Alizyme plc Annual Report & Accounts 2003
Alizyme plc Annual Report & Accounts 2003 Contents
01 Highlights for 2003
02 Chairmans statement
04 Chief Executives report
06 Renzapride
07 ATL-962
08 COLAL-PRED“
09 ATL-104
10 Board of Directors
12 Financial review
13 Financial contents
14 Consolidated profit and loss account
15 Consolidated balance sheet
16 Company balance sheet
17 Consolidated cash flow statement
19 Notes to the financial statements
32 Independent auditors report
34 Directors report
36 Combined Code report
42 Remuneration report
50 Glossary of terms
51 Corporate advisors
52 Shareholder notes Highlights for 2003
Renzapride (Irritable Bowel Syndrome; IBS)
n Successful results from Phase IIb clinical trial in constipation-predominant IBS (c-IBS) patients
n Successful results from Phase IIb clinical trial in mixed symptom IBS (m-IBS) patients
n Successful results from clinical study at Mayo Clinic, USA (announced in January 2004)
n New manufacturing patent application filed (further patent application announced in January 2004)
ATL-962 (Obesity)
n Successful results from Phase IIb clinical trial in clinically obese patients
n Grant of USA patent for ATL-962 which could provide protection through to 2020
COLAL-PRED“
n Progressed manufacturing process optimisation and scale-up for Phase III trials and commercialisation
ATL-104 (Mucositis)
n Granted CTX for Phase IIa clinical trial in cancer patients
Commercial
n Grant to Takeda of rights to a licence and development agreement for ATL-962 in Japan
Fundraising
n Placing and Open Offer raised £16.1m (£15.1m net of expenses) in February 2003
n Institutional Placing raised £11.5m (£11.1m net of expenses) in October 2003
Financial
n First revenues reported of £1.2m (2002: nil)
n Net loss of £10.0m (2002: £9.8m), in line with expectations
n Cash and short term investments £22.3m at year end (2002: £5.3m)
Alizyme plc Annual Report & Accounts 2003 01 Chairmans statement
At the start of 2003 we were looking forward to a landmark year in the history of the Company. Prospects
for substantial progress on our development projects through the results of robust clinical trials, the
potential for first commercialisation of one of our products and the strengthening of the financial position of
the Company, were all possibilities. The achievement of all of these has resulted in the most successful year
in our history and has strengthened all aspects of the Company. Alizyme is now maturing into a speciality
pharmaceutical development company, with a portfolio of later stage clinical development products.
Product Development
During the year we completed and reported success on three robust Phase IIb clinical trials involving
renzapride and ATL-962. These trials involved a total of over 1,000 patients. As a result, renzapride is being
prepared for entry into Phase III development and commercialisation and ATL-962 has demonstrated its
target product profile, such that further investment is justified in expanding the target patient population
and in preparing for entry into Phase III development. Progress has also been made on our other
development products, with COLAL-PRED“ continuing to move through manufacturing process optimisation
and scale-up in preparation for Phase III registration trials and ATL-104 being approved to commence its 
first proof of concept Phase II clinical trial in cancer patients.
Licence and Development Agreement
The first step towards commercialisation of one of our products was achieved when Takeda Chemical
Industries, Ltd. (Takeda), the largest pharmaceutical company in Japan, was granted rights to a licence 
and development agreement for ATL-962 in Japan, for the treatment of obesity and all related diseases. 
This provided us with an up-front payment of US $2 million that was supplemented by a further payment 
of US $3 million in January 2004.
Intellectual Property
One of the core elements of our value as a product development company is ownership and thorough
prosecution of our intellectual property portfolio. We continued to strengthen our asset base through the
grant of a patent in the USA for ATL-962, which could provide patent protection until 2020, and the filing of
new patent applications on renzapride. If granted, patents based on these applications could provide
protection for renzapride until 2024. In addition, a further five patents were granted in various jurisdictions
relating to applications in respect of the obesity and mucositis programmes.
Fundraising
The year started with a successful fundraising in difficult market conditions. We raised £16.1 million 
(£15.1 million net of expenses) through a Placing and Open Offer and were encouraged by the level of
support from both existing and new shareholders. Additionally, we raised a further £11.5 million (£11.1 million
net of expenses) through an institutional placing in October 2003. These proceeds, together with the £2.9
million (US $5 million) received to date from our agreement with Takeda, puts Alizyme in a strong financial
position to progress our products to their next stages of value creation for our shareholders.
Alizyme plc Annual Report & Accounts 2003 02
Alizyme is now maturing 
into a speciality pharmaceutical
development company, with a
portfolio of later stage clinical
development products, which
provides a firm base to add
further longer term value for 
our shareholders. Progress during the year resulted in a substantial enhancement of the value and profile of Alizyme, and an
endorsement of its strategy and methods of operation. This was reflected in a corresponding increase in the
Company s share price during the year from £0.34 to £1.73 per share. This, together with the two
fundraisings in 2003, resulted in an increase in the market capitalisation of the Company from £27 million to
£250 million at the year end. It is worth reflecting that, from inception to 31 December 2003, Alizyme has
invested a net total of £48.5 million of shareholders funds in developing the Company and its product
opportunities. Compared with industry standards, this continues to be a remarkable achievement, with
Alizyme continuing to operate a low overhead operating base, with only fifteen permanent staff, whilst
focusing its strategic investment on developing its product portfolio.
The Year Ahead
We expect 2004 to be a year of building on and exploiting the achievements of 2003, with renzapride
joining COLAL-PRED“ in registration studies at Phase III in preparation for commercialisation, with ATL-962
building on its sound base towards entry into Phase III clinical development and ATL-104 progressing
through its proof of concept study.
As the Board seeks to exploit the new strength of the Company and looks to maximize value for our
shareholders for the longer term, there are a number of potential strategies open to us for further
developing the Company.
The Board wishes to express its appreciation to both our longstanding and to our new investors for 
their support in the two successful rounds of fundraising in 2003. This provides Alizyme with a strong
financial base from which to explore various ways to fully exploit the commercial potential of its current
portfolio of products.
Finally, our thanks again go to all the staff of Alizyme, whose continuous efforts have been rewarded through
the successes achieved in 2003.
Sir Brian Richards CBE
Chairman
1 April 2004 
Alizyme plc Annual Report & Accounts 2003 03 Chief Executives report
Our corporate strategy of developing drug products, by demonstrating efficacy in patients and providing
comprehensive data packages to support further development and commercialisation, made significant
progress in 2003. As a result we now have two products entering Phase III registration studies, one product
being prepared for Phase III clinical development, with a fourth product currently in Phase II. This progress
has reduced the risk profile and enhanced the chance of success within our pipeline.
Renzapride
It was a busy year for renzapride with three separate clinical trials completing in irritable bowel syndrome
(IBS) patients, two in Europe and one in the USA.
In April 2003, the largest of these trials, a 510 patient Phase IIb trial in constipation-predominant IBS 
(c-IBS) patients in the UK reported successful results. This trial evaluated the efficacy and safety of three
doses of renzapride and placebo, administered once daily, over a twelve-week treatment period. At the
optimum dose of 4mg, the results demonstrated an improvement in relief of pain and discomfort and bowel
function over placebo, similar to the level of overall benefit reported for Novartis tegaserod
(Zelmac
¤
/Zelnorm
¤
) during its original Phase III clinical trials. Additional analysis indicated that the improved
response rate over placebo is enhanced by analysing the data from female patients only.
