through this approval process or that it will be approved in any specific period of time.

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     During its review, the FDA may ask for additional test data. If the FDA approves the product, it may require post-marketing testing, including potentially expensive post-market surveillance studies, known as phase 4 testing. This phase further assesses the product’s therapeutic value and provides additional information about the safety and efficacy of the product across a broader patient base. In addition, the FDA can impose restrictions on the use of the drug that may be difficult and expensive to administer.
     Orphan Drug Status — The Orphan Drug Act of 1983 encourages manufacturers to seek approval of products intended to treat “rare diseases and conditions” with a prevalence of fewer than 200,000 patients in the United States or for which there is no reasonable expectation of recovering the development costs for the product. For products that receive orphan drug designation by the FDA, the Orphan Drug Act provides tax credits for clinical research, FDA assistance with protocol design, eligibility for FDA grants to fund clinical studies and a period of seven years of marketing exclusivity for the product following FDA marketing approval. The Company’s crotalid antivenin, CroFab®, received marketing approval by the FDA in 2000, under the orphan drug program, and its methotrexate therapeutic, Voraxaze®, for which the Company is seeking marketing approval, received orphan drug designation by the FDA in August 2003. In February 2008, the FDA granted orphan drug designation to Oncogel™ for treatment of esophageal cancer.
     Fast Track Designation and Priority Review — Applicants may petition the FDA for “Fast Track” review of new drugs that treat serious disease and fill an unmet medical need (e.g., providing a therapy where none existed or providing a superior therapy). The Fast Track designation allows the applicant to interact closely with the FDA during the drug development and clinical trial design stage and to submit its marketing application in sections on a rolling basis as new data becomes available. Once an application has been submitted, an applicant may request Priority Review of the application by the FDA. Priority Review is available for drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists. Under Priority Review, the FDA’s goal for the application review process is reduced from the standard ten months to six months.
     Accelerated Approval — The FDA may accelerate approval of medicines that offer a significant improvement in the treatment of fatal or life-threatening conditions, or conditions for which there is no alternative therapy. The FDA may grant approval based on a surrogate endpoint — a measured marker or result that is a substitute for a clinically proven outcome. In certain cases, the FDA may permit phase 2 and phase 3 studies to be compressed into a single study or may grant marketing approval on a provisional basis with a written commitment to complete clinical studies that formally demonstrate patient benefit.
     Acceptance of Foreign Clinical Data — The FDA will accept reports of foreign clinical trials if they meet requirements for good clinical practice and are relevant to United States medical practice. It is, however, uncommon for the agency to approve a product without some evidence from clinical trials conducted in the United States, and most sponsors carry out at least one pivotal trial there. Studies conducted outside the United States are subject to special audits by FDA inspectors and may be rejected if United States requirements for record-keeping, protection of human subjects and other matters relating to good clinical practice are not met.
     Non-Patent Market Exclusivity — Under United States law, there are two forms of non-patent market exclusivity. First, the law prohibits approval of abbreviated new drug applications or literature-based applications for copies of innovative products for a period of five years after the approval of a new chemical entity, and three years after the approval of a new indication or dosage form for which substantial clinical trials were required.
     Second, the law provides for a seven-year period of protection for orphan drugs (see above). During this period, the FDA is precluded, subject to complex exceptions, from approving any application

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for the same drug, even if it is based on original data. These provisions apply to all drugs, including antibiotics and biological products.
     Post Approval — After regulatory approval is obtained, products are subject to continual review. Manufacturing, labeling and promotional activities are continually regulated by the FDA and equivalent regulatory agencies of other countries, and the manufacturer also reports certain adverse events involving its drugs to these agencies. Previously unidentified adverse events or an increased frequency of adverse events that occur post-approval could result in labeling modifications of approved products, which could adversely affect future marketing of a drug. Finally, approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing.
     Manufacturing Controls — Certain manufacturers and suppliers are required by the Federal Food, Drug and Cosmetic Act and by FDA regulations to follow Good Manufacturing Practice requirements and are subject to routine inspections by the FDA and certain state and foreign regulatory agencies for compliance with Good Manufacturing Practice and other applicable regulations. Upon routine inspection of these facilities, there can be no assurance that the FDA and other regulatory agencies will find the manufacturing process or facilities to be in compliance with Good Manufacturing Practice and other regulations. Failure to achieve satisfactory Good Manufacturing Practice compliance as confirmed by routine inspections could have a material adverse effect on a company’s ability to continue to manufacture and distribute its products in the United States, and in the most serious case, could result in the issuance of a regulatory warning letter or seizure or recall of products, injunction and/or civil fines or closure of a company’s manufacturing facility until Good Manufacturing Practice compliance is achieved.
     Advertising and Promotion — The FDA regulates advertising and promotion of prescription drugs. Promotion for unapproved uses is prohibited, and sponsorship of medical symposia and publications is restricted. Financial incentives to prescribers are regulated under federal and state criminal laws, as well as codes of practice for the medical professions.
     Noncompliance — Failure to comply with the applicable regulatory requirements can, among other things, result in fines, suspensions of regulatory approvals, product recalls, operating restrictions and criminal prosecution. In addition, the marketing and manufacturing of pharmaceutical products is subject to continuing FDA and other regulatory review, and later discovery of previously unknown problems with a product, manufacturer or facility may result in the FDA and other regulatory agencies requiring further clinical research or restrictions on the product or the manufacturer, including withdrawal of the product from the market.
     Product Liability — Companies that market products in the United States are subject to suit in state and federal courts for personal injuries caused by these items. The risk of product liability litigation is significantly greater in the United States than in most European jurisdictions, and damage awards can be substantial. FDA approval is not a defense to liability, but failure to comply with FDA requirements may constitute evidence of negligence.
     Medicare and Medicaid — The Medicare program, a federal program that provides defined health benefits for the aged, some disabled persons and persons with end-stage renal disease, may be an indirect source of revenue for products. Further, the Medicaid program, a joint federal and state program that provides defined health benefits to certain financially needy individuals, may also provide a source of revenue for products. These programs are subject to legislative and regulatory changes over which the Company has no control. Any restrictions on reimbursement, coverage or eligibility under the Medicare or Medicaid program could adversely affect the revenue generated by a product. Medicare and Medicaid fraud and abuse laws prohibit the soliciting, receiving, offering or payment of any bribe, kickback, rebate or other remuneration in return for the referral or recommendation of patients for items and services covered by federal health care programs. Because some products are covered by these programs, our activities are subject to these prohibitions.

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     In addition to these prohibitions, to the extent a company directly participates in the Medicare and Medicaid programs, it will be subject to additional extensive federal and state regulation, including:
  (a)   the provision of the Social Security Act, commonly known as the “Stark Law,” which prohibits certain referrals of Medicare patients by a physician to an entity if the physician or a member of such physician’s immediate family has a “financial relationship” with the entity, defined broadly to include compensation arrangements or ownership interests; and
 
  (b)   the federal False Claims Act which imposes civil and criminal liability on individuals or entities that submit false or fraudulent claims for payment to the government.
     Generic Substitution Statutes/Statutorily Required Rebates — Many states have enacted generic substitution statutes which permit, and in some cases require, the substitution of a different manufacturer’s version of a product than the one prescribed. In addition, many states require pharmaceutical companies to rebate a portion of their revenues from products sold to Medicaid beneficiaries back to the states concerned.
European Union Regulation
     The E.U. currently consists of 27 member states. Pharmaceutical companies operating in the E.U. are subject to regulatory controls governing the development, manufacture, labeling, and marketing of their products. National legislation in the area increasingly reflects initiatives at the E.U. level, normally in the form of directives and regulations. There is a broad range of E.U. legislation related to medicinal products. This legislation is supplemented by numerous non-binding guidelines (which provide guidance on safety, quality and efficacy). However, failure to comply with, or a departure from, the guidelines requires justification and may, for example, raise issues as to the adequacy of data submitted in support of an application to market a product. In November 2001, many of the stand-alone Directives regulating medicinal products were brought together and codified into a single Directive (Directive 2001/83/EC on the Community Code relating to medicinal products for human use). This has since been amended by including Directive 2003/63/EC and Directive 2004/27/EC.
     Pre-clinical Research — European legislation (Directive 2001/83/EC, as amended) imposes certain specific requirements for pre-clinical testing of a product where the data generated will be used for an application for a product marketing authorization in the E.U. Basic provisions in the legislation are expanded upon by a broad range of guidance documents which are important for companies to follow when products are under development. Deviation by companies from such guidance, particularly where they are specific to product groups, would generally require a strong justification upon application for a marketing authorization. Directive 86/609/EEC (as amended by Directive 2003/65/EC) established pre-clinical research standards to be met by research institutions engaged in animal research. These provisions are enforced through registration and inspection. Other directives on good laboratory practice have established high standards of practice for laboratories, with compliance again monitored through a system of inspection.
     Clinical Research — European legislation also stipulates requirements for conducting research in humans where the data is intended to be utilized in a marketing authorization application (Directive 2001/83/EC as amended by Directive 2003/63/EC and Directive 2004/27/EC). The European Committee for Medicinal Products for Human Use (“CHMP”) and the European Commission have also issued a number of guidelines on good clinical practice. In addition, other legislation, such as the Data Protection Directive (95/46/EC), is also relevant to the conduct of clinical research. Aside from these provisions, however, the conduct of research in the E.U. was not subject to specific E.U. legislation until April 2001, when the European Commission enacted Directive 2001/20/EC on the approximation of the laws, regulations and administrative provisions of the member states relating to the implementation of good clinical practice in the conduct of clinical trials on medicinal products for human use. This Directive harmonized the regulation of clinical research across the E.U.. Failure to satisfy the requirements, which include adherence to good clinical practice, may lead to a rejection of an application for a marketing

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authorization. Further principles and guidelines for good clinical practice as regards investigational medicinal products for human use have been implemented by Directive 2005/28/EC.
     Obtaining a Marketing Authorization — No pharmaceutical product may be marketed in the E.U. without a marketing authorization (although national legislation in some member states permits a product to be sold on a named patient basis). The UK Medicines Act 1968, as amended, governs applications for marketing authorization for human use in the United Kingdom. The Medicines Act implements, in the United Kingdom, detailed E.U. Directives on the licensing of pharmaceutical products. Each time new legislation is introduced at the European level, it is implemented in the United Kingdom pursuant to the Medicines Act. As a result, the core rules in force in the United Kingdom are essentially the same as those in force in other states within the E.U. In addition, individual countries within the E.U. may implement some additional national legislation relating to, for example, specific labeling requirements or in areas where there is no existing E.U. legislation.
     Registration Systems — Four principal systems currently exist in the E.U. for registering pharmaceutical products in order to obtain a marketing authorization: the national system, the mutual recognition procedure (“MRP”), the decentralized procedure (“DP”) and the centralized procedure (“CP”). The DP provides an alternative to the MRP.
     The national system involves the submission of a marketing authorization application to a single member state of the E.U. only. When a company wishes to apply for marketing authorizations in more than one E.U. member state, the mutual recognition procedure, the decentralized procedure or the centralized procedure described below must be used.
     The MRP involves a marketing authorization application initially directed to one national regulatory authority, termed the Reference Member State (“RMS”). As soon as the RMS has given approval for marketing, the decision is circulated to other member states nominated by the applicant, termed the Concerned Member States (“CMSs”), who then have to agree or disagree with this decision within 90 days.
     The DP is an alternative to the MRP and is intended for products that have not yet received authorization in any E.U. country. A key feature of this new process is that the RMS and the CMSs are chosen before the first step of the process and the RMS does not grant a Marketing Authorization prior to the application being reviewed by the CMSs (as is the case with the MRP).
     Both the mutual recognition procedure and the decentralized procedure include an arbitration process for resolving disputes and for arriving at a final decision, which is administered by CHMP. Such decision is legally binding both on the applicant and on the E.U. member states involved. The arbitration process may significantly lengthen the time from initial application to approval in all nominated member states. The result of such process may impose limitations not just on the marketing authorization applied for, but also on marketing authorizations obtained prior to the arbitration process. In accordance with Directive 2004/27/EC a formal Coordination Group was set up in November 2005 in order to address any issues that arise during the MRP and the new DP.
     The CP is a process for which there is a single application, a single evaluation and a single authorization for medicinal products within the E.U. This procedure applies only to certain types of applications and is compulsory for certain biotechnology products. Under Regulation 726/2004, new treatments for AIDS, cancer, diabetes and neurodegenerative diseases have to use the CP. Beginning May 2008, the CP became mandatory for new treatments for autoimmune diseases and other immune dysfunctions and viral diseases.
     The CP is administered by the EMEA (described below). A marketing authorization granted pursuant to the centralized procedure is recognized in all E.U. member states. A specific timetable is specified for evaluation of the application, including allowances for appeals.

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     The EMEA was established by Council Regulation EEC No. 2309/93 of July 1993 with effect from January 1, 1995. This Regulation has been replaced by Regulation 726/2004 which came into effect November 2005. The EMEA is responsible for coordinating the evaluation and supervision of medicinal products for both human and veterinary use across the E.U. On the basis of the EMEA’s opinion, the European Commission authorizes the marketing of a product approved by the centralized procedure. The EMEA comprises a management board, five committees of scientific experts responsible for preparing the EMEA’s opinion (one for medicinal products for human use, one for medicinal products for veterinary use, one for the designation of “orphan drugs” for rare diseases, one for herbal medicinal products and a new one for pediatrics), an executive director and a permanent secretariat.
     Criteria Assessed in Obtaining a Marketing Authorization — European Directive 2001/83/EC (as amended by Directive 2003/63/EC and Directive 2004/27/EC) sets out the basic principles for the regulation of marketing of medicinal products within the E.U. The criteria for the grant of a marketing authorization are quality, safety and efficacy. In order to demonstrate these criteria, a wide range of information and data are required to be submitted to the relevant regulatory authority. The exact requirements as to the analytical, pharmacotoxicological and clinical standards and protocols in respect of testing medicinal products to be submitted are detailed in European Directive 2003/63/EC (as amended). In summary, any application for a marketing authorization must be accompanied by, among other things, the results of:
    physico-chemical, biological or microbiological tests (establishing the quality of the products),
 
    pharmacological and toxicological tests (establishing the safety of the product), and
 
    clinical trials (studies in humans establishing efficacy and safety).
     The quality of the product is determined by laboratory studies and tests. These verify both the chemical constitution and stability of the product as well as the manufacturing processes used.
     The safety of the product is initially determined by studies to show matters such as toxicity, the effect on reproductive potential, adverse effects on genes, whether the product has the ability to cause cancer, how the product is distributed within the body, how quickly the body eliminates the product and the product’s interaction with other body chemicals.
     The efficacy and safety of the product are derived from clinical trials with volunteers and patients. Clinical trials are generally classified into phases 1 through 4, although there are not always distinct divisions between each phase.
     Phase 1 clinical trials are normally conducted in healthy human volunteers. The purpose of the trial is to obtain a preliminary evaluation of a product’s safety, its pharmacokinetic profile and its biological effect on humans.
     Phase 2 clinical trials assess the product for its short-term safety and preliminary efficacy in a limited number of patients. Later phase 2 trials may be comparative (e.g. comparing the product with a placebo). The appropriate dose ranges and regiments for phase 3 (safety and efficacy) trials are also determined during this phase.
     Phase 3 clinical trials are a comprehensive evaluation of safety and efficacy of the product based upon larger patient groups. The pattern and profile of the more frequent adverse reactions are investigated in detail and special features of the product are explored.

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     Phase 4 clinical trials are studies performed after a marketing authorization has been granted. They are designed to monitor drug use in the normal patient population. These studies are usually larger in scale and focus on efficacy in clinical practice and side effects.
     Marketing Authorizations for Orphan Drugs — In April 2000, the European Commission introduced a Regulation regarding orphan drugs. The main requirements for qualification are:
    the target disease condition has a prevalence of no more than 5 persons per 10,000;
 
    either the product offers potential significant benefit over existing treatment for the condition or there are no treatments for the condition.
     An application for orphan drug status may be made at any time up to submission of the marketing application. The benefits to successful applicants include:
    a reduced registration fee;
 
    use of the centralized registration procedure; and
 
    10 years’ exclusivity on the market.
     Maintenance of Marketing Authorizations — A marketing authorization application may be submitted when appropriate data is available. The submission of an application to a regulatory authority does not guarantee that a license to market the product will be granted by that regulatory authority. Furthermore, in certain cases (but excluding the centralized procedure), a national regulatory authority may impose its own requirements and may refuse to grant approval or may require additional data before granting an approval, even though the relevant product may have been approved by authorities in other countries. The time taken to obtain a national approval in individual countries varies, but can take from a few months to several years from the date of application. In contrast, it usually takes 12 to 18 months to gain approval under the centralized procedure. Marketing authorizations are granted subject to certain generally applicable conditions and may also be subject to product specific restrictions determined by regulatory authorities.
     When an authorization is granted and a product is brought to market, there are numerous obligations imposed upon the marketing authorization holder by the pharmaceutical legislation. These include the obligation to ensure that the product keeps pace with the state of scientific and technical knowledge, in particular, in terms of its manufacture and control. This means applying to vary the marketing authorization when the changes in the state of the art and relevant circumstances warrant its updating and amendment. Additionally, requirements for pharmacovigilance and the reporting of adverse reactions to products are central to the legislation. Within the E.U., advertising, and the production of labeling and patient information leaflets, are specifically regulated by Directives, with local codes of conduct and practice, in some cases, providing additional controls on corporate activity. The provisions of the legislation require significant staff and expertise which may be provided in-house and/or by external service. Examples of such staffing requirements include the need for pharmacovigilance and an information services individual within the company responsible for compliance.
     The regulatory authorities have the power to suspend, revoke or vary a marketing authorization:
    if the grant no longer satisfies safety, quality or efficacy standards;
 
    for reasons relating to and omissions in the product dossier; and
 
    for particulars or failures in relation to product manufacture.

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     The requirements for the performance of comprehensive pharmacovigilance for marketed products are designed for companies and regulators to detect product safety concerns and to take appropriate action in the interests of public health. The harmonization and streamlining of compulsory action and decision making on such matters in the E.U. through CHMP means that, increasingly, a concern arising in one member state in relation to a product marketed in several states will be examined at the E.U. level and the outcome of the examination will affect the product and its authorization across all member states in which it is sold and supplied.
     Manufacturing — Manufacturing conducted within the E.U. must meet good manufacturing practice requirements (Directive 2003/94/EC, which replaces Directive 91/356/EEC). Legislation (Directive 2001/83/EC as amended by Directive 2003/63/EC and Directive 2004/27/EC) imposes precise obligations upon manufacturers, in particular with regard to control, batch testing and release of products in the European market and the qualifications for the personnel authorized to undertake such activities. Inspections of manufacturing site facilities and procedures are regularly undertaken, both by local inspectors and by inspectors from other countries in which the product is to be sold. Failing an inspection may result in:
    product supplies being interrupted;
 
    recall; or
 
    plant closure pending elimination of defects.
     The legislation requires clear, contractual documentation regarding how manufacturing services are provided by one company to another when aspects of the manufacturing process are subcontracted to others by the marketing authorization holder and/or manufacturer.
     Wholesaling — Wholesale distribution in the E.U. is governed by Directive 2001/83/EC, as amended, and accompanying Good Distribution Practice Guidelines. Wholesalers must meet minimum requirements in terms of staff, facilities and procedure in order to obtain and retain authorization.
     Pricing — In a number of member states, it is not possible to market a product until pricing negotiations with the responsible government authorities have been concluded. Authorization by the regulatory authorities does not guarantee the negotiation of a satisfactory price or of reimbursement terms under national public health systems for the products concerned. In the United Kingdom, new or existing products which already have a marketing authorization may be referred by the Department of Health to the National Institute for Clinical Excellence (“NICE”) for a clinical and cost-effectiveness appraisal. Adverse findings (if any) in consequent NICE Guidance can mean that the target products will not be routinely prescribed on the National Health Service, that is, at public expense.
     Supplementary Protection Certificates — The time taken to research and develop medicinal products reduces the exclusivity provided by a product patent, and therefore, can reduce the period available to the developer to recoup investment through sales. In 1992, the E.U. introduced Regulation 1768/92 concerning the creation of a supplementary protection certificate for authorized products. While this regulation does not extend the patent, it does confer rights of a similar nature for the product after the patent has expired. The period during which the certificates are effective depends on calculations based upon the date of the application for the patent and the grant of the first E.U. marketing authorization for the product, with a maximum limit of five years.
     Abridged Applications — “Market Exclusivity” — In cases where the patent and supplementary protection certificate have expired or are not available, medicinal products can benefit from E.U. provisions which are commonly described as the rules of “market exclusivity,” but which, in fact, govern the making of abridged applications for marketing authorizations.

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     Regulation 726/2004 and Directive 2004/27/EC introduced the so called “8+2+1” data protection rules which are designed to reward innovation while encouraging the early availability of generic copies. These rules, which apply to applications for marketing authorizations for generic products submitted after November 2005, allow 10 or 11 years exclusivity in the E.U. for the reference product to which they relate. The 11 years protection will be applicable if a new marketing authorization for a therapeutic claim bringing a significant clinical benefit is obtained in the 8 years following marketing approval. Prior to this, some E.U. member states chose to implement 10 years’ exclusivity (e.g., U.K.) while other member states chose 6 years’ exclusivity (although the period for products approved by the centralized procedure has always been 10 years).
     The above rules do not, however, prevent a competitor from making a marketing authorization application accompanied by:
    a full data package compiled by the competitor;
 
    reference to published literature; or
 
    with the consent of the owner of the original data, cross reference to the data held on file by the regulatory authorities.
     The rules are only intended to limit the circumstances in which a marketing authorization may be granted without submission of a full data package, in order to protect the interests of the originator of the filed data who undertook and resourced the original research necessary to support an application to market.
     The Company’s Product Candidates — The human therapeutic products currently being developed by the Company will fall within the ambit of either the centralized procedure, the decentralized procedure or the mutual recognition procedure.
     During the development phases of the products, all clinical research programs must be conducted according to local and E.U. requirements in order to ensure the acceptability of the data generated for E.U. regulatory purposes. The Clinical Trials Directive (2001/20/EC) requires that both regulatory clearance and ethical approval be obtained prior to commencing a clinical study in either healthy volunteers or patients.
     Regulation of Veterinary Products — A very similar regulatory system applies in Europe with regard to veterinary medicinal products. In particular, biotechnology products are also subject to centralized review and registration under Regulation 726/2004 above. As is the case with human pharmaceutical products, no unauthorized veterinary product may be marketed in the E.U., subject to somewhat more limited exceptions than apply in relation to human pharmaceuticals.
      Regulation in Other Countries
     In general, regulation is similar in countries outside the United States and Europe, with the approval system regulated by specific agencies in each geographic area. However, approval by one agency does not ensure approval in other countries.
     In Australia, successful marketing of a therapeutic substance may be dependent on receiving marketing approval from the Therapeutic Goods Administration and also on obtaining Commonwealth Government subsidy for use of the product via either the Pharmaceutical Benefit Scheme or the Special Access Scheme. Applications for listing on either of these Schemes requires additional information, in particular economic analysis data, and approval for this second step may lag behind obtaining marketing approval. The Australian Government is able to exercise considerable power over price control through this process.

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Organizational Structure
     Protherics PLC acts as the holding company of a group consisting of its directly and indirectly held subsidiaries. Protherics PLC has the following principal subsidiaries:
                 
    % Held   Status   Country of Incorporation
Direct Holdings
               
Protherics Medicines Development Limited
    100     trading   England and Wales
Protherics Inc.
    100     trading   U.S.A. (Delaware)
Enact Pharma Limited
    100     trading   England and Wales
Proteus Biotechnology Limited
    100     dormant   England and Wales
Genethics Limited
    76     dormant   England and Wales
Indirect Holdings
               
Protherics UK Limited
    100     trading   England and Wales
Protherics Australasia pty Limited
    100     trading   Australia
Protherics-Utah, Inc.
    100     trading   U.S.A. (Tennessee)
Protherics Services pty Limited
    100     dormant   Australia
Protherics Salt Lake City, Inc. (formerly MacroMed, Inc.)
    100     trading   U.S.A. (Utah)
Kymed GB Limited
    100     dormant   England and Wales
Enzacta R&D Limited
    99.8     dormant   England and Wales
De Montfort Biopharma Limited
    100     dormant   England and Wales
Enzacta Limited
    99.8     dormant   England and Wales
TAb (Wales) Limited
    100     dormant   England and Wales
TAb (London) Limited
    100     dormant   England and Wales
Polyclonal Antibodies Limited
    100     dormant   England and Wales
Property, Plants and Equipment
     The Company leases its registered office, 3,812 sq. ft. of office space at The Heath Business & Technical Park, Runcorn, Cheshire WA7 4QF, from SOG Limited. This lease commenced on December 1, 2007, for an initial period of three years and is subsequently renewable annually at the option of the Company. In addition, the Company leases a corporate office, under three leases, at 3 Creed Court, 5 Ludgate Hill, London EC4M 7AA. These leases commenced in October 2003, December 2005 and October 2007 and are for an initial period of 3 years with a right to extend for a further two years.
     The Company also leases a 6,556 sq. ft. corporate office at 5214 Maryland Way, Suite 405, Brentwood, Tennessee 37027. The lease commenced on November 1, 2001 and will continue through December 31, 2009. The Company also leases 5,307 sq. ft. of laboratory and office space at 615 Arapeen Drive, Suite 105, Salt Lake City, Utah 84109, the lease for which commenced June 1, 2003, and will continue through May 31, 2012. In addition, the Company leases 17,629 sq. ft. of office, laboratory and clean room space at 2417 South 3850 West, Suite 150, West Valley City, Utah 84120, the lease for which commenced on September 1, 2006 and will continue through November 30, 2011, although the Company has a right to extend the lease for a further 3 years.
     Protherics UK Limited, a subsidiary of the Company, owns and operates production offices, quality control laboratories, a manufacturing facility, and land covering approximately 200 acres, located in Ceredigion, Wales.
     Protherics Australasia Pty Limited, a subsidiary of the Company, produces antisera at its facilities leased from the Turretfield Research Centre at Rosedale, near Adelaide, South Australia, where the Company has constructed offices, laboratories and a cleanroom. The lease of the Turretfield Research Centre has been extended to July 31, 2010, with an option to extend for a further five years. The South Australian Minister for Primary Industries holds a security interest on the buildings and equipment of Protherics Australasia Pty Limited in connection with notes payable in the principal amount of

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A$1,287,000, of which the final installment of $16,700 was repaid in April 2008. The interest rate was variable at the discretion of the Minister for Primary Industries.
     The Company’s sheep flock is located at Martindale, South Australia, where the Company is currently finalizing a new agreement with Martindale Holdings Pty Limited for the grazing rights for 5,500 to 8,500 sheep. The new agreement would allow sheep numbers to be expanded further by agreement with Martindale Holdings at a minimum of 12 months’ notice for pasture development. The new lease agreement would expire on May 31, 2013 with an option to extend for an additional five years.
     All of the Company’s laboratories, production facilities and farms currently in operation are suitably equipped for their intended purposes.
ITEM 4A. UNRESOLVED STAFF COMMENTS
     None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
     The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and notes thereto.
A. Operating Results
Year Ended March 31, 2008 Compared to Year Ended March 31, 2007.
     Total revenues for the fiscal year 2008 decreased by £5,052,000, or 16%, to £26,067,000 from £31,119,000 in fiscal year 2007. Revenues for fiscal year 2007 included a £10,000,000 manufacturing milestone on the Company’s CytoFab® program outlicensed to AstraZeneca. Excluding this milestone, total revenues for fiscal year 2008 increased by £4,948,000 or 23% over fiscal year 2007.
     The majority of the Company’s non-CytoFab® revenues were predominantly denominated in U.S. dollars and, therefore, the increasing weakness of the U.S. dollar against sterling has had an unfavorable impact on the revenue as reported in sterling, particularly with respect to the two main products, CroFab® and DigiFab®.
     CroFab® contributed sales of £15,707,000, up £1,577,000, or 11%, from the £14,130,000 recorded in fiscal year 2007. The majority of this product is sold through Nycomed. Our agreement with Nycomed splits revenue evenly between both parties. Seventy percent of the Company’s share of product revenues is earned on shipment of the product to Nycomed, with the balance earned once Nycomed sells the product. The increase in sales in the current year occurred due to increased product shipments to Nycomed which outweighed the effect of adverse currency exchange rate movements experienced over the year.
     DigiFab® contributed sales of £4,811,000, up 81% from £2,658,000 in fiscal year 2007. This increase arose as Nycomed recorded increased sales of DigiFab®. In addition, Nycomed also increased their product requirement to realign their inventory following reduced shipments in the prior two years. This underlying growth was only marginally moderated by the increasing weakness of the U.S. dollar.
     Voraxaze® revenues increased from £1,370,000 in fiscal year 2007 to £2,795,000 in fiscal year 2008, an increase of 104%. The increase in Voraxaze® revenues resulted primarily from revenues earned under the FDA Treatment Protocol approved in May 2007. Previously, Voraxaze® was only available on a named patient basis in Europe.

