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Cyprotex PLCAnnual Report & Accountsfor the year ended 31 December 2008

Stock Code: CRX

Strategic Partners For Pharmacokinetic Technology

Cyprotex PLC15 Beech Lane, Macclesfi eld,Cheshire, United Kingdom, SK10 2DR

Tel: +44 (0) 1625 505100Fax: +44 (0) 1625 [email protected]

www.cyprotex.com

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Stock code: CRX

Operational Highlights

Financial Highlights 1

Our Vision 2

Our Market 3

Our Business 4

About Pharmacokinetics and Toxicity 5

Business Review 6

Chairman’s and Chief Executive Offi cer’s Report 12

Financial Review 15

Board of Directors 20

Report of the Directors 21

Report on Directors’ Remuneration 24

Statement of Directors’ Responsibilities 26

Report of the Independent Auditor 27

Financial Statements 29

Notice of Annual General Meeting 60

Shareholder Information 60

Directors and Advisors IBC

Cyprotex specialises in ADME and pharmacokinetic screening and prediction.

2008 Highlights

• Launch of our new product catalogue in April 2008.

• Introduction of a new product line, Cloe® Select, a portfolio of bespoke later stage assays.

• Successful execution of larger scale strategic partnershipdeals with several of our customers.

• 47% Increase in the number of results delivered to ourcustomers compared with 2007.

• Expansion of our analytical capabilities with the purchaseof an Applied Biosystems QTRAP® 5500 LC-MS/MS, one of

the most sensitive instruments in the industry.

• Creation of additional laboratory space allowing forconsiderable expansion during 2009.

• Extension of our range of drug-drug interaction screens inresponse to customer and regulatory demands.

• Focus on improving efficiencies both in cost and time byenhancing our information technology systems.

• Continued participation in an EU-funded project (OSIRIS)to address REACH legislation using our in silico PB PK

(physiologically based-pharmacokinetic) expertise.

New for 2009

• Launch of our new company website in April 2009.

• Introduction of Cloe® Gateway, our new web based portal for access to Cyprotex services expected in Q2 2009.

• Release of our new enhanced version of our proprietarysoftware, Cloe® PK anticipated in Q2 2009.

• Expansion of our range of Cloe® Screen and Cloe® Select assays to provide a ‘one stop shop’ for all our clients’

ADME needs.

• Continued research in novel PB PK (physiologically based-pharmacokinetic) and QSAR (quantitative structure activityrelationship) modelling techniques with the developmentof new products in this area.

Directors and Advisors

DirectorsAnthony Baxter (Chief Executive Offi cer)

John Dootson (Chief Financial Offi cer)

Steve Harris (Non-Executive Director and Chairman)

SecretaryMark C. Warburton

Auditor Nominated AdvisorsGrant Thornton UK LLP Noble & Company Limited

4 Hardman Square 120 Old Broad Street

Spinningfi elds London, EC2N 1AR

Manchester, M3 3EB

Registrars Registered Offi ceCapita Registrars 100 Barbirolli Square

Northern House Manchester, M2 3AB

Woodsome Park

Fenay Bridge

Huddersfi eld, HD8 0LA

Financial Highlights

Operating Profit

up £1 mat £0.567 m

Revenue

up 43%to £5.18 m

Maiden Profit for the year

at £0.54 m

Management reiterates its confi dence in Cyprotex’s business plan and the value of its unique products and services.

• Revenues increased by 43% to £5.18 million (2007: £3.63 million)

• Gross profit rose by 49% to £4.48 million (2007: £3.00 million)

• Maiden operating profit of £567,000 (2007: loss of £496,000)

• Earnings per share of 0.36 pence (2007: loss per share of 0.35 pence)

• Successful fully subscribed Placing and Open Offer raised

£1.00 million (£0.97 million net of costs) in August 2008

• Year end cash position improved significantly to £1.58 million notwithstanding continued investment (2007: £0.3 million)

page 06 Cloe® Screen

page 08 Cloe® Select

page 10 Cloe® Predict

01Annual Report & Accounts for the year ended 31 December 2008

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Our Vision

Cyprotex’s vision is to provide, in partnership with our customers in drug discovery and development, the highest quality, fastest turnaround and most cost effective ADME and pharmacokinetic data to the pharmaceutical and biotechnology industries.

As a pure service business, we aspire to be a leading edge technology business in the provision of ADME screening services and in silico pharmacokinetic (PK) prediction to our customers which will translate into the discovery of more effective medicines.

Cyprotex — Our Ambition

• To exceed our customers expectations in the provision of our services

• To maintain our position as the leading ADME / PK outsourced service provider to the pharmaceutical and

biotechnology industries

• To focus on our core deliverables of highly reproducible data in the fastest turnaround time and at the most cost – effective price to our customers

• To invest in and further develop our unique automated platform and information management systems

• To improve the recognition of the Cyprotex brand world wide

• To expand our customer base and deepen the relationships with our existing clients

Background

Cyprotex was established in April 1999 and is situated in Macclesfield, Cheshire (UK). The company achieved listing on the Alternative Investment Market of the London Stock Exchange in 2002.

Originally founded by Dr David Leahy, the objective was to create a company that would transform ADME screening and pharmacokinetic prediction. Cyprotex has, over the last nine years, achieved this aim by combining both a wealth of knowledge and the scientific expertise of our staff with state-of-the-art equipment and automation.

Cyprotex boasts an established reputation as an ADME service provider, offering an exceptional service to both pharmaceutical and biotechnology companies worldwide. In the past twelve months 27 new companies have chosen to work with Cyprotex.Cyprotex continues to prove that quality of service and integrity of data can be achieved cost-effectively.

Our Company is a specialist provider of high quality in vitro ADME screening as well as robust in silico methods used in the prediction of in vivo pharmacokinetics. Cyprotex has developed a suite of services and technologies known as Cloe® (Cyprotex Lead Optimisation Engine).

Stock code: CRX02


Strategic Partners For Pharmacokinetic Technology.

Our Market

The Market

The global pharmaceutical market is facing ever mounting pressures over research and development productivity. Start-up and leading pharmaceutical and biotechnology companies alike benefit from outsourcing sections of their drug discovery programmes, helping reduce their current financial pressures. The global drug discovery market is said to have reached $5.4 billion in 2007 and is expected to exceed a value of $14 billion by 2013. Outsourcing of drug discovery services is expected to reach a level of $7.2 billion by 2009, reinforcing the trend that outsourcing is now widely accepted.

As the number of identified drug targets increase, identifying and characterising a compound’s ADME and toxicity profile is being sought earlier within the drug discovery and development process therefore avoiding failure during late development stages or within clinical trials. Partnering with contract research organisations (CROs) is becoming a necessity for the pharmaceutical and biotechnology industry.The European outsourcing market is forecasted to expand from $3.2 billion in 2004 to $5.1 billion by 2011.

Rapid High Quality Efficient

It is estimated that approximately 40% of all research and development work will be outsourced by 2010. The inevitable result will be the emergence of outsourcing companies as industry leaders. Specialist CROs who are able to provide access to a collection of expertise, improved testing capabilities and turnaround times supplementing in-house research efforts. Cyprotex is ideally placed to take full advantage of the growth in CRO usage successfully attracting new clients while retaining our existing client base.

Cyprotex is contracted to work for six of the

world’s top ten global Pharmaceutical

companies.



Our Business

Our Differentiators

High quality protocols – All our protocols are based on high quality industry accepted methods. They have been carefully designed to meet recommendations outlined in regulatory guidelines. Many of our customers have trialled our experimental assays and continue to use Cyprotex based on the success of these evaluations.

Automation – Cyprotex have invested heavily in automation both in terms of sophisticated laboratory equipment and creation of a customised laboratory information management system. This has enabled a dramatic increase in our efficiency by improving our capacity whilst reducing turnaround time and cost. The use of automation ensures highly consistent and reproducible data.

Dedicated Project Managers – Only the very best scientists are chosen to perform the role of Project Manager at Cyprotex. All have considerable experience in the area of ADME and pharmacokinetics and are highly trained as Project Managers. They oversee all aspects of the study from logistics, study management and data reporting to specific advice and consultancy.

Screening and Prediction – Cyprotex have extensive expertise in PB PK (physiologically based-pharmacokinetic) and QSAR (quantitative structure activity relationship) modelling techniques. Our ability to combine both experimental screening and in silico prediction provides an integrated approach which is attractive to many of our customers.

Products and Technology

Cloe® is an acronym for Cyprotex Lead Optimisation Engine.

Cyprotex combines in vitro ADME screening (Cloe® Screen) with unique pharmacokinetic prediction systems (Cloe® Predict) to offer an integrated suite of ADME services to pharmaceutical and biotechnology companies worldwide. In 2008, Cyprotex introduced a new Cloe® product line, Cloe® Select. Cloe® Select focuses on studies typically performed either at a later stage of drug discovery or during the preclinical development process.

By investing in automation and focusing on quality, Cyprotex offer an unrivalled service which combines detailed yet cost effective protocols with a rapid turnaround time.

Stock code: CRX04


Strategic Partners For Pharmacokinetic Technology.

About Pharmacokinetics and Toxicity

Pharmacokinetics

Pharmacokinetics is the study of the concentration of a compound within the body over time, including the processes of absorption, distribution,

metabolism and excretion (ADME). ADME is often investigated alongside toxicity and the combined term for these studies is ADMET. The

pharmaceutical and biotechnology industries have recognised that successful compounds show favourable ADMET properties and the need for

investigation at an early stage of drug discovery is crucial. This has led to an urgent need for more rapid, cost-effective in vitro ADMET capabilities,

which can be used to screen large numbers of compounds, as well as robust in silico methods.

Absorption

This is the movement of a compound through the gastro-intestinal tract. A compound’s ability to permeate the gut wall can govern its success as an oral medication.

Distribution

This is the reversible rate and extent of movement of a compound within blood components, tissues and organs. A compound’s distribution through the body can affect its therapeutic efficacy.

Metabolism

Is how a compound is broken down in the body, predominantly in the liver.

Excretion

Is how a compound is removed from the body. The speed of excretion is a determinant of the length of time a compound resides in the body.

Toxicity

This is the undesirable side effects of a compound leading to a patient’s non-compliance or even death.

A

D

M

E

T

Collaborations

During the first half of 2008, we completed our involvement in EUMAPP, an EU funded consortium. The goal of this project was to investigate how to accelerate from lab to clinic using a combination of human microdosing, improved analytical capabilities and in silico approaches. Cyprotex provided in silico support to this project.

We are continuing our participation in a longer term EU funded project, OSIRIS. The overall goal of this consortium is to develop software which identifies whether in vivo toxicity for a compound is to be triggered or waived based on its predicted toxicity and exposure. Cyprotex are building pharmacokinetic prediction models (both generic and local models) for environmental compounds.

Cyprotex will continue to seek further funding in 2009 for planned research and development activities.



Cloe® Screen

up 47%

Number of results delivered for our Cloe® services

Stock code: CRX06


Business Review

Expansion of Cloe® Screen

During 2008, we have continued to update our Cloe® Screen offering in response to regulatory recommendations and customer demand.

This has included expanding the range of isoforms in our cytochrome P450 inhibition drug-drug interaction screens. The cytochrome P450 family of enzymes play an important role in the metabolism of drugs. If two drugs are administered simultaneously and interact with the same enzyme then this can affect the metabolism of one or both of the drugs, with the consequence of elevated plasma levels and potential toxic effects. Providing an in vitro screen for drug-drug interactions can assist in identifying potential problems at an early stage.

We have also continued to improve Cloe® Screen effi ciency, both in terms of cost and time, by further enhancing our information technology systems.

By industrialising traditional high quality

methods, Cyprotex has developed a superior

yet cost-effective panel of screening

methods offering rapid turnaround; Cloe®

Screen. This is achieved by the use of

liquid handling robots, automated LC-MS/

MS analysis and a tailored laboratory-

information management system. Many of

the advances in throughput and consistency

have only been possible through major

investment in software systems for managing

materials and data flows. It has been essential

that our information systems have been able

to automate the human decision making

involved in assessing the quality of the data

and deriving results. This extremely powerful

system seamlessly manages all aspects of

sample tracking, laboratory automation and

results generation. Utilising this system is

instrumental to high throughput technology

as well as increasing the speed of screening,

it provides reassurance that the automation

and data are being effectively controlled.

I Highly reproducible, accurate data – our assays have been trialled by

many pharmaceutical and biotechnology

companies. Based on the success of

these trials, these clients now routinely

use these assays, and regard the data as

exceptionally high quality.

I Rapid data delivery - return of data

to our clients meets the fast turnaround

times demanded by them, and fits with

the make-test cycles in drug discovery.

I Highly cost-effective - achieved by

investing in automated systems.

I Consultancy - we employ highly trained

Principal Scientists who are experts in the

field of ADME and pharmacokinetics.

I Integration with predictive methods - Cloe® PK or other predictive

methods can be used to integrate and

interpret the experimental ADME data.

Rapid, high quality data delivery



Cloe® Select

up 47%


Stock code: CRX08


At the end of 2008, we expanded our bioanalytical facilities with the opening of a new laboratory to house the purchase of an AB Sciex QTRAP® 5500 LC-MS/MS, one of the most sensitive ion trap and triple quadrupole instruments in the industry.

Cyprotex was one of the fi rst companies in the UK to benefi t from this next generation technology which allows us to offer unparalleled sensitivity and a superior bioanalytical service to our customers. As well as enabling us to enhance our metabolite profi ling and identifi cation service, it will also allow us to offer a comprehensive bioanalytical method development and validation service. The instrument will increase the likelihood of detecting poorly sensitivity molecules which are problematic in conventional LC-MS/MS systems.