Later in the year, in September, we reported encouraging results in our Phase IIb clinical trial in 168
patients with mixed-symptom IBS (m-IBS). This was the first demonstration of efficacy and safety
specifically in the m-IBS patient population. This trial evaluated the efficacy and safety of three doses of
renzapride against placebo, administered once daily for eight weeks. At the optimum dose of 2mg per day,
there was an increase in the number of patients who responded positively with satisfactory relief of IBS
compared to placebo.
In January 2004, we reported positive clinical trial data from our pharmacokinetic/pharmacodynamic study in
48 c-IBS patients conducted at Mayo Clinic, USA. Renzapride caused substantial, dose-dependent
enhancement of colonic motility, which was statistically and clinically significant at the highest dose.
Improved bowel function was associated with accelerated colonic transit.
Although the study was not statistically powered to show efficacy, approximately twice as many patients
reported satisfactory relief of overall IBS symptoms with renzapride, than on placebo.
As a result of our manufacturing development activities on the renzapride programme during the year, we
filed a new patent application claiming various features of the manufacture of renzapride on a commercial
scale. If granted, patents based on this filing could provide protection for renzapride manufactured by this
process until 2024. Additionally, in January 2004 we announced that we had filed a new patent application
relating to a crystal form of renzapride with improved pharmaceutical properties, its manufacture and use in
medicine. If granted, patents based on this filing could provide protection for this invention until 2024.
The purpose of the Phase II clinical programme was to define the product profile in each patient population.
We are currently preparing renzapride for its Phase III development. We aim to seek regulatory approval for
entry into Phase III during the course of 2004 whilst continuing to evaluate opportunities, including out-
licensing, to exploit its commercial potential. Given the positive data derived from all three of these
independently run clinical trials, renzapride, through its unique mode of action, represents significant
potential in the management of IBS.
ATL-962
In September we reported successful results of our Phase IIb clinical trial of ATL-962 in 372 clinically obese
patients. This trial compared three doses of ATL-962 with placebo, over three months. The objectives of the
study were to determine the effect of ATL-962 on weight loss, together with its safety and tolerability profile,
in clinically obese subjects.
The trial met its primary endpoint, which was a statistically significant reduction in weight at all doses. The
clinical trial also demonstrated efficacy comparable to other approved obesity drugs of the same class,
whilst being generally well tolerated and with no safety issues.
Alizyme plc Annual Report & Accounts 2003 04
We have a track record of
successfully developing early
stage products, an attractive and
maturing portfolio, a strong cash
position and we have
demonstrated that we have an
identified path to revenue
generation and longer term,
sustainable profitability. In August, we announced the grant of rights to a licence and development agreement to ATL-962 for the
treatment of obesity and all related diseases to Takeda. This agreement, the first commercialisation of any of
Alizyme s products, provided us with an up-front payment of US $2 million. In January 2004, we announced
that, following a detailed review of the Phase IIb clinical trials results, Takeda had paid a further US $3
million to exercise its rights to the licence and development agreement. Takeda will pay for all development
costs in Japan and Alizyme could receive a further US $37 million payable on future milestones/events, with
double digit royalties payable on future sales by Takeda in Japan. We were extremely pleased to be able to
conclude this agreement with the leading Japanese company in metabolic disease, as we believe Takeda is
uniquely positioned to maximise the potential of ATL-962 in the Japanese market.
We are currently pursuing the further commercialisation of ATL-962, whilst preparing it for a second Phase
IIb clinical trial, this time in obese patients with diabetes. We aim to seek regulatory approval for this trial
with a view to commencing recruitment of patients in the second half of the year. Successful results from
this additional Phase IIb trial should further enhance the value of ATL-962 and provide a data package to
support an expanded Phase III development programme.
COLAL-PRED“
Activity continues to concentrate on manufacturing process optimisation and on scale-up for COLAL-PRED“
in preparation for the commencement of a Phase III clinical trial in Europe in patients with active ulcerative
colitis. We will seek regulatory approval for the Phase III trial in the coming months and would expect to
commence patient recruitment in the second half of 2004.
In order to exploit the extensive work we have undertaken in the manufacturing process optimisation and scale-
up and to maximise the future value from COLAL-PRED“, we have taken a strategic decision to manufacture
COLAL-PRED“ under contract and to retain the manufacturing rights to the marketed product. This decision allows
us to co-ordinate and control manufacturing on an international basis and supports our strategy of maximising
future shareholder returns, as we continue discussions with potential licensing and/or distribution partners.
ATL-104
During the year, ATL-104, our product for mucositis, was granted regulatory permission in the form of a CTX
from the UK Medicines and Healthcare products Regulatory Agency (MHRA) to undertake a Phase IIa clinical
trial to evaluate ATL-104 for the treatment of mucositis in cancer patients. The trial is designed to recruit up
to 60 patients, with ATL-104 being administered as a swallowable mouthwash. Results from this trial are
expected to be reported in the first quarter of 2005.
Summary and Outlook
The year 2003 was one of significant achievements and we have entered 2004 in a much stronger position. 
This allows a degree of flexibility in how we develop Alizyme and provide longer term value for our shareholders.
Alizyme s assets are important to the ongoing success of our business. We have a track record of successfully
developing early stage products, an attractive and maturing portfolio, a strong cash position and we have
demonstrated that we have an identified path to revenue generation and longer term, sustainable profitability. 
This now allows us to further develop our pipeline whilst considering various strategic alternatives to develop
the Company. So, the main focus for 2004 is simple, to build on and exploit the achievements of 2003.
Dr Richard Palmer
Chief Executive Officer
1 April 2004
Alizyme plc Annual Report & Accounts 2003 05 Renzapride
A unique approach to the challenge of IBS
Potentially an effective treatment for both constipation-predominant 
IBS (c-IBS) and mixed-symptom IBS (m-IBS).
Disease
IBS is a chronic gastrointestinal disorder characterised by recurrent symptoms of abdominal pain and
discomfort associated with disturbed bowel function, which may also be accompanied by a feeling of
bloating. It is one of the disorders most frequently seen by physicians, with estimates of up to 22% of the
adult population experiencing it at some time, of which the vast majority are women. Patients may have 
c-IBS, m-IBS or diarrhoea-predominant symptoms. IBS is a complex syndrome, for which there are currently
few effective drug treatments, especially for those patients with m-IBS.
Development status of renzapride
Renzapride, which is a 5-HT4 receptor full agonist/5-HT3 receptor antagonist, has completed Phase I and
extensive Phase II clinical studies including a c-IBS trial involving 510 patients and an m-IBS trial involving
168 patients. In addition, a trial at Mayo Clinic in the USA explored the relationship between gastrointestinal
motility and absorbed drug from three different doses in 48 c-IBS patients.
Clinical experience with renzapride
In Phase I and Phase II studies, renzapride has been shown to be safe and well-tolerated, and to provide
clinical benefit in IBS when compared to placebo in both c-IBS and m-IBS patients. We have now built up a
safety database of more than 1,100 subjects in up to 12 weeks dosing, showing renzapride to be potentially
a competitive product in the management of IBS.
Next steps
The data from the Phase II clinical programme aimed to define the product profile in each patient
population. We are currently preparing renzapride for entry into Phase III clinical development whilst
evaluating opportunities, including out-licensing, to exploit the commercial potential of this product.