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     ViperaTAb™ sales in fiscal 2007 were abnormally high following the release of new product for the European bite season that year. As anticipated, sales in 2008 decreased from £347,000 in the prior year to £182,000.
     Royalty income from Enfer Scientific relating to BSE testing has been declining for several years due to increased competition and pricing pressures. These pressures have continued during fiscal 2008 with revenues down from £277,000 in fiscal year 2007 to £224,000 in fiscal year 2008.
     Other revenues increased from £124,000 in fiscal 2007 to £273,000 in fiscal 2008 as a result of research income from Protherics Salt Lake City, Inc. (formerly MacroMed, Inc.) acquired in January 2007, contributing for the full year.
     Cost of sales increased by £1,129,000 to £12,463,000 in fiscal 2008, an increase of 10%. Although total revenues decreased, trading revenues, being those earned by sale of product, increased by £4,991,000 or 27%. This disparity arises from increased volumes of higher margin products and resulted in an improved gross margin on trading revenues from 39% in fiscal 2007 to 47% in fiscal 2008.
     Total research and development expenses increased, as planned, by £5,160,000, or 37%, from £13,978,000 in fiscal year 2007 to £19,138,000 in fiscal year 2008 as the Company increased investment in its development pipeline and saw the full year impact of the development activities arising from the Company’s acquisitions of Oncogel® and the inlicensing of AcadraTM and Digoxin Immune Fab for pre-eclampsia in January 2007. No research and development expenditures were capitalized in either fiscal 2007 or fiscal 2008.
     Administration expenses increased from £10,161,000 in fiscal year 2007 to £13,684,000 in fiscal year 2008. This increase is a consequence of the full year impact of acquisition of MacroMed, Inc. in January 2007 as well as losses on foreign exchange positions and increased costs associated with employee share options.
     As a consequence of the increased investment in the product pipeline and fiscal 2007 including a milestone payment of £10,000,000 in relation to CytoFab® which was not repeated in fiscal 2008, the Company recorded an operating loss of £19,218,000 in fiscal 2008, compared to a loss of £4,354,000 in fiscal 2007.
     Interest income for fiscal year 2008 increased by £1,227,000, or 106%, to £2,382,000 as a consequence of increased cash and short-term investments. The main factor was the £36,063,000 proceeds (net of expenses) of the placing and open offer undertaken in January 2007 thereby leading to higher average cash balances in the year. Interest expense for fiscal year 2008 reduced marginally from £417,000 to £415,000.
     The tax credit recognized in fiscal year 2008 mainly represents the anticipated receivable from the surrender of tax losses following incurrence of qualifying U.K. research and development expenditure from prior years and a deferred tax credit arising from the recognition of increased tax losses at the Company’s Australian operation. This was offset by the full provision against tax prepayments made in the U.S. following a reassessment of probability of recovery in fiscal year 2009.
     The Company’s net loss for fiscal year 2008 was £16,742,000 compared to a loss of £3,357,000 for fiscal year 2007.
Year Ended March 31, 2007 Compared to Year Ended March 31, 2006.
     Total revenues for the fiscal year 2007 increased by £13,410,000, or 76%, to £31,119,000 from £17,709,000. A substantial element of this increase related to CytoFab® where total revenues recognized

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in the year amounted to £12,213,000, and included the £10,000,000 manufacturing milestone receivable in the year, compared to £701,000 in the previous year.
     The majority of the Company’s non-CytoFab® revenues were predominantly denominated in U.S. dollars and, therefore, the continuing weakness of the U.S. dollar against sterling had an unfavorable impact on the revenue as reported in sterling, particularly with respect to the two main products, CroFab® and DigiFab®.
     CroFab® contributed sales of £14,130,000, up £2,630,000, or 23%, from the £11,500,000 recorded in fiscal year 2006. The majority of this product is sold through Nycomed. Our agreement with Nycomed splits revenue evenly between both parties. Seventy percent of the Company’s share of product revenues ,is earned on shipment of the product to Nycomed, with the balance earned once Nycomed sells the product. The increase in sales in fiscal year 2007 occurred due to increased product shipments to Nycomed in addition to increased royalties from Nycomed’s sales to its customers. This outweighed the effect of adverse currency exchange rate movements experienced over the year.
     DigiFab® contributed sales of £2,658,000, down 30% from £3,789,000 in fiscal year 2006. Nycomed continued to record increased sales of DigiFab®, however during 2005 and 2006 Nycomed reduced its orders from the Company to better align its inventory holdings with sales levels. Nycomed worked through much of its inventory and, as a result of the strong sales being recorded over fiscal year 2006, increased its orders for fiscal year 2007. In addition to the reduced shipments, the adverse exchange rate movements experienced over 2006 also contributed to the reduced sales in fiscal year 2007.
     Voraxaze® revenues increased from £836,000 in fiscal year 2006 to £1,370,000 in fiscal year 2007, an increase of 64%. The increase in Voraxaze® revenues, which is currently available on a named patient basis in Europe, is attributed to a continuing increase in product awareness within the medical community.
     ViperaTAb™ sales increased from £96,000 in fiscal year 2006 to £347,000 in fiscal year 2007 following release of new product at the start of the European bite season.
     Royalty income from Enfer Scientific relating to BSE testing suffered from increased competition and pricing pressures which have continued since 2004, and was down from £440,000 in fiscal year 2006 to £277,000 in fiscal year 2007.
     Other revenues reduced from £347,000 in fiscal 2006 to £124,000 in fiscal 2007. Revenues for fiscal 2006 reflected the recognition of £275,000 on technology outlicensed by Enact prior to its acquisition.
     Cost of sales increased by £42,000 to £11,334,000 in fiscal 2007, although fiscal 2006 had included exceptional costs of £1,362,000 arising during the closedown of the Company’s main manufacturing facility during a major upgrade and expansion. Excluding these exceptional items, cost of goods increased by £1,404,000, or 14%, caused primarily by increased shipments of CroFab® marginally offset by the reduction in shipments of the lower cost DigiFab® product.
     Total research and development expenses increased by £7,231,000, or 107%, from £6,747,000 in fiscal year 2006 to £13,978,000 in fiscal year 2007. The most significant factor in this rise was the Company’s development expenditure on CytoFab® following the licensing agreement with AstraZeneca UK Limited towards the end of fiscal year 2006. In addition, the Company undertook further work on Voraxaze® in support of its marketing authorization applications. Finally, the fourth quarter of fiscal 2007 began to reflect the effects of increased spending from the acquisition of MacroMed, Inc. in January 2007 and the two other products (AcadraTM and Digoxin immune fab for pre-eclampsia) in-licensed at the same time. No research and development expenditures were capitalized in either fiscal 2006 or fiscal 2007.

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     Administration expenses increased by £958,000, or 10%, from £9,203,000 in fiscal year 2006 to £10,161,000 in fiscal year 2007. This increase was a consequence of the increasing size of the business since the CytoFab® agreement with AstraZeneca UK Limited in the last quarter of fiscal 2006 and the acquisition of MacroMed, Inc. in January 2007. This increased expenditure was offset by gains on foreign currency positions and reduced costs associated with employee share options.
     As a consequence of the above, in particular the recognition of CytoFab® revenues, the Company recorded an operating loss of £4,354,000 in fiscal 2007, compared to a loss of £9,533,000 in fiscal 2006.
     Interest income for fiscal year 2007 increased by £754,000, or 188%, to £1,155,000 as a consequence of increased cash and short-term investments. The main factor in the increased funds was the January 2006 receipt from AstraZeneca UK Limited of £23.8 million relating to the CytoFab® project. In addition, proceeds of the £36,063,000 (net of expenses) placing and open offer undertaken in January 2007 also increased interest income in the final quarter of fiscal 2007.
     Interest expense for fiscal year 2007 reduced marginally from £431,000 to £417,000. This was the result of lower levels of interest paid on the 6% unsecured convertible loan notes issued as the main part of the consideration for the Enact acquisition in June 2003, offset by increased charges on finance leases entered into as the Company expanded its manufacturing capability as required under the CytoFab® agreement with AstraZeneca UK Limited.
     The tax credit recognized in fiscal year 2007 mainly represented the anticipated receivable from the surrender of tax losses following incurrence of qualifying U.K. research and development expenditure. This amounted to £353,000, compared with £325,000 in fiscal year 2006, offset by the deferred tax charge arising from the utilization of tax losses at the Company’s Australian operation.
     The Company’s net loss for fiscal year 2007 was £3,357,000 compared to a loss of £9,488,000 for fiscal year 2006.
B. Liquidity and Capital Resources
     The Company has devoted its efforts and resources to drug discovery and development programs. Capital resources have been used for the establishment and expansion of production facilities, for product research and development activities, for clinical testing and to meet the Company’s overall increased working capital requirements. Future capital requirements will depend on numerous factors, including revenues generated from the sale of CroFab®, DigiFab® and Voraxaze®, the success of the Company’s CytoFab® program with AstraZeneca, the progress of the Company’s other research programs and clinical trials, the development of regulatory submissions, the commercial viability of the Company’s products, the ability to attract collaborative partners with sales, distribution and marketing capabilities, and the terms of any new licensing arrangements.
     At March 31, 2008, the Company had cash and cash equivalents totaling £37,616,000 (including bank overdrafts). The Company had a net cash outflow from operating activities of £126,000 as compared to an operating loss of £19,218,000. The main contributing factor to this differential was the £10,000,000 CytoFab® milestone which was earned in fiscal 2007 but not received until fiscal 2008. Excluding this item and the amount recognized from the initial £16,300,000 received under the AstraZeneca agreement in January 2006, the Company would have had a net cash outflow from operating activities during fiscal year 2008 of £8,051,000, compared to a net cash outflow of £5,758,000 in fiscal year 2007 calculated on the same basis. This adverse movement resulted from the increased cost base, most notably research and development and general and administrative expenditure, of the operation enlarged by the acquired operations and projects in January 2007 offset by improved working capital management.
     Capital expenditures financed by cash increased 179% to £3,471,000 in fiscal year 2008 from £1,242,000 in fiscal year 2007 and were predominantly the Company’s investment in its Salt Lake City

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facility, expansion of manufacturing capacity in Australia and further development of its facilities in Wales.
     The Company invested no cash in intangible assets in fiscal 2008 when £4,092,000 of expenditure was incurred in intangible assets in the prior year being primarily the digoxin immune fab program for pre-eclampsia along with Acadra™. The Company also incurred net cash costs of £374,000 in relation to the purchase of MacroMed, Inc. in January 2007.
     Capital expenditures of approximately £3,000,000 are budgeted for fiscal year 2009 in order to instigate process improvements to the CroFab® manufacturing process, to enhance capacity at the Company’s Australian manufacturing facility in order to meet future requirements for CytoFab® and to enhance the manufacturing facilities in Salt Lake City to support the OncoGel® program.
     Funds for operating and capital requirements historically have been provided by the issue of equity and debt and from collaboration agreements and other financing arrangements. On June 18, 2003, the Company issued unsecured convertible loan notes to those Enact shareholders who had accepted the offer from the Company with additional loan notes being issued with subsequent acceptances. By September 2003, the Company had acquired the entire issued share capital of Enact and thereby issued loan notes totaling £7,196,000. The loan notes carry interest at the rate of 6% per annum, payable twice annually in arrears. If not previously repaid, converted or repurchased, the loan notes will be repaid at par at the end of a 7-year period. The loan notes are convertible at 25p per ordinary share. The terms of the loan notes permit the Company to repurchase the loan notes at any time by tender (available to all holders alike) or by privately negotiated transactions with individual holders at any price. The Company can enforce conversion should the principal amount of the loan notes outstanding be equal to 20% or less of the total notes issued at any time, or if the middle market quotation of an ordinary share at the close of a consecutive five business day period after June 19, 2006 is greater than 32.5p. The nominal value of the loan notes outstanding at June 30, 2008 was £2,034,000.
     In January 2006, the Company received a non-refundable initial payment of £16,300,000 under the CytoFab® outlicensing agreement with AstraZeneca, in order to fund the Company’s obligation under this agreement. In addition, AstraZeneca invested £7,500,000 in the Company’s ordinary shares.
     In June 2006, the Company signed an agreement with CoVaccine BV, a Dutch company, to acquire CoVaccine’s novel adjuvant. The Company will pay CoVaccine up to 1,050,000, which is to be satisfied by the grant of the right to receive 295,413 Protherics ordinary shares, following the signing of the deal, and a further 590,826 Protherics ordinary shares upon completion of two development related milestones, the first of which was achieved during fiscal 2007 and resulted in the issue of 253,211 Protherics ordinary shares.
     In December 2006, the Company signed an agreement with Advance In-Vitro Cell Technologies SL for the use of Acadra™ in the treatment of B-CLL for an initial £500,000 as well as a total of up to £17.9 million in development and commercial milestones.
     In January 2007, the Company completed the acquisition of MacroMed, Inc. and licensed the Digoxin Immune Fab program for pre-eclampsia from Glenveigh Pharmaceuticals LLC. Consideration for the MacroMed acquisition consisted of 15,677,199 Protherics ordinary shares issued on completion with an additional 1,741,911 ordinary shares issued in July 2008. Consideration for the Digoxin Immune Fab program was in the form of $6,500,000 cash and 3,093,638 Protherics ordinary shares issued at closing, with an additional milestone payment, payable at the Company’s option either as a $5,000,000 cash payment or the issuance of 4,944,400 Protherics ordinary shares, now falling due following the achievement of the first clinical milestone.
     In conjunction with these transactions, in January 2007 the Company raised an additional £36,063,000 net of expenses through a fully underwritten Cash Placing and Open Offer of new ordinary

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shares to fund the acquisition and future development of the Digoxin Immune Fab and Acadra™ projects as well as to fund the operations of MacroMed, Inc., which principally related to the OncoGel® program.
     The Company anticipates significant additional expenditure in the fulfillment of its obligations under the CytoFab® agreement with AstraZeneca, in addition to increasing expenditure on its enlarged portfolio of product candidates and marketing efforts in advance of an anticipated launch of Voraxaze® in both Europe and the U.S. In the 2007 fiscal year, the Company recognized a £10,000,000 milestone on the AstraZeneca agreement although future milestones are dependent upon the Company and AstraZeneca achieving defined milestone points, the achievement of which cannot be guaranteed. Management estimates that the existing cash resources, together with anticipated revenues from product sales and royalty payments will be sufficient to fund operations for at least the next twelve months. The principal source of liquidity in this period will be the cash balances currently held and anticipated revenues. Management’s estimate of product sales are based primarily on orders for CroFab® and DigiFab® currently received under its U.S. distribution agreement, which provides for orders to be made 12 months in advance of shipment. The Company’s ability to fully supply orders will depend, in part, on its ability to maintain its current manufacturing capacity, the ability of its third party contractors to fill and ship orders on a timely basis, and may be subject to other market and operating risks described herein under “Item 3. Key Information — Risk Factors.”
     The Company’s financial instruments comprise borrowings, some cash and liquid resources, forward foreign currency contracts and various items, such as trade receivables and trade payables that arise directly from its operations.
     It is, and has been throughout the period under review, the Company’s policy that no speculative trading in derivative financial instruments shall be undertaken. While the impact on cashflows from movements in U.S. dollar exchange rates can be significantly mitigated by such derivative financial instruments in the near term, there remains potential for significant impact on the results of the Company from exchange rate movements over the longer term. This arises from the main markets for the Company’s approved products being in the U.S. and therefore priced in U.S. dollars, while manufacturing costs are incurred in British pounds sterling and Australian dollars. For further discussion, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
C. Research and Development, Patents and Licenses, etc.
     The Company’s research and development expenses consist primarily of salaries and related personnel expenses, costs associated with clinical trials, costs associated with non-clinical activities, intellectual property costs and facility-related costs. Clinical trial expenses include payments to vendors such as clinical research organizations, suppliers of raw materials, clinical trial sites, laboratories for testing of clinical samples and consultants. To date, the Company has charged all research and development expenses to operations as incurred since the Company can only recognize such expenditure as an intangible asset when it is probable that the project will generate future economic benefit.
     The Company uses its internal research and development resources, including its employees and facilities, across various projects, the Company does not account for these internal research and development expenses on a project basis. These expenses are included in the “non-project expenses” category in the table below. The Company uses external service providers to assist in the conduct of its clinical trials and to provide various other research and development related products and services. The Company has tracked many of these external research and development expenses and certain specific internal costs on a project basis. To the extent expenses associated with external service providers are not attributable to a specific project, they are included in the “non-project expenses” category in the table below.
     The following table summarizes the Company’s research and development expenses for the periods indicated:

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    Year Ended March 31,  
    2008     2007     2006  
    £’000     £’000     £’000  
Project:
                       
Acadra™
    494       14        
Angiotensin (ATV)
    983       317       375  
CroFab®
    1,634       106       219  
Oncogel®
    2,503       400        
CoVaccine™
    661       296       132  
DigiFab®
    871       223       168  
Prolarix™
    1,554       621       280  
CytoFab®
    5,438       7,485       1,882  
Voraxaze®
    2,530       1,918       1,770  
Other projects
    32       14       102  
 
Total Project Expense
    16,700       11,394       4,928  
 
                       
Non Project Specific Expenses
    2,438       2,584       1,819  
 
Total Research and Development Expenses
    19,138       13,978       6,747  
 
     Management anticipates that it will make determinations as to which programs to pursue and the level of funding to direct to each program on an ongoing basis. As indicated in Item 4 of this Annual Report, in the financial year ending March 31, 2009, the main focus of the Company’s research and development efforts will be to:
    commence modification of the CroFab® manufacturing process and associated regulatory matters;
 
    continue to address outstanding issues raised by the MHRA to achieve U.K. marketing approval for DigiFab®;
 
    continue to address the issues raised by the FDA and EMEA on Voraxaze® to achieve marketing approval;
 
    further develop the CytoFab® manufacturing process at a batch size of 3,000 litres;
 
    complete the phase 1 Prolarix™ solid tumor study and prepare for the planned phase 2 study in primary liver cancer;
 
    complete the manufacturing and scale up of Angiotensin Vaccine and CoVaccine HT and prepare for a phase 2a study due to commence in 2008;
 
    continue the phase 1/2 safety and tolerability study of OncoGel® in brain cancer and prepare and commence a phase 2b study in esophageal cancer;
 
    plan and commence a phase 1/2 study for the treatment of B-CLL using Acadra™ ;
 
    complete the phase 2b study report on severe pre-eclampsia using Digoxin Immune Fabs.
     At this time, due to the risks inherent in the product development process and given the early stage of its product development programs, the Company is unable to estimate with any certainty the costs that will be incurred in the continued development of its product candidates for potential commercialization. There are numerous factors associated with the successful commercialization of any of the Company’s drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on the stage of development. With

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product development timelines, the probability of success and development costs vary widely. While the Company is currently focused on advancing its highest priority product development programs, future research and development expenses will depend on the determinations that the Company’s management makes as to the scientific and clinical success of each product candidate, as well as ongoing assessments as to each product candidate’s commercial potential and prioritization. In addition, the Company cannot forecast with any degree of certainty which of its current product candidates will be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect its development plans and capital requirements.
     The process of completing clinical trials and seeking regulatory approval for the Company’s product candidates may require the expenditure of substantial resources and is subject to the numerous risks and uncertainties associated with developing biopharmaceutical products, including significant and changing government regulation, the uncertainty of future preclinical and clinical study results and uncertainties associated with process development and manufacturing, distribution and marketing. For a discussion of the risks and uncertainties associated with the timing and expense of completing the development of a product, see “Item 3. Key Information. — Risk Factors.”
D. Trend Information
     Following the CytoFab® license agreement with AstraZeneca, effective in January 2006, the Company is recognizing the initial £16,300,000 milestone payment received over the period of the earnings process, currently estimated at approximately seven years. The Company therefore anticipates continuing to recognize additional revenue under this agreement during fiscal 2009. Revenue in fiscal 2007 included a £10,000,000 milestone earned for the development of the CytoFab® development process, however receipt of the subsequent milestones that may fall due under this agreement will be dependent upon the further progression of the program by the Company’s partner, AstraZeneca.
     As previously noted, the Company’s product revenues are currently largely denominated in U.S. dollars and therefore revenues from its CroFab®, DigiFab® and ViperaTAbTM products are dependent upon the currency exchange rates in effect at the date of transaction. The Company’s U.S. CroFab® and DigiFab® distributor, Nycomed, is required to provide the Company with product sales forecasts two years before anticipated delivery date and these estimates can be revised by +/- 25% until one year prior to delivery, at which point a firm order is placed. A significant proportion of the Company’s U.S. revenues for these products are based solely upon the Company supplying the required product for these orders with the balance being recognized when Nycomed makes sales into the marketplace.
     Advance orders of CroFab® from Nycomed for fiscal year 2009 indicate an increase in the level of shipments from fiscal 2008 although the Company remains dependent upon the ability of its filling and freeze-drying contractors to meet scheduled shipment dates.
     It is anticipated that the level of DigiFab® shipments to Nycomed during fiscal 2009 will exceed that of the prior year since, during fiscal 2008, Nycomed satisfied orders principally from its own inventories. During fiscal 2007, the Company commenced named patient sales of DigiFab® in Europe. These European revenues increased in fiscal 2008, the first full fiscal year in this market, and may increase further in fiscal year 2009 should the product obtain regulatory approval in Europe. Again, the Company remains dependent upon the ability of its filling and freeze-drying contractors to meet scheduled shipment dates.
     The Company has a high proportion of its income derived from the U.S. markets, where pricing is in U.S. dollars, although a major proportion of its manufacturing costs are in pounds sterling and Australian dollars. The Company mitigates its currency exposures by a policy of forward covering expected revenues for up to twelve months on a rolling basis. The Company intends to implement modest selling price increases in U.S. dollars in order to mitigate the negative effects of the weak dollar, and in the longer term, to make further cost reductions in the manufacturing process. However, there can be no

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assurance that the Company can fully compensate for the effects of continued U.S. dollar weakness on its results.
     The cost of goods recorded by the Company increased marginally during fiscal year 2008, and it would be expected to increase again should product shipments increase in the current fiscal year as anticipated. In prior years, the Company has lost batches of CroFab® and DigiFab® due to contamination at the Company’s third party filling and freeze drying contractors. While the Company does not expect this to recur during fiscal year 2009, it cannot guarantee that similar product losses will not occur. See “Item 3. Key Information — Risk Factors.”
     The Company has recorded a significant increase in research and development expenditures during fiscal year 2008 as the Company continued to commit resources to CytoFab® and undertake further work on Voraxaze® in support of the regulatory filings. In addition, fiscal year 2008 was the first full year of increased expenditure arising from the acquisition of MacroMed’s OncoGel® program in January 2007 and the other products in-licensed at the same time. With the continuing development pipeline, it is anticipated that significant research and development expenditures will be required in forthcoming years.
     Following the expansion of Company’s activities in the final quarter of fiscal year 2007, general and administrative expenditures increased in fiscal year 2008 as the Company managed the enlarged business. The Company intends to increase its pre-marketing initiatives and to build small sales forces in the U.S. in anticipation of a marketing approval for Voraxaze® and in advance of the return of the rights to the Company’s CroFab® and DigiFab® products. Consequently, this will lead to increases in administrative costs during fiscal year 2009 and 2010.
     The increased research and development and general and administrative expenditures would be funded by the current cash resources held and anticipated product revenues during fiscal year 2009.
E. Off-Balance Sheet Arrangements
     None.
F. Contractual Obligations and Commercial Commitments
     The Company’s contractual and commercial commitments at March 31, 2008 are illustrated below.
                                         
    Payments due by period  
            Less than     Between 1     Between 3     Over  
    Total     1 year     and 3 years     and 5 years     5 years  
Contractual Obligations   £’000     £’000     £’000     £’000     £’000  
Long-Term Debt Obligations
    2,166       54       2,112              
Capital Lease Obligations
    2,678       966       1,329       383        
Operating Lease Obligations
    4,105       929       1,877       1,299        
Unconditional purchase obligations
    126       126                    
     
Total
    9,075       2,075       5,318       1,682        
     
     Interest, not included in the above table, for the year ending March 31, 2009 is anticipated to be approximately £341,000.