Expansion of our Bioanalytical Facility with the purchase of an AB Sciex QTRAP® 5500 LC-MS/MS

2008 saw the successful launch of a new

Cloe® product line at Cyprotex. Cloe®

Select provides a portfolio of bespoke

ADME services which can be customised

to the individual clients’ drug discovery

and development requirements. This

service complements Cloe® Screen and

enables Cyprotex to offer solutions from

early drug discovery through to later

stage development projects. Our Cloe®

Select services currently encompass

cytochrome P450 induction studies using

fresh hepatocytes, P-glycoprotein inhibition,

metabolite profiling and identification and

pKa and logP determination using the Sirius

GLpKaTM. We will be expanding this area

of the business during 2009 to provide a

greater range of later stage services.

I Consultancy - Only highly experienced

scientists are chosen for the role of

Project Manager. These individuals

are experts in the field of ADME and

pharmacokinetics and their role is to

oversee, support and guide a project

from start to completion.

I Flexibility – We are able to customise

and adapt experimental ADME and

pharmacokinetic experiments based on

our clients’ specific project needs.

I Later stage solutions - Our Cloe®

Select service complements our Cloe®

Screen service to provide ADME solutions

from early drug discovery through to

later stage development projects.

I Regulations - Our services have

been designed to follow FDA

recommendations, providing constant

confidence in the data received.

I Results - Our customers have a number

of different reporting options from

summary data to a full written report.

Business Review continued

A portfolio of Bespoke ADME services



Cloe® Predict

up 47%


Stock code: CRX10


Cloe® Predict covers a suite of predictive

technologies and expertise available

at Cyprotex. We have a team of PB PK

(physiologically based-pharmacokinetic)

modellers and software engineers who

are building novel models for improving

the prediction of pharmacokinetics and

developing new systems for rapid and

innovative auto-QSAR (quantitative structure

activity relationship) techniques. Our

Company’s ability to provide this integrated

and effective approach to drug discovery is

a compelling and attractive proposition to

our clients.

Cloe® PK and Cloe® Predict Human Intestinal Absorption:Cloe® PK combines the generation of in vitro

ADME data with the ability to predict in vivo

pharmacokinetics using our expertise in

PB PK modelling. Cyprotex are also

developing models to predict specifi c in

vivo processes. The fi rst one of these models

(Cloe® Predict Human Intestinal Absorption)

integrates in vitro Caco-2 permeability data

with in vitro aqueous solubility to predict

intestinal absorption.

The Cyprotex Discovery Bus: The Cyprotex Discovery Bus is a novel and

powerful software platform designed

to enhance effi ciency in drug discovery

by automating human processes using

intelligent workfl ow. Two main applications

applicable to the drug discovery industry

include laboratory workfl ow processes which

streamline the fl ow of compounds into

assays and, subsequently, the capture and

interpretation of instrument data and also

auto-QSAR.

I Expertise – Cyprotex have a wealth of

experience and expertise in PB PK and

QSAR modelling techniques.

I Innovative Software – All our Cloe®

Predict products are novel techniques.

These products have been developed

and are owned by Cyprotex.

I Cost Effective Solutions – Our Cloe®

Predict products have been designed to

improve effi ciency in the drug discovery

process. For example, our Cloe® PK

product assists in prioritising compounds

with predicted optimal pharmacokinetics

for further testing. Our Discovery Bus

platform dramatically reduces operating

costs by enhancing productivity of

resource intensive processes.

I Better Understanding – By

integrating the in vitro ADME data with

physicochemical properties, Cloe® PK

provides a greater understanding of the

expected pharmacokinetics in vivo.

Cloe® Gateway Launch in 2009

Cyprotex realise the importance of maintaining an easy-to-use and informative website for our customers. In 2009, we will be launching our new website.

This will provide a useful resource for our customers to keep up-to-date with developments at Cyprotex and to learn more about the services we offer and why these are important in a drug discovery and development setting. One exciting addition to the website will be the launch of Cloe® Gateway our new web portal which allows access to online drug discovery services. This will be available very shortly after the launch of the website and will open up a number of interactive tools online.

Our website is an important source of information for our customers. We are looking forward to expanding our range of web-based resources via Cloe® Gateway throughout 2009.

Business Review continued

Improving efficiency in the Drug Discovery process



Change

In terms of Board structure and Management team composition at

Cyprotex there has been a considerable transformation. In June this

year, Robert Morrisson Atwater resigned as Chief Executive Officer

(CEO) and was replaced by Dr Anthony D. Baxter. Dr Baxter is an

experienced executive in the small/medium biotechnology and

medicinal chemistry sector businesses having been CEO of deltaDOT,

founding CEO of Argenta Discovery Ltd and CSO of Oxford Asymmetry

International (now Evotec AG) in recent years.

Dr Baxter, with his wealth of knowledge of providing customer focused,

high quality service offerings to this market, is leading an overhaul of

the Company’s sales and marketing operation — to positive effect.

In August 2008, Steve Harris joined the Board as Chairman. Mr Harris

has considerable experience in Non-Executive roles, of both private

and public companies, and is currently Chairman of Proteome

Sciences plc and Aquapharm Biodiscovery Limited, and Non-executive

Director of Advanced Medical Solutions Group plc and Phynova

group plc.

We have recently announced the recruitment of a new Chief Financial

Officer (CFO), John Dootson, FCA. Mr Dootson has assisted Cyprotex

for several years in a management consultative role that included all

aspects of finance and reporting.

During the year, Dr Martial Lacroix and Mr Minhaz Manji resigned their

positions as Non-Executive Directors. Nikolas Sofronis who stepped

down as Chairman in August left the Board in December, when

Mr Russell Gibbs also resigned as CFO. On 25 February 2009, Mr David

Evans resigned as a Non-Executive Director. We are very grateful to

each of them for their efforts in managing Cyprotex over the past

few years, stabilising the business and affording a platform for future

growth. We wish them all well in their future endeavours.

Mr Mark Warburton, Legal Counsel and Company Secretary, also

took responsibility for all Sales and Marketing activities during 2008

and effectively steered the business during the period of the Board

Chairman’s and Chief Executive Officer’s Report

Steve HarrisNon Executive Chairman

Dr Anthony D BaxterChief Executive Officer

2008 was a year of significant change, challenge and ultimately success for Cyprotex.

17 March 2009

Stock code: CRX12



changes. We are grateful to Mr Warburton for his considerable efforts

in managing the transformation of the business during the year.

Subsequent to the above changes, the Cyprotex Board is as follows:

Mr Steve Harris Non-Executive Chairman

Dr Anthony D. Baxter Chief Executive Officer

Mr John Dootson Chief Financial Officer

Mr Mark Warburton attends Board meetings in his capacity at

Company Secretary.

We are actively looking to further strengthen the Board with sector

experienced Non-Executive Directors and are seeking to recruit a high

calibre Chief Commercial Officer.

We have, during 2008, completely restructured our sales team and

have three new business development managers in the USA and two

in Europe. We have also created an Executive Management Team that

regularly meets to define the strategy for the business and our three

key managers, Dr Helen Gill, Dr Clive Dilworth and Dr John Cartmell

have all increased their operational responsibilities.

Challenge

Cyprotex continues to offer the highest quality, premium pre-clinical

ADMET services to our customers in the pharmaceutical, biotechnology

and agrochemical markets. A recent customer satisfaction survey

revealed that 95% of Cyprotex’s customers were wholly satisfied with

the services on offer, particularly commending the quality and quick

turnaround of data.

Our automated platform is a unique selling point for the business as it

affords exceptional reproducibility of data, miniaturisation of processes

and sizeable cost savings in operations. We must continue to invest

in the platform such that our key differentiators are maintained and

secured against competition. The Company’s oft stated view that our

services are highly operationally geared has been proven for the first

time. With an increasing number of customers and larger contracts we

have processed more samples and generated more data for roughly

the same operational cost. The result has been not only a pleasingly

increased turnover but a substantial increase in operating profitability.

The great challenge for Cyprotex is to maintain operational growth

and further increase profit margins whilst controlling fixed costs. In

order to achieve this, we must change the fundamental nature of our

business development strategy and develop ‘strategic relationships’

with customers rather than rely on ‘overflow’ business as it has done

in the past. Such ‘strategic relationships’ afford larger contracts

with fewer major customers, more visibility of earnings, operational

and scheduling efficiencies in the laboratory and the ability to grow

our technical service offerings to meet the scientific challenges our

customers face in ADMET.

This year we signed and completed the first such strategic contract

with a major European customer. We are pleased to report that this

contract has been subsequently renewed. The volumes of samples

processed and the range of assay types required was a challenge to

our laboratory team but we have now proven that we can handle such

large and complex contracts and deliver exactly what the customer

expects. These ‘strategic relationships’ mean that we are ever more

entwined with the customer’s decision making process in drug

discovery and this will help us to secure long-term revenues.

The challenge in 2009 and beyond is to secure more of these ‘strategic

relationships’. Our business development activities are aimed at

further deepening our relationships with existing customers and

approaching new customers who may benefit from a proposition

which enables them to secure high quality ADMET data without

expensive internal overhead.

The Chief Commercial Officer we are seeking to recruit will lead the

drive to secure such strategic contracts.

Success

Although, for reasons described above, the numbers of customers we

service is not a primary indicator of success, it is pleasing to note that

during 2008 we have increased our Master Service Agreements by 27

and now have over 200 customers registered. We have added several

significant major pharmaceutical companies who are working with

Cyprotex for the first time. Two of these new relationships have yielded

significant revenue.



Financial Highlights

Notwithstanding the significant management changes that took

place during the year, the Company has recorded a very progressive

financial performance.

Revenue for the period increased by 43% to £5.18 million

Gross profits rose by 49% to £4.48 million from £3.00 million in 2007

Operating profit was positive for the first time in the Company’s

history at £567,000 against a loss of £496,000 in 2007

Successful fully subscribed Placing and Open offer raised

£1.0 million (£0.97 million net of costs)

Earnings per share of 0.36 pence (2007: loss per share of 0.35 pence)

Notwithstanding continuing investment, the year end cash position

improved signifi cantly to £1.58 million from the low point recorded at

the half year to 30 June 2008 of £0.28 million

New Product and Facilities Development

During the year, the Company undertook a full review of the products

and services it offers with several of its largest customers. As a result

of that feedback, we have invested in Research and Development

programmes and in capital investments to improve both our range of

assays and our equipment base. Such investment has been moribund

in recent years. The following represents some of the new assays and

facilities that have been implemented in 2008/early 2009.

Two new laboratories (720 sq ft in total) have been built and fi tted

out at our Beech Lane facilities at a total cost of £125,000. These

new facilities provide room for a potential further 15 staff and were

offi cially opened in February 2009 by Sir Nicholas Winterton MP DL.

Early in 2009, a new AB Sciex QTRAP® mass spectrometer was

installed at a cost of £250,000. This instrument offers up to 10,000

times greater sensitivity in detection of samples.

In April 2008, we launched a new product line, Cloe® Select, which

enables the Company to offer more bespoke, customised assays for

our clients. Revenues from this service have steadily risen during

the year.

A new product catalogue was launched in April 2008.

We have enhanced our range of drug-drug interaction screens.

These include introducing our Cloe® Select P-gp inhibition

assay and extending the number of isoforms in our panel of CYP

inhibition screens.

These new facilities and assays have been well received by our

customers and are already generating new revenue for the business.

We are currently working on development programmes to more

fully commercially exploit our software services. We expect to

launch an innovative and novel pay-per-use service through a new

web-based portal called Cloe® Gateway. Further investments are

planned during 2009.

Communication

We have improved our communications with shareholders and

as promised have held quarterly investor meetings and detailed

presentations at Annual General Meetings. This regular updating of

investors will continue in 2009.

Summary and Outlook

2008 was something of a watershed year for Cyprotex. A new

management team and Board has been created and the Company

has proved its business model resulting in increased turnover and

two successive half yearly operating profit figures. We have engaged

with our customer base at a new commercial level and have delivered

the first ‘strategic’ contract successfully. With new belief in a cash

generative business, we can now also consider approaches to grow the

business by acquisition as well as organically.

We look forward to 2009 with confidence, despite the current

economic climate, and we would like to thank our staff for their

excellent work in delivering results on time, our customers for their

support and our investors for their encouragement and patience.

Chairman’s and Chief Executive Officer’s Report continued

Stock code: CRX14


Financial overview

The year ended 31 December 2008 marked a defining shift in the

financial profile of the business. Increased sales revenues, the

successful share Placing and Open offer, and the continued tight

control of costs saw the Company significantly cash generative over

the financial year. The business is very well placed to grow and develop

further in 2009 against the backdrop of a soundly based structured

financial framework.

Our business model

Our objective is to be recognised as the international standard setter

for ADMET screening. This goal is to be achieved by unmatched

throughput capability and reproducibility based on ever increasing

automation. We aim to be recognised and valued as a key ‘strategic

partner’ with customers in our area of expertise.

Our financial goals

We aim to capitalise on the increasing trend of Pharmaceutical

and Biotechnology companies outsourcing early stage compound

evaluation. Our investment in related technologies complete, with our

unrivalled technological expertise means that we are very well placed

to advance the aims in our business model.

The ADME market

The ADME market is currently estimated to be in excess of US$2

billion and the current outsourced market in excess of US$0.7

billion. Increased penetration of this substantial market is a key

financial objective.