Intellectual property
Renzapride is protected in major territories under granted patents, now owned by Alizyme, which are due to
expire in 2007. Protection may be available in certain jurisdictions for between 5 to 10 years by patent term
extensions or data exclusivity. Alizyme has filed two new patent applications on renzapride, for its crystal
form and also its manufacturing process, which could offer protection until 2024.
Commercial Opportunity
Irritable bowel syndrome currently affects up to 22% of the general population, of which around 30% have
predominantly constipation symptoms, around 30% predominantly diarrhoea symptoms and around 40%
have mixed symptoms. There are currently two main marketed products; Zelmac
¤
/ Zelnorm
¤
treating 
c-IBS and Lotronex
¤
treating diarrhoea-predominant IBS. There is currently no product either on the market
or in development targeting m-IBS specifically. As a result of its unique product profile, renzapride may
provide benefit in up to 70% of the IBS patient population. An effective drug with no patient compliance
issues could provide potential sales in excess of US $1 billion per annum.
Alizyme plc Annual Report & Accounts 2003 06 ATL-962
For the management of obesity and associated disorders
Potentially an effective treatment for obesity and associated conditions,
accompanied by a competitive side-effect profile.
Disease
The worldwide incidence of obesity is increasing at an alarming rate, with over 160 million people estimated
to be clinically obese. Clinical obesity is closely linked to increased incidence of several conditions, including
Type II diabetes, coronary heart disease and hypertension. Drug treatment is recommended for both weight
loss and weight loss maintenance in clinically obese patients and in overweight patients with these
associated medical conditions. A product with an attractive profile can therefore be expected to have
substantial global commercial potential.
Development status of ATL-962
ATL-962, which is a gastrointestinal lipase inhibitor, has completed Phase I clinical development, and during
2004 successfully completed a Phase IIb clinical trial in 372 clinically obese patients.
Clinical Experience with ATL-962
In a total of five Phase I clinical studies involving a total of 137 volunteers, ATL-962 was found to be safe
and well tolerated at doses up to three times the anticipated therapeutic dose. A series of three Phase Ib
studies were carried out in 99 healthy volunteers dosing three times daily for five days with a range of
doses of ATL-962. Subjects excreted similar levels of faecal fat, a surrogate marker for inhibition of
gastrointestinal lipases, but had substantially fewer gastrointestinal side-effects than subjects similarly dosed
with orlistat, the active ingredient in Xenical
¤
, Roche s obesity drug which also inhibits lipase.
In a Phase IIb study involving 372 clinically obese patients, the trial met its primary endpoint of statistically
significant weight loss across all three dose levels, compared to placebo. There was no significant difference
in the extent of weight loss between the three treatment groups receiving ATL-962 (60, 120 and 240mg three
times a day). The levels of weight loss measured over the three-month period were consistent with those of
other approved obesity drugs of the same class.
Next steps
We are currently pursuing further commercialisation of ATL-962 following the exercise by Takeda of its rights
to a licence and development agreement for the Japanese rights. We are also preparing ATL-962 for a second
Phase IIb trial, this time in obese patients with diabetes. We aim to seek regulatory approval for this trial
with a view to commencing recruitment of patients in the second half of the year. Successful results from
this additional Phase IIb trial should further enhance the value of ATL-962 and provide a data package to
support an expanded Phase III development programme.
Intellectual property
ATL-962 is covered by a family of Alizyme s patent applications that arose from its discovery programme
AZM-119 for novel lipase inhibitors. During 2003, we strengthened our asset position through the grant of a
patent in the USA for ATL-962, which could provide patent protection until 2020. We also had further patents
granted in various jurisdictions relating to applications in respect of the obesity programmes. We await
additional patents proceeding to grant through the national examination stages, with a view to being
granted in major and other territories worldwide from 2004 onwards.
Commercial Opportunity
The potential market for obesity, in major territories, is estimated to be in excess of 160 million patients,
although currently only 6 million patients are being therapeutically treated. The two main marketed products
for obesity, Xenical
¤
and Meridia
¤
, currently have safety and/or compliance issues. The only potential
significant competitor, that is currently in Phase III development, is Sanofi-Synthelabo s rimonabant
(Acomplia“). An effective drug with no patient compliance issues could provide potential sales in excess of
US $1 billion per annum.
Alizyme plc Annual Report & Accounts 2003 07 COLAL-PRED“
The  safe steroidfor ulcerative colitis
Potentially an effective anti-inflammatory steroid treatment for mild-to-
moderate ulcerative colitis (UC) without the typical side effects of steroids.
Disease
UC and Crohn s colitis are inflammatory diseases of the colon, which cause symptoms such as abdominal
pain, bleeding, cramping, fatigue and diarrhoea. In severe cases, surgery may be required to remove the
diseased tissue. These conditions are characterised by episodes of acute flare of the inflammation, followed
by periods of remission, before relapse into another flare. Mild cases are treated with non-steroidal anti-
inflammatory drugs based on 5-amino-salicylic acid (5-ASA) which are also currently used in the maintenance
of remission. In mild-to-moderate cases, anti-inflammatory steroids, such as prednisolone, are used, but they
are limited to short term use by their side-effects on a number of body systems. A product with the profile
of COLAL-PRED“ would represent a significant advance in the management of this condition.
Development status of COLAL-PRED“
COLAL-PRED“, which is an approved steroid (prednisolone sodium metasulphobenzoate) together with
Alizyme s proprietary colonic drug delivery system, COLAL“, has completed Phase II development in
Europe, and has regulatory approval to conduct a twelve month dosing Phase III clinical trial in
maintaining remission in UC patients.
Clinical experience with COLAL-PRED“
In a series of Phase I clinical trials in healthy volunteers, COLAL-PRED“ was shown to be reliably and
effectively delivered to the colon, with a consequently low level of drug absorbed into the blood, as a result
of delivery to the colon, providing a basis for the target product profile. In a Phase II trial in 37 mild-to-
moderate UC patients, COLAL-PRED“ showed similar anti-inflammatory efficacy, but with an absence of
steroid-related side-effects, compared to that reported for the gold standard, prednisolone.
Next steps
COLAL-PRED“ is being prepared for a Phase III registration trial in Europe for patients with active UC, 
whilst manufacturing is being optimised and scaled up to support the trial and for the Marketing
Authorisation Application in Europe. We would expect to commence patient recruitment in the second half of
2004. In parallel, Alizyme continues discussions with potential licensing and/or distribution partners to
commercialise the product.
Intellectual property
COLAL-PRED“ is protected under granted patents for the COLAL“ colonic delivery technology, exclusively
licensed from BTG plc, which are due to expire in 2011. In addition, patent applications for COLAL-PRED“
were made by Alizyme in 2002, which if granted, could provide protection for the product until 2022.
Commercial Opportunity
The potential market for ulcerative colitis is currently around 1 million patients in major territories. The
market is currently dominated by corticosteroids and 5-ASA products, which have safety and/or efficacy
issues, therefore offering a significant opportunity for a  safe steroid product such as COLAL-PRED“. 
There are currently no competitor products, either on the market or in development, with the same target
product profile, whilst new biological products are likely to be restricted in their use by cost. COLAL-PRED“
could be used to treat acute ulcerative colitis, Crohn s colitis, steroid dependent patients and potentially 
the maintenance of remission of ulcerative colitis, providing a potential market of more than US $250 million
per annum.