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     Under certain of the Company’s collaboration agreements, the Company may owe milestone or royalty payments in future periods to licensing or development partners, which payments are contingent upon the achievement of developmental or commercial milestones and other objectives. As of March 31, 2008, the total maximum amount of milestone payments we may be obligated to make under these agreements was approximately £26 million. However, this amount includes obligations related to pre-clinical and early stage products, and it is uncertain whether and when all of these milestones will be achieved. These obligations are therefore not included in this table. For a description of the Company’s material licensing and development agreements, see “Item 10. Additional Information — Material Contracts.
     Net Operating Loss Carryforwards
     The tax credits in fiscal years 2008, 2007 and 2006 have arisen as a result of research and development expenditure claimed under the Finance Act 2000. In fiscal year 2006, a deferred tax asset of £247,000 previously recognized in respect of the operating losses incurred in the U.S. was released since it is the directors’ opinion, based upon recent and forecast trading, that the level of profits in the U.S. in the forthcoming years will, in the short term, no longer lead to the realization of these assets, while in fiscal year 2008, the Company provided against income tax prepayments amounting to £250,000 for the same reasons. In fiscal year 2007, £104,000 of the deferred tax asset previously recognized in respect of operating losses incurred in Australia was utilized due to the profits in that jurisdiction while operating losses in fiscal year 2008 resulted in an increase in the recognized asset of £236,000. At March 31, 2008, the Company had tax losses, subject to the agreement of the Taxation Authorities, of approximately £94 million (2007: £84 million) available for offset against future taxable profits of the same trade. Of these losses, approximately £25 million (2007: £24.7 million) relates to net operating losses of Protherics Inc. and Protherics Salt Lake City, Inc., the use of £14.7 million of which is restricted to £0.9 million (US$1.9 million) per year.
     Recently Issued Accounting Pronouncements
     Recently issued accounting pronouncements under IFRS are discussed in Note 1 of the Notes to the Consolidated Financial Statements included herein at Item 17.
     Application of Critical Accounting Policies
     The critical accounting policies and estimates applied by the Company under IFRS are:
     Revenue — Revenue represents amounts receivable in respect of the sale of goods and services, license agreements and intellectual property to customers during the year, net of trade discounts given and value added tax. A description of the various elements of revenue and their accounting policies is given below:
    Products revenue is partly recognized upon the shipment of products to the distributor, the significant risks and rewards having been transferred to the distributor, with further amounts being recognized in accordance with the contractual terms upon shipment to the end user.
 
    Non-refundable up-front and milestone payments received by the Company are recognized over the period of the earnings process.
 
    Royalty income is generated by sales of products incorporating the Company’s proprietary technology. Royalty revenues are recognized once the amounts due can be reliably estimated based on the sale of underlying products and collectibility is assured.

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     Certain sales of the Company’s DigiFab® product include a right of replacement. Under IFRS, the Company considers that sales of this product represent a multiple-element arrangement transaction and defers a portion of the initial sale representing the estimated fair value of the second deliverable.
     The Company has a policy of holding forward foreign exchange contracts to hedge operating cash flows denominated in currencies other than British pounds sterling. As allowed under the transition rules to IFRS for fiscal year 2005, where the revenue denominated in a currency other than pounds sterling is the subject of a hedged instrument, revenue is recognized at the hedged rate. For fiscal years 2006 onwards, revenue denominated in a currency other than pounds sterling is recognized at the rate ruling at the time of the transaction.
     Application of the Revenue Policy to License Agreement with AstraZeneca UK Limited
     On December 7, 2005 the Company announced an agreement with AstraZeneca UK Limited for the development and commercialization of CytoFab®. Under the agreement, the Company could receive initial and milestone payments of up to £187.3 million being due upon occurrence of the following events:
     Upfront fee (£16.3 million)
1.   within one business day of the effective date of the AstraZeneca agreement;
 
    Pre-development milestones (£56 million in the aggregate)
 
2.   upon the decision by the Process Manufacturing and Supply Committee (or Steering Committee) to progress the Process Science Programme to the manufacture of the first 3,000 litre batch of the Product;
 
3.   upon the commencement of the first Phase 3 Trial;
 
4.   upon the decision by the relevant Person to continue the first Phase 3 Trial after the first interim analysis of the Clinical Outcomes of such Phase 3 Trial;
 
5.   upon the filing of the first application for the first Health Registration Approval with respect to the Product for use in the Primary Indication, wherever in the Territory;
 
    Post-development milestones (£115 million in the aggregate)
 
6.   upon the First Commercial Sale of the Product by or for the Licensee, any Affiliate of the Licensee or any Sub-licensee (in each case, including by its Distributor), in the United States;
 
7.   upon the First Commercial Sale of the Product by or for the Licensee, any Affiliate of the Licensee or any Sub-licensee (in each case, including by its Distributor), in any Major European Country;
 
8.   upon the First Commercial Sale of the Product by or for the Licensee, any Affiliate of the Licensee or any Sub-licensee (in each case, including by its Distributor), in Japan;
 
9.   upon the grant of the first Health Registration Approval of the Product for use in the first Secondary Indication in any Major Market;
 
    Manufacturing agreement and royalties
 
10.   upon shipment of commercial Product manufactured by the Company for sales post launch; and
 
11.   royalty on net sales of the Product achieved by the Licensee following launch.

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     In return for the above, the Company considers that the AstraZeneca agreement provides for the following obligations to be undertaken by the Company:
                 
    Obligations   Performance period   Deliverables   Cash flows
 
               
1.
  Delivery of know-how and regulatory documentation   All current documents and know how provided in early period post effective date with additional support provided until receipt of marketing approval by the FDA after which the Company will have delivered all support it is able to provide   Provision of documentation and internal resource for no fee, although certain out of pocket expenses may be recovered for attending specified meetings   Payments 1, 3, 4 and 5 (listed above)
 
               
2.
  Development of a manufacturing process as set out in the Process Science Agreement   Period to date at which Process Manufacturing and Supply Committee (or Steering Committee) agreed to progress the Process Science Programme to the manufacture of the first 3,000 litre batch of the product   Develop a robust manufacturing process to produce 2 batches of product to agreed specification   Payment 2 (listed
above)
 
               
3.
  Provision of material for phase 3 clinical trial   From completion of obligation 2 up to completion of phase 3 clinical trial   Manufacture of commercial batch of material   Payments 1, 3, 4 and 5 (listed above)
 
               
4.
  Participation in Steering Committee and Alliance Manager   From inception to the receipt of marketing approval by the FDA   Attendance and participation at meetings   Payments 1, 3, 4 and 5 (listed above)
 
               
5.
  Infrastructural improvements and contract manufacturing   Delivery of product for launch and beyond   Manufacturing capacity and product   Payments 10 and 11 (listed above)
     The Company has considered the remaining terms of the agreement and does not believe these represent obligations of the Company.
     IFRS treatment of the milestone payments
     Under IAS 18 Revenue, it is necessary to consider by reference to paragraph 13 whether the recognition criteria in the standard should be applied to the separately identifiable components of a single transaction in order to reflect the substance of that transaction. IAS 18 does not give guidance on what it means by “separately identifiable components.” In the Company’s judgment, the separately identifiable components of the agreement are the license, with associated and inseparable obligations, and contract manufacturing.
     Having determined that the first component was a license and associated obligations, the Company considered IAS 18’s requirements in relation to recognition of revenue from licenses — i.e., the use by others of the Company’s assets. IAS 18 uses the terms “royalties” to describe income generally

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from the use of long-term intangible assets of an entity, and that license fees, whether up front or contingent, fixed, variable or non-refundable, are all considered by reference to the same principles. As the Company has obligations to perform under the license agreement until FDA approval is achieved, the Company has determined that the revenue received up front should not be recognized immediately as a sale. Therefore the Company concluded that income from the license and its associated obligations should be recognized on an accruals basis in accordance with the substance of the agreement, over the development term.
     In determining the recognition policy for the milestone payments, the Company considered principally the guidance in IAS 18 regarding the recognition of revenue in relation to services. Paragraph 25 of the standard distinguishes services provided through indeterminate number of acts over a period of time from those that relate to a significant act. The Company judges whether the services in connection with a particular milestone represent a significant act by considering whether the efforts and risks involved in achieving that milestone are substantive. The remaining revenue is viewed as earned through indeterminate acts over the period for which services are required, but only recognized when no longer contingent.
     The Company, therefore, distinguishes between pre-development milestones involving substantive efforts (in terms of time, cost and manpower) by the Company and those pre-development clinical milestones that are largely under the control of AstraZeneca. These are referred to herein as the “substantive efforts” milestones and the “clinical development” milestones respectively.
     Under the Company’s accounting policy, milestones are treated as “substantive efforts” milestones if the following criteria have been satisfied:
    The milestone payments are non-refundable;
 
    The achievement of the milestone involves a degree of risk that was not reasonably assured at the inception of the arrangement;
 
    Substantive effort is involved in achieving the milestone;
 
    The amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with the achievement of the milestone; and
 
    The time that passes between the payments compares to the effort required to reach the milestone.
     Provided that the above criteria are met, the Company believes that the fees earned if it reaches a “substantive efforts” milestone represent a performance bonus that is contingent only on performance of the specified R&D services. Therefore, the milestone is recorded as revenue in full upon achievement of the milestone.
     Taking the actual payments received and to be received under the AstraZeneca agreement:
     £16,300,000 upfront, non-refundable payment
     The initial payment has been deferred and amortized over the expected term of the Company’s continued involvement in the R&D process. Changes in estimates of the timeline are recognized prospectively. As noted above, the upfront fee is being taken to income over the period of involvement by the Company in the development of CytoFab®. The Company considers that this period of involvement will end once the first indication has been approved by the FDA. The clinical development plan is to be undertaken by AstraZeneca, and based upon this plan, the Company estimated that its performance under

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the AstraZeneca agreement will cover the period to December 31, 2012, this being the targeted date of FDA approval.
     £10,000,000 milestone on approval to commence 3,000 litre batch for commercial trial
     The Company considered this milestone to be substantive since the achievement of this milestone was set out in the Process Science Programme based upon the Company’s completion of pre-defined steps to develop a manufacturing process and prove the process by producing two 600 litre batches. Under the Company’s accounting policy, this “substantive efforts” milestone payment was recognized as revenue when the milestone was achieved, and the milestone payment became due and collectible.
     “Clinical development” milestones
     Under the AstraZeneca agreement, AstraZeneca is solely responsible for the clinical trials, regulatory approval process and sales and marketing activities, including absorbing the costs of such activities. The Company does not consider that milestones 3-5 above will constitute “substantive efforts” milestones in view of the level of cost and manpower efforts expected to be dedicated by the Company to achieving the specific milestone concerned. When a “clinical development” milestone is achieved, a portion of the milestone revenue equal to the amount of progress toward completion will be recognized. The balance will be added to the remaining deferred revenue from the initial upfront payment, plus any previous milestones, and amortized over the future periods to completion. Progress to completion will be measured on a time basis, taking account of the estimated period to completion of the Company’s obligations under the license agreement. The Company anticipates receipt of the next milestone in 2010 upon commencement of the phase 3 trial.
     It is anticipated that milestone payments 6 to 9 will occur after FDA approval of CytoFab® and, therefore, after all of the Company’s obligations under the AstraZeneca agreement have been satisfied. Therefore, such milestones will be recognized on receipt.
     Deferred tax — Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
     Deferred tax liabilities are recognized for taxable temporary differences arising from investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
     The Company’s opinion is that the trading projections do not satisfy the definition within the relevant IFRS to enable it to recognize deferred tax assets for its U.K. and U.S. operations at March 31, 2007 and March 31, 2008. In the event that trading projections would satisfy the definition of the relevant IFRS, these assets could be recognized and credited to income in the period such determination was made.
     Goodwill — Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets, including intangible assets, of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment or when events or changes in circumstances indicate the carrying value may be impaired, and carried at cost less accumulated impairment losses. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold.

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     Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous U.K. GAAP amount. Goodwill arising on acquisitions in the year ended March 31, 1998 and earlier periods has been written off to reserves, has not been reinstated in the balance sheet and is not included in determining any subsequent profit or loss on disposal.
     Research and development expenditure - Research expenditure is recognized as an expense as incurred. Expenditure incurred on development projects (relating to the design and testing of new or improved products) are recognized as intangible assets when it is probable that the project will be a success, considering factors including its commercial and technological feasibility, status of regulatory approval, and the ability to measure costs reliably. Other development expenditures are recognized as an expense as incurred. Non-inventory related research and development expenditures previously recognized as expenses are not recognized as assets in a subsequent period. Development expenditure that have a finite useful life and that have been capitalized are amortized from the commencement of the commercial production of the product on a straight line basis over the period of its expected benefit.
     No development expenditure has been capitalized in fiscal years 2008, 2007 or 2006.
     Research and development inventories - Inventories relating to research and development projects are fully written down in the income statement unless the Company considers it probable to realize economic value from their sale or use. If the circumstances that previously caused these inventories to be written down below cost subsequently change and there is clear evidence of an increase in realizable value, the write down is reversed.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
     The following table sets forth information as of June 30, 2008 about the directors and executive officers of the Company.
             
Name   Age   Position within the Company
 
           
Executive Directors
           
Andrew John Heath, M.D., Ph.D.(1)
    60     Chief Executive Officer and Director
Rolf-Kristian Berndtson Soderstrom, BA, ACA
    42     Finance Director and Director
James Campbell Christie, BSc., MBA
    50     Operations Director and Director
Saul Komisar, MBA, BS
    39     President, Protherics Inc. and Director
 
           
Non-Executive Directors
           
Stuart Michael Wallis, FCA, CTA(1)(2)
    62     Chairman
Garry Watts, FCA(1)(2)(3)
    51     Director
John Robert Brown, Ph.D, MBA, FRSE(1)(2)(3)
    53     Director
Bryan Geoffrey Morton, BSc., MBA(1)(2)(3)
    52     Director
Jacques Gonella Ph.D(1)
    66     Director
 
           
Executive Officers
           
Ian Scoular, Ph.D, BSc, DMS
    58     Director of Business Development
Sally Waterman, Ph.D, BSc, DMS
    50     Director of Research & Development
Nick Staples, Ph.D, BSc
    38     Director of Corporate Affairs
 
(1)   Member of Nomination Committee.
 
(2)   Member of Remuneration Committee
 
(3)   Member of Audit Committee
     Executive Directors

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     Andrew John Heath, M.D., Ph.D. is the Chief Executive Officer of the Company. Dr. Heath holds an M.D. and Ph.D. from Sweden’s Gothenburg University. After a career in research and clinical medicine at Vanderbilt University, he joined the pharmaceutical industry in 1989. Dr. Heath has held both R&D and commercial positions with Glaxo and Astra, in Europe and the U.S. He served as Chief Executive Officer at AeroGen Inc, from 1996 until joining Therapeutic Antibodies Inc. as Chief Executive Officer in March 1998. He continued as CEO upon the formation of Protherics in 1999 following the merger of Therapeutic Antibodies Inc. and Proteus International plc. Dr. Heath is a non-executive director of XL Techgroup Inc. and the BioIndustry Association.
     Rolf-Kristian Berndtson Soderstrom, B.A., A.C.A. is Finance Director for the Company. Mr Soderstrom joined the Board of Protherics in August 2007. After qualifying as a Chartered Accountant, he worked in the Corporate Recovery and Corporate Finance department of PricewaterhouseCoopers. In 2000, he joined Cable & Wireless plc as a Director of Corporate Finance where he managed M&A and funding opportunities and was responsible for a range of listed investments. In 2004, he joined Cobham plc as a Divisional Finance Director managing a portfolio of businesses across Europe and the U.S. He is a trustee of the Protherics pension scheme.
     James Campbell Christie, B.Sc., M.B.A. is Operations Director for the Company. He has been in the biopharmaceutical industry since 1980 and worked with GSK, Celltech and Centocor BV before joining Therapeutic Antibodies Inc. in 1998. Mr. Christie was appointed to the Protherics Board in September 1999. He has management responsibility for manufacturing, quality, process development and technical support operations in Australia, the U.K. and Salt Lake City. Mr. Christie is a trustee of the Protherics pension scheme.
     Saul Komisar, M.B.A., B.S. is President of Protherics Inc. Mr. Komisar joined Therapeutic Antibodies Inc. in December 1996 prior to its merger with Proteus International plc to form Protherics, having spent the previous six years working in corporate finance and banking, specializing in the healthcare industry. He has responsibility for Protherics’ U.S. operations, including the commercialization of the Company’s FDA approved products. He holds an M.B.A. from The Owen Graduate School of Management at Vanderbilt University and is a non-executive Director with Franklin Synergy Bank, a U.S. commercial retail bank. Mr. Komisar also serves on the boards of several non-profit and volunteer organizations.
     Non-Executive Directors
     Stuart Michael Wallis, F.C.A., C.T.A. became Chairman of Therapeutic Antibodies Inc. in September 1998 and in 1999, following the merger of Therapeutic Antibodies Inc. and Proteus International plc, he became Chairman of Protherics. He was previously the Chief Executive Officer of Fisons plc and Chairman of Communisis plc and is currently Chairman of Plethora Solution Holdings PLC, BCS Global Networks Ltd., LGC Holdings Ltd. and is a director of other private companies.
     Garry Watts, F.C.A. joined the Board of Protherics in February 2004. Mr. Watts is currently the Chief Executive Officer of SSL International PLC having previously held the position of Finance Director and Managing Director for Europe. He is also a non-executive director of Stagecoach PLC, where he chairs the Audit Committee, and of the Medicines and Healthcare Products Regulatory Agency. Previously, he held executive directorships at Celltech Group plc and Medeva plc. He is a Chartered Accountant and was previously a partner with KPMG, leading the U.K. healthcare and life science practice.
     John Robert Brown, Ph.D., M.B.A., F.R.S.E. joined the Board of Protherics in March 2004 and was previously the Chief Executive Officer of Acambis PLC after holding the position of Finance Director. He is currently the Chairman of BTG plc, Scottish Biomedical Ltd and CXR Biosciences. He is a non-executive director of several companies, including Vectura Group PLC. He is a member of the Technology Strategy Board and is Chairman of the Roslin Foundation.

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     Bryan Geoffrey Morton, B.Sc., M.B.A. joined the Board of Protherics in February 2004. Mr. Morton has a B.Sc. in Pharmacology from Aberdeen University and an M.B.A. from Durham University. He began his pharmaceutical career in sales and has held a wide range of senior positions during a 30 year career in the healthcare industry, largely with Merck and Co. Inc. and Bristol Myers Squibb. In 2003, Mr. Morton founded Zeneus Pharma, which was sold to Cephalon in late 2005. Mr. Morton subsequently founded and is Chief Executive Officer of EUSA Pharma Inc., a specialty pharmaceutical company. He is a non-executive director of Aircraft Medical Ltd, a medical device company, and is a member of the Pilgrim Software global advisory board.
     Jaques Gonella, Ph.D., joined the Board in January 2007 following the acquisition of MacroMed, Inc. (now Protherics Salt Lake City, Inc.). Prior to the acquisition, he was a non-executive director of MacroMed, Inc., joining its board in 1999 in connection with an equity investment in the company. He is the principal in the consulting firm JG Consulting AG and is the founder of Permatec, which merged with Mediject in 2001 to form Antares Pharma, Inc., a U.S. public medical device company. Dr. Gonella also serves as Chairman of the board of directors of Antares Pharma. Prior to founding Permatec, he founded JAGO Pharma AG in 1983 and served as its President and Chief Executive Officer until its acquisition in May 1996 by SkyePharma PLC. Before founding JAGO, he occupied various positions with F. Hoffman La Roche Ltd. and Pfizer Inc. between 1968 and 1979. He holds a doctorate in analytical chemistry from the Polytechnic Institute of Lausanne, Switzerland.
     Executive Officers
     Ian Scoular, Ph.D., B.Sc., D.M.S. has served as Director of Business Development for the Company since July 2002. Mr. Scoular has more than 20 years business development experience in the pharmaceutical industry through positions in Nycomed Pharma, Schering Plough and Reckitt & Colman. He is responsible for seeking commercial partners for the Company’s development products and intellectual property portfolio.
     Sally Waterman, Ph.D., B.Sc., D.M.S. has served as Director of Research and Development since April 2005. Ms. Waterman has over 25 years experience within the pharmaceutical industry. She previously served as Director of Development Operations at Xenova Group plc, following its acquisition of KS Biomedix Holdings plc, where she was Vice President of Research and Development. Prior to this, she held various senior positions within Vanguard Medica plc (now Vernalis plc), including Vice President of Non-Clinical Development.
     Nick Staples, Ph.D., B.Sc. joined Protherics in 2003 and, as Director of Corporate Affairs, is responsible for corporate development and investor relations. He was previously a biotechnology analyst at WestLB Panmure and spent four years as a management consultant in the Life Sciences practice at PA Consulting Group, gaining experience in strategic planning, business analysis and due diligence. He holds a Ph.D. in Biochemistry from the University of Cambridge.
     There are no family relationships among the directors or other executive officers. There are no arrangements or understandings with major shareholders, customers or suppliers or others pursuant to which any person was selected to serve as a director or senior manager.
     The Board has appointed the following standing committees:
     Audit Committee. The Audit Committee is comprised of Messrs. Watts, Brown and Morton. The Audit Committee monitors the adequacy of the Company’s internal controls, reviews accounting policies and financial reporting and discusses with the auditors the proposed audit program and the results of the audit of the Company’s financial statements. The Audit Committee is chaired by Mr. Watts.
     Remuneration Committee. The Remuneration Committee is comprised of Messrs. Wallis, Watts, Brown and Morton. Dr. Gonella resigned from the Committee on July 26, 2007. The Remuneration Committee meets at least once a year to review the Company’s policy on directors’ remuneration. The

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Remuneration Committee evaluates the performance of the executive directors and other senior employees and advises the Board regarding their annual remuneration package. The Remuneration Committee is chaired by Dr. Brown.
     Nomination Committee. The Nomination Committee has been established to recommend the appointment of new directors to the Board. The Nomination Committee is comprised of Messrs. Wallis, Watts, Brown, Morton, Gonella and Heath. The Nomination Committee is chaired by Mr. Wallis.
Board Practices
     The Board currently has four executive directors and five non-executive directors. Although non-executive directors are not appointed for specific terms, the Company’s Articles of Association require directors to stand for re-election at least every three years.
Compliance with NASDAQ Marketplace Rules
     Protherics’ American Depositary Shares began trading on the NASDAQ Global Market in September 2005. As a listed issuer, the Company is subject to NASDAQ’s corporate governance standards contained in NASDAQ’s Marketplace Rules. In general, under Rule 4350, foreign private issuers such as Protherics are permitted to follow home country corporate governance practices instead of certain provisions of Rule 4350 without having to seek individual exemptions from NASDAQ. A foreign private issuer that follows a home country practice instead of any such provisions of Rule 4350 must disclose in its annual reports filed with the Commission each requirement of Rule 4350 that it does not follow and describe the home country practice followed by the issuer in lieu of such requirements. The Company’s independent United Kingdom counsel has advised the Company that its corporate governance practices are not prohibited by the laws of England and Wales.
     The requirements of Rule 4350 and the corporate governance practices that the Company follows in lieu thereof are described below:
    Rule 4350(f) requires that the quorum for any meeting of stockholders must not be less than 33 1/3% of the outstanding shares of a company’s common voting stock. The Company’s Articles of Association provide that not less than two shareholders present in person or by proxy and entitled to vote shall constitute a quorum for the transacting of business at any general meeting of shareholders. This quorum requirement is consistent with customary practice in the United Kingdom and is not prohibited by the laws of England and Wales.
 
    Rule 4350(c) requires that a majority of the board of directors be comprised of independent directors as defined in Nasdaq Rule 4200. The Board has determined that four directors, Messrs. Wallis, Watts, Brown and Morton meet the definition of “independent” under Rule 4200. Accordingly, the Company currently does not satisfy the Nasdaq requirement that a majority of the board of directors be “independent” under Rule 4200. The Board of Directors does satisfy the independence requirements of the Listing Rules of the U.K. Financial Services Authority (the “UKLA Listing Rules”) and the laws of England and Wales.
 
    Rule 4350(c) requires that nominees to a company’s board of directors be selected, or recommended for the board’s selection, either by a majority of the company’s independent directors or by a nominations committee comprised solely of independent directors. Nominees for Protherics’ Board are selected by its Nomination Committee, which is comprised of six directors, four of whom are non-executive directors meeting NASDAQ’s definition of “independent director.” Dr. Heath, as the Company’s Chief Executive Officer, is not considered to be “independent” under Nasdaq Rule 4350(c). Dr.

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      Gonella, a former director of MacroMed, Inc, which the Company acquired in January 2007, was a party to a consulting agreement with MacroMed and is, therefore, not deemed to be “independent” under Rule 4350(c). As comprised, however, the Nomination Committee complies with the UKLA Listing Rules and the laws of England and Wales.
 
    Rule 4350(c) requires that the compensation of a listed company’s chief executive officer and its other executive officers be determined or recommended to the board of directors either by a majority of the company’s independent directors or by a compensation committee comprised solely of independent directors. Compensation of Protherics’ executive officers is determined by the Remuneration Committee of the Board of Directors, which is currently comprised of four non-executive directors meeting Nasdaq’s definition of “independent director.” Dr. Gonella resigned from the Remuneration Committee on July 26, 2007 and, as previously disclosed, was not considered “independent” under Rule 4350. As comprised, the Remuneration Committee also complies with the UKLA Listing Rules and the laws of England and Wales.
 