Performance

The 2008 financial year marked a step change in the financial

performance of Cyprotex. Ten years on from inception, the

Company has now; through significant investment in equipment,

high automation, and the skill, dedication and expertise of its staff,

established an unrivalled automated ADMET service. The ability of the

Company to innovate and automate allows us to meet and exceed

customer expectation and drive throughput levels to many times that

achieved by the pharmaceutical industry ‘in-house’. The Company

is now cash generative and with significant available liquid resources,

is well positioned to fund proprietary developments, to expand

and diversify its offering, and additionally actively seek business

opportunities for growth.

Key performance indicators – financial

The key financial performance indicators used by the Board, in 2008, as

a measure of the success of the business are as follows:

Financial Review

John DootsonChief Financial Officer

17 March 2009


KPI’s – financial

2008 2007 Year on year

£m £m increase

Revenue 5.18 3.63 42.7%

Operating profit/(loss) 0.57 (0.50) 1.07 million

Cash inflow/(outflow)

from operations 0.54 (0.04) 0.58 million

Cash 1.58 0.30 1.28 million

Earnings per share

– basic (pence) 0.36p (0.35)p 0.71p



Financial Review continued

Capital structure

2008 2007

Summary balance sheet £m £m

Fixed assets 1.2 1.4

Current assets excluding cash 1.3 0.8

Current liabilities excluding debt (0.6) (0.4)

Net assets before cash/(debt) 1.9 1.8

Cash 1.6 0.3

Debt due within five years (0.2) (0.3)

Debt due greater than five years (0.5) (0.5)

Shareholders’ funds 2.8 1.3

Shareholders’ funds have increased by £1.5 million in the year ended

31 December 2008 following a combination of fund raising and the

Company recording its maiden profit after tax. In August 2008, the

Company successfully raised £1.0 million (£0.97 million net) in cash via a

Placing and Open offer issuing 40,000,000 ordinary shares of 2.50 pence.

The Company has an unused bank overdraft facility of £200,000 (2007:

£250,000)

Revenues and pre-tax profit

2008 2007

Summary income statement £m £m

Revenue 5.18 3.63

Gross profit 4.48 3.00

Gross profit percentage 86.5% 82.6%

Operating costs

- Staff costs (2.52) (2.19)

- Depreciation (0.24) (0.26)

- Other administrative (1.15) (1.05)

Operating profit/(loss) 0.57 (0.50)

Net finance costs (0.03) (0.04)

Profit/(loss) before tax 0.54 (0.54)

EPS – basic (pence) 0.36p (0.35)p

The Company achieved revenue in the year of £5.18 million, an increase

of 42.7% from the year ended 31 December 2007, with gross profits up

49% at £4.48 million. The share based payment charge for the year,

which is included within administrative costs and has no net cash effect,

was £15,729 (2007: £63,489). Operating results for the year improved by

over £1 million in the year was £567,023 (2007: loss £495,627).

(Loss) for the year

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2002 2003 2004 2005 2006 2007 2008

Revenue Profit for the year

Year ended 31 December

£m

Revenue and Profit and Loss for the year

Cash flow from operations

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

2002 2003 2004 2005 2006 2007 2008

Operating profit/(loss)


£m

Cash flow from operations

Stock code: CRX16



The Company made a profit before tax of £542,262 in the financial year

(2007: loss £543,102); utilising brought forward tax losses there was no

tax charge in the year leaving a profit after tax of £542,262 (2007: Tax

credit £64,367, loss after tax £478,735). Earnings per share was 0.36p

(diluted 0.35p) which compares favourably to 2007 when a loss per

share of 0.35p was recorded.

Cash flow

2008 2007

Summary cash flow statement £m £m

Inflow/(outflow) from operations 0.54 (0.04)

Net finance charges (0.03) (0.05)

Taxation received 0.07 0.09

Capital expenditure (net) (0.15) (0.03)

Net cash flow before financing 0.43 (0.03)

Share issues (net) 0.97 -

Other financing (net) (0.12) (0.12)

Net cash inflow/(outflow) 1.28 (0.15)

Opening cash 0.30 0.45

Closing cash 1.58 0.30

With a high positive correlation between cash flow and profitability

the Company was cash generative from operations in 2008 for the

first time in its history. This coupled with a highly successful and

oversubscribed Placing and Open raising £0.97 million (net) in August

2008 leaves the Company at the start of 2009 with significant cash

resources.

Principal risks/uncertainties

Management has attempted to minimise its exposure to identified

external and internal variables that may have an effect on the

operations of the Company. Where possible, measures to monitor

and mitigate such risks have been enacted and processes adopted to

formally identify and examine such situations.

The nature of Cyprotex’s operations nevertheless requires the Board

and its investors to assess the principal risks facing its operations and

these are considered below.

Business evolution

Trading activity is dependent, in part, on continuing global investment

in new drug discovery and development. Adoption of new practices

for such development or significant regulatory change by authorities

such as the FDA, or the supplanting of the screening of molecular

compounds by means of electronic simulation or software emulation or

prediction, would have a direct impact on likely revenues achieved by

the Company. This inherent risk is addressed by the close partnership

arrangements Cyprotex enjoys with its principal customers.

Economic downturn

2008 2007 2006 2005

Sales by territory % % % %

United Kingdom 24 21 14 11

Rest of Europe 46 29 47 61

USA and North America 29 48 38 27

Rest of the World 1 2 1 1

The analysis above demonstrates that the business is not dominated by

customers from one specific region and this provides a certain amount

of insulation from local variations.

EBIT

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0

0.5

1.0

1.5

2002 2003 2004 2005 2006 2007 2008

EBITDA


£m

-4.0

EBITDA & EBIT EBIT

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0

0.5

1.0

1.5

2002 2003 2004 2005 2006 2007 2008

EBITDA


£m

-4.0

Agro pharm5%

Biotech10%

Pharma83% Academia

1%

Other1%

ROW1%

Rest of Europe46%

USA & Canada

29%

United Kingdom

24%

Revenues by customer type



Financial Review continued

Fluctuations in currency exchange rates

Sales by currency 2008 2007 2006 2005

Sterling GBP 36% 38% 51% 73%

US Dollar USD 30% 49% 40% 26%

Euro EUR 34% 13% 9% 1%

Fluctuations in commodity prices

The completion of our services relies on materials that are specific and

specialist by nature. The prices of such products are susceptible to

fluctuations dependent upon market conditions. In order to mitigate

the impact of such price movements, management has established a

number of regular supply arrangements that provide some forward

visibility.

In a severe worldwide economic downturn, however, marketing and

pricing strategies would need to be modified to reflect these new

conditions. Investment for the benefit of personal health and longevity

has historically followed longer-term patterns and are set more by

Governments. As such, the business is not over reliant on shorter-term

fluctuations in consumer confidence.

Fixed overheads

A large proportion of the Company’s overheads are fixed. There is a

potential risk that if revenue growth slows these fixed costs will not be

covered. Conversely given a relatively low level of consumable

costs, the Company exhibits a high level of operational gearing. The

operating cost of the core operation, however, provides only limited

scope for reduction without impacting quality of service.

Seasonality

2008 2007 2006 2008 2007 2006

£m £m £m % % %

Revenue — First half 2.24 1.69 1.62 43.3 46.5 46.3

— Second half 2.94 1.94 1.88 56.7 53.5 53.7

Total 5.18 3.63 3.50 100.0 100.0 100.0

Variations are driven by both budgets and vacation trends of the

Company’s customer base. Historically, trade is strongest during the

final quarter as annual projects complete. Trade slows with summer

holidays in the third quarter and, to a lesser extent, immediately after

the New Year. The Company switches any surplus resources to internal

research and product development to compensate for seasonal

variations.

Competition

The market in which the Company operates is competitive and

highly fragmented. By technological innovation and investment,

it endeavours to offer its global customer base a quality of service

unmatched by its competitors. The Company competes for market

share with other external Contract Research Organisations and the

Pharmaceutical industries own ‘in-house’ ADMET capabilities

Product obsolescence

The Company offers highly technological products and services.

Having internally developed such proprietary offerings and by

continuing to invest in their advancement, management is confident of

their ability to remain competitive.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2008200720062005200420032002

Top 5 6 to 10 11 to 20 Remainder

£m

Client revenue concentration

Approximately 64% of our revenue (2007: 62%) was derived in US

dollars or euros. This currency component has increased substantially

over the last three years. With the majority of operating costs incurred

in sterling the Company could be exposed to foreign currency

fluctuations. There are some costs that are hedged naturally. Forward

book visibility is limited to a number of weeks and whilst customers

agree in principle to levels of compounds to be screened each year

there is no absolute certainty of workflows. It is against this operational

background that the Company currently does not sell currency

forward.

Stock code: CRX18



Regulatory changes affecting the business

The industry in which the Company operates is strictly regulated and

changes may impact to decrease revenue, increase expenditure, or a

combination of both.

Management aims to mitigate such risks by ensuring that its

customers are aware of the impact of changing legislation. Currently,

management foresees no such legislative change likely to adversely

affect its operations; by contrast, management anticipates regulatory

guidance toward independent verification to work in its favour.

Financial risks are considered on a regular basis by the Board including

future interest rates, liquidity and foreign currency risk. Apart from

using short-term and period deposits, interest rate risks are limited to

the fixed element of finance lease/hire purchase agreements that the

Company has occasionally used and base rate risk on bank loans.

Typically, the Company arranges lease finance and hire purchase for

fixed periods ranging from 3 to 5 years, to enable purchase of assets

where it is considered to be an effective use of funds.

On 17 January 2005, Cyprotex entered a 20-year mortgage facility of

£704,000 with Bank of Scotland to substantially fund the acquisition of

a long-leasehold interest in its operational premises. Interest payable

on this bank loan is charged at 1.75% over the bank’s base rate.

Liquidity risk

Surplus funds are invested on a short-term basis at money market

rates and therefore such funds are available at short notice.

Foreign currency risk

With over 60% of revenues now denominated in US dollars and

euros the Company has considerable potential exposure to foreign

currency fluctuations. To limit this exposure the company has sales

price agreements with major customers that do not exceed one year

and that are not coterminous. Additionally, individual ADMET services

contracts known internally as ‘Rounds’ are short in timeframe and

as part of our minimum service standards completed within ten

working days of a compound arriving on site. Control over debtor

management within the Company is strong and surplus currency is

sold on receipt.

Our people

The success of the Company is highly dependent upon the

recruitment and retention of the correctly qualified and skilled

staff. They are the key drivers of profitability and growth. There are

remuneration schemes in place designed to mitigate the risk of losing

key individuals and reduce the risk arising from the absence of suitable

resources.

Pension funding

The Company does not have a defined benefit pension scheme for any

of its employees.

Treasury policies and financial risk

Surplus funds are intended to support the Company’s working

capital requirements and provide adequate resources to expand its

service offering both organically and by acquisition. These funds are

invested through the use of short-term and period deposits of up to

three months. It is not Company policy to use financial derivatives to

routinely manage exposure and other financial assets and liabilities.

Agro pharm5%

Biotech10%

Pharma83% Academia

1%

Other1%

ROW1%

Rest of Europe46%

USA & Canada

29%

United Kingdom

24%

Geographical sales

Jan

-08

Feb

-08

Mar

-08

Ap

r-08

May

-08

Jun

-08

Jul-0

8

Au

g-0

8

Sep

-08

Oct

-08

No

v-08

Dec

-08

Jan

-09

Feb

-09

Mar

-09

20%

40%

60%

80%

100%

120%

140%

Final results released

Tony Baxter appointed

Proposed placing of £1m

AGM

Placing

Trading update

Trading update

Steve Harris appointed

Interim results released

Shares peak at 4.89p

52-week low of 1.9p

CRX AIM all share

CRX share price analysis vs AIM all share



Dr Anthony Baxter (aged 48)Chief Executive Officer

Dr Anthony Baxter was formerly the founding CEO of Argenta Discovery

Limited, a leading drug discovery services and proprietary therapeutics

company backed by substantial venture capital investment. In less than

four years from the company’s start-up in 1999, he grew services revenue

to over £9 million which included building a pipeline of novel therapeutic

programmes. He then led the successful merger of the business with biotech

company, Etiologics Limited. Prior to this, Dr Baxter was Chief Scientific Officer

of Oxford Asymmetry International PLC and helped build the business from an

early stage company to its flotation on the LSE and then to its eventual merger

with Evotec in 2000 at a valuation of £316 million. Most recently, Dr Baxter

led the turnaround of deltaDOT Limited, a proteomics/genomics platform

technology company, which involved fundraising of £8.3 million. He is currently

Non-Executive Chairman of Equinox Pharma Limited, an Imperial College spin

out company focussing on development of ‘machine learning’ for iterative

and multi-parametric drug discovery projects.

John Dootson (aged 47)Chief Financial Officer

John Dootson has 25 years experience in both professional practice and

in industry. Trained with Tenon and Ernst & Young, John has extensive

managerial experience in major accounting practices and has worked on

a wide range of projects including London Stock Exchange flotations and

circulars, corporate governance, company acquisitions and disposals and

specialist advice to growing SMEs. John has worked in a number of roles in

Industry at Financial Controller and Director level, including seven years within

the senior head office finance team of BTP plc, a former FTSE250 speciality

chemical manufacturer with over 50 sites worldwide prior to its sale to Clariant

AG for £1.1bn.

John is a Fellow of the Institute of Chartered Accountants in England and

Wales and for the last four years he has assisted Cyprotex in a management

consultative role that has included all aspects of finance and reporting.

Steve Harris (aged 66)Chairman

Steve Harris is an experienced Non-Executive Director with a range of private

and public companies in the life sciences sector. He has a wide experience in

fundraising and IPOs and extensive international pharmaceutical and biotech

experience with particular focus on business development and licensing.