Alizyme plc Annual Report & Accounts 2003 08 ATL-104
Treating the side-effects of cancer therapy 
Potentially an orally administered treatment for mucositis of the 
mouth and gastrointestinal tract, caused by cancer chemotherapy and
radiotherapy, for which there is currently no approved drug treatment.
Disease
Mucositis is characterised by severe ulceration, bleeding and pain in the mouth and gastrointestinal tract,
caused by damage to the cells that line these tissues by cancer chemotherapy and radiotherapy. 
It occurs in 40% of all cancer sufferers. The severity of the mucositis is influenced by the intensity of the
cancer therapy and by the individual drugs used to treat particular cancer types. It can be a dose-limiting
side-effect of cancer treatment, which can require the use of powerful pain relieving medications, feeding via
a tube, and antibiotic therapy to control associated infection. There is currently no effective drug treatment
for mucositis. ATL-104 administered orally has a similar effect in laboratory models to that published for
palifermin, an intravenous preparation of keratinocyte growth factor, that Amgen has in development for
mucositis. Amgen s product has shown encouraging Phase III clinical data in mucositis in cancer patients.
Development status of ATL-104 
ATL-104 has completed pre-clinical development and three Phase I clinical trials in healthy volunteers. It is
now in a Phase IIa clinical trial in cancer patients.
Clinical experience with ATL-104 
Phase I clinical trials in 68 healthy volunteers, involving single dose and repeat daily dosing of a range of
doses for five days, have shown ATL-104 to be safe and well tolerated.
Next steps 
ATL-104 has regulatory and Ethics Commitee approval for a Phase IIa clinical trial in cancer patients, to
evaluate whether Alizyme s pre-clinical data translate into clinical benefit in patients. The trial is designed to
recruit up to 60 cancer patients, with ATL-104 being administered as a swallowable mouthwash. Results from
this trial are expected to be reported in the first quarter of 2005.
Intellectual property 
ATL-104 is protected under patents, wholly owned by Alizyme, which have been granted in Europe and the
USA and are due to expire in 2017. We had additional patents granted in various jurisdictions relating to
applications in respect of the mucositis programmes during 2003. Further patent applications are under
examination with a view to being granted in other territories worldwide from 2004 onwards.
Commercial Opportunity 
Oral mucositis occurs in 40% of all cancer patients. In head and neck cancer and bone marrow transplant
patients, 70 — 80% of patients suffer mucositis. There are currently no marketed products for treating
mucositis, although Amgen have an intravenous product, palifermin, currently in Phase III clinical
development. ATL-104 can be administered orally, which gives it a unique product profile, enabling the
treatment of oral and gastrointestinal mucositis locally, rather than systemically. The potential market for a
successful mucositis product could be in excess of US $500 million per annum.
Alizyme plc Annual Report & Accounts 2003 09 Board of Directors
Alizyme plc Annual Report & Accounts 2003 10
Sir Brian Richards CBE BSc PhD Non-Executive Chairman Dr Richard Palmer BSc PhD Chief Executive Officer
Tim McCarthy MBA FCCA Finance Director John Gordon MA FCA Non-Executive Director
William Edge MA, MBA Non-Executive Director Richard Forrest BSc Non-Executive Director Sir Brian Richards CBE BSc PhD (Aged 71, Non-Executive Chairman)
Sir Brian Richards has been Non-Executive Chairman of Alizyme since its founding. He was research and
development director for Searle UK and has been Chairman or non-executive director of a number of other
biotechnology companies internationally and has sat on a number of advisory committees including the CBI
Biotechnology Strategy Group and the Council of the Biotechnology and Biological Sciences Research
Council. He was knighted in 1997 for services to the biotechnology industry.
Dr Richard Palmer BSc PhD (Aged 52, Chief Executive Officer)
Dr Palmer joined the Board of Alizyme as Chief Operating Officer, to be responsible for the Group’s research
and development, in September 1996 and became Chief Executive in March 1997. He has a PhD in
pharmacology from University College, London and over 30 years’ experience in both research and in
international product development management at Wellcome and GlaxoWellcome. He has co-authored over
one hundred research papers and several patents and is one of the most-cited biomedical research scientists
in the UK. He has led multi-disciplinary drug discovery and international product development teams
involving both chemical and biotechnology products in oncology, cardiovascular disease, immunology and
inflammation in pre-clinical and clinical development. Dr Palmer retains overall responsibility for the Group’s
research and development activities.
Tim McCarthy MBA FCCA (Aged 47, Finance Director)
Mr McCarthy is a co-founder of Alizyme. He is a qualified accountant and gained an MBA from Cranfield
School of Management in 1988. He has held senior financial positions in a number of multinational
companies. He has been instrumental in the start up and early stages of development of a number of
biotechnology companies over the last 10 years, including being the founding finance director of Peptide
Therapeutics Group plc (now Acambis plc) until April 1995. Mr McCarthy is also Company Secretary of 
Alizyme plc and has overall responsibility for the Group s financial, investor relations and business
development matters.
John Gordon MA FCA (Aged 64, Non-Executive Director)
Mr Gordon joined the Board of Alizyme in June 1996. He is a qualified chartered accountant and moved into
corporate finance, initially at Hill Samuel and then Robert Fleming, where he became a director in 1974. In
1985 he became head of corporate finance at Capel-Cure Myers. In 1989 he became a co-founder and head
of corporate finance at Beeson Gregory. He is the designated senior independent non-executive director of
Alizyme and is a non-executive director of a number of other companies.
William Edge MA, MBA (Aged 67, Non-Executive Director)
Mr Edge joined the Board of Alizyme in June 1998. He has extensive experience in the pharmaceutical
industry and as a venture capitalist. He held senior positions at Wyeth Laboratories and PA Consulting. He
co-founded Grosvenor Venture Managers in 1985, which was sold to Mercury Asset Management in 1994. He
now acts as a consultant to Northern Venture Managers and to Merlin Biosciences Limited.
Richard Forrest BSc (Aged 55, Non-Executive Director)
Mr. Forrest joined the Board of Alizyme in May 2002. He has gained extensive commercial experience in the
international pharmaceutical industry over the last 30 years, of which 19 years were spent in the Rhone-
Poulenc Rorer Group (now Aventis), where his most senior position was Senior Vice-President, Europe. His
roles have included responsibility for General Management, Marketing and Sales and Business Development
in Europe and Rest of the World (South America, Africa, Middle East and South-East Asia). His most recent
position was Chief Operating Officer of Novuspharma SpA, an Italian biopharmaceutical company, which
merged with Cell Therapeutics Inc. in January 2004.
Alizyme plc Annual Report & Accounts 2003 11 Financial review
Results of Operations
We report a loss of £10.0 million for the year ended 31 December 2003 (2002: £9.8 million), in line with
expectations. The loss for the year is again consistent with the large clinical trials that were ongoing during
the year and the focused investment in our late stage clinical programmes.
Turnover
The Group s first revenue of £1.2 million (US $2 million) was recorded following the grant of rights to a
licence and development agreement for Japanese rights to Takeda for ATL-962.
We concluded the agreement with Takeda in August 2003, at which time they made a non-refundable
payment of US $2 million. In January 2004, Takeda made a further payment of US $3 million in order to
exercise its rights under the agreement. The total agreement is worth up to US $42 million, with the further
US $37 million payable on future milestones/events. The agreement also provides for Takeda to pay all
development costs in Japan and for Alizyme to receive double-digit royalties on future sales in Japan.