    Rule 4350(i) requires that issuers obtain shareholder approval before a stock option or purchase plan is established or materially amended or other equity compensation arrangement is made pursuant to which stock may be acquired by officers, directors, employees or consultants of the issuer, subject to certain exceptions. The Company seeks shareholder approval for the adoption or amendment of stock plans or stock purchase plans only as required by the Articles of Association of the Company, the UKLA Listing Rules and the laws of England and Wales. Subject to the exceptions permitted in the UKLA Listing Rules, this involves seeking shareholder approval to any such plan that falls into either of the following categories (as defined in the UKLA Listing Rules):
  a)   an employees’ share scheme, if the scheme involves or may involve the issue of new shares or the transfer of treasury shares; and
 
  b)   a long-term incentive scheme in which one or more directors of the Company is eligible to participate; and
 
  c)   to non-minor amendments of any such scheme, to the extent required by the rules of the relevant scheme. In this context, it should be noted that the provisions of the rules relating to whether amendments to the scheme rules must be approved by shareholders must themselves be drafted to ensure compliance with the UKLA Listing Rules.
Executive Compensation
     The following overall policy has applied throughout the year and is intended to continue to apply for the financial year ending March 31, 2009.
    Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the necessary calibre and to reward them for enhancing value to shareholders; and
 
    a substantial proportion of the remuneration of the Executive Directors should be performance related. This is delivered through participation in the Company’s Deferred Bonus Plan and Long Term Incentive Plan, both of which are structured to deliver share based payments which will align Directors’ interests with those of shareholders and to reward participants for creating shareholder value.

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     The Remuneration Committee (the “Committee”) undertakes an annual review of market practice and considers the remuneration levels of directors in companies of similar size from within and outside of the industry sector. Overall reward levels depend on the achievement of corporate and individual performance targets. To this extent the Committee has reviewed the Company’s share incentive schemes and believes that grant levels and performance criteria remain appropriate to the Company’s current circumstances and prospects.
     The main elements of the remuneration package for Executive Directors and Senior Management to date have been:
     Fixed
    Basic salary and benefits in kind
     Variable
    Annual incentive under the Deferred Bonus Plan (the “DBP”)
 
    Long Term Incentive Plan (the “LTIP”)
 
    Share option plans
     For the Executive Directors, the proportion of fixed to variable remuneration is approximately 35% fixed to 65% variable at maximum. Only the basic salary element is pensionable.
         
    Policy   Performance Targets
 
       
Base Salary
  Reflects market competitive level for the role and individual contribution   Individual contribution
 
       
Annual incentive
under the DBP
 
•   Maximum award 75% of base salary for fiscal year 2008 (50% for fiscal years 2006 and 2007)
  Personal performance targets, specific to individual directors.
 
       
 
 
•   Awards in excess of 50% of base salary are subject to significantly more stretching performance conditions (fiscal year 2008 only)
  Deferred portion awarded as an option over shares, vesting after two years
 
       
 
 
•   50% of the award generally deferred into shares
   
 
       
Long-Term Incentive
Plan
 
•   LTIP is used as the primary incentive mechanism for Executive Directors and members of Senior Management.
  Total Shareholder Return against FTSE All Share Pharmaceutical & Biotech companies (excluding FTSE 100 companies)
 
       
 
 
•   Grants up to 100% of base salary
   
 
       
2005 Executive
Share Option Plan
 
•   Not currently used for Executive Directors

•   In any event, other than in exceptional circumstances, no
  Grants made to Senior Management below Board level are based on Total Shareholder Return against FTSE All Share Pharmaceutical & Biotech companies (excluding FTSE 100 companies)

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    Policy   Performance Targets
 
  combined award could be made under both the LTIP and the Executive Share Option Plan in any one year which would exceed 200% of salary    
    Basic salaries and benefits in kind
     Basic salaries are determined by the Remuneration Committee prior to the beginning of each year and when an individual changes position or responsibility. In deciding appropriate levels, the Committee considers the Company as a whole and takes into account the performance of the individual and the rates for similar positions in comparable companies. Basic salaries are reviewed annually.
     The principal benefits in kind include permanent health insurance and private medical insurance. Benefits in kind are not pensionable.
    Annual incentive under the Deferred Bonus Plan
     The purpose of the DBP is to reward participants for performance over the previous financial year and to provide an element of retention through the payment of part of any award in deferred shares.
     Participation in the DBP is at the discretion of the Committee. Current policy is to grant awards annually to Executive Directors and Senior Management.
     The maximum bonus award under the DBP is up to 75% of base salary, provided that, to the extent that an award exceeds 50% of base salary, the vesting of such excess will, in the opinion of the Remuneration Committee, be dependent on the achievement of significantly more stretching Performance Targets. This allows the Company to structure and offer a remuneration package that is sufficiently competitive to attract and incentivise the right caliber of individuals and reflects current market practice.
     While the Committee cannot disclose the actual performance targets due to commercial sensitivity, it is satisfied that these are appropriately challenging for the level of award that may vest. The measures for the financial year ending March 31, 2008 were based on performance targets specific to each Director’s area of responsibility which were considered to be key to the long term success of the business. Performance targets for the year ending March 31, 2009 will continue to follow this policy.
     For the year ending March 31, 2008 the Directors were awarded the following bonuses:
         
    Bonus as % of base salary
J.C. Christie
    50 %
A.J. Heath
    50 %
S. Komisar
    50 %
B.M. Riley
    40 %
R.B. Soderstrom
    50 %(1)
 
(1)   The bonus payable to R.B. Soderstrom for the year to March 31, 2008 is on a pro rata basis to his period of service.

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     At the discretion of the Remuneration Committee, the award under the DBP is payable in cash or as deferred shares, or a proportion of cash and deferred shares. The Remuneration Committee decides each year what proportion of the annual incentive should be delivered as deferred shares, but usual policy is 50%.
     Where a proportion of the award is delivered as deferred shares, these are normally granted in the form of options. The number of deferred shares is calculated by dividing the amount of the bonus by the market value of the shares on the date of grant, or such other day as the Committee may determine. Options will normally be granted at nominal value and will be exercisable between two and ten years from date of grant. If the individual leaves within the two year deferral period, under normal circumstances the option is forfeited. However, the Committee retains the discretion to allow the individual to retain the shares if appropriate.
     Further details of awards made under this plan are discussed later in this section within “Share Options and Warrants Granted in Protherics PLC”.
    Pension contributions
     The Company operates a defined contribution pension scheme for the benefit of Executive Directors and employees. Their dependants are eligible for a lump sum in the event of death in service. The assets of the pension scheme are held separately from those of the Company. The Committee may make payments to the pension scheme in lieu of bonuses or salary increases, at its discretion. In the year ending March 31, 2008, Directors and Senior Management were given the opportunity to waive all rights to receive an annual bonus under the Deferred Bonus Plan and, at the sole discretion of the Remuneration Committee, the Company would make additional contributions to the Company’s Pension Plan on behalf of those Directors and Senior Managers.
    Long Term Incentive Plan
     The LTIP is used as the primary incentive mechanism for Executive Directors and members of senior management. Other key employees are also invited to participate. Other than in exceptional circumstances, awards will not be granted in any year with a value greater than the individual’s annual remuneration (excluding bonuses and benefits in kind). Current policy is to grant awards to Directors and Senior Management at six-monthly intervals.
     Subject to the achievement of the relevant performance conditions, awards will normally vest three years from date of grant. Option awards may then be exercised up to ten years from the date of grant. The Committee may amend the performance conditions in certain circumstances, subject to their replacement with equally stretching conditions.
     In exceptional circumstances, the Committee may exercise its discretion to allow a proportion of an award to vest on cessation of employment with the Company.
     Further details of these plans are discussed later in this section within “Share Options and Warrants Granted in Protherics PLC”.
    Discretionary share option plans
     The Company has previously operated an Approved Share Option Plan and an Unapproved Share Option Plan for Directors and employees. These plans have now expired and no further options may be granted under them. Options are normally exercisable up to ten years from date of grant.

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     In exception circumstances, the Remuneration Committee has discretion to waive or amend performance conditions on awards under the LTIP and the 2005 Executive Share Option Plan. In using this discretion, the Committee may consider, as appropriate, the extent to which the performance period has elapsed and the performance conditions have been met over that period although this is not required under the rules of the schemes.
     Further details of these plans are discussed later in this section within “Share Options and Warrants Granted in Protherics PLC”.
     For information relating to these elements of the compensation packages for Executive Directors, see Note 7 of the Notes to the Consolidated Financial Statements included herein at Item 17.
     Executive Director Service Contracts — The following executive directors of Protherics have entered into service contracts with the Company, the details of which are as follows:
                 
    Date of       Notice period due from
Director   Agreement   Annual salary   the Company   the Director
A. Heath
  November 6, 2001   £301,250
U.S. $95,550
  12 months   12 months
B.M. Riley
  July 13, 1995   £190,000(1)   12 months   6 months
R.B. Soderstrom
  March 29, 2007   £220,000   12 months   12 months
J.C. Christie
  September 21, 2000   £190,000   12 months   6 months
S. Komisar
  June 8, 2007   $350,000(2)   Nil(3)   3 months
 
(1)   Mr. Riley resigned from the Board effective August 9, 2007.
 
(2)   Mr. Komisar and Mr. Soderstrom were appointed to the Board on April 26, 2007 and August 9, 2007, respectively.
 
(3)   Mr. Komisar’s contract is terminable by the Company at any time upon written notice, which shall specify the date of termination.
     Termination of the contracts requires six months notice by the employee and twelve months notice by the Company, with the exception of Dr. Heath and Mr. Soderstrom, where the notice periods are twelve months from either party. Except in the case of Mr. Komisar, upon serving or receiving notice, the Company has the right at its discretion to pay salary in lieu of notice. Under the terms of Mr. Komisar’s contract, he is entitled to receive an amount equal to twelve months’ base salary, in addition to certain other payments as detailed in the contract. There are no other provisions for compensation payable upon early termination of the service contracts.
     The executive directors of Protherics are also entitled to the following benefits: private medical insurance for themselves and their immediate families, long term disability insurance, and payment of professional memberships and subscriptions. In addition, the Company makes contributions to a defined contribution pension for the executive directors amounting to 20% of salary. In the case of Mr. Riley, the Company also made pension contributions of £23,000 in lieu of salary. Further details as to benefits provided to each director are included in Note 7 of the Notes to the Consolidated Financial Statements included herein at Item 17.
     Pursuant to the terms of his agreement, Mr. Komisar is entitled to receive an annual bonus in an amount to be determined by the Board. The Company also has a bonus scheme under which the remuneration committee may award the executive directors of Protherics bonuses of up to 50% of salary, rising to 75% for year ended March 31, 2008.
     Except as set out above, there are no existing or proposed service contracts between the executive directors and any member of the Company.

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     B.M. Riley resigned from the Board effective August 9, 2007. Notice to terminate his employment was effective from October 30, 2007 after a period of accrued leave. In accordance with his service contract, he will receive twelve months’ salary payable monthly in arrears as compensation for loss of office. He will continue to receive company pension contributions and normal benefits in kind during the twelve months notice period and will participate in the Deferred Bonus Plan for the year to March 31, 2009 on a pro rata basis. Mr. Riley has agreed to enter into a one-year Consultancy Agreement with the Company effective November 12, 2008, under which he will receive a monthly consultancy fee of £8,000 payable in arrears.
     Non-Executive Director Letters of Appointment — Pursuant to a consultancy agreement dated April 1, 2007, Mr. Wallis is to receive £25,000 annually for the provision of strategic consulting services to the Company. The agreement is terminable by 12 months notice from either party. In addition, Mr. Wallis is entitled to receive remuneration for his services as Chairman of the Board under a letter of appointment dated September 1, 1998, subsequently amended by agreement and replaced by a new letter of appointment dated May 24, 2007. Under these varying letters of appointment, Mr. Wallis received £54,167 in fiscal year 2008. These letters of appointment also entitled Mr. Wallis to receive a fully expensed automobile and are terminable by either party on 12 months notice.
     Mr. Watts has a letter of appointment dated January 19, 2004 under which he received £37,500 in fiscal year 2008. The appointment is terminable by either party on 3 months notice.
     Dr. Brown has a letter of appointment dated February 23, 2004 under which he received £37,500 in fiscal year 2008. The appointment is terminable by either party on 3 months notice.
     Mr. Morton has a letter of appointment dated July 21, 2005 under which he received £32,500 in fiscal year 2008. The appointment is terminable by either party on 3 months notice.
     Dr. Gonella has a letter of appointment dated January 20, 2007 under which he received £32,500 in fiscal year 2008. The appointment is terminable by either party on 3 months notice.
Employees
     The number of persons, including directors, employed by the Company as of March 31, 2008, 2007 and 2006, broken down by activity and geographic location, is shown below.
                                                                         
    2008   2007   2006
    U.K.   U.S.   Australia   U.K.   U.S.   Australia   U.K.   U.S.   Australia
 
                                                                       
Management
    43       4       3       36       3       5       30       2       4  
Administration
    24       10       8       24       12       5       28       5       3  
Research and production
    127       36       53       119       32       30       106       7       29  
Total
    194       50       64       169       47       40       164       14       36  
     Briefing and consultative procedures exist throughout the Company to keep employees informed on general business issues and other matters of concern. The Company has a policy of offering share options to all eligible employees, subject to availability under the option plan rules. None of the Company’s U.S. employees are subject to a collective bargaining agreement, and the Company has never experienced a work stoppage.
     The Company has made every effort to ensure that the principal members of its management and research team are suitably incentivized, but the retention of such staff cannot be guaranteed, and the loss

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of their services could materially adversely affect the ability of the Company to achieve its planned development objectives.
Share Ownership
     The following table sets forth, for each executive and non-executive director of the Company, their interest in the ordinary shares of the Company (including the interests of their immediate families and persons connected with them) and the percentage of the Company’s outstanding share capital represented by such ownership interests as of July 4, 2008.
                         
                    6% Convertible
    Ordinary           Loan Notes
Name   shares owned   Percentage   (£)(1)
S.M. Wallis
    566,689       0.17 %     60,606  
A.J. Heath
    419,810       0.12 %     24,242  
R. B. Soderstrom
    20,000       0.01 %      
J.C. Christie
    31,885       0.01 %      
S. Komisar
    27,594       0.01 %      
G. Watts
    90,000       0.03 %      
J.R. Brown
    22,500       0.01 %      
B.G. Morton
                 
J. Gonella(2)
    9,162,017 (2)     2.68 %      
 
(1)   The 6% Loan Notes are convertible into ordinary shares at 25p per ordinary share from December 19, 2004 and expire by their terms on June 19, 2010.
 
(2)   Dr. Gonella received the above shares in consideration for his interest in MacroMed, Inc. when it was acquired by the Company in January 2007.
     Share Options and Warrants Granted in Protherics PLC
     The Company has operated an approved share option plan, an unapproved share option plan and an approved savings related share option plan for executive directors and employees to motivate those individuals through equity participation in the Company. A separate option plan was set up for the benefit of certain former Therapeutic Antibodies employees at the time of the 1999 merger.
     On January 27, 2005, the Company adopted a Long-term Incentive Plan (“LTIP”), a Deferred Bonus Plan (“DBP”) and an Executive Share Option Plan (“ESOP”) consisting of an unapproved section with a linked Inland Revenue approved addendum. The Company has also granted individual unapproved options. The plans are overseen by the Remuneration Committee, which determines the amounts and terms of awards granted to eligible individuals under each plan. Details of the plans under which options have been granted are set out below.
    2005 Executive Share Option Plan (the “ESOP”).
     The option price is the greater of the market value of the shares on the date of grant (or the average market values on the three days immediately preceding the date of grant if the Committee so determines) and the nominal value of the shares. In any year, the value of options granted to an individual will not exceed twice the individual’s annual remuneration (excluding bonuses, commissions and benefits in kind). This limit may be exceeded in exceptional circumstances at the discretion of the Remuneration Committee.

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     Subject to satisfying conditions that are imposed at the time options are granted, which are normally market-based, options will be exercisable from the end of the vesting period, normally three years from the date of grant, to ten years from the date of grant. The Committee may waive the conditions, in certain circumstances subject to their replacement with equally stringent conditions. The Committee retains discretion not to set conditions for awards made to employees who are not Executive Directors.
    2005 Long-term Incentive Plan (the “LTIP”)
     Awards under the LTIP are made in the form of share options over new issue shares with an award price equal to the aggregate nominal value of the number of shares under option. The Remuneration Committee’s current policy is to grant awards twice yearly. The value of awards granted in a one-year period will not exceed the amount of the individual’s annual remuneration (excluding bonuses and benefits in kind). This limit may be exceeded in exceptional circumstances at the discretion of the Committee.
     Provided the Remuneration Committee is satisfied that the Company has achieved sound underlying performance, awards will vest based on the Company’s Total Shareholder Return (“TSR”). Performance will be measured after three years from the date of grant by measuring the Company’s TSR against a comparator group consisting of the primary listed components of the FTSE All Share Pharmaceutical and Biotech Index but excluding those companies in the FTSE 100 (currently AstraZeneca PLC, GlaxoSmithKline PLC and Shire plc). TSR will normally be averaged across a period of three months before the date of the award and three months before the date on which the performance period ends, although the Committee may determine that a different averaging period is appropriate and properly reflective of management performance. In any event, this will not be more than six months or less than one month. This is in keeping with normal market practice and is a practical adjustment to smooth out the impact of short-term market influences and to provide a more robust measure of the performance of the Company. Awards will vest, on a sliding scale between each step, as follows:
         
    % of total
Protherics PLC TSR relative to comparator group   award vesting
 
Upper decile
    100 %
Upper quartile
    80 %
Median
    30 %
Below median
  Nil
     Measuring the Company’s performance against these comparators recognizes the importance for shareholders that the Company outperform its sector and reflects the importance of the Company’s aim of sustainable share price growth. In addition, the Remuneration Committee must be satisfied that the Company has achieved sound underlying performance.
     Under the LTIP, the Board has also adopted a Performance Share Plan, pursuant to which the Company may make conditional awards of ordinary shares to eligible employees, subject to the achievement of certain targets, which are normally market-based, as determined by the Remuneration Committee.
    2005 Deferred Bonus Plan (the “DBP”)
     Awards under the DBP may be paid, at the discretion of the Remuneration Committee, in the form of cash or options to purchase ordinary shares, subject to achieving certain performance targets set by the Committee. In fiscal year 2007, the maximum award was set at 50% of base salary, but could be exceeded in exceptional circumstances. For fiscal year 2008, this maximum award was increased to 75%

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following approval by the shareholders on July 26, 2007. The receipt of the additional 25% is subject to performance targets that are significantly more demanding than those applied to the first 50%. Performance is measured against annual targets, which are set for each individual participant and are determined with reference to the requisite performance for achieving the overall strategic objectives of the business. These targets may be amended should the Remuneration Committee consider this to be in the interests of the Company, subject to their replacement with equally stringent conditions. The Committee will determine the extent to which the award will be delivered as cash or, as an option over the Company’s ordinary shares.
     Where awards under this plan are delivered as an option, the number of shares under the award is calculated by dividing the amount of the bonus by the market value of the shares on the date on which the award vests, or such other day as the Committee determines. Options will normally be granted at a nominal, or nil, exercise price and will normally be exercisable between two and ten years after grant. If the individual leaves within the two year deferral period, under normal circumstances the option is forfeited. The Committee retains the discretion to allow the individual to retain the shares if appropriate.
     Under the DBP, awards can be made in the form of options at nil or a nominal price per share. Options were granted under the DBP on June 12, 2006, June 11, 2007 and June 9, 2008 at 2p per share. Benefits arising under the DBP are not pensionable.
     Under the DBP, the Board has also adopted a U.S. Sub-Plan providing for awards under the DBP to eligible employees who are U.S. taxpayers.
    Savings-related Share Option Plan
     The Company also operates an Approved Savings Related Share Option Plan, which is open to all employees with a minimum of six months service. Options may be granted under this Plan at a discount of up to 20% from market value on the date immediately preceding the date of the invitation made to employees to subscribe for options. All options granted under this plan during the year and outstanding at March 31, 2008, have been made at a 20% discount. Options may be exercised during the period of six months following maturity of the savings contract. Under the rules of the plan, participants may choose either a three-year or a five-year savings contract. There are no Company performance criteria under the Savings Related Share Option plan.
    Other plans and grants
     The Company has previously operated an approved share option plan, an unapproved share option plan and an approved savings related share option plan for Executive Directors and employees to motivate those individuals through equity participation in the Company. The Remuneration Committee has responsibility for supervising the plans and the grant of options to Executive Directors under the terms of the plans.
     Under both the approved and unapproved share option plans, which have been used widely across the Company, the exercise price of the options granted is equal to the market value of the Company’s shares at the time the options are granted. Options issued prior to March 2004 may then be exercised on any date between three and ten years from the date of grant of the option, subject to the Company’s share price outperforming the average price of shares in the FTSE All Share Pharmaceutical and Biotech Index in any three year period commencing on or after the date of grant of the option. The Unapproved Plan requires that, for options granted to holders with an aggregate value (at the date of grant) for all options between four and eight times annual salary, those options may be exercised between five and ten years from the date of grant, subject to the Company meeting the required performance criteria. Prior to December 1999, the Approved Plan required real growth in earnings per share over three years. Initially, the Unapproved Plan, adopted by Proteus International plc in 1996 prior to the merger with Therapeutic Antibodies Inc., contained Company performance criteria intended for an early stage biotechnology

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company, relating principally to the successful completion of agreements with milestone payments generating revenue. The Board considered that the criteria was not appropriate to the more mature business of Protherics PLC, and, under the plan rules, adopted the Company performance criteria approved in December 1999 as likely to be a more fair and effective incentive.
     The options granted on March 1, 2004 are subject to revised Company performance criteria intended to improve compliance with best practice guidelines. Company performance could be measured at any time after three years from grant. If the TSR of the Company reaches the median of the FTSE All Share Pharmaceuticals and Biotech Index, one third of the shares under option become exercisable, rising on a sliding scale such that all the shares under option become exercisable if the Company’s performance is at or above the upper quartile. For options granted to holders with an aggregate value (at the date of grant) for all executive plan options of between four and eight times annual salary, Company performance will be measured after five years. No options are exercisable if the TSR of the Company is at the median of the FTSE All Share Pharmaceutical and Biotech Index. Options may then be exercised on a sliding scale beyond this point, with the maximum number of shares being exercisable if the Company’s performance is at or above the upper quartile. The Committee must also be satisfied that there has been an improvement in the Company’s underlying financial performance over the period. These performance criteria were selected to incentivize directors to enhance shareholder value above the Company’s peer group. On March 1, 2007, the Company’s performance was measured on these options (excluding those required to be measured after five years), and, based on the criteria, 81.74% of these options were considered to be vested by the Remuneration Committee.
     In addition, Dr. Heath was granted an option to subscribe for 600,000 ordinary shares at 39p on December 22, 1999. The agreement was structured as an individual option agreement to facilitate the retention of Dr. Heath as the Chief Executive Officer of the Company. The existing options held by Dr. Heath had exercise prices significantly in excess of the then current market price and in order to provide Dr. Heath with sufficient incentive, it was thought appropriate to enter into the option agreement. The terms of the agreement are similar to those of the Unapproved Share Option Plan. In particular, the option may generally be exercised only between the third and tenth anniversaries of the date of grant, and on the date of exercise, the share price must have outperformed the average of the FTSE All Share Pharmaceutical and Biotech Index in any preceding three year period. An adjustment may be made to the number of shares under option or the exercise price in the case of a variation in share capital, subject to confirmation by the auditors that it is in their opinion fair and reasonable. The option lapses if Dr. Heath leaves the Company voluntarily, and must be exercised within three months if his employment ceases by reason of injury, disability, sickness or redundancy. The agreement confers no pensionable benefits. No amendment may be made to the benefit of Dr. Heath except with the prior approval of the Company in General Meeting except for minor amendments to benefit the administration of the agreement or to obtain or maintain favorable tax, exchange control or regulatory treatment for Dr. Heath or the Company or its subsidiaries. No such options have been exercised to date.