His present roles include being Non-Executive Chairman of Proteome Sciences

PLC, a proteomics company listed on AIM.

Steve is also a Non-Executive Director of: Advanced Medical Solutions Group

PLC, a wound healing company listed on AIM; and Non-Executive Chairman of

Aquapharm Biodiscovery Limited, a private company engaged in researching

and developing novel antibiotics, antibacterials and antifungals derived from

Marine organisms.

Board of Directors

Stock code: CRX20


The Directors of Cyprotex PLC present their report to the shareholders, together with the audited financial statements, for the year ended 31 December 2008.

Principal activities and trading review

Cyprotex PLC is a holding Company and its primary subsidiary is Cyprotex Discovery Limited. The principal activities of the Group are that of providing in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity/Pharmacokinetic) information to the pharmaceutical and biotechnology industries.

Details of the Group’s performance during the year, expected future developments and the principal risks and uncertainties facing the Group are contained in the Chairman’s and Chief Executive Officer’s Report set out on pages 12 to 14 and the Financial Review set out on pages 15 to 19.

Accounting standards and IFRS

For Group financial statements the Company reports under International Financial Reporting Standards (‘IFRS’). The parent Company accounts continue to be reported under United Kingdom generally accepted accounting practice (‘UK GAAP’).

Results and dividends

The profit for the year, after taxation, was £542,262 (2007: loss £478,735) and an equivalent amount has been transferred to reserves.

The Directors do not propose the payment of a dividend. A financial review of the results is included on pages 15 to 19.

Going concern

The Group recorded a profit after taxation of £542,262 in the year ended 31 December 2008 and cash and deposits rose by £1,284,028 to £1,584,882 in the year then ended (2007: fall of £154,425). The Directors have reviewed the budget, financial forecasts including cash flow forecasts and other relevant information and believe that the Group has adequate resources to continue in operation for the foreseeable future. Accordingly, the financial statements are prepared on a going concern basis.

Directors

The Directors of the Company who served during the year were as follows:

Mr R. Morrisson Atwater (resigned 3 June 2008)Mr R.B. Gibbs (resigned 31 December 2008)Mr N. Sofronis (resigned 31 December 2008)Mr M. Manji (resigned 24 June 2008)

Dr M. Lacroix (resigned 24 June 2008)Mr D.W. Evans (resigned 25 February 2009)

Dr A. Baxter (appointed 3 June 2008)Mr R.S. Harris (appointed 29 August 2008)

In addition, Mr J.K. Dootson was appointed as a Director on2 March 2009.

In accordance with the Company’s articles of association Mr J.K. Dootson and Mr R.S. Harris who were appointed as Directors seek confirmation of their appointments from Shareholders at the Annual General Meeting.

All Directors are subject to re-election and election at intervals of no more than three years.

Further details of the Directors, their service agreements, remuneration and fees, are set out on pages 24 and 25.

The Board

The Board currently comprises two Executive Directors, and the Chairman, a Non-Executive Director, with a clear division of duties. The Board meets regularly throughout the year to direct and control the strategy and operating performance of the Group. The Group is actively seeking to strengthen the Board with the appointment of Non-Executive Directors with sector experience a priority.

The following Committees deal with specific aspects of the Group’s affairs:

Audit Committee — comprises one Executive Director and one Non-Executive Director, Mr R.S. Harris, as Chairman. The Auditor attends the meetings and reports as appropriate. The Committee reviews the Group’s accounting policies, financial reporting, internal control and risk management processes. It also considers the appointment and fees of the external auditors and ensures that auditor objectivity and independence have not been compromised and meets at least twice during the year.

Remuneration Committee — following the substantial changes to the Board structure this committee currently comprises one Non-Executive Director, Mr R.S. Harris as Chairman and one Executive Director, Mr J.K. Dootson as an interim appointment. Mr J.K. Dootson will step down from this Committee on the appointment of a second Non-Executive Director of the Company. It recommends to the Board the policy for executive remuneration and it determines, on behalf of the Board, the terms and conditions of service of the Executive Directors. The Report on Directors’ Remuneration is set out on pages 24 and 25.

Directors’ Report




Directors’ Report continued

Internal control

The Board is responsible for establishing and maintaining the Group’s system of internal control, which is designed to meet the particular needs of the Group and the risks to which it is exposed. Such a system is designed to manage these risks, to provide reasonable but not absolute assurance against material misstatement or loss and to maintain proper accounting records to ensure the integrity of financial information used within the business and for external publication.

The Board has reviewed the effectiveness of its system of internal control as it operated during the period. The Board has considered whether the Group’s internal control processes would be significantly enhanced by an Internal Audit Function and has taken the view that at the Group’s current stage of development, this is not required. The Board will review this matter each year.

The key procedures that the Board has established include the following:

Clearly defined authorisation limits and procedures.

Budgets are reviewed and approved by the Board, and regularly monitored against monthly performance and forecasts

The Group’s financial and operating performance is closely monitored at regular Board meetings with formal Board reports from each Executive Director covering their areas of business responsibility.

The Board conducts ongoing reviews of the internal control systems and business processes to ensure that they remain appropriate to the needs of the Group.

Relations with shareholders

The Board recognises the importance of continual communications with shareholders and will maintain a programme of institutional dialogue, including presentations following the Company’s announcements of its final full year figures and of the half-year results.

There is also an opportunity, at the Company’s Annual General Meeting, for individual shareholders to raise general business matters with the Board and notice of the Company’s Annual General Meeting is circulated to all shareholders at least twenty-one working days before such meeting.

The annual report is to be published on the Company’s website, www.cyprotex.com, which also includes press releases and other announcements during the year.

Policy in respect of supplier payments

The Company and its principal subsidiary undertakings agree terms and conditions for transactions with suppliers and pay suppliers within the agreed terms, provided that suppliers comply with those terms and conditions. At 31 December 2008, the Group had an average of 29 days purchases (2007: 37 days) outstanding in trade payables. The Company had an average of nil days (2007: nil days) purchases outstanding in trade payables.

Charitable and political contributions

Charitable contributions amounted to £150 (2007: £85). The Group made no political contributions (2007: £nil).

Employee involvement

The Group recognises and seeks to encourage the involvement of its employees, with the aim being the recruitment, motivation and retention of quality employees throughout the Group. An unapproved share option scheme is in place operated within the Enterprise Management Incentive Scheme where applicable.

The Group’s employment policies, including the commitment to equal opportunity, are designed to attract, retain and motivate employees regardless of sex, race, religion or disability.

The Group is committed to ensuring and communicating the requirements for a safe and healthy working environment for all employees, consistent with health and safety legislation and, wherever practicable, gives full consideration to applications for employment from disabled persons.

Employee share schemes

Employee involvement in financial performance is encouraged through participation in the Company’s share option schemes. At 31 December 2008, 16 employees, five ex-Directors and one consultant to the Company held options over 19,736,000 ordinary shares in the Company under the unapproved share option scheme (2007: 22 employees and one consultant: 20,401,813 ordinary shares). The number of options held by five ex-Directors and vested at 31 December 2008 was 14,950,000. Of these, 14,500,000 are held by former Executive Directors of the Company and if not exercised within one year of their resignation from the Company will lapse. Further information on share options is shown in note 24 on pages 48 to 49.

Annual General Meeting

The Annual General Meeting of the Company will be held at The ENT Room, The Royal Society of Medicine, 1 Wimpole Street, London, W1G 0AE on Tuesday 14 July 2009 at 10.00 a.m. The notice of the Annual General Meeting will be forwarded to shareholders as a separate document along with the Annual Report & Accounts.

Stock code: CRX22



Major interests in shares

At 5 March 2009, the following persons held interests in excess of 3% of the ordinary share capital of the Company:

Number of

Percentage ordinary

holding shares

Bank of Scotland 15.17% 27,115,174

Intercapital Private Group Ltd 15.12% 27,024,465

R. Koch 9.37% 16,748,868

Prof D.E. Leahy 5.82% 10,401,600

R. Long 4.48% 8,000,000

GLA Dow 3.72% 6,649,727

BNP Paribas Luxembourg 3.07% 5,485,064

R. Sneller 3.02% 5,400,000

No other person has notified an interest in the ordinary shares of the Company required to be disclosed to the Company in accordance with

sections 198 to 208 of the Companies Act 1985.

Auditor

Grant Thornton UK LLP offer themselves for reappointment as auditors in accordance with section 489 of the Companies Act 2006. A resolution to

reappoint them as auditors and to authorise the Directors to determine their remuneration will be proposed at the Annual General Meeting.

By order of the Board

Mark C. WarburtonCompany Secretary

17 March 2009



Directors’ Remuneration Report

Board changes

The Board of the Company has gone through considerable changes in 2008 with two appointments and five resignations. Accordingly, there have been a number of changes of personnel attending the remuneration committee in the year.

Remuneration Committee

The Remuneration Committee currently comprises one Non-Executive Director, R.S. Harris as Chairman, and on an interim basis one Executive Director J.K. Dootson, who will step down on the appointment of a second Non-Executive Director. The Committee provides advice and recommendations to the Board regarding the framework for executive remuneration and the individual remuneration package for each Executive Director.

Remuneration policy

The remuneration policy for Executive Directors is to provide competitive remuneration packages to attract, retain, and motivate high quality people in competition with comparable companies. The main components of the remuneration of Executive Directors comprise:

Service contracts — the Executive Directors have service contracts with a notice period of between three and six months to be given by either the Director or the Company. The service contract of both executive directors provides that in the event of a change of control in the ownership of the Company the notice period increases twofold. The Remuneration Committee considers the circumstances of individual cases of early termination and determines compensation payments accordingly. Non-Executive Directors do not have service contracts but do have agreements that are terminable upon a three month notice period by either themselves or by the Company. These agreements provide for the attendance at Board meetings, an undertaking to advise the Company with respect to the management and conduct of business and the attendance at meetings of the Audit and Remuneration Committees of the Board as required. The Executive Directors determine the remuneration of the Non-Executive Directors without reference to the Remuneration Committee.

Basic salary and benefits — basic salaries of Executive Directors are determined annually after a review of the performance of each individual. Benefits in kind principally comprise private healthcare, death and disability in service cover.

Bonuses — the Executive Directors are eligible for bonus payments at the discretion of the Remuneration Committee and such discretion will be exercised based upon the performance of the Group. A bonus of £35,928 was awarded to Dr A. Baxter for the year ended 31 December 2008.

Share options — the Company has an unapproved share option scheme whereby options to acquire ordinary shares may be granted at the discretion of the Board, with the approval of the Remuneration Committee to Directors and employees of the Company. Further details of the awards to Directors are set out on pages 48 and 49.

Pensions — during the period, R.B. Gibbs, R. Morrisson Atwater and Dr A.D. Baxter have been beneficiaries of a defined contribution personal pension scheme; the Company’s contributions are 10% of total pensionable earnings. It is the intention of the Remuneration Committee to review the remuneration packages of the Executive Directors during the forthcoming financial year and to make recommendations to the Board of Directors for the introduction of an appropriate bonus incentive scheme, linked to personal and Group targets for both Executive Directors and staff.

Stock code: CRX24



Directors’ remuneration

Compensation

for loss 2008 2007 2008 2007

Salary/fee Bonus Benefits of office Total Total Pension Pension

£ £ £ £ £ £ £ £

Executive DirectorsA.D. Baxter a,b 89,821 35,928 — — 125,749 — 2,695 —

R. Morrisson Atwater a 69,903 — 443 117,500 187,846 146,090 13,403 14,500

R.B. Gibbs 107,300 — 441 58,333 166,074 100,510 10,000 10,000

Non–Executive DirectorsR.S. Harris a,c 10,000 — — — 10,000 — — —

N. Sofronis a 18,290 — — — 18,290 10,097 — —

M. Manji a 4,643 — — — 4,643 10,000 — —

M. Lacroix a 2,369 — — — 2,369 4,996 — —

D.W. Evans 4,987 — — — 4,987 4,915 — —

Total 307,313 35,928 884 175,833 519,958 276,608 26,098 24,500

Remuneration is from the date of appointment to the date of resignation.

a part year only

b ongoing salary of £155,000 pa

c ongoing fee of £30,000 pa

During the year three Directors (2007: two Directors) participated in defined contribution pension schemes.

Share pricesDuring 2008 the high and low share prices were 4.03p and 1.90p (2007: 8.00p and 2.75p). The share price at 31 December 2008 was 2.63p

(2007: 3.50p).

By order of the Board

Mark C. WarburtonCompany Secretary

17 March 2009



Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the European Union and the financial statements for the Parent Company in accordance with United Kingdom Accounting Standards, (United Kingdom Generally Accepted Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the Group as at the end of the financial year and of the profit or loss of the Group for that period.

In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the accounts

comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

The work carried out by the Auditor does not involve consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the information contained in the financial statements since they were presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Auditor’s information

In so far as the Directors are aware:

There is no relevant audit information of which the Company’s Auditor is unaware; and

The Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information.

Stock code: CRX26


Report of the Independent Auditor to the Members of Cyprotex PLC

We have audited the Group and Parent Company financial statements (the “financial statements”) of Cyprotex PLC for the year ended 31 December 2008 which comprise the principal accounting policies, the Group income statement, the Group and Parent Company balance sheets, the Group cash flow statement, the Group statement of changes in shareholders’ equity and notes 1 to 39. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

The Directors’ responsibilities for preparing the Annual Report and the Group financial statements in accordance with United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and for preparing the Parent Company financial statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice), are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. The information given in the Directors’ Report includes that specific

information presented in the Financial Review and Chairman’s and Chief Executive Officer’s Report that is cross-referred from the Business Review section of the Directors’ Report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Directors’ Report, the Directors’ Remuneration Report, the Chairman’s and Chief Executive Officer’s Report, and Financial Review. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.