Research and Development
Alizyme is committed to maximising shareholder value through the development of its portfolio of clinical
products. As a result, we continue to focus our investment of shareholders funds into the research and
development process. Research and development remains our most significant investment totalling £11.4
million in 2003 (2002 : £9.7 million) or 91% (2002 : 89%) of the operating expenses for the year.
Management and Administration
Management and administration costs in 2003 remained static at £1.2 million (2002: £1.2 million).
Interest
Interest receivable increased to £0.5 million (2002 : £0.4 million) as a result of higher average cash and
short term investment balances throughout the year, although average interest rates achieved of 3.64% were
lower when compared to interest rates achieved in 2002 of 4.07%.
Taxation
The research and development tax credit for 2003 amounts to £0.9 million (2002: £0.7 million) and is a
continuing source of support for research and development investment. There was a charge for overseas
withholding tax of £0.1 million (2002: nil) as a result of a 10% withholding tax on the US $2 million received
from Takeda under the licence and development agreement.
Liquidity and Cash Resources
At 31 December 2003, the Company had cash and short term investments of £22.3 million (2002 : £5.3
million). The net cash outflow during the year, before management of liquid resources and financing, was
£9.4 million (2002: £10.1 million).
Fundraising
In February 2003, we raised £16.1 million (£15.1 million net of expenses) through a Placing and Open Offer
of 57,542,499 new ordinary shares at a price of 28 pence per share. In October 2003, we raised a further
£11.5 million (£11.1 million net of expenses) through an institutional placing of 6,844,800 new ordinary
shares at a price of 168 pence per share. We are delighted to welcome a number of new institutional
investors to the Company.
Alizyme has now raised a total of £70.8 million from inception. As at 31 December 2003, a net total of £48.5
million had been invested in developing Alizyme and its product opportunities.
Tim McCarthy
Finance Director
1 April 2004
Alizyme plc Annual Report & Accounts 2003 12
Fundraising History
1996
Pre-float funding £2.6m
July 1996
Initial Public Offering £5.0m
April 1998
Placing and Open Offer £5.5m
July 1999 
Placing and Open Offer £5.2m
2000 
Warrants exercised £3.1m
August 2000 
Placing and Open Offer £21.2m
February 2003 
Placing and Open Offer £16.1m
October 2003 
Institutional Placing £11.5m
2000 — 2003
Options exercised £0.6m Alizyme plc Annual Report & Accounts 2003 13
Financial contents
14 Consolidated profit and loss account
15 Consolidated balance sheet
16 Company balance sheet
17 Consolidated cash flow statement
19 Notes to the financial statements
32 Independent auditors report
34 Directors report
36 Combined Code report
42 Remuneration report
50 Glossary of terms
51 Corporate advisors
52 Shareholder notes 2003 2002
Notes £000s £000s
Turnover 2 1,243 —
Operating expenses:
Research and development (11,401) (9,692)
Management and administration  (1,179) (1,176)
Operating loss (11,337) (10,868)
Interest receivable 3 521 396
Loss on ordinary activities before taxation 6 (10,816) (10,472)
Taxation on loss on ordinary activities 7 808 710
Loss for the financial year being the retained loss for the year
attributed to the members of Alizyme plc 16 (10,008) (9,762)
Loss per share for the year — basic and diluted 8 (7.7p) (12.3p)
There were no recognised gains or losses in either year other than the loss for that year.
All amounts relate to continuing activities.
The accompanying notes form an integral part of this Consolidated profit and loss account.
Consolidated profit and loss account
For the year ended 31 December 2003
Alizyme plc Annual Report & Accounts 2003 14 Alizyme plc Annual Report & Accounts 2003 15
2003 2002
Notes £000s £000s
Fixed assets
Tangible assets 9 113 231
Current assets
Debtors 11 1,959 1,659
Short term investments 21,854 5,204
Cash at bank and in hand 452 116
24,265 6,979
Creditors: Amounts falling due within one year 12 (3,309) (2,796)
Net current assets 20,956 4,183
Total assets less current liabilities 21,069 4,414
Provisions for liabilities and charges 14 (279) —
Net assets 20,790 4,414
Capital and reserves
Called-up share capital 15 2,886 1,587
Share premium account 16 61,071 35,986
Capital reserve 16 1,530 1,530
Profit and loss account 16 (44,697) (34,689)
Equity shareholdersfunds 17 20,790 4,414
Approved by the Board of Directors and signed on its behalf by:
Sir Brian Richards CBE
Chairman
1 April 2004  
The accompanying notes form an integral part of this Consolidated balance sheet.
Consolidated balance sheet
As at 31 December 2003 2003 2002
Notes £000 s £000 s
Fixed assets
Investments 10 179 179
Current assets
Debtors 11 42,057 32,470
Short term investments 21,854 5,204
Cash at bank and in hand 297 127
64,208 37,801
Creditors: Amounts falling due within one year 12 (176) (182)
Net current assets 64,032 37,619
Total assets less current liabilities being net assets 64,211 37,798
Capital and reserves
Called-up share capital 15 2,886 1,587
Share premium account 16 61,071 35,986
Profit and loss account 16 254 225
Equity shareholdersfunds 64,211 37,798
Approved by the Board of Directors and signed on its behalf by:
Sir Brian Richards CBE
Chairman
1 April 2004  
The accompanying notes form an integral part of this Company balance sheet.
Company balance sheet
As as 31 December 2003
Alizyme plc Annual Report & Accounts 2003 16 Alizyme plc Annual Report & Accounts 2003 17
2003 2002
£000s £000s
Net cash outflow from operating activities (10,439) (11,188)
Returns on investments and servicing of finance
Interest received 470 470
Net cash inflow from returns on investments and servicing of finance 470 470
Taxation
Research and development tax credit received 710 693
Overseas tax paid (124) —
Net cash inflow from taxation 586 693
Capital expenditure and financial investment
Purchase of tangible fixed assets (15) (71)
Net cash outflow from investing activities (15) (71)
Cash outflow before management of liquid resources and financing (9,398) (10,096)
Management of liquid resources
Net cash (placed on)/withdrawn from money market deposits (16,650) 9,877
Net cash (outflow)/inflow from management of liquid resources (16,650) 9,877
Financing
Issue of ordinary share capital (net) 26,384 99
Net cash inflow from financing 26,384 99
Increase/(decrease) in cash 336 (120)
The accompanying notes form an integral part of this Consolidated cash flow statement.
Consolidated cash flow statement
For the year ended 31 December 2003 Notes to the Consolidated cash flow statement
Reconciliation of operating loss to operating cash flows
2003 2002
£000s £000s
Operating loss (11,337) (10,868)
Depreciation charge 133 132
Increase in debtors (27) (435)
Increase/(decrease) in creditors 513 (9)
Increase/(decrease) in provision 279 (8)
Net cash outflow from operating activities (10,439) (11,188)
Analysis and reconciliation of net funds
At At
1 January 31 December
2003 Cash flow 2003
£000s £000s £000s
Cash at bank and in hand 116 336 452
Liquid resources (short term cash deposits) 5,204 16,650 21,854
Net funds 5,320 16,986 22,306
Reconciliation of net cash flow to movement in net funds
2003 2002
£000s £000s
Increase/(decrease) in cash 336 (120)
Increase/(decrease) in liquid resources (short term cash deposits) 16,650 (9,877)
Movement in net funds 16,986 (9,997)
Net funds at 1 January 5,320 15,317
Net funds at 31 December 22,306 5,320
Consolidated cash flow statement
Alizyme plc Annual Report & Accounts 2003 18 Alizyme plc Annual Report & Accounts 2003 19
1 Accounting Policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the
year and the preceding year, is set out below.