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     The table below sets forth the details of the Company’s outstanding share options as of June 30, 2008.
                                                 
    At April 1,                   Cancelled   At June 30,   Exercise
Date exercisable   2007   Granted   Exercised   Or expired   2008   price (p)
 
                                               
Individual unapproved
                                               
22 Dec 2002 to 21 Dec 2009
    600,000                         600,000       39.00  
9 July 2002 to 8 July 2010
    25,000                         25,000       40.00  
9 July 2002 to 8 July 2010
    15,000                         15,000       25.00  
9 July 2002 to 31 May 2007
    3,850                   3,850             U.S.$6.00  
21 Dec 2007 to 20 Jun 2009
    40,000                         40,000       86.00  
21 Jun 2008 to 20 Jun 2010
    40,000                         40,000       86.00  
Approved scheme
                                               
28 Jan 2003 to 27 Jan 2010
    46,924             5,461       2,088       39,375       37.50  
28 Feb 2004 to 27 Feb 2011
    264,000             35,000       11,000       218,000       43.50  
19 Feb 2009 to 15 Feb 2016
    25,401                   25,401             93.50  
Unapproved scheme
                                               
22 June 2001 to 21 June 2008
    65,000                   65,000             46.00  
22 Dec 2002 to 21 Dec 2009
    385,000                         385,000       39.00  
27 Jan 2003 to 26 Jan 2010
    87,097                   2,440       84,657       37.50  
2 Aug 2003 to 1 Aug 2010
    2,908                         2,908       28.50  
22 Feb 2004 to 21 Feb 2011
    1,145,000                         1,145,000       43.50  
16 Jan 2005 to 15 Jan 2012
    2,177,000             25,000       137,000       2,015,000       39.50  
9 July 2005 to 8 July 2012
    350,000                         350,000       25.00  
20 Jun 2006 to 19 Jun 2013
    900,000                         900,000       23.25  
24 Jun 2006 to 23 Jun 2013
    30,000                   5,000       25,000       23.00  
1 Mar 2007 to 28 Feb 2014
    735,660             40,870             694,790       58.50  
1 Mar 2009 to 28 Feb 2014
    325,000                         325,000       58.50  
27 Sep 2009 to 26 Sep 2014
    310,000                   236,185       73,815       49.50  
28 Feb 2008 to 27 Feb 2015*(1)
    716,475             132,420       584,055             2.00  
19 Jul 2008 to 18 Jul 2015*(2)
    113,785                         113,785       2.00  
7 Sep 2008 to 6 Sep 2015
    115,000                   100,000       15,000       60.50  
21 Dec 2008 to 20 Dec 2015*(3)
    763,665                   11,607       752,058       2.00  
21 Dec 2008 to 20 Dec 2015
    85,000                         85,000       78.50  
12 Jun 2009 to 11 Jun 2016*(4)
    944,359                   69,508       874,851       2.00  
12 Jun 2008 to 11 Jun 2016+(1)
    109,806             36,818       5,331       67,657       2.00  
12 Jun 2009 to 11 Jun 2016
    10,000                         10,000       86.00  
11 Jul 2009 to 10 Jul 2016
    50,000                   50,000             78.50  
22 Aug 2009 to 21 Aug 2016*(5)
    6,383                         6,383       2.00  
15 Dec 2009 to 14 Dec 2016*(6)
    970,615                   77,185       893,430       2.00  
15 Dec 2009 to 14 Dec 2016
    50,000                   50,000             73.75  
5 Jan 2010 to 4 Jan 2017
    630,000                   60,000       570,000       72.25  
11 Jun 2009 to 10 Jun 2017+(2)
          184,317             14,793       169,524       2.00  
11 Jun 2010 to 10 Jun 2017*(7)
          1,620,901             141,343       1,479,558       2.00  
11 Jun 2010 to 10 Jun 2017
          50,000             50,000             58.75  
17 Jul 2010 to 16 Jul 2017*(7)
          8,510                   8,510       2.00  
31 Jul 2010 to 30 Jul 2017*(8)
          19,633                   19,633       2.00  
10 Aug 2010 to 9 Aug 2017*(9)
          423,076                   423,076       2.00  
28 Sept 2010 to 17 Sept 2017*(10)
          17,346                   17,346       2.00  
23 Nov 2010 to 22 Nov 2017*(11)
          1,594,962             40,408       1,554,554       2.00  
4 Dec 2010 to 3 Dec 2017*(12)
          13,302                   13,302       2.00  
9 Jun 2011 to 8 Jun 2018*(13)
          2,905,636             35,076       2,870,560       2.00  
9 Jun 2010 to 8 Jun 2018+(3)
          523,380                   523,380       2.00  
Savings related options
                                               
1 Feb 2009 to 31 Jul 2009
    245,954                   87,449       158,505       65.00  
1 Feb 2011 to 31 Jul 2011
    381,924                   256,600       125,324       65.00  
1 Feb 2010 to 31 Jul 2010
    68,424                   13,033       55,391       58.00  
1 Feb 2012 to 31 Jul 2012
    115,749                   78,484       37,265       58.00  
1 Jan 2010 to 30 Jun 2010
          285,759             22,325       263,434       2.00  

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    At April 1,                   Cancelled   At June 30,   Exercise
Date exercisable   2007   Granted   Exercised   Or expired   2008   price (p)
1 Jan 2012 to 30 Jun 2012
          379,746                   379,746         2.00
Protherics PLC option plan for ex-Therapeutic Antibodies employees
                                               
27 Jan 2000 to 29 June 2008
    162,238                   162,238           175.0 to 312.0
 
 
    13,112,217       8,026,568       275,569       2,397,399       18,465,817          
 
 
*   Options issued or conditional shares awarded under the Long Term Incentive Plan approved by the shareholders on January 27, 2005. The price of a share at the date of grant was (1) 54.75p, (2) 57.00p, (3) 78.50p, (4) 85.00p, (5) 79.25p, (6) 73.75p, (7) 58.75p, (8) 47.75p, (9) 52.00p, (10) 49.00p, (11) 53.75p, (12) 54.75p and (13) 37.00p.
 
+   Options issued or conditional shares awarded under the Deferred Bonus Plan approved by the shareholders on January 27, 2005. The price of a share at the date of grant was (1) 85.00p, (2) 58.75p and (3) 37.00p.
     At March 31, 2008, there were no unexercised warrants (2007: nil; 2006: nil) for ordinary shares, however, there are unexercised warrants for 100,000 (2007: 100,000, 2006: 212,500) ordinary shares in Enact Pharma PLC which expire on July 9, 2012 and are exercisable at 30p per share. Should these be exercised, the Company is entitled to repurchase these shares by issuing £17.05 6% convertible loan notes (“6% Loan Notes”) per 100 Enact Pharma PLC ordinary shares. The 6% Loan Notes became convertible at 25p per ordinary share on December 19, 2004. The terms of the 6% Loan Notes permit the Company to repurchase the 6% Loan Notes at any time by tender (available to all holders alike) or by privately negotiated transactions with individual holders at any price.

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Share Options held by Directors of Protherics PLC
Details of share options granted to directors are set forth in the table below as of June 30, 2008.
                                                                         
            At April                           At June   Exercise   Exercisable
        1, 2007   Granted   Exercised   Cancelled   30, 2008   Price (p)   From   To
Unapproved options                                                                
B. M. Riley(2)
  Unapproved     65,000                         65,000       46.00     22 Jun 2001   21 Jun 2008
 
  Unapproved     50,000                         50,000       39.00     22 Dec 2002   21 Dec 2009
 
  Unapproved     120,000                         120,000       43.50     22 Feb 2004   30 Apr 2010
 
  Unapproved     350,000                         350,000       39.50     16 Jan 2005   30 Apr 2010
 
  Unapproved     200,000                         200,000       23.25     20 Jun 2006   30 Apr 2010
 
  Unapproved     183,915                         183,915       58.50     1 Mar 2007   30 Apr 2010
 
  LTIP     132,420             132,420 (4)(6)                 2.00 (7)   28 Feb 2008   30 Apr 2010
 
  LTIP     92,357                   4,302 (3)     88,055 (4)     2.00 (8)   1 Nov 2008   30 Apr 2010
 
  LTIP     102,128                   20,892 (3)     81,236 (4)     2.00 (9)   1 Nov 2008   30 Apr 2010
 
  LTIP     119,322                   44,678 (3)     74,644 (4)     2.00 (10)   1 Nov 2008   30 Apr 2010
 
  LTIP           161,702             86,832 (3)     74,870 (4)     2.00 (11)   1 Nov 2008   30 Apr 2010
 
 
            1,415,142       161,702       132,420       156,704       1,287,720                          
 
J. C. Christie
  Unapproved     250,000                         250,000       39.00     22 Dec 2002   21 Dec 2009
 
  Unapproved     80,000                         80,000       43.50     22 Feb 2004   21 Feb 2011
 
  Unapproved     250,000                         250,000       39.50     16 Jan 2005   15 Jan 2012
 
  Unapproved     100,000                         100,000       23.25     20 Jun 2006   19 Jun 2013
 
  Unapproved     122,610                         122,610       58.50     1 Mar 2007   28 Feb 2014
 
  LTIP     111,416                   111,416             2.00 (7)   28 Feb 2008   27 Feb 2015
 
  LTIP     77,707                         77,707       2.00 (8)   21 Dec 2008   20 Dec 2015
 
  LTIP     101,547                         101,547       2.00 (9)   12 Jun 2009   11 Jun 2016
 
  LTIP     118,644                         118,644       2.00 (10)   15 Dec 2009   14 Dec 2016
 
  LTIP           161,702                   161,702       2.00 (11)   11 Jun 2010   10 Jun 2017
 
  LTIP           176,744                   176,744       2.00 (13)   23 Nov 2010   22 Nov 2017
 
  LTIP           270,270                   270,270       2.00 (14)   9 Jun 2011   8 Jun 2018
 
  DBP           128,378                   128,378       2.00 (14)   9 Jun 2010   8 Jun 2018
 
  SAYE     14,384                         14,384       65.00     1 Feb 2009   31 Jul 2009
 
Total
            1,226,308       737,094             111,416       1,851,986                          
 
S. Komisar(1)
  Unapproved     15,000                         15,000       39.00     22 Dec 2002   21 Dec 2009
 
  Unapproved     11,629                         11,629       37.50     27 Jan 2003   26 Jan 2010
 
  Unapproved     200,000                         200,000       43.50     22 Feb 2004   21 Feb 2011
 
  Unapproved     150,000                         150,000       23.25     20 Jun 2006   19 Jun 2013
 
  Unapproved     143,045                         143,045       58.50     1 Mar 2007   28 Feb 2014
 
  LTIP     100,251                         100,251       2.00 (7)   19 Jul 2008(5)        
 
  LTIP     72,380                         72,380       2.00 (8)   21 Dec 2008(5)        
 
  LTIP     91,456                         91,456       2.00 (9)   12 Jun 2009(5)        
 
  LTIP     100,173                         100,173       2.00 (10)   15 Dec 2009(5)        
 
  LTIP           151,396                   151,396       2.00 (11)   11 Jun 2010(5)        
 
  LTIP           157,980                   157,980       2.00 (13)   23 Nov 2010(5)        
 
  LTIP           252,460                   252,460       2.00 (14)   9 Jun 2011(5)        
 
  DBP     27,594             27,594                   2.00 (9)   12 Jun 2008(5)        
 
  DBP           50,177                   50,177       2.00 (11)   11 Jun 2009(5)        
 
Total
            911,528       612,013       27,594             1,495,947                          
 
A. J. Heath
  TA Plan     116,300                   116,300             175.00     27 Jan 2000   29 Jun 2008
 
  Unapproved     500,000                         500,000       43.50     22 Feb 2004   21 Feb 2011
 
  Unapproved     1,000,000                         1,000,000       39.50     16 Jan 2005   15 Jan 2012
 
  Unapproved     300,000                         300,000       23.25     20 Jun 2006   19 Jun 2013
 
  Unapproved     325,000                         325,000       58.50     1 Mar 2009   28 Feb 2014

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            At April                           At June   Exercise   Exercisable
        1, 2007   Granted   Exercised   Cancelled   30, 2008   Price (p)   From   To
 
  LTIP     221,233                   221,233             2.00 (7)   28 Feb 2008   27 Feb 2015
 
  LTIP     157,556                         157,556       2.00 (8)   21 Dec 2008   20 Dec 2015
 
  LTIP     186,507                         186,507       2.00 (9)   12 Jun 2009   11 Jun 2016
 
  LTIP     215,304                         215,304       2.00 (10)   15 Dec 2009   14 Dec 2016
 
  LTIP           297,661                   297,661       2.00 (11)   11 Jun 2010   10 Jun 2017
 
  LTIP           325,581                   325,581       2.00 (13)   23 Nov 2010   22 Nov 2017
 
  LTIP           500,000                   500,000       2.00 (14)   9 Jun 2011   8 Jun 2018
 
  Individual Plan     600,000                         600,000       39.00     22 Dec 2002   21 Dec 2009
 
Total
            3,621,900       1,123,242             337,533       4,407,609                          
 
R. B.
  LTIP           423,076                   423,076       2.00 (12)   10 Aug 2010   9 Aug 2017
Soderstrom(1)
  LTIP           204,651                   204,651       2.00 (13)   23 Nov 2010   22 Nov 2017
 
  LTIP           313,513                   313,513       2.00 (14)   9 Jun 2011   8 Jun 2018
 
  DBP           99,099                   99,099       2.00 (14)   9 Jun 2010   8 Jun 2018
 
Total
                  1,040,339                   1,040,339                          
 
(1)   Messrs.Komisar and Soderstrom were appointed to the Board on April 26, 2007 and August 9, 2007 respectively. Their options are stated as at their date of appointment.
 
(2)   Mr. Riley resigned from the Board effective August 9, 2007.
 
(3)   Following Mr. Riley’s resignation from the Board, these awards were forfeited to the extent shown (see Note 4 below).
 
(4)   Having carefully considered Mr. Riley’s performance during his tenure as Finance Director and with due regard to the requirement to mitigate loss, the Committee has exercised its discretion under the terms of the Long Term Incentive Plan to allow a proportion of Mr. Riley’s LTIP option awards to vest with effect from August 9, 2007, being the effective date of his resignation from the Board. In determining whether it was appropriate to exercise this discretion, the Committee gave due consideration to Mr. Riley’s achievements in delivering shareholder value during his tenure as a Director of the Company. The percentage of the LTIP option awards vesting was time apportioned from the date of grant of the award to the date of his termination of employment with the Company on October 30, 2008. All options held by Mr. Riley under the Unapproved Scheme at the time of his resignation from the Board had met the relevant performance conditions and were exercisable in full. The Committee has determined that Mr. Riley’s LTIP and Unapproved options will expire 18 months from his termination date, or, if earlier, ten years from the their date of grant.
 
(5)   Awards made under the terms of the LTIP and DBP to Mr. Komisar are in the form of Performance Shares. LTIP awards vest three years from the date of grant subject to the achievement of the relevant performance conditions. Awards under the DBP vest two years from the date of grant.
 
(6)   On March 7, 2008, Mr. Riley exercised an option over 132,420 ordinary shares granted under the terms of the LTIP. The market price of the Company’s ordinary shares on the date of exercise was 51.00p.
 
The market price of the Company’s ordinary shares on the date of grant was (7)57.00p (8)78.50p, (9)85.00p, (10)73.75p, (11) 58.75p, (12)52.0p, and (13)53.75p, and (14)37.00p
Performance criteria for awards made under the terms of the Company’s various share option plans are summarized in the table below.

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Plan   Performance condition(1)
Option granted prior to March 1, 2004 under the Unapproved and Approved Share Option Plans   May be exercised on any date between three and ten years from the date of the grant of the option subject to the Company’s share price outperforming the average price of shares in the FTSE Pharmaceutical Index in any three-year period commencing on or after the date of grant of the option.
 
       
Option granted on March 1, 2004 under the Unapproved Plan   Performance is measured after three years from the date of grant by measuring the Total Shareholder Return (“TSR”) of the Company against a comparator group consisting of the FTSE All Share Pharmaceutical and Biotech Index.
 
       
Options issued to existing holders with a total aggregate value (at the date of grant) of up to four times annual salary
  TSR performance
Upper quartile
Median
Below median

  % of award vesting
100%
33%
Nil

    The Committee must also be satisfied that there has been an improvement in the Company’s underlying financial performance over the period.
 
       
    Options granted under the Unapproved Plan on September 27, 2004 matured on September 27, 2007. Following application of the above measures, the Remuneration Committee determined that 35.15% of the shares would vest.
 
       
Option granted on March 1, 2004 under the Unapproved Plan   Performance is measured after five years from the date of grant by measuring the TSR of the Company against a comparator group consisting of the FTSE All Share Pharmaceutical and Biotech Index.
 
       
For options granted to existing holders with a total aggregate value (at the date of grant) between four and eight times annual salary
  TSR performance
Upper quartile
Median
Below median

  % of award vesting
100%
33%
Nil

    The Committee must also be satisfied that there has been an improvement in the Company’s underlying financial performance over the period.
 
       
Option granted
under the 2005
Executive Share
Option Plan
  Performance is measured after three years from the date of grant by measuring the TSR of the Company against a comparator group consisting of the FTSE All Share Pharmaceutical and Biotech Index excludes those companies in the FTSE 100 (currently AstraZeneca PLC, GlaxoSmithKline PLC and Shire plc)
 
       
None of the Directors hold options under this Plan.
  TSR performance
Upper decile
Upper quartile
Median
Below median

  % of award vesting
100%
80%
30%
Nil

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Plan   Performance condition(1)
Long Term Incentive
Plan
  Performance is measured after three years from the date of grant by measuring the TSR of the Company against a comparator group consisting of the FTSE All Share Pharmaceutical and Biotech Index excludes those companies in the FTSE 100 (currently AstraZeneca PLC, GlaxoSmithKline PLC and Shire plc)
 
       
 
  TSR performance
Upper decile
Upper quartile
Median
Below median

  % of award vesting
100%
80%
30%
Nil

    Options granted on February 28, 2005 matured on February 28, 2008. Following application of the above measures, the Remuneration Committee determined that nil shares would vest.
 
       
Performance criteria for individual options granted to A.J. Heath (Individual Plan):   The option may generally be exercised only between the third and tenth anniversaries of the date of grant, and on the date of exercise, the share price must have outperformed the average of the FTSE Pharmaceuticals Index in any preceding three-year period.
 
       
    The option lapses if Dr. Heath leaves the Company voluntarily, and must be exercised within three months if his employment ceases by reason of injury, disability, sickness or redundancy. The agreement confers no pensionable benefits. No amendment may be made to the benefit of Dr. Heath without the prior approval of the Company in General Meeting except for minor amendments to benefit the administration of the agreement or to obtain or maintain favorable tax, exchange control or regulatory treatment for Dr. Heath or any Group Member.
 
       
Performance
criteria for the
Protherics PLC Plan
for ex-Therapeutic
Antibodies
employees (TAb
Plan):
  Dr. Heath holds options over 116,300 shares under the Protherics PLC Plan for ex-Therapeutic Antibodies employees (TAb). There are no performance criteria under this Plan, which mirrors the terms of the Therapeutic Antibodies 1990 Plan, from which the options were transferred.
 
(1)   In exception circumstances, the Remuneration Committee has discretion to waive or amend performance conditions on awards under the LTIP and the 2005 Executive Share Option Plan. In using this discretion, the Committee may consider, as appropriate, the extent to which the performance period has elapsed and the performance conditions have been met over that period although this is not required under the rules of the schemes.
Messrs. Wallis, Watts, Brown, Morton and Gonella do not hold options over the Company’s ordinary shares.
The price of the Company’s ordinary shares to which the options relate was 54.00p at March 31, 2008, and fluctuated between 42.75p and 72.50p during the year.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
     The table below shows all holders who, to the Company’s knowledge, own, directly or indirectly, 5% or more of the Company’s ordinary shares, as of June 30, 2008, being the most recent practicable date before reporting.
                 
    # of   % of
Shareholder   shares   issued shares
AXA S.A.
    41,716,497       12.26 %
Aviva plc
    40,910,879       12.05 %
INVESCO plc
    37,361,912       11.01 %
HBOS plc
    20,245,926       5.97 %
     All of the Company’s major shareholders have the same voting rights.
     At June 30, 2008, a total of 344,417,123 ordinary shares were issued and outstanding, of which 13,247,698 shares were held of record by approximately 365 holders with registered addresses in the U.S., representing approximately 3.9% of the currently outstanding ordinary shares. Of those shares, at July 28, 2008, 1,519,400 ordinary shares were represented by American Depositary Receipts issued by The Bank of New York, as depositary, in the name of The Depositary Trust Company, as nominee. Because certain of these ordinary shares and American Depositary Receipts were held by brokers or other nominees, the number of record or registered holders in the U.S. is not representative of the number of beneficial holders in the U.S. or of the residence of the beneficial holders.
     To the Company’s knowledge, it is not directly or indirectly owned or controlled by another corporation, by any foreign government, or by any other natural or legal person, nor are there any arrangements known to the Company, the operation of which could result in a change in control of the Company.
Related Party Transactions
     On January 4, 2007, the Company completed the acquisition of MacroMed, Inc. (subsequently renamed Protherics Salt Lake City, Inc.). Dr. Gonella was a non-executive director and shareholder of MacroMed, Inc. As consideration for his interest in MacroMed, Inc., Dr. Gonella received 8,245,815 Protherics PLC 2p ordinary shares, valued at £6,102,000 at the date of the transaction and a further 916,202 shares on July 4, 2008 at the expiration of the 18 month holdback period.
     JG Consulting, a business owned by Dr. Gonella, charged to MacroMed, Inc. a total of $60,000 during the year (2007: $71,000, 2006: $nil) for the provision of consultancy services supplied by employees other than Dr. Gonella.
     During fiscal year 2008, the Company acquired goods and services from BCS Global Networks Limited, a company of which Stuart Wallis is a director, at a cost of £15,000 (2007: £33,000, 2006: £nil). During fiscal year 2008, LGC Promochem Limited provided testing service to the Company at a cost of £3,000 (2007: £1,000). LGC Promochem Limited is part of LGC Group Holdings plc, a Company of which Stuart Wallis became a director during fiscal year 2007.
     The Company rents its Nashville office from C.A. Gardner, a relative of Mr. Komisar. During the year, the Company paid $140,000 in rent to C.A. Gardner (2007: $120,000, 2006: $103,000)

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     All the above transactions are considered by the Board to be at arms-length and undertaken under standard terms and conditions.
Interests of Experts and Counsel
     Not applicable.
ITEM 8. FINANCIAL INFORMATION
Consolidated Statements and Other Financial Information
     Reference is made to Item 19 for a list of all financial statements filed as part of this Annual Report.
Legal Proceedings
     From time to time, the Company must engage in formal opposition proceedings to protect its proprietary rights and to challenge patent claims of third parties. See “Item 4. Information on the Company — Intellectual Property, Patents and Trademarks.”
Dividend Policy
     To date, the Company has not paid dividends on its ordinary shares. The Company intends to retain any future earnings to finance the expansion of its business and has no present intention to pay cash dividends. The declaration and payment of future dividends will be determined by the Company’s Board of Directors in light of conditions existing in the future and are expected to depend upon earnings, financial condition, capital requirements and other relevant factors not presently determinable.
ITEM 9. LISTING
     The principal trading market for the Company’s ordinary shares is the London Stock Exchange (“LSE”) under the symbol “PTI.L.” The Company’s ordinary shares were admitted to the Official List of the LSE in December 1996.
     The Company’s American Depositary Shares are listed for trading on the NASDAQ Stock Market under the symbol “PTIL.” Each American Depositary Share represents 10 ordinary shares deposited with The Bank of New York (the “Depositary”). The Depositary issues American Depositary Receipts, which may represent any number of American Depositary Shares. The Company furnishes the Depositary with annual reports containing a review of operations, audited consolidated financial statements prepared in accordance with IFRS and an opinion on the Consolidated Financial Statements by the Company’s independent auditors. The Company also furnishes the Depositary with semi-annual reports containing unaudited interim consolidated financial information prepared in accordance with IFRS. The Depositary arranges for the mailing of Protherics’ reports to all record holders of American Depositary Shares. In addition, the Company furnishes the Depositary with copies of all notices of shareholders’ meetings and other reports and communications that are distributed generally to its shareholders, and the Depositary arranges for the mailing of such notices, reports and communications to all record holders of American Depositary Shares.
     The following table sets forth for the periods indicated, (i) the high and low closing mid-market prices as reported in the Daily Official List for the ordinary shares as reported by the London Stock Exchange and (ii) the high and low reported sale prices for the American Depositary Shares on the NASDAQ Stock Market.

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    Ordinary Shares   American Depositary Shares(1)
Financial Year Ended March 31,   High   Low   High   Low
    £   £   $   $
2004
    0.618       0.165                  
2005
    0.658       0.467                  
2006
    0.998       0.450       18.99 (2)     8.50 (2)
2007
                               
First Quarter
    0.925       0.783       16.99       15.15  
Second Quarter
    0.910       0.780       17.25       13.90  
Third Quarter
    0.953       0.640       17.26       12.53  
Fourth Quarter
    0.793       0.658       15.44       12.64  
2008
                               
First Quarter
    0.725       0.535       14.36       10.90  
Second Quarter
    0.598       0.458       12.30       9.00  
Third Quarter
    0.578       0.460       12.40       9.48  
Fourth Quarter
    0.608       0.428       12.33       9.74  
2009
                               
First Quarter
    0.548       0.300       10.50       6.45  
                                 
Calendar Year 2008                                
Most Recent Six Months                                
January
    0.605       0.495       12.33       9.74  
February
    0.560       0.503       12.00       10.71  
March
    0.540       0.428       11.59       10.25  
April
    0.548       0.450       10.50       8.52  
May
    0.488       0.420       9.30       8.52  
June
    0.410       0.300       8.92       6.45  
 
(1)   Each American Depositary Share represents 10 ordinary shares.
 
(2)   Period covers from September 28, 2005, the date trading of the American Depositary Shares on the NASDAQ Stock Market commenced, to March 31, 2006.
ITEM 10. ADDITIONAL INFORMATION
Memorandum and Articles of Association
     Objects and Purposes
     The Company was originally founded in 1987 and was incorporated in England and Wales under the Companies Act 1985 (as amended) (the “Companies Act”) on January 12, 1990, as a public company limited by shares with the registered number 2459087. The Memorandum of Association of the Company provides that the Company’s principal object is to carry on the business of a holding company. The objects of the Company are set out in full in clause 4 of the Memorandum of Association which is available for inspection at The Heath Business & Technical Park, Runcorn, Cheshire, WA7 4QX.
     The Articles of Association of the Company (the “Articles”) contain provisions, inter alia, to the following effect:
     Voting Rights
     Subject to any special terms as to voting upon which any shares may have been issued, every shareholder present in person or as a duly appointed proxy of a member shall upon a show of hands have one vote, and on a poll, shall have one vote for every share of which he is a holder. A shareholder in respect of whom an order has been made by any court or official having jurisdiction in matters concerning

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mental disorder or incapacity to manage one’s affairs may vote, whether on a show of hands or on a poll, by his receiver or curator bonis and such receiver or curator bonis may, on a poll, vote by proxy.
     In the case of joint holders of a share, any one of such persons may vote at any meeting either personally or by proxy. If more than one such joint holders is present at any meeting, either personally or by proxy, the shareholder whose name stands first on the register shall be entitled to vote.
     No shareholder shall, unless otherwise determined by the Directors, be entitled to be present and vote, either in person or by proxy, at any general meeting or upon any poll in respect of any shares held by him if:
  (a)   any calls or other moneys due and payable in respect of these shares remain unpaid; or
 
  (b)   he or any person appearing to be interested in shares held by him has been duly served with a direction notice under section 793 of the Companies Act 2006 concerning the disclosure of interests in voting shares, and has failed to supply the Company with the information required by the notice or has supplied information which is false or misleading in a material respect.
     The instrument appointing a proxy and accompanying documentation if necessary, shall be deposited at the registered office or at such other place within the United Kingdom as is specified in the notice convening the meeting or in case of an appointment sent in electronic form, at the address specified for such purpose not less than 48 hours before the time of meeting.
     Dividends and other payments
     Holders of ordinary shares are entitled to the profits of the Company available for distribution and resolved to be distributed in accordance with the Companies Act, although no interest shall be payable on such distribution. The profits which the Company may determine to distribute in respect of any financial year shall be distributed rateably among the holders of the ordinary shares according to the amounts paid up on the ordinary shares held by them respectively, unless otherwise provided by the terms of issue. Dividends may be satisfied wholly or partly by the distribution of assets.
     The Board, if authorized by an ordinary resolution of the Company, may offer the holders of ordinary shares the right to elect to receive new ordinary shares, credited as fully paid, instead of cash for all or part of the dividend specified by that ordinary resolution.
     The Board may from time to time declare an interim dividend.
     The Board may deduct from any dividend payable to the holder of ordinary shares all such sums as may be due from such holder to the Company on account of calls or otherwise in relation to such ordinary shares.
     The Company may make use of all dividends unclaimed after one year until so claimed. A dividend unclaimed for 12 years from the date when it became due for payment will be forfeited and revert to the Company.
     Return of Capital
     In a winding-up, a liquidator must distribute any surplus after payment to all creditors to the holders of ordinary shares pro rata to their holdings of shares.