Report of the Independent Auditor to the Members of Cyprotex PLC

Opinion

In our opinion:

the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31 December 2008 and of its profit for the year then ended;

the Group financial statements have been properly prepared in accordance with the Companies Act 1985;

the Parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Parent Company’s affairs as at 31 December 2008; and

the information given in the Directors’ Report is consistent with the financial statements.

Separate opinion in relation to IFRSs

As explained in Note 2 to the Group financial statements, the Group in addition to complying with its legal obligation to comply with IFRSs as adopted by the European Union, has also complied with the IFRSs as issued by the International Accounting Standards Board.

In our opinion the Group financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group’s affairs as at 31 December 2008 and of its profit for the year then ended.

Grant Thornton UK LLPRegistered AuditorsChartered AccountantsManchester

17 March 2009

Stock code: CRX28


Financial Statements

Consolidated income statement 30

Consolidated balance sheet 31

Consolidated statement of changes

in shareholders’ equity 32

Consolidated statement of cash flows 33

Notes to the consolidated accounts 34

Parent Company balance sheet 56

Notes to the Parent Company accounts 57






Consolidated income statement for the year ended 31 December 2008

2008 2007

Continuing operations Notes £ £

Revenue 5 5,181,396 3,626,118

Cost of sales (703,473) (621,717)

Gross profit 4,477,923 3,004,401

Administrative expenses (3,910,900) (3,500,028)

Operating profit/(loss) 6 567,023 (495,627)

Finance income 8 16,234 8,591

Finance costs 9 (40,995) (56,066)

Profit/(loss) before taxation 542,262 (543,102)

Income tax 10 — 64,367

Profit/(loss) for the year 542,262 (478,735)

Profit/(loss) per share from continuing operations— basic 11 0.36p (0.35)p

— diluted 11 0.35p (0.35)p

Stock code: CRX

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Consolidated balance sheet for the year ended 31 December 2008

2008 2007

Notes £ £

ASSETSNon current assetsProperty, plant and equipment 12 1,181,662 1,365,661

1,181,662 1,365,661

Current assetsInventories 13 118,557 113,694

Trade receivables 14 989,205 467,105

Other receivables 15 232,208 192,911

Current tax assets — 68,986

Cash and cash equivalents 1,584,882 300,854

2,924,852 1,143,550

Total assets 4,106,514 2,509,211

LIABILITIES

Non current liabilitiesLong term borrowings 580,500 611,500

Obligations under finance leases 10,729 72,399

16 591,229 683,899

Current liabilitiesTrade payables 18 153,330 166,334

Current portion of long term borrowings 17 25,000 22,500

Other payables 20 478,575 275,768

Obligations under finance leases 17 61,670 92,556

718,575 557,158

Total liabilities 1,309,804 1,241,057

EQUITYShare capital 22,23 178,698 138,648

Share premium account 10,594,200 9,663,685

Other reserve 128,070 128,070

Share based payment reserve 379,202 363,473

Retained losses (8,483,460) (9,025,722)

Shareholders’ equity 2,796,710 1,268,154

Total equity and liabilities 4,106,514 2,509,211

The accounts were approved by the Board of Directors and authorised for issue on 17 March 2009.

They were signed on its behalf by:

J.K. Dootson Chief Financial Officer

Annual Report & Accounts for the year ended 31 December 2008

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Consolidated statement of changes in shareholders‘ equity for the year ended 31 December 2008

Share Share based

Share premium Other payment Retained Total

capital account reserve reserve losses equity

£ £ £ £ £ £

Balance at 31 December 2006 138,573 9,662,913 128,070 299,984 (8,546,987) 1,682,553

Changes in equity for 2007Loss for the year — — — — (478,735) (478,735)

Total recognised income and expense for the period — — — — (478,735) (478,735)

Issue of share capital 75 772 — — — 847

Share based payment charge — — — 63,489 — 63,489


Changes in equity for 2008Profit for the year — — — — 542,262 542,262

Total recognised income and expense for the period — — — — 542,262 542,262

Issue of share capital 40,050 930,515 — — — 970,565

Share based payment charge — — — 15,729 — 15,729


The other reserve arose on the acquisition of Cyprotex Discovery Limited by the Company on 4 January 2002, which was accounted for as a

merger.

Stock code: CRX

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Consolidated statement of cash flows for the year ended 31 December 2008

2008 2007

£ £

Cash flows from operating activitiesProfit/(loss) after taxation 542,262 (478,735)

Adjustments for:

Depreciation 243,392 264,225

Share based payment charge 15,729 63,489

Investment income (16,234) (8,591)

Interest expense 40,995 56,066

Taxation income recognised in income statement — (64,367)

(Increase)/decrease in trade and other receivables (473,277) 98,408

Increase in inventories (4,863) (28,058)

Increase in trade and other payables 189,803 54,207

Cash inflow/(outflow) from operations 537,807 (43,356)

Interest paid (40,995) (56,066)

Income tax received 68,986 95,448

Net cash inflow/(outflow) from operating activities 565,798 (3,974)

Cash flows from investing activitiesPurchase of property, plant and equipment (147,630) (33,338)

Sale of property, plant and equipment 117 —

Interest received 16,234 8,591

Net cash used in investing activities (131,279) (24,747)

Cash flows from financing activitiesProceeds from issue of share capital (net) 970,565 847

Repayment of long-term borrowings (28,500) (24,300)

Payment of finance lease liabilities (92,556) (102,251)

Net cash generated/(used) in financing activities 849,509 (125,704)

Net increase/(decrease) In cash and cash equivalents 1,284,028 (154,425)

Cash and cash equivalents at beginning of period 300,854 455,279

Cash and cash equivalents at end of period 1,584,882 300,854


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Notes to the consolidated accounts for the year ended 31 December 2008

1. Nature of operations and general information Cyprotex PLC and its subsidiaries’ (‘the Group’) principal activity is the provision of in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity/Pharmacokinetic) information to the pharmaceutical industry.

Cyprotex PLC is the Group’s ultimate Parent Company. It is incorporated and domiciled in England and Wales. The address of the registered offi ce of Cyprotex PLC is 100 Barbirolli Square, Manchester, M2 3AB. It trades through a wholly owned subsidiary, Cyprotex Discovery Limited whose place of business is 15 Beech Lane, Macclesfi eld, Cheshire, SK10 2DR. Cyprotex PLC’s shares are listed on the Alternative Investment Market of the London Stock Exchange.

The consolidated statements of Cyprotex PLC are presented in Pounds Sterling (£), which is also the functional currency of the parent.

2. Basis of preparationThe consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), including International Accounting Standards (IAS) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). Practice is continuing to evolve on the application and interpretations of IFRS. Further standards may be issued by the International Accounting Standards Board (IASB) and standards currently in issue and endorsed by the EU may be subject to interpretations issued by IFRIC. IFRS, as adopted by the EU, differs in certain respects from IFRS as issued by the IASB. However, the consolidated fi nancial statements for the period presented would be no different had the Group applied IFRS as issued by the IASB. References to IFRS hereafter should be construed as references to IFRS as adopted by the EU.

The preparation of fi nancial statements, in conformity with generally accepted accounting principles under IFRS, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

The fi nancial statements have been prepared using the measurement and recognition bases specifi ed by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the detailed accounting policies below.

The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these fi nancial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 December 2008.

3. Going concernThe Group recorded a profi t after taxation of £542,262 in the year ended 31 December 2008 and cash and deposits rose by £1,254,028 to £1,584,882. The Directors have reviewed the budget, fi nancial forecast including cash fl ow forecasts and other relevant information and believe that the Group has adequate resources to continue in operation for the foreseeable future. Accordingly, the accounts are prepared on a going concern basis.

4. Summary of signifi cant accounting policiesBasis of consolidationThe Group fi nancial statements consolidate those of the company and its subsidiary undertakings drawn up to the balance sheet date. Subsidiaries are entities over which the Group has the power to control the fi nancial and operating policies so as to obtain benefi ts from its activities. The Group obtains and exercises control through voting rights.

Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the fi nancial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Business combinations completed prior to the date of transition to IFRS The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition to IFRS. Accordingly, the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax and minority interest are adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions.

Stock code: CRX

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4. Summary of signifi cant accounting policies continuedProperty, plant and equipment Property (including property subject to lease terms in excess of 800 years), plant and equipment is stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction or commissioning.

Depreciation Depreciation is calculated to write down the cost, less any estimated residual value, of all property plant and equipment by equal annualinstalments over the estimated useful economic lives as follows:

Long leasehold land and buildings Over 50 yearsOffi ce equipment Over 10 yearsComputer equipment Over 3 yearsLaboratory equipment Over 5 years

Material residual value estimates are updated at least annually.

Impairment testing of property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, refl ecting market conditions less costs to sell, and value in use based on an internal discounted cash fl ow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Disposal of assets The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement.

Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable.

Revenue is reduced for any rebates and other similar allowances.

Revenue on the outright sale of services and software, where no supplier obligations remain, is recognised on delivery to the customer.

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of the transaction is deemed to be able to be estimated reliably when all the following conditions are satisfied:

the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the entity the stage of completion of the transaction at the balance sheet date can be measured reliably and is estimated by reference to the level of

work performed; and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Where a contract for goods or services involves delivery of several different elements and is not fully delivered or performed by the year end, revenue is recognised based on the proportion of the fair value of the elements delivered to the fair value of the overall contract.

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rates applicable.


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Notes to the consolidated accounts continuedfor the year ended 31 December 2008

4. Summary of signifi cant accounting policies continuedInventories Inventories are stated at the lower of cost and net realisable value on a fi rst-in-fi rst out basis, after making allowance for obsolete and slow moving items. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion.

Research and development Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Development costs incurred are capitalised during the development phase when all the following conditions are satisfi ed:

completion of the intangible asset is technically feasible so that it will be available for use or sale; the Group intends to complete the intangible asset and use or sell it; the Group has the ability to use or sell the intangible asset; the intangible asset will generate probable future economic benefi ts. Among other things, this requires that there is a market for the output

from the intangible asset or the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefi ts; there are adequate technical, fi nancial and other resources to complete the development and to use or sell the intangible asset; and the expenditure attributable to the intangible asset during its development can be measured reliably.

Development costs not meeting these criteria for capitalisation are expensed as incurred.

Amortisation commences upon completion of the asset and is in line with expected future related revenues.

Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposit, together with other short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignifi cant risk of changes in value with maturities of three months or less from acquisition.

Leased assets In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a fi nance leasing liability.

The interest element of leasing payments is charged to the income statement in constant proportion to the capital balance outstanding over the period of the lease.

All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight-line basis over the lease term. Lease incentives are spread over the term of the lease.

Pensions The Group operates a defi ned contribution scheme. Pension costs charged against profi ts are the contributions payable to the scheme in respect of the accounting period.

Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the income statement in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of recognised income and expenses to the extent that they relate to a gain or loss on that non-monetary item taken to the statement of changes in shareholder equity, otherwise such gains and losses are recognised in the income statement.

Stock code: CRX

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4. Summary of signifi cant accounting policies continuedThe assets and liabilities in the fi nancial statements of foreign subsidiaries and related goodwill are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to the “Foreign currency reserve” in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal.

The Group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes translation differences that arose before the date of transition to IFRS and includes later translation differences.

Taxation and deferred tax Current tax is the tax currently payable or receivable based on taxable profi t or loss for the period.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profi t. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.

Government and other grants Grants in respect of capital expenditure are credited to a deferred income account and are released to the income statement by equal annual instalments over the expected useful lives of the relevant assets.

Grants of a revenue nature are credited to the income statement in the same period as the related expenditure.

Share based payments In accordance with IFRS 2, the fair value of equity-settled share based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group’s estimate of when share options will eventually vest. In the case of options granted, fair value is measured by a Black-Scholes pricing model.

All share based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2006 are recognised in the fi nancial statements in accordance with IFRS 1.

All equity-settled share based payments are ultimately recognised as an expense in the income statement with a corresponding credit to the share based payment reserve.

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate or the number of share options expected to vest. Estimates are revised subsequently if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options that have vested are not exercised.

Upon exercise of share options, the proceeds received net of attributable transaction cost are credited to share capital, and where appropriate share premium.

Financial assets Financial assets are divided into the following categories: loans and receivables; financial assets at fair value through profit or loss; available-for-sale financial assets; and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired.


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4. Summary of signifi cant accounting policies continued All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.

Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

An assessment for impairment is undertaken on each fi nancial asset at least at each balance sheet date

Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities categorised as at fair value through profi t or loss are remeasured at each reporting date at fair value, with changes in fair value being recognised in the income statement. All other fi nancial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in fi nance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Financial liabilities are categorised as at fair value through profi t or loss where they are classifi ed as held-for-trading or designated as at fair value through profi t or loss on initial recognition.

A fi nancial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Equity Equity comprises the following: “Share Capital” represents the nominal value of equity shares. “Share Premium” represents the excess over nominal value of the fair value of consideration received for equity shares net of expenses of the

share issue. “Other Reserve” represents the balance arising on merger when Cyprotex Discovery Limited was acquired by the Company on 4 January

2002, as previously reported under UK GAAP. “Share based payment reserve” represents equity settled share-based employee remuneration until such share options are exercised. “Retained earnings/(losses)” represents retained profi ts and losses.