Basis of accounting: The financial statements have been prepared under the historical cost convention and
in accordance with applicable accounting standards.
Basis of consolidation: The Group financial statements consolidate the financial statements of Alizyme plc
(the Company) and its subsidiary undertaking, Alizyme Therapeutics Limited, up to 31 December 2003.
No separate profit and loss account is presented for Alizyme plc, as permitted by Section 230 of the
Companies Act 1985. The Companys profit for the year was £29,000 (2002 — £196,000 loss).
In accordance with FRS 8, Related Party Disclosures the Group does not disclose transactions or balances
between group entities which are wholly eliminated on consolidation.
Turnover: Turnover consists of income received, in the normal course of business, from licence and
development agreements and is stated net of any trade discounts, VAT and other sales related taxes.
Income from these agreements is typically in the form of fees on signature, milestone receipts on
achievement of predetermined events, and royalties on the sale of the product once marketed.
Turnover is recognised when licence rights are granted to the extent that the Company has performed its
contractual obligations, based on the fair value of the right to consideration for each component of the
agreement.
Research and development: Research and development expenditure is written off as incurred.
Taxation: Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be
paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
balance sheet date where transactions or events that result in an obligation to pay more tax in the future
or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are
differences between the Groups taxable profits and its results as stated in the financial statements that
arise from the inclusion of gains and losses in tax assessments in periods different from those in which
they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all
available evidence, it can be regarded as 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 at the average tax rates that are expected to apply in the periods in which the
timing differences are expected to reverse, based on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
Notes to the financial statements
31 December 2003 1 Accounting Policies (continued)
Tangible fixed assets: Tangible fixed assets are stated at cost, net of depreciation and any provision for
impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost,
less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows:
Computer equipment 3 years
Office fixtures and fittings 3 years
Office equipment 3 years
Residual value is calculated on prices prevailing at the date of acquisition.
Investments: Fixed asset investments are shown at cost less provision for impairment. Current asset
investments are stated at the lower of cost and net realisable value.
In the company balance sheet, for investments in subsidiaries acquired for consideration including the
issue of shares qualifying for merger relief, cost is measured by reference to the nominal value only of the
shares issued. Any premium is ignored.
Short term investments: Comprise short term cash deposits and are shown at cost with accrued interest
included in debtors.
Pension costs: The Group does not maintain any pension plans, but makes defined contributions to the
personal pension arrangements of all its executive Directors and employees. The amount charged to the
profit and loss account in respect of pension costs is the contribution payable in the year.
Leases: Rentals under operating leases are charged on a straight-line basis over the lease term, even if the
payments are not made on such a basis.
Foreign currency: Transactions in foreign currencies are recorded at the rate of exchange at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date. Any gain or loss arising from a change in
exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the
profit and loss account.
2 Turnover and loss on ordinary activities before taxation
Turnover consists of non-refundable income, received in the normal course of business, from the granting
of rights to a licence and development agreement to Takeda Chemical Industries, Ltd., a company
incorporated in Japan.
No turnover arose during the preceding year.
The turnover and loss on ordinary activities before taxation derives from the Group s principal activity in
the United Kingdom.
All net assets are located in the United Kingdom.
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 20 Alizyme plc Annual Report & Accounts 2003 21
3 Interest receivable
2003 2002
£000s £000s
Interest receivable on short term cash deposits 521 396
4 Staff costs
The average monthly number of employees (including executive Directors) was:
2003 2002
Number Number
Research and development 11 13
Management and administration 4 3
15 16
Their aggregate remuneration comprised:
2003 2002
£000s £000s
Wages and salaries 1,297 1,380
Social security costs 176 169
Other pension costs (see note 19) 146 147
1,619 1,696
The analysis above excludes National Insurance contributions of £11,000 (2002: nil) payable following the
exercise of share options in the year and a provision of £279,000 (2002: nil) for National Insurance
contributions that will be payable on gains realised upon the future exercise of share options issued.
5 Directorsremuneration
Aggregate remuneration
The total amounts for Directors remuneration and other benefits were as follows:
2003 2002
£000s £000s
Emoluments 779 834
Money purchase contributions to Directors pension arrangements 80 82
859 916
Further details concerning the Directors remuneration, shareholdings and share options which form part of
these financial statements are set out in the Remuneration report on pages 42 to 49. 6 Loss on ordinary activities before taxation
Loss on ordinary activities before taxation is stated after charging:
2003 2002 
£000s £000s
Depreciation of owned tangible fixed assets 133 132
Operating lease rentals
— land and buildings 193 235
Auditors remuneration for audit services
— payable to Deloitte & Touche LLP in total by Group 24 20
— payable to Deloitte & Touche LLP by Company (included as part of Group) 17 14
Amounts payable to Deloitte & Touche LLP and their associates by the Company and its UK subsidiary
undertakings in respect of non-audit services, including reporting accountant work on fundraising, taxation
services and interim review work, were £95,000 (2002 — £11,000).
7 Taxation on loss on ordinary activities
2003 2002
£000s £000s
Current tax
Research and development tax credit 932 710
Overseas withholding tax (124) — 
Tax credit on loss on ordinary activities 808 710
The standard rate of tax for the year, based on the UK standard rate of corporation tax is 30%
(2002 — 30%). The actual tax credit for the current and previous year varies from the standard rate for the
reasons set out in the following reconciliation:
2003 2002
£000s £000s
Loss on ordinary activities before tax (10,816) (10,472)
Tax on ordinary activities at standard rate 3,245 3,142
Effect of:
Expenses not deductible for tax purposes (10) (3)
Tax deduction for share option exercise 203 —
Capital allowances in deficit of depreciation (23) (14)
Utilisation of tax losses (2,682) (2,658)
Movement in short term timing differences 4 5
R & D expenditure surrendered for tax credit (1,749) (1,331)
Additional 50% deduction for qualifying R & D 1,012 859
— —
R & D tax credit 932 710
Overseas withholding tax (124) —
808 710
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 22 Alizyme plc Annual Report & Accounts 2003 23
Factors that may affect the future tax charge: Deferred tax assets have not been recognised in respect of
timing differences relating to revenue losses as there is insufficient evidence that the assets will be
recovered. The amount of the asset not recognised in respect of the revenue losses is £12,178,000 
(2002 — £9,421,000). These assets would be utilised if the companies were to make future taxable income.
There are trading losses of approximately £40.5m (£31.0m — 2002) available to carry forward against future
tax liabilities.
8 Loss per share
Loss per share is based on the loss of £10,008,000 for the year ended December 2003 (year ended
December 2002 — £9,762,000) and on 130,476,000 ordinary shares (2002 — 79,291,000 ordinary shares),
being the weighted average number of ordinary shares in issue and ranking for dividend during the year.
The diluted loss per share takes into account the dilutive effect of share options. Ordinary shares which
are potentially issuable are only included in the calculation of diluted earnings per share if their issue
would decrease net profit per share or increase net loss per share. The exercise of share options does not
increase the basic loss per share and therefore the basic and diluted loss per share remain the same.