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     Variation of Rights
     All or any of the rights attached to any class of shares of the Company for the time being in issue may be varied or abrogated in such manner as may be provided by such rights, or in the absence of any such provision, either with the consent in writing of the holders of not less than three quarters in nominal value of the issued shares of that class, or the sanction of a special resolution passed at a separate general meeting of the holders of the issued shares of that class, but not otherwise. The provisions of the Articles of Association relating to general meetings apply to every such separate meeting, save that the necessary quorum at such meeting, other than an adjourned meeting, shall be two persons present holding or representing by proxy at least one third in nominal value of the issued shares of that class.
     Transfers
     All transfers of uncertified shares shall be made in accordance with and be subject to the provisions of the Uncertified Securities Regulations 2001 and the facilities and requirements of the relevant system and, subject thereto, in accordance with any arrangements made by the Directors pursuant to the Articles of Association.
     The instrument of transfer of a certificated share shall be in the usual form or such other form as shall be approved by the Directors of Protherics and shall be signed by or on behalf of the transferor, and if the share is not fully paid, by the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register in respect thereof.
     The Directors may decline to recognize any instrument of transfer of a share which is not fully paid, provided that where any shares which are not fully paid are admitted to the Official List of the Financial Services Authority or AIM, the discretion shall not be exercised in such a way as to prevent open and proper dealings in those shares. The Articles of Association do not contain any restriction on the free transferability of fully paid shares provided that the instrument of transfer is in favor of not more than four transferees. In relation to a certificated share, the Directors may decline to recognize any instrument of transfer unless the instrument of transfer is left at the registered office of the Company or at such other place as determined by the Directors, accompanied by the certificate for those shares and evidence as reasonably required by the Directors to prove the title of the transferor and due execution.
     No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to any share. Any instrument of transfer which is registered may be retained by the Company. If the Directors refuse to register a transfer they shall, in the case of certificated shares, within two months after the date on which the transfer was lodged with the Company, send to the transferee notice of the refusal and (except in the case of fraud), return to him the instrument of transfer, or in the case of uncertified shares, notify such persons as may be required by the Uncertified Securities Regulations 2001 and the requirements of the relevant system concerned.
     Directors of Protherics
     Except as provided in this paragraph, a Director shall not vote, or be counted in the quorum in relation to, any resolution of the Board or of a committee of the Board concerning any matter in which he has to his knowledge, directly or indirectly, a material interest (together with any interest of any person connected with him within the meaning of Sections 252-5 of the Companies Act 2006), other than his interest in shares or debentures or other securities of the Company. If he shall do so, his vote shall not be counted.
     A Director shall (in the absence of some other material interest that is indicated below) be entitled to vote (and be counted in the quorum) in respect of any resolution concerning any of the following matters, namely:

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  (a)   the giving of any guarantee, security or indemnity to him in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;
 
  (b)   the giving of any guarantee, security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security;
 
  (c)   any proposal concerning an offer of any shares, debentures or other securities of or by the Company or any of its subsidiary undertakings for subscription or purchase in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;
 
  (d)   any contract, arrangement or transaction concerning any other body corporate in which he or any other person connected with him within the meaning of Section 252-2 of the Companies Act 2006 is interested, directly or indirectly and whether as an officer or shareholder or otherwise howsoever provided that he is not nor any persons connected with him are not to his knowledge, the holder of or beneficially interested in (under sections 820-825 of the Companies Act 2006) one per cent or more of any class of the equity share capital of such body corporate or of the voting rights available to members of the relevant body corporate;
 
  (e)   any contract, arrangement or transaction for the benefit of the employees of the Company or any of its subsidiaries which does not accord to them privileges or advantages not accorded to the employees to whom the scheme relates;
 
  (f)   any contract, arrangement or transaction concerning any insurance which the Company is to purchase and/or maintain for the benefit of any Directors;
 
  (g)   the giving of any indemnity pursuant to the articles of association; and
 
  (h)   the provision of funds to any Director to meet or doing an act enabling the directors to avoid incurring expenditure as described in sections 205(1) or 206 of the Companies Act 2006.
     A Director shall not vote or be counted in the quorum on any resolution concerning his own appointment as the holder of any office or place of profit with the Company or any company in which the Company is interested including fixing or varying the terms of his appointment or the termination thereof.
     Each of the Directors shall be paid a fee for his services at a rate determined by the Board from time to time provided that the aggregate of such fees (excluding any amounts payable under any other provision of the Articles) shall not exceed £400,000 per annum or such higher amount as the Company may determine from time to time. These provisions do not apply to executive Directors or managing Directors.
     The Directors may be paid all reasonable traveling, hotel and other expenses incurred by them in performing their duties as Directors including all such expenses incurred in connection with attendance at meetings of the Board or any committee of the Directors or general meetings or if in the opinion of the Directors it is desirable to make special journeys or perform special services.
     A Director appointed to an executive office may be paid such remuneration in such manner as the Board may decide.

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     The Board may make provision for the payment of pension or life assurance benefits for any Director or former Director who holds or has held any executive office or employment with the Company or a body corporate which is or was a subsidiary undertaking or a parent undertaking of the Company or another subsidiary undertaking of a parent undertaking of the Company or otherwise associated with the Company or any such body corporate, or a predecessor in business of the Company or any such body corporate , and for any member of his family or any of his dependants.
     Each Director shall retire from office at the third annual general meeting after the annual general meeting at which they were last elected, but they may stand for reelection at the meeting at which they retire. A separate vote must be held on each Director standing for reelection.
     Borrowing powers
     The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of its undertaking, property and uncalled capital, and to issue debentures.
     The Directors shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings, so as to secure (as regards subsidiary undertakings, so far as by such exercise they can secure) that the aggregate amount at any one time owing by the Group (being the Company and its subsidiary undertakings for the time being owing to persons outside the Group) in respect of all monies borrowed, exclusive of moneys borrowed by the Company or any of its subsidiaries from any other of such companies shall not at any time, without the previous sanction of an ordinary resolution of the Company, exceed an amount equal to three times the aggregate of:
  (a)   the nominal issued and paid up capital of the Company; and
 
  (b)   the amounts standing to the credit of the consolidated reserves of the Group whether distributable or undistributable and including (without limitation) share premium amount, capital redemption reserve and profit and loss account all as shown in a consolidation of the then latest audited balance sheet of the Group but after:
  (A)   making such adjustments as may be appropriate in respect of any variation in the issued and paid up share capital the share premium account and the capital redemption reserve fund of the Company or merger reserve since the date of its latest audited consolidated balance sheet and any shares whose issue has been underwritten, but which have not yet been issued shall be deemed to have been paid up to the extent that the underwriters or other persons are liable therefore;
 
  (B)   excluding therefrom (i) any sums set aside for future taxation; (ii) amounts attributable to outside shareholders in subsidiary undertakings and adding back an amount equal to amounts charged in respect of any deferred tax liabilities and any deficit relating to pensions and other post retirement/employment benefits or any asset or liability which has been revalued; and deducting from reserves amounts credited in respect of any deferred tax assets and any surpluses relating to pensions and other post retirement/employment benefits or any asset or liability which has been revalued;.
 
  (C)   deducting therefrom (i) an amount equal to any distribution by the Company or any subsidiary undertaking out of profits earned prior to the date of its latest audited balance sheet and which have been declared, recommended or made since that date except so far as provided for in

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      such balance sheet, (ii) goodwill and other intangible assets and (iii) any debit balances on profit and loss account; and
  (D)   making such adjustments (if any) as the Auditors may consider appropriate.
     Alteration of Capital
     The Company may, from time to time, by ordinary resolution increase its share capital by the creation of new shares, such increase to be of such aggregate amount and to be divided into shares of respective amounts as the resolution may prescribe. All new shares will be subject to the provisions of the articles with reference to allotment payment of calls, lien, transfer and otherwise.
     The Company may by ordinary resolution consolidate its shares or subdivide its shares into shares of smaller amount and may by such resolution determine that, as between the holders of the shares resulting from such subdivision, one or more of such shares shall have some preferred or other advantage as regards dividends, capital, voting or otherwise.
     The Company may from time to time, by special resolution, reduce its share capital, any capital redemption reserve fund and any share premium account in any manner authorized by law. The Company may also by ordinary resolution cancel any shares not taken or agreed to be taken by any person and diminish the amount of its share capital by the nominal value of the shares so cancelled.
     The Company may purchase its own shares in any manner authorized by law and under the articles of association.
     Liability to further capital calls by the Company
     The Company may issue shares that are not fully paid up and can make different arrangements between the shareholders as to the amount of calls to be paid and the time of payment of such calls. Subject to the terms of allotment thereof, the Directors can call up for all or part of the monies unpaid on the shares as they think fit. A minimum of fourteen days notice must be given to the shareholder stating the amount to be paid, to whom payment must be made and the time and place at which payment must be made. The Company does not currently have any shares in issue that are not fully paid up.
Annual and Extraordinary General Meetings
     Extraordinary general meetings are convened by the Directors whenever they think fit.
     An annual general meeting must be held by the Company once a year.
     The annual general meeting must be convened on a minimum of 21 clear days notice. All meetings other than an annual general meeting, i.e., Extraordinary General meetings, are called by a minimum of 14 clear days notice when either special or ordinary resolutions are proposed. Ordinary Resolutions must be passed by a simple majority of those members who (being entitled to do so) vote at the general meeting, and special resolutions must be passed by a majority of not less than 75% of the members who (being entitled to do so) vote at the general meeting.
     The notice must specify the place, day and hour of the meeting and the general nature of any special business to be discussed.
     To be held valid, a quorum of not less than two shareholders present in person or by proxy and entitled to vote must be present at each general meeting.

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     Limitations on the Right to Own Securities
     Fully paid shares are issued free from all liens and from any restriction on the right of transfer except any restriction imposed by failure to comply with a notice issued under section 793 of the U.K. Companies Act 2006, by which a public company can, by notice in writing, require a shareholder to confirm his present and past shareholding in the share capital of the Company or give particulars of his identity and the extent of his interest and of any other person interested in the same shares as the case may be.
     Any shareholder who has failed to comply with a section 793 notice is not entitled to be present and vote at general meetings.
Relevant Provisions Applicable to Companies Under English Law
     Discrimination against shareholders as a result of such shareholder owning a substantial
number of shares
     The City Code on Takeovers and Mergers (the “City Code”) applies inter alia to offers for all public companies considered by the Panel on Takeover and Mergers (the “Panel”) to be resident in the United Kingdom, the Channel Islands or the Isle of Man.
     The City Code regulates the conduct, structure and timetable of UK takeovers and is designed principally to ensure that shareholders are treated fairly and not denied an opportunity to decide on the merits of a takeover and that shareholders of the same class are afforded equivalent treatment by an offeror. The City Code comprises general principles that are essentially statements of good standards of commercial behavior and a series of rules expanding on them and regulating particular areas of takeover activity that often have the effect of delaying or defining a change in control of the company.
     Under the City Code, if any person acquires shares which results in that person (and any persons acting in concert with him, as defined in the City Code) holding shares carrying 30 percent or more of the voting rights of the Company, that person shall be compelled to offer to acquire the remainder of the share capital of the Company at a cash price of not less than the highest price paid by the offeror or persons acting in concert with it during the preceding 12 months.
     Changes in Control of the Company
     The City Code prescribes a timetable for takeover offers. An offer document must be posted normally within 28 days of the announcement of a firm intention to make an offer, and an offer must initially be open for a minimum of 21 days following the date on which the offer document is posted (the “Posting Date”). The City Code provides that the 60th day after the Posting Date is the final day for an offer to become or be declared unconditional as to acceptances. In practice, where 90% acceptances for the offer are received, the bidder can implement the provisions for compulsorily acquiring holdings of any outstanding minority shareholders. The 81st day is the last day for fulfillment of all other conditions if the offer is declared unconditional as to acceptances on day 60. If these timings are not met, the offer will lapse.
     Disclosure of Shareholder Ownership
     Under part 6 of the Financial Services and Markets Act 2000, Chapter 5 of the Disclosure and Transparency Rules (DTR) sets out the notification thresholds and deadlines for shareholders and issuers to notify major shareholders in a company, where shares are admitted to and trading on a regulated market or a prescribed market. Once a person has a holding of 3% or more of the target’s total voting rights and capital in issue and also if their holding changes to reach, exceed or fall below every 1% above 3% of the target’s total voting rights and capital in issue, a notification must be made to the company within two trading days from the date of such change. A company must release details to a Regulatory

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Information Service (RIS) as soon as possible on receipt of a notice and by no later than end of the following trading day for U.K. issuers with shares admitted to trading in a regulated market.
Material Contracts
     The following is a summary of the Company’s existing principal licensing agreements, collaborative arrangements and other material agreements:
     AstraZeneca UK Limited
     On December 7, 2005, the Company announced an agreement with AstraZeneca UK Limited for the development and commercialization of CytoFab®, as a treatment for the initial indication of severe sepsis. Under the agreement, the Company received an initial payment of £16.3 million. In addition, AsztraZeneca made a £7.5 million equity investment at 68.24p per share, a 30% premium to the average mid-market closing price over the three months prior to the agreement, representing 4.3% of the Company’s share capital following the transaction.
     The Company could receive up to £171 million on the achievement of further milestones and will also receive royalties on global product sales of 20% of net sales for a minimum of 10 years in each country in which CytoFab® is sold along with payments in return for the commercial supply of bulk drug substance and drug product. AstraZeneca is responsible for clinical development and sales and marketing of CytoFab®. The Company is primarily responsible for drug product manufacturing including clinical trial material.
     During fiscal year 2006, the Company received an initial payment of £16.3 million along with the £7.5 million equity investment. In accordance with the accounting policies adopted by the Company, £701,000, £2,213,000 and £2,075,000 was recorded as revenue in fiscal year 2006, 2007 and 2008, respectively. In addition, a milestone of £10,000,000 was earned and recognized as revenue in fiscal year 2007.
     Altana, Inc.
     In October 1997, the Company entered into an agreement with Altana, Inc. which provides Altana with exclusive U.S. distribution rights for CroFab® and DigiFab® (Altana, Inc were subsequently acquired by Nycomed). Under the agreement terms, the Company is entitled to receive certain milestone, product sales and royalty payments. In February 2001 and February 2002, Altana began marketing and distributing the Company’s CroFab® and DigiFab® products, respectively, under the agreement in the United States. In November 2005, Altana exercised its nil-cost option to renew the agreement for a further five years, ending in 2010. The Company recognized a total of £19,826,000 as revenue under the agreement in fiscal year 2008.
     Glenveigh Pharmaceuticals LLC
     In January 2007, the Company entered into an agreement to in-license from Glenveigh Pharmaceuticals LLC and certain affiliated parties (collectively, “Glenveigh”) intellectual property relating to the use of antibody fragments that bind digoxin, including Protherics’ DigiFab® and GlaxoSmithKline’s Digibind®, for the treatment of pre-eclampsia and eclampsia. Under the Glenveigh license, the Company paid Glenveigh $6.5 million cash at closing and issued Protherics ordinary shares with an aggregate market value of $5 million (3,093,638 shares). The Company will pay an additional milestone of $5 million (in ordinary shares of the Company or cash, at the Company’s option) following successful completion of the phase 2b trial, with further milestones and royalties upon successful completion of the subsequent clinical and commercial events amounting to a maximum of $10 million or a percentage of any subsequent sublicense receipts. Glenveigh will also receive a royalty of up to 5% on net sales.

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     CoVaccine BV
     In June 2006, the Company entered into an agreement with CoVaccine BV to acquire CoVaccine’s novel adjuvant, primarily for inclusion in the Company’s Angiotensin Vaccine product candidate. The Company will pay CoVaccine up to 1,050,000, which is to be satisfied by the issuance of zero coupon unsecured convertible loan notes, repayable at March 31, 2026 unless previously converted. These notes grant the right to receive 295,413 Protherics ordinary shares following the signing of the agreement, and a further 590,826 Protherics ordinary shares upon completion of two development related milestones or are repayable at par if not previously repaid, converted or purchased. The first of these milestones, being 253,211 Protherics ordinary shares, was paid during fiscal 2008. In addition to these shares, CoVaccine is entitled to a royalty on the net sales of products containing the CoVaccine adjuvant for a period ended the earlier of the tenth anniversary of the first sale and the expiry of the last valid claim on the first patent application to be granted in respect of the CoVaccine adjuvant. Both notes issued to date, for 295,413 and 253,211 shares, have subsequently been converted.
     Advance In Vitro Cell Technologies S.L. (“Advancell”)
     In December 2006, the Company entered into an in-license and co-development agreement with Advancell with respect to intellectual property rights for the use of Acadra™ (formerly Acadesine) in the treatment of B-cell chronic lymphocytic leukemia (“B-CLL”). The Company has paid Advancell an initial £500,000 cash consideration, as well as a total of up to £17.9 million in development and commercialization milestones. The Company expects to invest approximately £1.5 million in the development of Acadra™ through the end of the first clinical study. Under the agreement, Advancell will receive a 12.8% royalty on net sales.
     Diatos SA
     In December 2004, MacroMed, Inc., which was acquired by the Company in January 2007, entered into an agreement with Diatos SA for the development and commercialization of OncoGel® outside North America, Mexico, North Korea and South Korea, The maximum upfront and milestone payments under this agreement for the European market total $10,450,000, of which $1,850,000 was received prior to MacroMed, Inc. being acquired. Further milestones may be received for development in Asia and the rest of the world amounting to $5,175,000 and $2,170,000, respectively. In addition, the Company will receive royalties in net sales of up to 12%.
     Samyang Genex Corporation
     In an agreement dated November 2001 and updated in June 2006, MacroMed entered into an license and supply agreement with Samyang Genex Corporation. This agreement provides Samyang Genex Corporation with the right to distribute OncoGel® in North and South Korea. Under this agreement, Samyang Genex will pay a royalty to MacroMed of 5% of net sales and 12% of other revenues received in respect of OncoGel® in North and South Korea. MacroMed will pay Samyang Genex similar royalties for net sales and other OncoGel® revenues outside of North and South Korea. Since MacroMed was acquired by the Company, no amounts have been paid or received under this agreement. This agreement also permits MacroMed to purchase supplies of Genexol, a generic brand of paclitaxel, a raw material required in the manufacture of OncoGel®.
     Idis Limited
     Under an agreement dated March 1, 2006, Idis Limited distributes the Company’s Voraxaze® product in the E.U. on a named patient supply basis. The Company is paid for all product supplied to customers and during fiscal year 2008 the Company recognized revenue of £1,232,000 under this agreement.

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     Chesapeake Biological Laboratories Inc
     In March 2003, the Company entered into a contract manufacturing agreement with Chesapeake Biological Laboratories Inc. to fill and freeze dry the Company’s CroFab® and DigiFab® products. Under the agreement, which commenced in May 2003, Chesapeake is entitled to a set fee per batch of product filled and freeze-dried. Costs of £1,144,000 have been incurred under this contract in fiscal year 2008.
     Scientific Collaborations
     A portion of the Company’s research and development and product testing activities are carried out through affiliations and consulting arrangements in place from time to time with clinical research organizations and scientists at academic institutions in the United Kingdom, Scandinavia and North America. These include arrangements in respect of pre-clinical and clinical research, consultancy, patents, royalties and facility leases. Where appropriate, the Company has entered into formal agreements with such third parties, which ensure that ownership of any intellectual property rights arising out of such arrangements vests with the Company.
Exchange Controls
     There are currently no English laws, decrees or regulations that restrict the export or import of capital, including, but not limited to, foreign exchange controls or that affect the remittance of dividends, interest or other payments to non-U.K. resident holders of ordinary shares.
Taxation
     The following is a general description of the principal United States federal income tax consequences and certain United Kingdom tax consequences of the ownership and disposition of the Company’s ordinary shares and American Depositary Shares (“ADSs”), as evidenced by American Depositary Receipts, by a U.S. holder (as defined below). The following discussion assumes that U.S. holders of ADSs will be treated as owners of the ordinary shares underlying their ADSs for U.S. federal income tax purposes. Accordingly, except as noted, the U.S. federal and U.K. tax consequences discussed below apply equally to U.S. holders of ADSs and ordinary shares. This description is for general information purposes only and is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, and judicial and administrative interpretations thereof) and the United Kingdom, and the Convention Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains and which came into force on March 31, 2003 (the “Income Tax Convention”), all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. In particular, numerous provisions of current U.S. federal income tax law (including certain tax rates referred to herein) are scheduled to change in future years, without further legislative action, as a result of “sunset” provisions.
     This discussion is based in part on representations by the Depositary and assumes that the obligations under the Amended and Restated Deposit Agreement among the Company, the Depositary, and the Owners and Beneficial Owners of the American Depositary Receipts (the “Deposit Agreement”) and any related agreements will be performed in accordance with their terms. The tax treatment of a holder of ordinary shares or ADSs may vary depending upon his or her particular situation.
     The discussion below does not address the tax treatment of holders subject to special treatment under the U.S. federal income tax law (including, but not limited to, U.S. expatriates, insurance companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, securities broker-dealers, persons that have a “functional currency” other than the U.S. dollar, holders who hold ordinary shares or ADSs as part of hedging or conversion transactions and holders owning, directly or indirectly, 10% or more of the voting shares of the Company). Further, this discussion does not

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consider the tax treatment of holders who are partnerships or who hold ordinary shares or ADSs through a partnership or other pass-through entity. The following summary is directed to U.S. holders who will hold the ordinary shares and ADSs as a capital asset.
     For purposes of this discussion, a “U.S. holder” is any beneficial owner of ordinary shares or ADSs that is not and has not been resident (and, in the case of an individual, is not and has not been ordinarily resident) in the United Kingdom for U.K. tax purposes and is (i) an individual citizen or resident of the United States, for the purpose of the Income Tax Convention, (ii) a corporation or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any state thereof, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.
     The discussion below does not address the effect of any U.S. state or local tax law on a holder of ordinary shares or ADSs, nor any U.S. or U.K. gift or estate tax consequences. This summary is not intended to be, nor should it be construed to be, legal or tax advice. Investors are urged to consult their own tax advisors regarding the U.S. federal, state and local and the U.K. and other tax consequences of their purchase, ownership and disposition of ordinary shares and ADSs. This discussion does not apply to any person who is not a U.S. holder or to any person who does not hold ordinary shares or ADSs.
United States Federal Income Tax Consequences to U.S. Holders
     Taxation of Dividends
     The Company does not expect to pay dividends for the foreseeable future. In the event the Company does pay a dividend, a U.S. holder receiving a distribution on ordinary shares or ADSs generally will be required to include such distribution in gross income as a taxable dividend to the extent such distribution is paid from the current or accumulated earnings and profits of the Company (as determined for U.S. federal income tax purposes). Such dividend will be treated as foreign source dividend income to the U.S. holder for U.S. federal income tax purposes. To the extent that the Company makes distributions in excess of its current and accumulated earnings and profits, these distributions will be treated first as a tax-free return of capital to each U.S. holder. This treatment will reduce the adjusted basis which each U.S. holder has in his or her ordinary shares or ADSs, but not below zero. Distributions in excess of a U.S. holder’s adjusted tax basis in his or her ordinary shares or ADSs will be taxable as a capital gain, provided such shares have been held as capital assets. This gain will be taxable as a long-term capital gain if the ordinary shares or ADSs have been held for more than one year. Dividends paid by the Company generally will not be eligible for the dividends received deduction otherwise available to corporate holders. See also the discussion below entitled “Passive Foreign Investment Company Rules.”
     The amount of any distribution paid in pounds sterling will equal the U.S. dollar value of the pounds sterling received calculated using the exchange rate in effect on the date the dividend is received by the U.S. holder or by the Depositary (in the case of ADSs), regardless of whether the pounds sterling are converted into U.S. dollars on this date. If the pounds sterling received as a distribution are converted into U.S. dollars on the date of receipt, the recipient U.S. holder generally will not be required to recognize foreign currency gain or loss upon such conversion. If the pounds sterling received as a distribution are not converted into U.S. dollars on the date of receipt, the recipient U.S. holder will have a basis in the pounds sterling equal to their U.S. dollar value on the date of receipt. Generally, any gain or loss realized on a subsequent conversion or other disposition of the pounds sterling will be taxable as ordinary income or loss.
     Dividends paid to a non-corporate U.S. holder for taxable years that begin before January 1, 2011 that constitute qualified dividend income generally will be taxable to the U.S. holder at a maximum tax rate of 15% provided that the ordinary shares or ADSs are held by such U.S. holder for more than 60 days

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during the 121-day period beginning 60 days before the date that the relevant share or ADS becomes ex-dividend with respect to such dividend and the U.S. holder meets other holding period requirements. For this purpose, “qualified dividend income” generally includes dividends received from a U.S. corporation, as well as from a qualified foreign corporation. A “qualified foreign corporation” is generally defined as (i) a foreign corporation incorporated in a possession of the United States, (ii) a foreign corporation that is eligible for benefits of a comprehensive income tax treaty with the United States which the U.S. Treasury determines is satisfactory and which includes an exchange of information program, or (iii) a foreign corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. However, a qualified foreign corporation does not include a “passive foreign investment company” — see discussion below entitled “Passive Foreign Investment Company Rules.” The U.S. Internal Revenue Service (the “IRS”) has determined that the Income Tax Convention meets the above treaty test. The Company’s ordinary shares will not be considered readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that the Company’s ADSs, which are listed on the NASDAQ Global Market, are readily tradable on an established securities market in the United States. There can be no assurance that the Company’s ADSs will be considered readily tradable on an established securities market in later years. U.S. holders should consult their own tax advisors on the eligibility of any dividends paid by us as “qualified dividend income” and any reduced rates of taxation.
     There will be no U.K. withholding tax on dividends. Therefore, a U.S. holder will not be entitled to claim a foreign tax credit in respect of any dividends.
     Taxation of Capital Gains
     If you are a U.S. holder and you sell or dispose of ordinary shares or ADSs, you will recognize a gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar amount of cash and the fair market value of any property you receive and your adjusted tax basis (determined in U.S. dollars) in the ordinary shares or ADSs sold or disposed of. This gain or loss will be capital if you held the ordinary shares or ADSs as a capital asset and generally will be U.S. source income or loss. Such gain or loss will be long-term capital gain or loss if you held the ordinary shares or ADSs sold or disposed of for more than one year. In the case of a U.S. holder who is an individual, capital gains will generally be subject to U.S. federal income tax at preferential rates if specified minimum holding periods are met. The maximum capital gains tax for non-corporate U.S. holders is 15% for capital assets held for over one year and sold or exchanged in taxable years beginning before January 1, 2011. The deduction of capital losses is subject to certain limitations. See also the discussion below entitled “Passive Foreign Investment Company Rules.”
     Information Reporting and Backup Withholding
     The Company reports to its U.S. holders and the IRS the amount of dividends and other proceeds paid during each calendar year and the amount of any tax withheld. Under the backup withholding rules, a U.S. holder may be subject to backup withholding at a current rate of 28% with respect to dividends paid unless the U.S. holder is a corporation or is otherwise exempt and:
    when required, demonstrates this fact or provides a taxpayer identification number;
 
    certifies as to no loss of exemption from backup withholding; and
 
    otherwise complies with the backup withholding rules.
     If you do not provide the Company with your correct taxpayer identification number, you may also be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amount you pay as backup withholding will be creditable against your income tax liability.