Stock code: CRX

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4. Summary of signifi cant accounting policies continued Critical accounting and judgements and key sources of estimation uncertainty Estimates and accounting judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The preparation of fi nancial statements under IFRS requires management to make assumptions and estimates about future events. The resulting accounting estimates will, by defi nition, differ from actual results. The assumptions and estimates that have a signifi cant risk of causing a material adjustment within the next fi nancial year are:

Share option charges Expected life of share options, volatility of shares, risk-free yield rate to maturity and expected dividend yield impact on the calculation of fair value used in the valuation of share options at grant date..

Recognition of revenue and profi t on contracts to provide services Revenue and profi t are recognised by reference to the estimated stage of completion of the contract to the extent of contract costs incurred that it is probable will be recoverable.

Research and development Careful judgement is applied when deciding whether the recognition requirements, set out in full above, for development costs have been met.

Adoption of new and revised standards Standards and Interpretations in issue not yet adopted At the date of the authorisation of these fi nancial statements, the following standards and interpretations, which have not been applied in these fi nancial statements, were in issue but not yet effective. The Directors anticipate the adoption of these standards and interpretations will have no material impact on the Group’s fi nancial statements, with the exception of IAS 1, which will affect the presentation of changes in equity and introduces a statement of comprehensive income. This amendment will not affect the fi nancial position or results of the Group but will give rise to additional or changed disclosure. The Directors anticipate that the Group will adopt these standards and interpretations on their effective dates.

IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009). IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009). Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements — Puttable Financial Instruments and

Obligations Arising on Liquidation (effective 1 January 2009). IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009). Amendment to IFRS 2 Share-based Payment — Vesting Conditions and Cancellations (effective 1 January 2009). Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial

Statements. Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009). Amendment to IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged Items (effective 1 July 2009). Amendment to IFRS 7 Financial Instruments: Disclosures — Improving Disclosures About Financial Instruments (effective 1 January 2009). Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009). IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009). IFRS 8 Operating Segments (effective 1 January 2009). IFRIC 13 Customer Loyalty Programmes (IASB effective date 1 July 2008). IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009). IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008). IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009). IFRIC 18 Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009).


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5. Revenue and segmental analysis Revenue represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities and is stated net of value added tax and trade discounts.

The Group operates in one principal area of activity, that of providing in vitro and in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion, Toxicity/Pharmacokinetic) information to the pharmaceutical and biotechnology industries. The revenue and operating profi t for the years are derived from the Group’s principal activity.

The geographical analysis of revenue by destination is as follows:

2008 2007

£ £

United Kingdom 1,245,124 753,468

Rest of Europe 2,368,687 1,072,586

USA 1,519,488 1,730,468

Rest of World 48,097 69,596

5,181,396 3,626,118

6. Operating profi t/(loss)This is stated after charging/(crediting):

2008 2007

£ £

Auditor’s remuneration

— fees payable to the Company Auditor for the audit of the Parent Company and Group financial statements 13,000 12,500

— statutory audit fees for subsidiaries 12,000 10,000

— other services 7,800 2,350

— tax services 11,600 9,200

Depreciation of owned assets 175,283 204,842

Depreciation of assets under finance leases and hire purchase contracts 68,109 59,383

Research and development — including staff costs 428,328 364,782

(Profit)/loss on foreign currency translation (166,895) 12,098

Share based payment charge (see note 25) 15,729 63,489

Stock code: CRX

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7. Staff costs

2008 2007

£ £

Wages and salaries 2,150,525 1,852,389

Social security costs 200,742 180,081

Other pension costs 165,022 158,379

2,516,289 2,190,849

The average monthly number of employees during the year was made up as follows:

2008 2007

No. No.

Operations technical 10 11

Development technical 30 27

Administration 4 4

Selling and Distribution 5 4

49 46

Directors’ remuneration

Compensation

for loss 2008 2007 2008 2007

Salary/fee Bonus Benefits of office Total Total Pension Pension

£ £ £ £ £ £ £ £

Executive DirectorsA.D. Baxter a,b 89,821 35,928 — — 125,749 — 2,695 —

R. Morrisson Atwater a 69,903 — 443 117,500 187,846 146,090 13,403 14,500

R.B. Gibbs 107,300 — 441 58,333 166,074 100,510 10,000 10,000

Non-Executive DirectorsR.S. Harris a,c 10,000 — — — 10,000 — — —

N. Sofronis a 18,290 — — — 18,290 10,097 — —

M. Manji a 4,643 — — — 4,643 10,000 — —

M. Lacroix a 2,369 — — — 2,369 4,996 — —

D.W. Evans 4,987 — — — 4,987 4,915 — —

Total 307,313 35,928 884 175,833 519,958 276,608 26,098 24,500

Remuneration is from the date of appointment to the date of resignation.

a part year only

b ongoing salary of £155,000 pa

c ongoing fee of £30,000 pa

During the year three Directors (2007: two Directors) participated in defined contribution pension schemes.

8. Finance income

2008 2007

£ £

Finance income:

Income from deposits 16,234 8,591


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9. Finance costs

2008 2007

£ £

Interest payable:

Bank overdraft — 35

Interest element of finance leases and hire purchase contracts 1,811 13,881

Bank loans 39,184 42,150

40,995 56,066

10. Income tax (a) Tax on profit/(loss) on ordinary activities The tax charge/(credit) is made up as follows:

2008 2007

£ £

Current tax:

Corporation tax at 30% — 68,986

Adjustment in respect of prior year — (4,619)

Tax on profit/(loss) on ordinary activities — 64,367

Deferred tax

Origination and reversal of temporary differences — —

Benefit of tax losses recognised — —

— —

Total tax charge/(credit) in income statement — (64,367)

(b) Factors affecting current tax charge/(credit)The current tax charged/(credited) for the year is lower than the standard rate of corporation tax at 28.5% (2007: 30%) due to the differences

explained below:

2008 2007

£ £

Profit/(loss) on ordinary activities before taxation 542,262 (543,102)

Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28.5% (2007: 30%) 154,545 (162,931)

Effects of:

Expenses not deductible for tax purposes 13,205 26,814

R&D tax relief (62,618) 17,246

Movement in unprovided deferred tax asset (103,288) (72,046)

Change in rate of deferred tax (1,844) 121,931

Adjustment to charge in respect of prior periods — 4,619

Current tax charge/(credit) for the period in the income statement — (64,367)

The tax rate used for the 2008 reconciliation above is at the average corporate tax rate of 28.5% (2007: 30%) payable by corporate entities in the

United Kingdom on taxable profits under tax law in that jurisdiction.

Stock code: CRX

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10. Income tax continued

(c) Factors that may affect current and future tax charges The Group has tax losses of £5,396,161 (2007: £6,134,333) that are available for offset against future profits arising from the same trade. No

provision has been made for deferred tax on losses carried forward in the Group. A deferred tax asset will only be recognised for the carry-forward

of unused tax losses and unused tax credits to the extent that it is probable that future taxable profits of the Group will be available, against

which the unused tax losses and unused credits can be utilised. Given the uncertainty in the level of future profits and absence of other reversing

temporary differences, there is insufficient evidence that a deferred tax asset should be recognised in respect of these losses.

(d) Deferred taxation No provision has been made for deferred tax on losses carried forward as they will only be available for offset when the Company makes taxable

profits. As the timing of these profits is not certain, it has been assumed that the losses will not be recoverable in the foreseeable future.

The unprovided deferred tax asset comprises the following amounts:

2008 2007

£ £

Capital allowances 114,002 29,618

Other temporary differences 4,166 3,914

Tax losses 1,510,925 1,717,613

1,629,093 1,751,145

All amounts are calculated at 28% (2007: 28%) using the liability method.

11. Profi t/(loss) per ordinary share Basic profit/(loss) per ordinary share is calculated based on the profit/(loss) for the year attributable to ordinary share holders divided by the

weighted average number of ordinary shares in issue during the year.

For the year ended 31 December 2008, diluted profit per share is calculated based upon the profit for the year attributable to ordinary share

holders divided by the weighted average number of ordinary shares in issue during the year as adjusted for the dilutive effect of outstanding

share options whose options price is lower than the share price at that date.

For the year ended 31 December 2007 the loss for the year and the weighted average number of ordinary shares for the purpose of calculating

the diluted earnings per share are the same as for the basic earnings per share calculation. This is because the outstanding share options would

have the effect of reducing the loss per ordinary share and would therefore not be dilutive.

Basic 2008 2007

Attributable profit/(loss) (£) 542,262 (478,735)

Average number of ordinary shares in issue for basic earnings per share (number) 152,554,545 138,604,307

Basic profit/(loss) per share (pence) 0.36 (0.35)

Diluted

Attributable profit/(loss) (£) 542,262 (478,735)

Average number of ordinary shares in issue for diluted earnings per share (number) 153,486,023 138,604,307

Diluted profit/(loss) per share (pence) 0.35 (0.35)


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12. Property, plant and equipment

Long leasehold Office Computer Laboratory

and buildings equipment equipment equipment Total

£ £ £ £ £

Carrying amount at 1 January 2007 834,991 24,028 67,219 495,788 1,422,026

Additions — 1,945 19,876 186,039 207,860

Depreciation (17,385) (4,630) (34,603) (207,607) (264,225)

Carrying amount at 31 December 2007 817,606 21,343 52,492 474,220 1,365,661

£ £ £ £ £Carrying amount at 1 January 2008 817,606 21,343 52,492 474,220 1,365,661Additions 9,500 6,089 20,927 22,994 59,510Disposals — — (117) — (117)Depreciation (17,401) (4,921) (31,345) (189,725) (243,392)

Carrying amount at 31 December 2008 809,705 22,511 41,957 307,489 1,181,662

At 31 December 2007 £ £ £ £ £

Cost or valuation 869,309 46,685 354,143 1,859,465 3,129,602

Accumulated depreciation (51,703) (25,342) (301,651) (1,385,245) (1,763,941)

Net book value 817,606 21,343 52,492 474,220 1,365,661

At 31 December 2008 £ £ £ £ £Cost or valuation 878,809 52,774 373,276 1,882,459 3,187,318Accumulated depreciation (69,104) (30,263) (331,319) (1,574,970) (2,005,656)

Net book value 809,705 22,511 41,957 307,489 1,181,662

Included in laboratory equipment above were amounts under finance lease and hire purchase contracts. The net book value of such assets was

£168,780 (2007: £236,889) and the depreciation charged in the year was £68,109 (2007: £59,383).

13. Inventories

2008 2007

£ £

Raw materials and consumables 118,557 113,694

Inventory expensed during the year amounted to £588,856 (2007: £443,844).

The difference between the replacement cost and the book value of inventory is not material.

14. Trade receivables

2008 2007

£ £

Trade receivables 989,205 467,105

Amounts past due at 31 December 2008 amounted to £382. There were no amounts past due at 31 December 2007.

The average credit period taken on trade receivables excluding deferred income is 50 days (2007: 45 days). Trade receivables do not carry interest.

No provision (2007: £nil) has been made for receivables and all amounts are considered recoverable.

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15. Other receivables

2008 2007

£ £

Other receivables 4,633 57,579

Prepayments and accrued income 227,575 135,332

232,208 192,911

16. Non-current liabilities

2008 2007

£ £

Bank loans 580,500 611,500

Obligations under finance leases and hire purchase contracts 10,729 72,399

591,229 683,899

17. Maturity profi les

2008 2007

Obligations under Obligations under

finance leases finance leases

and hire and hire

purchase purchase

Bank loans contracts Total Bank loans contracts Total

£ £ £ £ £ £

Within one year or on demand 25,000 61,670 86,670 22,500 92,556 115,056

In one or two years 25,000 10,729 35,729 22,500 61,670 84,170

In two to five years 75,000 — 75,000 67,500 10,729 78,229

Over five years 480,500 — 480,500 521,500 — 521,500

605,500 72,399 677,899 634,000 164,955 798,955

A bank loan of £704,000 was advanced by Bank of Scotland on 17 January 2005 to assist with the purchase of the Company’s operating premises

in Macclesfield. The loan is repayable in equal monthly instalments over 20 years. The bank loan carries an interest rate of 1.75% above base rate.

Interest payable on this bank loan is subject to offset against current bank account balances in hand held with Halifax Bank of Scotland. The bank

loan is secured by a fixed and floating charge over all other assets of the Group. Amounts due under finance lease and hire purchase contracts are

secured on the assets to which they relate.

18. Trade payables

2008 2007

£ £

Trade payables 153,330 166,334

The average credit period taken for trade purchase is 29 days (2007: 37 days). No interest is charged on trade payables. The Directors consider the

carrying amount of trade payables approximate to their fair value.


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19. Gross payments due Gross cash payments due under debt obligations of the Group based on interest rates prevailing at 31 December 2008 and 31 December 2007

are as follows:

2008 2007

Obligations under Obligations under

finance leases finance leases

and hire and hire

purchase Trade purchase Trade

Bank loans contracts payables Total Bank loans contracts payables Total

£ £ £ £ £ £ £ £

Within six months 25,710 32,298 153,330 211,338 33,102 63,504 166,334 262,940

Six to twelve months 25,710 32,298 — 58,008 33,102 37,649 — 70,751

In one to five years 205,680 10,826 — 216,506 264,816 81,195 — 346,011

Over five years 569,905 — — 569,905 800,006 — — 800,006

827,005 75,422 153,330 1,055,757 1,131,026 182,348 166,334 1,479,708

The above contractual maturities effect the gross cash flows, which may differ from the carrying values of the related liabilities at the balance

sheet date.