9 Tangible fixed assets
Office
Computer fixtures and Office
equipment fittings equipment Total
£000s £000s £000s £000s
Group
Cost:
At 1 January 2003 208 193 159 560 
Additions 3 — 12 15
At 31 December 2003 211 193 171 575
Depreciation:
At 1 January 2003 132 112 85 329 
Charge for the year 40 50 43 133
At 31 December 2003 172 162 128 462
Net book value:
At 1 January 2003 76 81 74 231
At 31 December 2003 39 31 43 113
The Company has no tangible fixed assets. 10 Fixed asset investments
Subsidiary undertaking of the Company
£000s
Cost and net book value at beginning and end of year 179
In 1996, the Company acquired 100% of the share capital of Alizyme Therapeutics Limited, a company
registered in England and Wales, in consideration of shares. In accordance with Sections 131 and 133 of
the Companies Act 1985 the Company has taken no account of any premium on the shares issued and has
recorded the cost of investment at the nominal value of the shares issued. The difference between the net
assets acquired and the nominal value of shares issued has been credited to a capital reserve on
consolidation.
The principal activity of Alizyme Therapeutics Limited is the discovery, development and commercialisation
of pharmaceutical products for the treatment of obesity, diseases related to obesity (such as diabetes) and
disorders of the gastrointestinal tract.
11 Debtors: Amounts falling due within one year
Group Company
2003 2002 2003 2002
£000s £000s £000s £000s
Amounts owed by Group undertakings — — 41,978 32,430
Other debtors 72 63 2 5
Research and development tax credit 932 710 — —
Prepayments and accrued income 955 886 77 35
1,959 1,659 42,057 32,470
12 Creditors: Amounts falling due within one year
Group Company
2003 2002 2003 2002
£000s £000s £000s £000s
Trade creditors 1,320 1,333 33 25 
Other taxation and social security 218 170 — — 
Accruals 1,771 1,293 143 157
3,309 2,796 176 182
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 24 Alizyme plc Annual Report & Accounts 2003 25
13 Financial instruments
The disclosures in this note deal with financial assets and financial liabilities as defined in Financial
Reporting Standard 13 Derivatives and Other Financial Instruments: Disclosures (FRS 13). Certain financial
assets, such as investment in the subsidiary company, are excluded from the scope of these disclosures.
As permitted by FRS 13, short-term debtors and creditors have been excluded from the disclosures, other
than the currency disclosures.
The Group s financial instruments comprise cash and short term investments and various items such as
prepayments, trade creditors and accruals, which arise directly from the Group s operations. It is, and has
been throughout the period under review, the Group s policy that no speculative trading in financial
instruments shall be undertaken.
The main risks arising from the Group s financial instruments are interest rate risk, currency risk and
liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below. These policies have remained unchanged throughout the year.
(i) Interest rate risk
The Group has no financial assets other than sterling cash deposits of £21,854,000 (2002 — £5,204,000)
which are part of the financing arrangements of the Group. The sterling cash deposits comprise deposits
placed on money markets for periods of up to six months and at call. The Group seeks to maximise
interest receipts within these parameters. Interest receipts are earned on money market deposits at the
prevailing market rate.
The weighted average interest rate received during the year on these cash deposits was 3.64% (2002 —
4.07%) and the weighted average time for which the rate was fixed was 116 days (2002 — 114 days). 13 Financial instruments (continued)
(ii) Currency risk
The Group s principal functional currency is pounds sterling (GBP), however, during 2003 the Group had
both income and expenditure in United States dollars (USD). The Group s policy is to maintain natural
hedges, where possible, by matching USD income with USD expenditure. To date the Group has not
hedged any transactional currency exposure, however, it will continue to monitor this option with
consideration to future income and expenditure in foreign currencies.
(iii) Liquidity risk
The Group s policy throughout the year regarding liquidity has been to maximise the return on funds
placed on deposit but to minimise the associated risk by placing funds in low risk cash deposits.
The Group held the following financial assets at 31 December
2003 2002
£000s £000s
Assets held as part of the financing arrangements of the Group:
Sterling cash deposits 21,854 5,204
Cash (GBP) 284 116
Cash (USD) 168 —
22,306 5,320
The sterling cash deposits comprise deposits placed on money markets for periods of up to six months
and at call.
(iv) Borrowing facilities
The Group has no borrowing facilities available to it.
(v) Fair value of financial assets
The Directors consider there to be no material difference between the book value and the fair value of the
Group s financial instruments at the balance sheet date.
vi) Market price risk
The Group s exposure to market price risk comprises interest rate exposure. Group funds are invested in
money market cash deposits with the objective of maintaining a balance between accessibility of funds
and competitive rates of return. In practice, this has meant that no deposits were made with a maturity
greater than 185 days (2002 — 186 days) during the year.
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 26 Alizyme plc Annual Report & Accounts 2003 27
14 Provisions for liabilities and charges
2003 2002
£000s £000s
Group
Provision for National Insurance on share option gains
At 1 January — 8
Charged to profit and loss account 279 — 
Released unused — (8)
At 31 December 279 —
In accordance with Urgent Issues Task Force abstract 25 (National Insurance contributions on share option
gains) the Group has recognised a provision of £279,000 (2002 — Nil) for National Insurance contributions
that will be payable on gains realised upon the future exercise of share options issued. The provision
calculation is based upon the closing share price of the Company on 31 December 2003, which was 173p 
(2002 — 34p) and calculated at a National Insurance rate of 12.8% (2002 — 11.8%). Any provision is
allocated over the performance period of each employee, where the performance period is the period
during which the employee must perform the services necessary to become unconditionally entitled to the
options.
The Company has no provisions.
15 Called-up share capital
(a) Ordinary shares of 2p each
2003 2002
£000s £000s
Authorised:
250,000,000 ordinary shares of 2p each 5,000 5,000
Allotted, called-up and fully paid:
144,314,993 ordinary shares of 2p each (2002 — 79,354,444) 2,886 1,587
During the year 64,960,549 shares with a nominal value of 2p were issued. Of these, 57,542,499 were
issued under a Placing and Open Offer in February 2003 at a price of 28 pence per New Share; 6,844,800
were issued under an institutional placing in October 2003 at a price of 168 pence per New Share; and
573,250 were issued as a result of the exercise of share options. Further information relating to the
exercise of these options can be found in note 15b. 15 Called-up share capital (continued)
(b) Share options
There are five share option schemes, four concerning options over the ordinary shares of Alizyme plc and
one concerning options over the ordinary shares of Alizyme Therapeutics Limited (the Alizyme Limited
Unapproved Share Option Scheme). The Directors and employees of the Group hold options under these
share option schemes. The movements in the schemes during the year were as follows:
Alizyme plc Schemes:
At At
1 January Options Options Options 31 December Exercise Earliest date Expiry
2003 granted exercised lapsed 2003 price exercisable date
Scheme Number Number Number Number Number
(i) 2,095,000 — (445,000) — 1,650,000 30p 18/07/1996 19/06/2005 (vi)
(i) 1,625,000 — — — 1,625,000 80p 18/07/1996 19/06/2005 (vi)
(i) 281,250 — (31,250) — 250,000 40p 18/07/1996 20/06/2005 (vi)
(ii) 220,000 — — (100,000) 120,000 60p 19/07/1999 18/07/2005 (v),(vi)
(ii) 100,000 — — — 100,000 60p 07/11/1999 06/11/2005 (v),(vi)
(ii) 105,000 — (5,000) — 100,000 60p 06/04/2000 05/04/2006 (v),(vi)
(ii) 300,000 — — — 300,000 30p 19/10/2000 28/04/2007 (v),(vi)
(ii) 120,000 — (20,000) (50,000) 50,000 32.5p 19/10/2000 12/05/2007 (v),(vi)
(ii) 420,000 — (45,000) (75,000) 300,000 38p 19/10/2000 20/07/2008 (v),(vi)
(ii) 155,000 — (27,000) — 128,000 64p 27/01/2003 26/01/2009 (vi)
(ii) 389,655 — — — 389,655 145p 21/09/2003 20/09/2009 (vi)
(iii) 216,066 — — — 216,066 112p 02/05/2004 01/05/2011
(iii) 50,000 — — — 50,000 49p 19/10/2004 18/10/2011
(iii) 85,235 — — — 85,235 74.5p 02/05/2005 01/05/2012
(iii) 54,054 — — — 54,054 55.5p 19/06/2005 18/06/2012
(iii) — 157,070 — — 157,070 49.5p 08/08/2006 07/08/2013
(iv) 765,525 — — — 765,525 112p 02/05/2004 01/05/2011
(iv) 1,000,000 — — — 1,000,000 82p 11/04/2005 10/04/2012
(iv) 651,202 — — — 651,202 74.5p 02/05/2005 01/05/2012
(iv) 90,090 — — — 90,090 55.5p 19/06/2005 18/06/2012
(iv) — 2,107,571 — — 2,107,571 49.5p 08/08/2006 07/08/2013
8,723,077 2,264,641 (573,250) (225,000) 10,189,468
(i) Alizyme plc Unapproved Share Option Scheme.