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     The foregoing discussion assumes that the Company is not currently, and will not in the future become, a “passive foreign investment company” for U.S. federal income tax purposes. If the Company were classified as a passive foreign investment company, the U.S. federal income tax consequences to you with respect to the ordinary shares and ADSs would be significantly different than that described above and you generally would be subject to increased U.S. federal income tax liabilities and possibly interest charges, as described below.
     Passive Foreign Investment Company Rules
     U.S. holders owning shares of a “passive foreign investment company” (“PFIC”) are subject to special U.S. federal income tax treatment with respect to certain distributions received from the PFIC and with respect to gain from the sale or other disposition of PFIC shares. For U.S. federal income tax purposes, the Company will be a PFIC for any taxable year if either (i) 75% or more of the Company’s gross income in a taxable year were passive; or (ii) at least 50% of the average percentage of the Company’s assets, by value, produced or were held for the production of passive income. For this purpose, if the Company were to own, directly or indirectly, at least 25% by value of the stock of another company, it would be treated for purposes of the above tests as if it held its proportionate share of the assets, and received directly its proportionate share of the income, of that company. Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities, and gains from assets which would produce income of this type.
     If the Company is treated as a PFIC, U.S. holders may be subject to increased tax liability upon the disposition of the ordinary shares and ADSs or upon the receipt of certain distributions, unless such holder makes one of two elections. Special rules would apply to direct and certain indirect U.S. holders upon disposition of their ordinary shares and ADSs, receipt of an “excess distribution,” certain non-recognition transactions, or use of ordinary shares or ADSs as security for a loan. You could be subject to tax as if any gain or distribution were ordinary income earned ratably over the period of time during which you held the ordinary shares or ADSs, including an interest charge on the deferred tax, and other adverse tax consequences. If you were to make a timely filed mark-to-market election with respect to the ordinary shares or ADSs you owned or were treated as having owned, at the close of your taxable year, you would include as ordinary income in that taxable year any excess of the fair market value of the ordinary shares or ADSs as of the close of the year over your adjusted tax basis in those shares. In turn, you would be allowed a deduction for the taxable year in the amount of any excess of the adjusted basis of the ordinary shares or ADSs over their fair market value at the close of the taxable year, limited to the amount of the net mark-to-market gains you previously included in your income. If you were to make a timely qualified electing fund election, the above-described rules generally would not apply. If a qualified electing fund election were made, you would be currently taxable on your pro-rata share of the Company’s ordinary earnings and profits and net capital gains, regardless of whether the income or gain was actually distributed to you.
     You should consult your own tax advisors prior to the purchase of ordinary shares or ADSs and from time to time concerning the status of the Company as a PFIC and the consequences of making an election as described above. Neither the Company nor its advisors have a duty or will undertake to inform you that the Company is a PFIC or of changes in circumstances that would cause the Company to become a PFIC.
United Kingdom Tax Consequences to U.S. Holders
     Taxation of Dividends
     The Company does not expect to pay dividends for the foreseeable future. In the event the Company does pay a dividend, under current U.K. taxation legislation, no tax will be withheld from dividend payments by the Company. A U.K. tax credit in respect of any dividend paid by the Company is

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available for certain persons not resident in the United Kingdom. However, U.S. holders are not entitled to such tax credit.
     Taxation of Capital Gains
     A U.S. holder should not generally be liable for U.K. taxation on capital gains realized on the disposal of such holder’s ordinary shares or ADSs unless at the time of the disposal such U.S. holder is either (i) a non-corporate person or entity which carries on a trade, profession or vocation in the United Kingdom through a branch or agency and which used the ordinary shares or ADSs in or for the purposes of the trade or which used, held or acquired the ordinary shares or ADSs for the purposes of such branch or agency; or (ii) a corporate entity which carries on a trade in the United Kingdom through a permanent establishment and which used the ordinary shares or ADSs in or for the purposes of the trade or which used, held or acquired the ordinary shares or ADSs for the purposes of such permanent establishment.
     Stamp Duty and Stamp Duty Reserve Tax
     If ordinary shares are transferred to the Depositary under the Deposit Agreement, the Depositary may charge the U.S. holder who receives the ADSs representing those shares for the U.K. stamp duty or Stamp Duty Reserve Tax (“SDRT”) owed at a rate of 1.5% of the market value of those shares (such market value potentially being rounded up to the nearest multiple of £5.00. No SDRT will be payable on an agreement to transfer ADSs, nor will stamp duty be payable on transfer of the ADSs, provided, among other requirements, that the instrument of transfer is executed outside the United Kingdom and subsequently remains at all times outside the United Kingdom. If the Depositary transfers the underlying ordinary shares to a U.S. holder who owned ADSs representing such ordinary shares, such U.S. holder will pay duty at a rate of £5.00 per transfer. If the Depositary transfers the underlying ordinary shares to a purchaser at the direction of a U.S. holder who owned ADSs representing such ordinary shares, such purchaser will pay duty at a rate of 0.5% of the purchase price (such price being rounded up to the nearest multiple of £5.00).
     If an owner of ordinary shares transfers his or her shares to another person through the use of a transfer document executed in or brought into the United Kingdom, the purchaser usually pays the stamp duty at a rate of 0.5% (the price being rounded up to the nearest multiple of £5.00). When ordinary shares are transferred without the use of a transfer document, stamp duty does not apply. Instead, the purchaser pays SDRT at a rate of 0.5% of the purchase price. If stamp duty is subsequently paid on the transfer, SDRT may, in certain circumstance, be refunded.
Documents on Display
     It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1(800) SEC-0330 for further information on the public reference rooms and their copy charges. Certain documents are on display at the Company’s offices at The Heath Business & Technical Park, Runcorn, Cheshire WA7 4QX.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial instruments
     The Company’s financial instruments comprise primarily cash and cash equivalents, borrowings, foreign currency contracts and other derivative instruments, and various items, such as trade receivables and trade payables, which arise directly from its operations. The main purpose of these financial instruments is to provide working capital for the Company’s operations.
     The main risks arising from the Company’s activities and involving the use of financial instruments are foreign currency risk, interest rate risk and liquidity risk. The Board reviews and

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determines the Company’s objectives and policies for managing each of these risks. Details of the Company’s objectives and policies, both during the year and since the year end, are set out below, along with numerical disclosures for each category of financial instrument. Except where indicated, these disclosures are indicative of the situation throughout the year.
Foreign currency risk
     The Company makes use of forward foreign currency contracts to fix a proportion of its expected U.S. dollar sales into sterling, thereby reducing uncertainty over the level of the Company’s cash inflows from sales when reported in sterling. Typically in fiscal 2008, the Company took out forward contracts and options for anticipated U.S. dollar receipts, in excess of U.S. dollar expenses, for a rolling period of 12 months. At March 31, 2008, the Company held such instruments amounting to $9,000,000, all of which mature within the following 12 months. The fair value of these instruments is disclosed in Note 27 to the Financial Statements attached hereto. While the Company has orders from its U.S. distributor for sales which will be denominated in U.S. dollars, under the terms of the contract, the precise value of the sale is not determinable until the point of sale.
     The Company has overseas subsidiaries in the U.S. and Australia whose revenues, expenses, assets and liabilities are denominated in U.S. dollars and Australian dollars respectively. In order to protect the Company’s sterling balance sheet from movements in exchange rates, subsidiary companies have borrowed funds in their local currency. The Company does not consider that its external debt denominated in currencies other than its functional currency produces any material foreign exchange risk.
     The Company had overall surplus cash funds throughout the year. Determining in which currency to hold cash is undertaken with reference to anticipated future expenditure patterns and relative returns on funds held in different currencies. The Company’s policy has been to hold surplus funds in sterling over the long term, which has achieved a high interest rate return and is the currency in which a large proportion of the Company’s expenditure is incurred. This also mitigates the risk of fluctuations in the Company’s net assets, when reported in sterling.
     Where subsidiary companies have monetary assets and liabilities denominated in currencies other than their functional currency, these balances are translated into that subsidiary’s functional currency. Gains and losses on those intercompany balances that are considered to be ‘as permanent as equity’ are recorded in reserves. Other foreign exchange gains and losses arising are recorded immediately in the income statement.
Exchange Rate Sensitivity
     The table below provides information about the Company’s derivative financial instruments and other financial instruments and presents such financial instruments in U.K. pounds sterling, which is the Company’s reporting currency. The table presents principal cash flows and related weighted average interest rates by expected maturity dates on instruments that are sensitive to foreign currency exchange rates, being US dollar and Australian dollar denominated debt obligations.
                                                         
                                                    Fair  
    2009     2010     2011     2012     2013     Total     value  
On-Balance Sheet Financial Instruments   £’000     £’000     £’000     £’000     £’000     £’000     £’000  
 
                                                       
Finance Lease obligations
                                                       
Fixed Rate (US$ denominated)
    17       12       2       1             32         (1)
Average interest rate
    16.6 %     16.0 %     12.1 %     11.3 %           16.0 %        
 
                                                       
Bank Loans
                                                       

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                                                    Fair  
    2009     2010     2011     2012     2013     Total     value  
    £’000     £’000     £’000     £’000     £’000     £’000     £’000  
On-Balance Sheet Financial Instruments
                                                       
Fixed Rate (US$ denominated)
    2       141                         143       142  
Average interest rate
    5.6 %     5.6 %     5.6 %                 5.6 %        
 
                                                       
Finance Lease obligations
                                                       
Fixed Rate (A$ denominated)
    63       30       18       8             119         (1)
Average interest rate
    7.5 %     7.6 %     7.6 %     7.6 %           7.5 %        
 
                                                       
Australian Notes payable
                                                       
Floating Rate (A$ denominated)
    8                               8       8  
Average interest rate
    6.3 %                             6.3 %        
 
(1)   The fair value of the Company’s lease obligations approximates to their carrying value.
Interest rate risk
     The Company finances its operations predominantly through cash and cash equivalents generated through operating activities, from the issuance of equity shares, and through finance leases. It is the Company’s policy to invest surplus cash on deposit for short or medium term periods. At March 31, 2008, 2007 and 2006, all cash reserves, as quantified in Note 17 to the Financial Statements attached as an exhibit hereto, were held overnight by financial institutions.
     The following table sets out the carrying value under IFRS by maturity, for each financial instrument that is exposed to interest rate risk at March 31, 2008.
                                                         
    Amounts falling due:  
    Within     Between     Between     Between     Between     Over 5        
    1 year     1 and 2 years     2 and 3 years     3 and 4 years     4 and 5 years     years     Total  
    £’000     £’000     £’000     £’000     £’000     £’000     £’000  
2008
                                                       
Floating rate:
                                                       
Cash at hand and in bank
    1,166                                     1,166  
 
                                                       
Fixed rate:
                                                       
Short term bank deposits
    36,494                                     36,494  
Bank overdrafts
    (44 )                                   (44 )
Borrowings
    (10 )     (141 )                             (151 )
6% Convertible unsecured loan notes
          (1,971 )                             (1,971 )
Obligations under finance lease
    (966 )     (682 )     (638 )     (333 )     (59 )           (2,678 )
Anticipated Transactions and Related Derivatives
     The Company also utilizes currency derivatives to hedge future transactions and cash flows. The Company is a party to a variety of foreign currency forward contracts and options in the management of its exchange rate exposures. The instruments purchased are denominated in US dollars and Australian dollars. Details of the instruments held by the Company are disclosed in Note 27 to the financial statements attached as an exhibit hereto.

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Interest Rate Sensitivity
     The table below provides information about the Company’s derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. The information is presented in U.K. pounds sterling, which is the Company’s reporting currency. The instrument’s actual cash flows are determined in both U.S. dollars (US$) and Australian dollars (A$), as indicated in parentheses.
                                                         
                                        Fair  
    2009     2010     2011     2012     2013     Total     value  
    £’000     £’000     £’000     £’000     £’000     £’000     £’000  
 
                                                       
Finance Lease obligations
                                                       
Fixed Rate (£ denominated)
    886       640       618       324       59       2,527         (1)
Average interest rate
    7.9 %     7.9 %     8.0 %     8.2 %     8.8 %     8.0 %        
 
                                                       
Fixed Rate (US$ denominated)
    17       12       2       1             32         (1)
Average interest rate
    16.6 %     16.0 %     12.1 %     11.3 %           16.0 %        
 
                                                       
Fixed Rate (A$ denominated)
    63       30       18       8             119         (1)
Average interest rate
    7.5 %     7.6 %     7.6 %     7.6 %           7.5 %        
 
                                                       
Bank Loans
                                                       
Fixed Rate (US$ denominated)
    2       141                         143       142  
Average interest rate
    5.6 %     5.6 %                       5.6 %        
 
                                                       
Australian Notes payable
                                                       
Floating Rate (A$ denominated)
    8                               8       8  
Average interest rate
    6.3 %                             6.3 %        
 
                                                       
Convertible Loan Notes
                                                       
Fixed Rate (£ denominated) (2)
                2,050                   2,050       1,965 (3)
Average interest rate
                6.0 %                 6.0 %        
 
(1)   The fair value of the Company’s lease obligations approximates to their carrying value.
 
(2)   The book value of this instrument was £1,971,000 at March 31, 2008.
 
(3)   This represents the fair value of the liability component of a bifurcated instrument.
Liquidity risk
     The Board and senior management monitor the level of cash and liquid resources on a regular basis to ensure that the Company has sufficient liquid funds to enable it to meet its commitments as they fall due. This is achieved through the production and review of cash forecasts, including sensitivity analyses. The Company’s cash and liquid resources are invested in bank deposits, with institutions with high credit ratings.
Fair values of financial assets and financial liabilities
     The fair values of the Company’s borrowings and 6% Convertible Unsecured Loan Notes are disclosed in Notes 20 and 21 to the Financial Statements attached as an exhibit hereto. The Company considers that there is no material difference between the book values and fair values of its remaining financial assets and liabilities as at March 31, 2008. Fair values have been calculated by discounting cash flows at prevailing interest rates.

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     The fair value of the Company’s derivative financial instruments is disclosed in Note 27 to the Financial Statements attached as an exhibit hereto.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
     Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
     None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
     None.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
     As of the end of the period covered by this report, management carried out an evaluation, with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based on their evaluation of such controls and procedures, management concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports are filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to management, including the Company’s chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
     Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed under the supervision of and with the participation of management, including the principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with IFRS. As of the end of the 2008 fiscal year, management conducted an assessment of the effectiveness of internal control over financial reporting in relation to criteria for effective internal control over financial reporting described in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of March 31, 2008.
     There has been no change in the Company’s internal control over financial reporting during the fiscal year ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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     KPMG Audit Plc, which has audited the Company’s consolidated financial statements for the fiscal year March 31, 2008, has also audited the effectiveness of the Company’s internal control over financial reporting. The report of KPMG Audit Plc is included under Item 17 of this Form 20-F.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
     The Board of Directors has determined that Mr. Garry Watts, the Chairman of the Audit Committee, meets the requirement of an “Audit Committee Financial Expert” as defined by the Securities and Exchange Commission. Mr. Watts was appointed to the Audit Committee on February 2, 2004. The Board of Directors has determined that Mr. Watts is “independent” as that term is defined in the NASDAQ listing standards applicable to audit committee members and as required by the Securities Exchange Act of 1934, and the rules and regulations of the Securities and Exchange Commission thereunder.
ITEM 16B. CODE OF ETHICS
     The Board of Directors has adopted a Code of Ethics applicable to the Chief Executive Officer, Finance Director and Financial Controller. A copy of this Code of Ethics is available on the Company’s website at www.protherics.com.
     In addition, the Company complied with the provisions of the Financial Reporting Council Combined Code on Corporate Governance issued in June 2006 (“the Code”) throughout the year ended March 31, 2008 except for Section 1 of the Code:
    Composition of the Remuneration Committee. Dr. Gonella, who is not considered by the Board to be independent due to the material business relationship he has had with the Company as a non-executive director and shareholder of MacroMed, Inc., a company acquired by Protherics in January 2007, was a member of the Remuneration Committee from the start of the year until July 26, 2007. Dr. Gonella brings substantial knowledge and experience of the pharmaceutical business, which assists the Committee in discharging its duties. However, the Board acknowledges the recommendations of the Code in the respect of Remuneration Committee independence and has resolved that Dr. Gonella will attend meetings of the Committee by invitation only. Accordingly, Dr. Gonella resigned from the Committee on July 26, 2007. Following his resignation, the Committee is comprised solely of independent non-executive Directors.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
     The following summarizes the audit and non-audit fees paid to the Company’s independent auditors, for the years ended March 31, 2008, 2007 and 2006. During the year ended March 31, 2007, KPMG Audit Plc replaced PricewaterhouseCoopers LLP as auditors of the Company. The table includes remuneration earned during the period each party held the position of auditor.
                                         
    2008             2007             2006  
 
            KPMG Audit PLC     PwC LLP     Total        
    £’000     £’000     £’000     £’000     £’000  
 
Audit fees
    245       174       61       235       101  
Audit related fees
    16       10             10       36  
Tax fees
    50       26       54       80       117  
All other fees
    94       249             249        
 
Total
    405       459       115       574       254  
 
     In addition to the above, PricewaterhouseCoopers LLP earned £43,000 in the year ended March 31, 2007 following their resignation from services related to corporate finance transactions.

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Audit Fees
     Audit fees consisted of fees for professional services rendered by the independent auditor in connection with statutory audits and regulatory filings.
Audit Related Fees
     Audit related fees consisted fees for professional services rendered by the independent auditor such as assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and include accounting reviews and reviews of Company assessments as to the effects of new accounting standards and other regulatory requirements.
Tax Fees
     Tax fees consisted principally of assistance with matters related to compliance, planning and advice.
All Other Fees
     All other fees in fiscal year 2008 were principally related to assistance in preparing responses to comments from the Securities and Exchange Commission related to the Company’s 2007 Annual Report on Form 20-F. In fiscal year 2007, such fees were principally related to assistance in acquisitions and disposals of businesses.
     The Audit Committee follows an audit and non-audit services pre-approval practice and has delegated the pre-approval of non-audit services to be performed by Company’s auditors to the Audit Committee chairman, and where appropriate, the Audit Committee Chairman refers back to the full Audit Committee for approval. All audit engagements are pre-approved by the full Audit Committee.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
     Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
     None.

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PART III
ITEM 17. FINANCIAL STATEMENTS
     Reference is made to Item 19 for a list of all financial statements filed as part of this Annual Report.
ITEM 18. FINANCIAL STATEMENTS
     The Company has elected to provide financial statements pursuant to Item 17.
ITEM 19. EXHIBITS
     (A) Financial Statements and Schedules
     1. Financial Statements
     
    Page
Auditors’ Report (KPMG Audit Plc)
  F-1
 
   
Auditors’ Report (PricewaterhouseCoopers LLP)
  F-3
 
   
Income Statements for the years ended March 31, 2006, 2007 and 2008
  F-4
 
   
Statements of Recognised Income & Expense March 31, 2006, 2007 and 2008
  F-4
 
   
Balance Sheets at March 31, 2007 and March 31, 2008
  F-5
 
   
Cash Flow Statements for the years ended March 31, 2006, 2007 and 2008
  F-6
 
   
Notes to Financial Statements
  F-7
     2. Financial Schedules
All financial statement schedules have been omitted because they are not required or the required information is provided in the Consolidated Financial Statements and Notes thereto.
     (B) Exhibits
     
Exhibit    
Number   Exhibit Title
 
   
1.1
  Articles of Association of Protherics PLC, as amended on July 22, 2008*
 
   
1.2
  Memorandum of Association of Protherics PLC (6)
 
   
2.1
  Instrument constituting 6 per cent. Unsecured Convertible Loan Notes 2010 (3)

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Exhibit    
Number   Exhibit Title
 
   
2.2
  Instrument constituting Unsecured Convertible Loan Notes 2026 (2)
 
   
4.1
  Distribution Agreement, dated October 11, 1997, between Therapeutic Antibodies Inc. and Altana, Inc. (7)
 
   
4.2
  First Amendment to the Distribution Agreement, dated October 25, 1999, between Altana, Inc. and Protherics (6)
 
   
4.3
  Amendment No. 1 to Distribution Agreement, dated September 12, 2000, between Altana, Inc. and Protherics (6)
 
   
4.4
  Amendment No. 3 to Distribution Agreement, dated February 2002, between Altana Inc. and Protherics (4) (+)
 
   
4.5
  Manufacturing Agreement, dated March 19, 2003, between Protherics UK Limited and Chesapeake Biological Laboratories Inc (4) (+)
 
   
4.6
  Memorandum of Lease, dated August 1, 1995, between Minister for Primary Industries, as Lessor, and TAb Australasia Pty. Limited, as Lessee (8)
 
   
4.7
  Patent and Know-how Licence Agreement, dated December 7, 2005, between Protherics Inc., Protherics UK Limited and AstraZeneca Ireland Operations (a branch in Ireland of AstraZeneca UK Limited) (2)(+)
 
   
4.8
  Asset Sale and Purchase Agreement, dated June 6, 2006, between CoVaccine B.V., Protherics Molecular Design Limited and Protherics PLC (2)(+)
 
   
4.9
  Agreement and Plan of Merger and Reorganization dated as of December 7, 2006, by and among Protherics PLC, MacroMed Acquisition Corp. and MacroMed, Inc. (1) (+)
 
   
4.10
  Exclusive License Agreement, dated December 15, 2004, between MacroMed, Inc. and Diatos SA (1) (+)
 
   
4.11
  Restated License and Supply Agreement, dated June 20, 2006, between Samyang Genex Corporation and MacroMed, Inc. (1) (+)
 
   
4.12
  Collaboration Agreement, dated December 6, 2006, between Protherics Medicines Development Limited and Advance In Vitro Cell Technologies S.L. (1) (+)
 
   
4.13
  License Agreement, dated December 7, 2006, between Protherics Medicines Development Limited and Glenveigh Pharmaceuticals, LLC, Glenveigh Research, LLC, C. David Adair, M.D., CDA Royalty Investors, LLC, and CDA Licensing Administrators, LLC. (1) (+)
 
   
4.14
  First Amendment to License Agreement, dated April 15, 2008, between Protherics Medicines Development Limited and Glenveigh Pharmaceuticals, LLC, Glenveigh Research, LLC, C. David Adair, M.D., CDA Royalty Investors, LLC, and CDA Licensing Administrators, LLC. *
 
   
4.15
  Supply and Distribution Agreement, dated March 1, 2006, between Protherics Molecular Design Limited and Idis Limited *
 
   
4.16
  Proteus Approved Executive Share Option Scheme (7)
 
   
4.17
  Proteus Unapproved Share Option Scheme (7)

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Exhibit    
Number   Exhibit Title
 
   
4.18
  Amendment to the Protherics PLC Employee Share Option Scheme (formerly known as the Proteus Unapproved Share Option Scheme) *
 
   
4.19
  Option Deed, dated December 22, 1999, between Protherics PLC and Andrew J. Heath (6)
 
   
4.20
  Protherics PLC 2005 Long-Term Incentive Plan (2)
 
   
4.21
  Protherics PLC Performance Share Plan (2)
 
   
4.22
  Protherics PLC 2005 Deferred Bonus Plan (2)
 
   
4.23
  U.S. Sub-plan to Protherics PLC 2005 Deferred Bonus Plan (2)
 
   
4.24
  Protherics PLC 2005 Executive Share Option Plan (2)
 
   
4.25
  The Protherics PLC Company Share Option Plan for Therapeutic Antibodies Inc. Employees adopted on January 27, 2000 (6)
 
   
4.26
  Protherics PLC 2008 Sharesave Scheme*
 
   
4.27
  Employment Agreement, dated November 13, 2001, between Protherics Inc. and Andrew J. Heath (5)
 
   
4.28
  Employment Agreement, dated November 13, 2001, between Protherics PLC and Andrew J. Heath (5)
 
   
4.29
  Employment Agreement, dated April 17, 2007, between Protherics PLC and Rolf B. Soderstrom *
 
   
4.30
  Employment Agreement, dated July 13, 1995, between Protherics PLC and James C. Christie (5)
 
   
4.31
  Employment Agreement, dated June 8, 2007, between Protherics Inc and Saul Komisar (1)
 
   
4.32
  Letter of Appointment dated May 24, 2007, between Protherics PLC and Stuart M.Wallis (1)
 
   
4.33
  Consultancy Agreement, dated May 24, 2007, between Protherics PLC and Stuart M. Wallis (1)
 
   
4.34
  Letter of Appointment dated January 19, 2004, between Protherics PLC and Garry Watts (3)
 
   
4.35
  Letter of Appointment dated February 23, 2004, between Protherics PLC and John R. Brown (3)
 
   
4.36
  Letter of Appointment dated July 21, 2005, between Protherics PLC and Bryan G. Morton (2)
 
   
4.37
  Letter of Appointment dated January 24, 2007, between Protherics PLC and Jacques Gonella (1)
 
   
8.1
  List of Subsidiaries*
 
   
11.1
  Code of Ethics (3)
 
   
31.1
  Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

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Exhibit    
Number   Exhibit Title
 
   
31.2
  Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
 
   
32.1
  Certifications pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
*   Filed herewith
 
(+)   Portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Commission.
 