20. Other payables

2008 2007

£ £

Other taxes and social security costs 59,521 53,321

VAT payable 2,327 2,534

Other payables 54,083 67,864

Accruals and deferred income 362,644 152,049

478,575 275,768

21. Operating lease commitmentsAnnual commitments under non-cancellable operating leases are £nil (2007: £nil).

22. Called up share capital

2008 2007

No. £ No. £

Authorised:

Ordinary shares of 0.1p each 300,000,000 300,000 200,000,000 200,000

2008 2007

No. £ No. £

Allotted, called up and fully paid:


Stock code: CRX

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23. Share issuesDuring the year ended 31 December 2008, 50,000 shares (2007: 74,972) were issued to satisfy share options previously granted under Cyprotex

PLC’s employee share option scheme. On 26 August 2008, 40,000,000 shares were issued via a Placing and Open offer at 2.50 pence. Share issues for

the two years ended 31 December 2008 may be summarised as follows:

Number £

Year to 31 December 2007

At 1 January 2007 138,573,016 138,573

Issue of shares — in satisfaction of share options exercised 74,972 75

At 31 December 2007 138,647,988 138,648


At 1 January 2008 138,647,988 138,648Issue of shares — in satisfaction of share options exercised 50,000 50 — Placing and Open offer 40,000,000 40,000

At 31 December 2008 178,697,988 178,698

Shares issued in the year ended 31 December 2008 yielded £1,000,565 in cash (2007: £847) and increased equity by £970,565 (2007: £847). The

weighted average share price at the date of exercise in the year ended 31 December 2008 was 2.50 pence (2007: 5.17 pence).

Shares issued during the year in satisfaction of share options previously granted under Cyprotex PLC’s employee share option scheme are

detailed below:

No. of

employees Share Share

Number Option exercising capital premium

Date issued price options £ £

19 June 2007 45,828 1.13p two 45.83 472.03

15 August 2007 10,398 1.13p one 10.40 107.10

9 November 2007 18,746 1.13p one 18.75 193.08

74,972 74.98 772.21

No. of employees Share Share Number Option exercising capital premiumDate issued price options £ £

25 July 2008 50,000 1.13p one 50.00 515.00

50,000 50.00 515.00


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24. Share optionsAt 31 December 2008, options over 19,736,000 (2007: 20,401,813) ordinary shares were outstanding as shown below:

At At 1 January Options Options 31 December Earliest

2008 exercised lapsed 2008 Date Exercise date of Date of

Notes Number Number Number Number granted price exercise expiry

i b 259,200 — — 259,200 07-12-01 0.175p 07-12-03 07-12-11

ii a, b 515,613 (50,000) (15,613) 450,000 13-05-03 1.13p 13-05-05 31-05-13

iii a, b 175,000 — — 175,000 15-05-03 1.13p 21-08-04 21-08-12

iv b 999,999 — — 999,999 16-01-04 10.0p 16-01-04 02-06-09

iv 6,000,001 — — 6,000,001 16-01-04 10.0p 16-01-04 02-06-09

v a, b 1,902,000 — (100,200) 1,801,800 04-06-04 11.0p 04-06-06 30-06-14

vi b 450,000 — — 450,000 8&9-09-04 11.0p 8&9-09-06 7&8-09-14

a, b 125,000 — (125,000) — 03-11-04 11.0p 03-11-06 30-11-14

vii 4,000,000 — — 4,000,000 20-05-05 10.0p 30-06-05 02-06-09

viii a, b 1,212,109 — — 1,212,109 25-05-06 8.25p 10-11-07 30-12-09

viii a 2,287,891 — — 2,287,891 25-05-06 8.25p 10-11-07 30-12-09

ix a, b 1,770,442 — (125,000) 1,645,442 25-05-06 8.25p 25-05-08 25-05-16

x a 454,558 — (250,000) 204,558 25-05-06 8.25p 25-06-08 25-05-16

xi a 250,000 — — 250,000 01-08-06 8.25p 01-08-08 01-08-16

20,401,813 (50,000) (615,813) 19,736,000

Notes

a exercisable as follows:

— 50% on second anniversary

— 2.085% each subsequent month for 22 months

— remainder one month later

b ‘EMI’ — Enterprise Management Incentives

The share price at 31 December 2008 was 2.63p (2007: 3.50p). During the year the high and low prices were 4.03p and 1.90p (2007: 8.00p and 2.75p).

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24. Share options continued

i) 259,200 options remain of 1,101,600 which were granted to a number of employees of the Company on 7 December 2001. Each of the

options may be exercised on or after the second anniversary of the date of grant at 0.175p per share. The options are conditional on the

option holder remaining an employee of the Company at the relevant date of exercise of the options.

ii) 450,000 options remain of 1,000,000 which were granted to a number of employees of the Company on 13 May 2003. Each of the options

may be exercised: 50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months; and a fi nal

tranche for the balance at 1.13p per share. The options are conditional on the option holder remaining an employee of the Company at the

relevant date(s) of the exercise of the options.

iii) 175,000 options remain of 452,778 which were granted to a number of employees of the Company on 21 August 2002. Each of the options


tranche for the balance at 18p per share. The options are conditional on the option holder remaining an employee of the Company at the

relevant date(s) of the exercise of the options. On 15 May 2003, these options were surrendered and reissued at a price of 1.13p per share.

iv) Following the approval of shareholders in General meeting 7,000,000 options were granted to Robert Morrisson Atwater, a former Director

of the Company on 16 January 2004. Each of the options may be exercised on or after 16 January 2004 at 10.0p per share. The options are

not conditional on the option holder remaining a Director of the Company at the relevant date of exercise of the options. However if not

exercised within twelve months of leaving the Company these options lapse.

v) 1,801,800 options remain of 3,925,622 which were granted to a number of employees of the Company on 4 June 2004. Each of the options


tranche for the balance at 11.0p per share. The options are conditional on the option holder remaining an employee of the Company at the

relevant date(s) of the exercise of the options.

vi) Options totalling 450,000 were granted to Directors on 8 and 9 September 2004. Each of the options may be exercised on or after the second

anniversary of the date of grant at 11.0p per share. The options are not conditional on the option holder remaining a Director of the

Company at the relevant date of exercise of the options.

vii) Options totalling 4,000,000 were granted to Robert Morrisson Atwater, a former Director of the Company on 20 May 2006. Each of the

options may be exercised on or after 31 December 2006 at 10.0p per share. The options are not conditional on the option holder remaining

a Director of the Company at the relevant date of exercise of the options. However if not exercised within twelve months of leaving the

Company these options lapse.

viii) Options totalling 3,500,000 were granted to Russell Gibbs, a former Director of the Company on 25 May 2006. Each of the options may be

exercised on or after 10 November 2008 at 8.25p per share. The options are not conditional on the option holder remaining a Director of

the Company at the relevant date of exercise of the options. However if not exercised within twelve months of leaving the Company these

options lapse.

ix) 1,645,442 options remain of 1,845,442 which were granted to a number of employees of the Company on 25 May 2007. Each of the options


tranche for the balance at 8.25p per share. The options are conditional upon the option holder remaining an employee of the Company at

the relevant date(s) of the exercise of the options.

x) 204,558 options remain of 1,204,558 which were granted to a number of employees of the Company on 25 May 2006. Each of the options


tranche for the balance at 8.25p per share. The options are conditional upon the option holder remaining an employee of the Company at

the relevant date(s) of the exercise of the options.

xi) Options totalling 250,000 were granted to a US-based consultant of the Company on 25 May 2006. Each of the options may be exercised:

50% on or after the second anniversary of the date of grant; 2.085% each month thereafter for 22 months; and a fi nal tranche for the

balance at 8.25p.


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25. Share based payments The Company has a share option scheme for all employees of the Group. Options are exercisable at a price equal to the average quoted market

price of the Company’s shares on the date of grant. Vesting periods vary with each grant and details are given in the tables below. If the option

remains unexercised after a period of ten years from the date of grant the option expires. Generally, options to employees who are not Directors

are forfeited if an employee leaves the Group before the options vest. Certain options granted to former Executive Directors lapse twelve months

after leaving the Company and details of these are given in full in note 24.

Details of the share options outstanding during the year are as follows:

2008 2007

Number of Weighted average Number of Weighted average

share options exercise price share options exercise price

Outstanding at beginning of year 20,401,813 9.18p 22,726,785 9.17p

Granted during the year — — — —

Forfeited during the year (615,813) 9.08p (2,250,000) 9.33p

Exercised during the year (50,000) 1.13p (74,972) 1.13p

Expired during the year — — — —

Outstanding at the end of the year 19,736,000 9.21p 20,401,813 9.18p

Exercisable at the end of the year 19,042,444 9.24p 17,644,096 9.29p

The weighted average share price at the date of exercise for share options exercised during the period was 2.13p (2007: 5.17p).

The options outstanding at 31 December 2008 and vested had a weighted average exercise price of 9.24p (2007: 9.29p) and weighted average

remaining contractual life of 5.27 years (2007: 6.69 years).

In 2007, 7,000,000 options were granted on 25 May and 250,000 on 1 August.

The aggregated estimated fair value of the options granted on those dates is £205,172.

The inputs into the Black-Scholes model are as follows:

2008 2007

Weighted average share price 6.97p 6.97p

Weighted average exercise price 4.24p 4.24p

Expected volatility 59% 59%

Expected life 4 yrs 4 yrs

Risk-free rate 5.25% 5.25%

Expected dividends nil nil

As a relatively young listed Company, management did not consider information regarding the historic volatility of the Cyprotex share price

either sufficiently reliable or a realistic indicator on which to base a valid estimate of future performance. Accordingly, the Black-Scholes financial

model used price volatility from an appropriate basket of peer group companies in order to calculate the valuations.

The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise

restrictions, and behavioural considerations.

The Group recognised total expenses of £15,729 and £63,489 related to equity-settled share based payment transactions in 2008 and 2007

respectively.

26. Capital commitments At 31 December 2008, the Group had outstanding capital commitments of £160,000 (2007: £nil).

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27. Financial instruments Functional currency The functional currency of the parent and trading subsidiary is pounds sterling (£).

Capital risk management The Group manages capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through optimisation of debt and equity.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 17, cash and cash equivalents and equity attributable to equity holders of the parent.

Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 4 to the financial statements.

Treasury policies and financial risk Surplus funds are intended to support the Group’s short-term working capital requirements. These funds are invested through the use of short-term and period deposits, with a policy of maximising fixed interest returns as well as providing the flexibility required for funding ongoing operations. It is not Group policy to routinely use financial derivatives to manage exposure and other financial assets and liabilities. Financial risks are considered to be future interest rates, liquidity and foreign currency risk. The Board will review its existing policies in the coming period. Short term, foreign currency risk may potentially impact the Group given that currently over 60% of revenues are based in either euros or US dollars.

Categories of financial instruments

2008 2007 £ £

Financial assets Loans and receivablesTrade receivables 989,205 467,105Other receivables 4,633 57,579Cash and cash equivalents 1,584,882 300,854

2,578,720 825,538

Financial liabilities Other financial liabilitiesLong term borrowings 580,500 611,500Obligations under finance leases 72,399 164,955Trade payables 153,330 166,334Current portion of long term borrowings 25,000 22,500Other payables – (part) 54,083 67,864Accruals and deferred income 362,644 152,049

1,247,956 1,185,202


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27. Financial instruments continued

The floating rate short-term deposits are placed with banks for a period up to three month maturity and during the year earned interest between

the following rates.

Interest rate risk management Apart from using short-term and period deposits, interest rate risks are limited to the fixed element of finance lease/hire purchase agreements that the Group has occasionally used and base rate risk on bank loans.

Typically, the Group arranges lease finance and hire purchase for fixed periods ranging from 3 to 5 years, to enable purchase of assets where it is considered to be an effective use of funds.

Interest rate risk profile of financial assets The interest rate risk profile of financial assets was confined to floating rate sterling assets.

Financial assets Floating rate on which financial no interest assets is earned Total31 December 2008 £ £ £

US dollar 218,707 — 218,707Euro 42,031 — 42,031Sterling 1,323,744 400 1,324,144

1,584,482 400 1,584,882

31 December 2007US dollar 106,349 — 106,349Euro 477 — 477Sterling 193,628 400 194,028

300,454 400 300,854

Floating rate financial assets comprise cash deposits on money market deposit with a maturity of less than three months.


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2008 2007

Maximum Minimum Maximum Minimum

% % % %

US dollar 5.30 1.45 5.59 4.64

Euro 5.00 3.00 4.70 3.60

Sterling 5.75 2.54 6.40 5.23

Interest rate sensitivity analysis The following table illustrates the sensitivity of the net results for the year and equity to a reasonably possible change in interest rates of + 1.5%

and - 0.75%, with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current

market conditions. The calculations are based on the Group financial instruments (both assets and liabilities) held at the balance sheet date. All

other variables are assumed to be constant.

2008 2007

1.5% (0.75)% 1.5% (0.75)%

£ £ £ £

Net result for the year increase/(decrease) 15,000 (7,500) (5,000) 2,500

Equity increase/(decrease) 15,000 (7,500) (5,000) 2,500

Interest rate risk profile on financial liabilitiesThe interest rate risk profile of financial liabilities is as follows:

Fixed rate Floating rate

financial financial

liabilities liabilities Total

31 December 2008 £ £ £Bank loan — 605,500 605,500Obligations under finance leases 72,399 — 72,399

72,399 605,500 677,899

31 December 2007

Bank loan — 634,000 634,000

Obligations under finance leases 164,955 — 164,955

164,955 634,000 798,955

Weighted average interest rate of fixed rate financial liabilities

Fixed rate financial

liabilities

Weighted average

Weighted average period for which

Interest rate rate is fixed

% Years

31 December 2008 Sterling 8.3 1

31 December 2007

Sterling 8.3 2

Fixed rate financial liabilities consist of finance lease obligations.


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27. Financial instruments continued

Credit risk management Credit risk refers to the credit risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The

principal credit risk arises from the Group’s trade receivables. The trade receivable balance of £989,205 (2007: £467,105) includes three

(2007: five) customers who represent more than 5% of the total balance. At 31 December 2008, 61% (2007: 61%) of the trade receivables

balance related to these customers. In order to manage credit risk, the Directors set limits for customers based on a combination of payment

history, third party credit references and an independent rating agency. The Group’s exposure and the credit rating of its counterparties are

continuously monitored. Credit exposure is controlled by counterparty limits that are reviewed bi-annually.

Ongoing credit evaluation is performed on the financial condition of accounts receivable.

Liquidity risk management Surplus funds are invested on a short-term basis at money market rates and therefore such funds are available at short notice.

Foreign currency risk management In anticipation of any further expansion of North American and European sales, which are mainly denominated in US dollars and euros, the

associated currency risk (whilst partly offset by overseas expenditure) is regularly reviewed by the Board. To limit this exposure the Company

has sales price agreements with major customers that do not exceed one year and are not coterminous. Additionally, individual ADMET service

contracts known internally as ’Rounds‘ are short in time frame and as part of our minimum service standards completed within ten working

days of a compound arriving on site. Control over debtor management within the Company is strong and surplus currency is sold on receipt.

Translation of and realisation of currency assets and liabilities will give rise to net currency gains and losses recognised in the income statement.

Net monetary assets and liabilities of the Company, denominated in currencies other than sterling were as follows.

2008 2007

£ £

US dollar 398,590 375,265

Euro 475,401 57,408

873,991 432,673

The Company trades in sterling, US dollar and euro. If the euro and US dollar both weakened by 10% the effects on profit/(loss) after taxation

and shareholders’ equity would be as follows

2008 US Dollar Euro £ £

Increase in —Profit after taxation 40,000 48,000

Increase in —Shareholders’ Equity 40,000 48,000

2007

US Dollar Euro

£ £

Decrease in —Loss after taxation 38,000 6,000

Increase in —Shareholders’ Equity 38,000 6,000

Stock code: CRX

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Currency risk profile The functional currency of the Company is sterling and the majority of its costs are incurred in that currency. At 31 December 2008, the Group

had the following foreign currency assets and liabilities denominated in euros and US dollars:

2008 2007

£ £

Cash and cash equivalents 260,738 106,826

Trade receivables 624,213 352,734

Trade payables 10,960 26,887

Borrowing facilities On 17 January 2005, Cyprotex entered a 20-year mortgage facility of £704,000 with Bank of Scotland to substantially fund the acquisition of a

long-leasehold interest in its operational premises. Interest payable on this bank loan is 1.75% over the bank’s base rate.

As at 31 December 2008, the Group had a bank overdraft facility of £200,000 (2007: £250,000).

Fair value of financial assets and financial liabilities The fair value based upon the market value or discounted cash flows, of the financial instruments detailed above was not materially different

from the book values.

28. Related party transactions Transactions with related parties comprised payments made to Prof. David Leahy (who owns 5.82% of the issued Share Capital of the Company)

in respect of consultancy services provided to the Group of £1,000 (2007: £36,275). There were no other transactions with related parties

during the years ended 31 December 2008 and 31 December 2007. Amounts owed to a related party at 31 December 2008 were £1,000 and

31 December 2007 £nil.

Prof. David Leahy has been assisting the Company with research generally and specifically in the field of Automated Medicinal Chemistry.

29. Key management compensation The remuneration of the officers of the Company and the officers of the Company’s subsidiary undertakings, who are considered to be key

management personnel of the Group, are as follows:

2008 2007

£ £

Short-term employee benefits 495,054 276,608

Compensation for loss of office 175,833 —

Post-retirement benefits 35,799 14,500

706,686 291,108

Share based payment charge 12,977 52,674

719,663 343,782

30. Pension commitments The Group’s principal subsidiary Cyprotex Discovery Limited operates a defined contribution scheme, The Cyprotex Group Stakeholder Pension

Scheme, for its Directors and employees. The assets of the scheme are held separately from those of the Group in an independently administered

scheme. The unpaid contributions at 31 December 2008 were £13,965 (2007: £12,657).


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Parent Company balance sheet at 31 December 2008

2008 2007

Notes £ £

Fixed assetsInvestments 33 1 1

1 1

Current assetsDebtors 34 2,003,084 1,254,887

Cash at bank and in hand 793,626 13,266

Net current assets 2,796,710 1,268,153

Net assets 2,796,711 1,268,154

Capital and reservesCalled up share capital 35,36 178,698 138,648

Share premium account 37 10,594,200 9,663,685

Other reserve 37 379,202 363,473

Profit and loss account 37 (8,355,389) (8,897,652)

Shareholders’ funds 37 2,796,711 1,268,154

The accompanying notes are an integral part of this balance sheet.

Approved by the Board on 17 March 2009.

J.K. Dootson Chief Financial Officer

Stock code: CRX

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Notes to the Parent Company accounts for the year ended 31 December 2008

31. Accounting policies Basis of preparation The Parent Company accounts of Cyprotex PLC have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. These Company only accounts have been prepared under UK GAAP.

Investments Investments are included at cost less provision for impairment. The cost of investments includes the cost to the Company in respect of Parent Company shares issued to employees of subsidiaries.

Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account.

The financial statements of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. The exchange difference arising on the retranslation of opening net assets is taken directly to reserves. All other translation differences are taken to the profit and loss account.

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

Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but nor reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:

— Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.

Financial instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. A financial liability exists where there is a contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities under potentially unfavourable conditions.

Finance costs and gains and losses relating to financial liabilities are included in the profit and loss account. The carrying amount of the liability is increased by the finance cost and reduced by payments made in respect of that liability. Finance costs are calculated so as to produce a constant rate of charge on the outstanding liability. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.


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Notes to the Parent Company accounts continuedfor the year ended 31 December 2008

32. Staff costs

2008 2007

£ £

Wages and salaries 40,289 30,008

Social security costs 865 1,280

41,154 31,288

The average number of employees was four (2007: four). Staff costs comprised amounts paid for the services of the Non-Executive Directors of

the Group.

33. InvestmentsCompany £

Cost:At 1 January 2008 431,537

Additions 15,729

At 31 December 2008 447,266

Provision for impairmentAt 1 January 2008 431,536

Provision in year 15,729

At 31 December 2008 447,265

Carrying value of investments:

At 31 December 2008 1

At 31 December 2007 1

The following companies are wholly owned subsidiaries of Cyprotex PLC:

Country of Proportion held by Nature of

Subsidiary undertakings Registration Holding Company and Group business

Cyprotex Discovery Ltd England and Wales Ordinary shares 100% Provision of in vitro

and in silico ADMET

information

Cyprotex Research Ltd England and Wales Ordinary shares 100% Dormant

Cyprotex North America, Inc United States Ordinary shares 100% Non-trading

Additions in the year relate to share options in the parent granted to employees of subsidiary undertakings.

Full provision has been made against the investments in Cyprotex Discovery Limited and Cyprotex North America, Inc.

34. Debtors

2008 2007

£ £

Amounts owed by Group undertakings 1,998,726 1,248,306

Other debtors 4,358 6,581

2,003,084 1,254,887

Stock code: CRX

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35. Called up share capital

2008 2007 No. £ No. £

Authorised:


2008 2007 No. £ No. £

Allotted, called up and fully paid:


36. Share issuesDuring the year ended 31 December 2008, 50,000 shares (2007: 74,972) were issued to satisfy share options previously granted under Cyprotex

PLC’s employee share option scheme. On 26 August 2008, 40,000,000 shares were issued via a Placing and Open offer at 2.50 pence. Share issues in

the two years ended 31 December 2008 may be summarised as follows:

Number £


At 1 January 2007 138,573,016 138,573

Issue of shares — in satisfaction of share options exercised 74,972 75

At 31 December 2007 138,647,988 138,648

Year to 31 December 2008At 1 January 2008 138,647,988 138,648Issue of shares — in satisfaction of share options exercised 50,000 50 — Placing and Open offer 40,000,000 40,000

At 31 December 2008 178,697,988 178,698

37. Reconciliation of shareholders’ funds and movements on reserves

Share Share Other Profit and 2008 2007

capital premium reserve loss account Total Total

£ £ £ £ £ £

At 1 January 2008 138,648 9,663,685 363,473 (8,897,652) 1,268,154 1,682,553

Share based payment — — 15,729 — 15,729 63,489

Issue of shares 40,050 930,515 — — 970,565 847

Profit/(loss) for the year — — — 542,263 542,263 (478,735)

At 31 December 2008 178,698 10,594,200 379,202 (8,355,389) 2,796,711 1,268,154

38. Operating lease commitments Annual commitments under non-cancellable operating leases are £nil (2007: £nil).

39. Capital commitments At 31 December 2008, the Company had no outstanding capital commitments (2007: £nil).


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Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Cyprotex PLC (the “Company”) will be held at The ENT Room, The Royal Society of

Medicine, 1 Wimpole Street, London, W1G 0AE on Tuesday, 14 July 2009 at 10.00 a.m. Full details of resolutions are set out in a separate document

which accompanies this Annual Report & Accounts.

Shareholder Information

Financial information The trading results of the Group are normally published at the following times:

Interim results for the six months to 30 June in August

Final results for the year to 31 December in March/April

Annual General Meeting The Annual General Meeting will be held at The ENT Room, The Royal Society of Medicine, 1 Wimpole Street, London, W1G 0AE

on Tuesday 14 July 2009 at 10.00 a.m.

Share price information The Company’s share price is available from the website of London Stock Exchange under CRX.

Company website — www.cyprotex.com The Company’s website provides information on products, activities and financial information. It includes latest financial information and press

releases and any other information that is relevant to the Company.

Shareholder enquiries Any queries regarding individual shareholdings, transfers, etc. should be directed to Capita Registrars.

Shareholders wishing to consolidate two or more individual certificates may do so by writing to Capita Registrars at the address given below,

enclosing the certificates to be consolidated.

Where shareholders are receiving duplicate sets of accounts or mailings, as a result of inconsistencies in name or address details, they should

advise the registrars so that this can be corrected.

Other enquiries regarding the Group should be directed to the Company Secretary.

Capita Share Dealing Facility for existing shareholders Capita takes care of the share register for Cyprotex PLC. If you want to sell your shares in the Company or purchase more, Capita provides this

service. This low cost dealing service is available both online and by telephone via www.capitadeal.com or tel: 0871 664 0364 (calls cost 10p per

minute plus network charges).

Stock code: CRX

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Stock code: CRX

Operational Highlights

Financial Highlights 1

Our Vision 2

Our Market 3

Our Business 4

About Pharmacokinetics and Toxicity 5

Business Review 6

Chairman’s and Chief Executive Offi cer’s Report 12

Financial Review 15

Board of Directors 20

Report of the Directors 21

Report on Directors’ Remuneration 24

Statement of Directors’ Responsibilities 26

Report of the Independent Auditor 27

Financial Statements 29




Cyprotex specialises in ADME and pharmacokinetic screening and prediction.

2008 Highlights

• Launch of our new product catalogue in April 2008.

• Introduction of a new product line, Cloe® Select, a portfolio of bespoke later stage assays.

• Successful execution of larger scale strategic partnershipdeals with several of our customers.

• 47% Increase in the number of results delivered to ourcustomers compared with 2007.

• Expansion of our analytical capabilities with the purchaseof an Applied Biosystems QTRAP® 5500 LC-MS/MS, one of

the most sensitive instruments in the industry.

• Creation of additional laboratory space allowing forconsiderable expansion during 2009.

• Extension of our range of drug-drug interaction screens inresponse to customer and regulatory demands.

• Focus on improving efficiencies both in cost and time byenhancing our information technology systems.

• Continued participation in an EU-funded project (OSIRIS)to address REACH legislation using our in silico PB PK

(physiologically based-pharmacokinetic) expertise.

New for 2009

• Launch of our new company website in April 2009.

• Introduction of Cloe® Gateway, our new web based portal for access to Cyprotex services expected in Q2 2009.

• Release of our new enhanced version of our proprietarysoftware, Cloe® PK anticipated in Q2 2009.

• Expansion of our range of Cloe® Screen and Cloe® Select assays to provide a ‘one stop shop’ for all our clients’

ADME needs.

• Continued research in novel PB PK (physiologically based-pharmacokinetic) and QSAR (quantitative structure activityrelationship) modelling techniques with the developmentof new products in this area.

Directors and Advisors

DirectorsAnthony Baxter (Chief Executive Offi cer)

John Dootson (Chief Financial Offi cer)

Steve Harris (Non-Executive Director and Chairman)

SecretaryMark C. Warburton

Auditor Nominated AdvisorsGrant Thornton UK LLP Noble & Company Limited

4 Hardman Square 120 Old Broad Street

Spinningfi elds London, EC2N 1AR

Manchester, M3 3EB

Registrars Registered Offi ceCapita Registrars 100 Barbirolli Square

Northern House Manchester, M2 3AB

Woodsome Park

Fenay Bridge

Huddersfi eld, HD8 0LA

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Cyprotex PLCAnnual Report & Accountsfor the year ended 31 December 2008

Stock Code: CRX


Cyprotex PLC15 Beech Lane, Macclesfi eld,Cheshire, United Kingdom, SK10 2DR

Tel: +44 (0) 1625 505100Fax: +44 (0) 1625 [email protected]

www.cyprotex.com

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