(1)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on August 13, 2007.
 
(2)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on July 31, 2006.
 
(3)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on September 30, 2004.
 
(4)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on September 30, 2003.
 
(5)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on September 30, 2002.
 
(6)   Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 20-F, filed on September 27, 2001.
 
(7)   Incorporated by reference to exhibits filed with the Company’s Registration Statement on Form F-4, filed on August 16, 1999, File No. 333-85347.
 
(8)   Incorporated by reference to exhibits filed by Therapeutic Antibodies Inc. with its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995, File No. 0-25978.

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SIGNATURES
     The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
         
July 31, 2008  PROTHERICS PLC
 
 
  By:   /s/ Rolf Soderstrom    
    Rolf Soderstrom   
    Finance Director   
 

 


Table of Contents

Report of the Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Protherics PLC
We have audited Protherics PLC’s (“Protherics”) internal control over financial reporting as of 31 March 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Protherics’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Protherics maintained, in all material respects, effective internal control over financial reporting as of 31 March 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Protherics as of 31 March 2008 and 2007, and the related consolidated income statements, consolidated statements of recognized income and expense, and consolidated cash flow statements for the two years then ended, and our report dated [ ] 2008 expressed an unqualified opinion on those consolidated financial statements.
KPMG Audit Plc
Manchester, United Kingdom
31 July 2008

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Report of the Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Protherics PLC
We have audited the accompanying consolidated balance sheets of Protherics PLC and subsidiaries as of 31 March 2008 and 2007, and the related consolidated income statements, consolidated statements of recognized income and expense and consolidated statements of cash flows for the two years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Protherics PLC and subsidiaries as of 31 March 2008 and 2007, and the results of their operations and their cash flows for the two years then ended, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and IFRS as adopted by the European Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Protherics PLC’s internal control over financial reporting as of 31 March 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated [   ] 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
KPMG Audit Plc
Manchester, United Kingdom
31 July 2008

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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Protherics PLC:
In our opinion, the accompanying statements of income, of recognized income and expense and cash flows for the year ended 31 March 2006 present fairly, in all material respects, the results of operations and cash flows of Protherics PLC and its subsidiaries for the year ended 31 March 2006, in conformity with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and IFRS as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
London, United Kingdom
25 July 2006

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Income Statements
for the year ended 31 March 2008
                                 
            2008     2007     2006  
    Notes     £’000     £’000     £’000  
 
                               
Revenue
    4       26,067       31,119       17,709  
Cost of sales
                               
 
Cost of sales excluding exceptional closedown costs
            (12,463 )     (11,334 )     (9,930 )
Exceptional closedown costs
    6                   (1,362 )
 
Total cost of sales
            (12,463 )     (11,334 )     (11,292 )
 
Gross profit
            13,604       19,785       6,417  
 
                               
Administrative expenses
                               
Research and development
            (19,138 )     (13,978 )     (6,747 )
General and administrative
            (13,684 )     (10,161 )     (9,203 )
 
Total administrative expenses
            (32,822 )     (24,139 )     (15,950 )
 
 
                               
Operating loss
    6       (19,218 )     (4,354 )     (9,533 )
 
 
                               
Finance income
    8       2,382       1,155       401  
Finance costs
    9       (415 )     (417 )     (431 )
 
Loss before tax
            (17,251 )     (3,616 )     (9,563 )
Tax
    10       509       259       75  
 
Loss for the year
    25       (16,742 )     (3,357 )     (9,488 )
 
                                 
            Pence     Pence     Pence  
 
                               
Basic and diluted loss per share
    11       (4.9 )     (1.2 )     (3.8 )
The results relate to continuing operations.
Statements of Recognised Income & Expense
for the year ended 31 March 2008
                                 
            2008     2007     2006  
            £’000     £’000     £’000  
 
                               
Exchange differences on translation of foreign operations
            236       749       (158 )
 
Net expense recognised directly in equity
            236       749       (158 )
 
                               
Loss for the year
            (16,742 )     (3,357 )     (9,488 )
 
Total recognised expense for the year
            (16,506 )     (2,608 )     (9,646 )
Adjustments arising on first time adoption of IAS 32 and IAS 39
    25                   211  
 
Total losses recognised since last financial statements
                    (2,608 )     (9,435 )
 
All recognised income and expense is attributable to equity shareholders.
The notes on pages F-7 to F-56 form part of these financial statements.

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Balance Sheets
at 31 March 2008
                         
            2008     2007  
    Notes     £’000     £’000  
Non-current assets
                       
Goodwill
    12       10,865       10,878  
Intangible assets
    13       19,119       19,652  
Property, plant and equipment
    14       11,884       9,987  
Deferred tax asset
    10       345       99  
 
 
            42,213       40,616  
 
 
                       
Current assets
                       
Inventories
    15       10,205       10,707  
Derivative instruments
    22             114  
Tax receivables
            763       773  
Trade and other receivables
    16       3,975       15,066  
Cash and cash equivalents
    17       37,660       39,989  
 
 
            52,603       66,649  
 
 
                       
Total assets
            94,816       107,265  
 
                       
Current liabilities
                       
Trade and other payables
    18       19,210       14,037  
Current tax liabilities
            370       273  
Obligations under finance leases
    21       966       1,048  
Bank overdrafts and loans
    19       54       46  
Derivative instruments
    22       170        
 
 
            20,770       15,404  
 
 
                       
Non-current liabilities
                       
Trade and other payables
    18       8,670       10,844  
Borrowings
    19       141       157  
Convertible loan notes
    20       1,971       2,100  
Obligations under finance leases
    21       1,712       2,289  
 
 
            12,494       15,390  
 
 
                       
Total liabilities
            33,264       30,794  
 
                       
 
Net assets
            61,552       76,471  
 
 
                       
Shareholders’ equity
                       
Share capital
    23       6,806       6,783  
Share premium account
    24       136,292       135,951  
Shares to be issued
    25       1,289       1,289  
Merger reserve
    25       51,163       51,163  
Equity reserve
    25       203       220  
Cumulative translation reserve
    25       794       558  
Retained earnings
    25       (134,995 )     (119,493 )
 
Total equity
            61,552       76,471  
 
The financial statements were approved by the Board of Directors and authorised for issue on July 2008. They were signed on its behalf by:
R Soderstrom
Director
The notes on pages F-7 to F-56 form part of these financial statements.

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Cash Flow Statements
for the year ended 31 March 2008
                                 
            2008     2007     2006  
    Notes     £’000     £’000     £’000  
 
                               
Cash flows from operating activities
                               
 
                               
Cash (outflow) / inflow from operations
    32       (126 )     (16,051 )     12,609  
Income tax paid
                        (50 )
Income tax received
            282       293       5  
 
Net inflow / (outflow) from operating activities
            156       (15,758 )     12,564  
 
 
                               
Investing activities
                               
Interest received
            2,382       1,155       401  
Proceeds on disposal of property, plant and equipment
            2       2       52  
Purchases of property, plant and equipment
            (3,471 )     (1,242 )     (1,989 )
Purchases of other intangible non-current assets
                  (4,092 )      
Acquisition of subsidiary, net of cash acquired
                  (374 )      
Capital grants received
            9             250  
 
Net cash used in investing activities
            (1,078 )     (4,551 )     (1,286 )
 
 
                               
Financing activities
                               
Interest paid
            (160 )     (170 )     (257 )
Interest paid on finance leases
            (238 )     (213 )     (133 )
Repayment of borrowings
            (55 )     (36 )     (171 )
Repayment of finance leases
            (1,063 )     (837 )     (582 )
Proceeds from issue of loan note
                  30        
Proceeds from issue of shares
            53       36,162       8,049  
 
Net cash (outflow) / inflow from financing activities
            (1,463 )     34,936       6,906  
 
 
                               
Net (decrease) / increase in cash and cash equivalents
            (2,385 )     14,627       18,184  
 
                               
Cash and cash equivalents at the beginning of year
            39,989       25,438       7,242  
 
                               
Effect of foreign exchange rate changes
            12       (76 )     12  
 
Cash and cash equivalents at the end of year
    17       37,616       39,989       25,438  
 
The notes on pages F-7 to F-56 form part of these financial statements.

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Table of Contents

     1 General Information
Protherics PLC is a company incorporated in the United Kingdom under the Companies Act 1985.
The financial information set out below does not constitute the company’s statutory accounts for the years ended 31 March 2008, 2007 or 2006. Statutory accounts for 2006 and 2007 have been delivered to the registrar of companies, and those for 2008 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
These financial statements are presented in Sterling because that is the currency of the primary economic environment in which the Company operates. Foreign operations are included in accordance with the policies set out in note 2.
Standards effective in the current period
In the current year, the Company has adopted IFRS 7, Financial Instruments: Disclosures, which is effective for annual reporting periods beginning on or after 1 January 2007, and consequential amendments to IAS 1, Presentation of Financial Statements. The impact of the adoption of IFRS 7 and the changes to IAS 1 has been to expand the disclosures provided in these financial statements regarding the Company’s financial instruments and management of capital (see note 27). As a disclosure based standard there have been no changes in either accounting policy or the primary financial statements.
The following standards and interpretations had no material impact on the Company’s results, assets or liabilities or were not relevant:
    IFRS 2 (Amendment), Share-Based Payment — Vesting Conditions and Cancellations;
 
    IFRS 4, Insurance Contracts;
 
    IAS 1, Amendment on Capital Disclosures;
 
    IFRIC 7, Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies;
 
    IFRIC 8, Scope of IFRS 2, Share-Based Payment;
 
    IFRIC 9, Reassessment of Embedded Derivatives; and
 
    IFRIC 11, IFRS 2 — Group and Treasury Share Transactions.

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Standards in issue not yet adopted
At the date of authorisation of these financial statements the following standards and interpretations were in issue but not yet effective:
    IFRS 8, Operating Segments;
 
    Amendment to IAS 1, Presentation of Financial Statements;
 
    Amendment to IAS 23, Borrowing Costs;
 
    IFRIC 13, Customer Loyalty Programmes; and
 
    IFRIC 14, IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction.
IFRS 8 was endorsed by the EU during 2007 and the Directors anticipate that the adoption of this standard may result in additional segment disclosures when it comes into effect for periods commencing on or after 1 January 2009.
All other standards referred to above are yet to be endorsed by the EU and the Directors do not anticipate that the adoption of these standards will have a significant impact on the Financial Statements of the Group when they come into effect for periods commencing on or after 1 January 2009.
None of the interpretations have been endorsed by the EU and none are expected to have a significant impact on adoption.
     2 Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.
Basis of accounting
The Company financial statements have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (“IASB”) and International Financial Reporting Standards as adopted by the European Union (collectively referred to as “IFRS”).
The financial information presented on pages to has been prepared based on IFRS, including International Accounting Standards (“IAS”) and Interpretations issued by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are relevant to its operation and effective for accounting periods beginning on 1 April 2007.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities. A summary of the more important policies are set out below.
The preparation of financial statements in conformity with IFRS 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 revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates.

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Basis of consolidation
The consolidated financial statements of Protherics PLC incorporate the financial statements of the Company and all entities over which it can exercise control (its “subsidiaries”). Control is achieved by the power to govern the financial and operating policies of the subsidiary so as to obtain benefits from it’s activities, and generally accompanies a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date on which control ceases.
The purchase method is used to account for the acquisition of subsidiaries by the Company. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Company’s share of identifiable net assets, including intangible assets acquired, is recorded as goodwill. If the cost of acquisition is less than the fair value of the Company’s share of net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Company.
On consolidation, all intra-group transactions, balances, income and expenditure are eliminated.
Segment reporting
A business segment is a group of assets, liabilities and operations engaged in providing products or services that are subject to risks and returns that are different from those of other parts of the business. A geographical business segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.
Foreign currency translation
Items included in the financial statements of each of the Company’s entities are measured using the functional currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Sterling, which is the Company’s functional and presentational currency.
Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates of exchange prevailing at that date. Gains and losses arising on translation are included in the income statement.
On consolidation, the results of operations that have a functional currency different from the presentational currency are translated at the average rate of exchange during the year and their balance sheets at the rates ruling at the date of the balance sheet. Exchange differences arising on translation from 1 April 2004 are taken directly to a separate component of equity, the cumulative translation reserve.

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Revenue recognition
Revenue represents amounts received or receivable in respect of the sale of goods and services to customers during the year, net of trade discounts given and value added tax, and in respect of licence agreements and research and collaboration agreements.
A description of the various elements of revenue and the associated accounting policies is given below:
    Products
 
      The Company recognises revenue for product sales when each condition of IAS 18, paragraph 14 is wholly-satisfied. Where sales arrangements specify a second element of revenue contingent upon a specified event, this revenue is not recognised until this event has occurred and it is certain that the economic benefit triggered by this event will flow to the Company. In cases where product is sold to a customer with a right of replacement, the Company views the transaction as a multi-element arrangement and a portion of the value from the sale is deferred and allocated to the replacement right based on the fair value of the replacement right.
 
    Upfront and milestone payments
 
      Non-refundable upfront and milestone payments are deferred and recognised as the earnings process is completed. Where the Company has performance obligations, upfront payments are deferred over the period in which these obligations are satisfied. In determining the performance obligations under the contract, consideration is given as to whether elements of the obligations meet the criteria for separate accounting. The Company applies the substantive milestone method in accounting for subsequent milestone payments. Milestone payments that are considered substantive are recognised into income in the year in which they are received. Milestones that do not satisfy the criteria to be considered as substantive are amortised over the remaining period in which the Company expects to fulfil its performance obligations under the agreement. The Company considers the following when assessing whether a milestone is considered substantive:
    Are the milestone payments non-refundable?
 
    Does the achievement of the milestone involve a degree of risk that was not reasonably assured at the inception of the arrangement?
 
    Is substantive effort involved in achieving the milestone?
 
    Is the amount of the milestone payment reasonable in relation to the effort expended or the risk associated with the achievement of the milestone?
 
    How does the time that passes between the payments compare to the effort required to reach the milestone?
    Outlicensed product royalties
 
      Royalty income is generated by sales of products incorporating the Company’s proprietary technology. Royalty revenues are recognised once the amounts due can be reliably estimated based on the sale of underlying products and recoverability is assured. Where there is insufficient historical data on sales and returns to fulfil these requirements, for example in the case of a new product, the royalty revenue will not be recognised until the Company can reliably estimate the underlying sales.
Research and development expenditure
Research expenditure is recognised as an expense as incurred. Expenditure incurred on development projects (relating to the design and testing of new or improved products) is recognised as intangible assets when it is probable that the project will generate future economic benefit, considering factors including its commercial and technological feasibility, status of regulatory approval, and the ability to measure costs reliably. Other development expenditures are recognised as an expense as incurred. Development expenditure previously recognised as an expense is not recognised as an asset in a subsequent period. Development expenditure that has a finite useful life and which has been capitalised is amortised from the commencement of the commercial production of the product on a straight line basis over the period of its expected benefit.
No development expenditure has been capitalised in either the current or prior two years.
Exceptional items
The Company defines exceptional items as those items which are not expected to occur frequently and by their nature or size, would distort the comparability of results from year to year.

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Finance income and costs
Finance income comprises of income on funds invested and is recognised as it accrues using the effective interest method.
Finance costs comprise interest expenses on borrowings and are recognised in the Income Statement using the effective interest method.
Intangible fixed assets — Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets, including intangible assets, of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment or when events or changes in circumstances indicate the carrying value may be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amount. Goodwill arising on acquisitions in the year ended 31 March 1998 and earlier periods has been written off to reserves, has not been reinstated in the balance sheet and is not included in determining any subsequent profit or loss on disposal.
Intangible fixed assets — Other
Purchased trademarks, licenses and customer lists are recognised at cost on acquisition and are subject to amortisation over their useful life from the point at which the asset is available for use. The amortisation charge is calculated on a straight-line basis over their estimated useful lives (currently a maximum of 10 years).
Property, plant and equipment
Land and buildings comprise mainly factories and offices. All property, plant and equipment is shown at cost less subsequent depreciation and impairment losses, except for land, which is shown at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in an asset’s carrying amount only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the asset can be measured reliably.
Depreciation on assets is calculated using the straight-line method to allocate the cost of each asset less its residual value over its estimated useful life as follows:
     
          Buildings and improvements
  5% to 10% per year
          Plant and machinery
  10% to 15% per year
          Computer equipment and software
  20% to 33% per year
          Fixtures, fittings and motor vehicles
  20% to 25% per year
Asset residual values and useful lives are reviewed and adjusted as appropriate at each balance sheet date.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the carrying amount exceeds the higher of the asset’s fair value less cost to sell and value in use. Any impairment charge is recorded in the income statement.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement. Borrowing costs incurred during the construction of assets are expensed as incurred.

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Impairment of tangible and intangible assets
The Company reviews the carrying amounts of its tangible assets and intangible assets with finite lives when events or circumstances indicate the carrying value may be impaired, whilst goodwill with an indefinite life is reviewed for impairment on an annual basis. In performing such reviews, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying value of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, provided that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost comprises materials, direct labour and a share of production overheads appropriate to the relevant stage of production. Provision is made for obsolete, slow-moving or defective items where appropriate. Net realisable value is determined at the balance sheet date on commercially saleable products based on estimated selling price less all further costs to completion and all relevant marketing, selling and distribution costs.
Inventories relating to research and development projects are fully written down in the income statement unless the Company considers it probable to realise economic value from their sale or use. If the circumstances that previously caused these inventories to be written down below cost subsequently change and there is clear evidence of an increase in realisable value, the write down is reversed.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising from investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Such assets are depreciated over the shorter of their estimated useful lives or the length of the lease. Assets purchased under hire purchase agreements are accounted for similarly, except that these assets are depreciated over their estimated useful lives.
Rentals under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Government grants
Government grants towards staff re-training costs are recognised as income over the periods in which the related costs are incurred and are deducted in reporting the related expense.
Government grants relating to property, plant and equipment are treated as deferred income and released to the income statement over the useful lives of the assets concerned.
Pensions
The Company operates a defined contribution retirement benefit scheme for all members of staff who wish to participate. The funds of the scheme are administered by trustees and are independent of the Company’s finances. The Company’s contributions are charged in the income statement as they fall due.
Share-based payments
The Company has applied the requirements of IFRS 2, Share-Based Payments. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The Company grants share options to Directors and employees. Equity-settled share-based payments are measured at fair value at the date of grant and expensed on a straight-line basis over the expected life of the option, based on the estimate of the number of options that will eventually vest.
The share options granted have varying performance criteria required for the option to vest and these are considered in the method of measuring the fair value. Where it is considered appropriate, the fair value is measured using the Black-Scholes model. Where complex market based performance criteria exist, a simulation model has been used, based on the same underlying methodology as the Black-Scholes model, to establish the fair value on grant.

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Financial liabilities and equity instruments issued by the Company
    Classification as debt or equity
 
      Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
 
    Equity instruments
 
      An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
 
    Compound instruments
 
      The component parts of compound instruments issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.
 
    Financial liabilities
 
      Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
 
      Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
 
      The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
 
    Derecognition of financial liabilities
 
      The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
 
    Derivative financial instruments
 
      The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Company uses foreign exchange forward contracts and options to hedge these exposures. These hedges do not qualify as accounting hedges in accordance with IAS 39. The Company does not use derivative financial instruments for speculative purposes. The use of financial derivatives is in accordance with the Company’s policies approved by the Board of Directors, which is to hedge the foreign currency exposure from the expected US dollar sales on a rolling twelve month basis.
 
      Further details of derivative financial instruments are disclosed in note 27.
 
      Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in the income statement immediately.
 
      A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than twelve months and it is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.
 
    Embedded derivatives
 
      Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

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Convertible loan notes
The convertible loan notes are considered by the Company to be compound financial instruments and are accounted for in accordance with the policy set out above.
Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.
The interest expense on the liability component consists of the coupon rate and the element of the equity component proportionate to the liability component outstanding. This latter part is added to the carrying amount of the convertible loan notes.
Trade receivables
Trade receivables do not carry any interest and are stated at their face value as reduced by appropriate allowances for estimated irrecoverable amounts.
Trade payables
Trade payables are not interest bearing and are stated at their face value.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Financial guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
Financial risk management
The Company’s multinational operations expose it to a variety of financial risks that include the effects of changes in foreign exchange rates, credit risks and liquidity risks. The Company undertakes procedures which aim to reduce uncertainty in the financial performance of the Company which are discussed below:
    Foreign exchange risk
 
      A significant element of the Company’s revenue is denominated in US dollars whilst much of its cost base in the provision of these products is denominated in Sterling. The Company enters into foreign exchange contracts and similar derivatives to manage cash flows in the form of foreign exchange contracts and similar derivatives which typically extend for twelve months and cover 70 to 100% of anticipated Sterling requirements.
 
    Credit risk
 
      A significant element of the Company’s revenue is generated from sales to one customer in the US. Management are constantly in communication with this customer and monitor both sales and payments from this customer to minimise the credit risk exposure.
 
    Liquidity risk
 
      The Company maintains a mixture of short and medium term deposits that are designed to ensure the Company has sufficient available funds for operations and planned expansions.
 
    Interest rate risk
 
      The Company seeks to mitigate partially against increased interest rates whilst maintaining a degree of flexibility to benefit from decreasing rates of interest by holding a mix of fixed and floating rate financial liabilities. The Company seeks to maximise the amount of interest income from its cash balances by using a variety of short-terms, fixed high0interest deposit and money-market accounts.

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     3 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical Accounting Judgements
In the process of applying the Company’s accounting policies, described in note 2, management has made the following judgements that have had the most significant effect on the amounts recognised in the financial statements.
Revenue recognition
As described in note 2, it is the Company’s policy to recognise non-refundable upfront payments over the period of the earnings process. During the year ended 31 March 2006, the Company received £16.3m from AstraZeneca UK Ltd in a Patent and License Know How agreement for CytoFab™. The Company considers that its obligations under the license agreement consist of the license, provision of development services, regulatory support and steering committee participation. The Company considers that the development services and the regulatory support it can supply will cease with the approval of CytoFab™ by the FDA and while the steering committee continues to operate after product approval by the FDA, the Company has received confirmation that its participation after this date would become voluntary. Based on the clinical development plan to be undertaken by AstraZeneca, the Company currently estimates that its performance under the agreement will be completed over the period to December 31, 2012 and, therefore, is recognising the £16.3m on a straight line basis, over the estimated performance period.
During the year ended 31 March 2007, the Company earned a £10 million milestone from AstraZeneca UK Ltd which was recognised as revenue in that year since the Company considered this a substantive milestone for which the earnings process had been completed. This milestone was payable upon the decision of the Process Manufacturing and Supply Committee to progress the Process Science Programme to the manufacture of the first full commercial scale batch of CytoFab™, the decision reflecting AstraZeneca’s acknowledgement that the Company had successfully developed a commercially viable manufacturing process capable of providing material for clinical trial and also subsequent launch. The previous methods applied by the Company had used alternative processes and techniques that were not commercially viable and had such development failed, no further amounts would have been received under the agreement. The Company considered the non-refundable nature of the milestone along with risks set out above, the substantial costs and efforts incurred in its achievement over a 14 month period, and considered that this satisfied the criteria used to determine whether a milestone is substantive as set out in its accounting policies.
In determining the revenue recognition period, management considered the detailed criteria for the recognition of revenue per IAS 18, Revenue, and is satisfied that all requirements have been met by the Company.
Acquisitions
Judgements have been made in respect of the identification of intangible assets made on acquisitions in the prior year based on pre-acquisition forecasts, analysis and negotiations. In addition to the judgements and estimates made in establishing the intangible assets acquired and their value, in certain instances, these assets are in development and are only amortised once the development phase has been completed, although these assets are subjected to impairment review in accordance with the accounting policy described in note 2.
Key Sources of Estimation Uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

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     4 Revenue
An analysis of the Company’s revenue is as follows:
                         
    2008     2007     2006  
    £’000     £’000     £’000  
 
                       
Sale of products
    23,495       18,504       16,221  
Revenue in respect of product development
    2,296       12,213       976  
Other
    52       125       72  
 
 
    25,843       30,842       17,269  
Outlicensed product royalties
    224       277       440  
 
 
    26,067       31,119       17,709  
Finance income
    2,382       1,155       401  
 
 
    28,449       32,274       18,110  
 
     5 Segmental Reporting
For management purposes, the Company is organised into two operating segments, the sale, manufacture and development of pharmaceutical products and royalties arising from outlicensed technology. These divisions are the basis on which the Company reports its primary segment information.
The revenue and costs of each segment are clearly identifiable and allocated to each segment accordingly. There are no inter-segmental revenues. The exceptional item shown within cost of sales for the year ended 31 March 2006 is included within the sale, manufacture and development of pharmaceutical products operating segment.
Business segments
                         
    2008    
    Sale, manufacture              
    and development of     Outlicensed        
    pharmaceutical     product        
    products     royalties     Total  
    £’000     £’000     £’000  
Continuing operations
                       
 
                       
Revenue
    25,843       224       26,067  
 
Segment result
    (19,429 )     211       (19,218 )
 
                       
Finance income
                    2,382  
Finance costs
                    (415 )
 
Loss before tax
                    (17,251 )
Tax
                    509  
 
Loss for the year a