This scheme runs in parallel with the Alizyme Limited Unapproved Share Option Scheme, such that a
participant who exercises options granted under either one of these schemes may not exercise options
granted under the other. These two schemes were established with the intention of rewarding participants
in the event the Company was floated or the business was disposed of. No further options will be granted
under these schemes.
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 28 Alizyme plc Annual Report & Accounts 2003 29
15 Called-up share capital (continued)
(ii) The Alizyme plc 1996 Unapproved Executive Share Option Scheme
(iii) The Alizyme plc 1996 Inland Revenue Approved Executive Share Option Scheme
(iv) The Alizyme plc 2001 Unapproved Executive Share Option Scheme
During the year The Alizyme plc 2001 Unapproved Executive Share Option Scheme was amended by the
Remuneration Committee of the Company by passing a resolution to allow the Scheme to cover options
that qualify as an Enterprise Management Incentive (EMI) for the purposes of section 527 of, and schedule
5 to, the Income Tax (Earnings and Pensions) Act 2003. Of the 2,107,571 options granted during the year
1,153,029 were issued as EMI options.
Options granted under The Alizyme plc 1996 Unapproved Executive Share Option Scheme, The Alizyme plc
1996 Inland Revenue Approved Executive Share Option Scheme and The Alizyme plc 2001 Unapproved
Executive Share Option Scheme are subject to an exercise condition. Options cannot be exercised unless
the share price of the Company s ordinary shares has increased by a percentage greater than the
percentage increase in the FTSE All-Share Index over a period ending on the third anniversary of the date
of grant of the option (Earliest date exercisable) or any longer period not exceeding the expiry date of the
options.
(v) These options, under The Alizyme plc 1996 Unapproved Executive Share Option Scheme, became
unconditionally exercisable following the Company s move from AiM to the Official List on 19 October 2000. 
(vi) At the Extraordinary General Meeting held on 19 February 2003, an ordinary resolution was passed
authorising the amendment of the rules of the Alizyme plc Unapproved Share Option Scheme, The Alizyme
plc 1996 Unapproved Executive Share Option Scheme and the Alizyme Limited Unapproved Share Option
Scheme. This amendment provided that the options would now lapse on the ninth anniversary of the date
of grant (as now shown in the table above under Expiry date), as opposed to the seventh anniversary of
the date of grant. 16 Reserves
Share
Capital premium Profit and
Reserve account loss account Total
£000s £000s £000s £000s 
Group:
At 1 January 2003 1,530 35,986 (34,689) 2,827
Share issues after expenses — 25,085 — 25,085
Retained loss for the year — — (10,008) (10,008)
At 31 December 2003 1,530 61,071 (44,697) 17,904
The Capital Reserve arises as a result of the difference between the value of net assets of Alizyme
Therapeutics Limited when acquired and the nominal value of shares issued in consideration for 100% of
the issued share capital (see note 10).
Share
premium Profit and
account loss account Total
£000s £000s £000s
Company:
At 1 January 2003 35,986 225 36,211
Share issues after expenses 25,085 — 25,085
Retained profit for the year — 29 29 
At 31 December 2003 61,071 254 61,325
17 Reconciliation of movements in Group shareholdersfunds
2003 2002
£000s £000s
Loss for the year (10,008) (9,762) 
New ordinary shares issued net of expenses 26,384 99
Net increase / (decrease) in shareholders funds 16,376 (9,663)
Opening shareholders funds 4,414 14,077 
Closing shareholders funds 20,790 4,414
Notes to the financial statements (continued)
31 December 2003
Alizyme plc Annual Report & Accounts 2003 30 Alizyme plc Annual Report & Accounts 2003 31
18 Financial commitments
Annual commitments under non-cancellable operating leases are as follows:
Group Company Group Company
2003 2003 2002 2002
£000s £000s £000s £000s
Land and buildings with an expiry date:
— within one year 65 — 193 —
— between two and five years — — 65 —
65 — 258 —
Annual commitments under cancellable research and development contracts are as follows:
Group Company Group Company
2003 2003 2002 2002
£000s £000s £000s £000s
Research and development with an expiry date:
— within one year 746 — 4,035 —
— between two and five years 41 — 30 —
787 — 4,065 —
19 Pension arrangements
The Group does not maintain any pension plans but makes defined contributions to the private pension
arrangements of all its executive Directors and employees.
Contributions in the year to 31 December 2003 were £146,000 (2002 — £147,000).
20 Contingent liabilities
In May 2000 the Group acquired the rights to renzapride from SmithKline Beecham plc. On 13 November
2000, the Group renegotiated the commercial terms of that agreement and SmithKline Beecham plc agreed
to forego royalty payments from the Group in consideration for receiving a one-off payment of £3,000,000.
The payment will only be made after first regulatory approval of the product for sale in a major market.
21 Subsequent events
On the 30 January 2004, the Company announced that Takeda Chemical Industries, Ltd. had made a
payment of US $3,000,000, gross of withholding tax, to exercise its rights to a licence and development
agreement for Japanese rights to ATL-962 for the treatment of obesity and all related diseases. Alizyme plc Annual Report & Accounts 2003 32
We have audited the financial statements of Alizyme plc for the year ended 31 December 2003 which
comprise the profit and loss account, the balance sheets, the cash flow statement and the related notes 1
to 21. These financial statements have been prepared under the accounting policies set out therein. We
have also audited the information in the part of the directors remuneration report that is described as
having been audited.
This report is made solely to the companys 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 companys
members those matters we are required to state to them in an auditors 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 companys members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
As described in the statement of directors responsibilities, the companys directors are responsible for the
preparation of the financial statements in accordance with applicable United Kingdom law and accounting
standards. They are also responsible for the preparation of the other information contained in the annual
report including the directors remuneration report. Our responsibility is to audit the financial statements
and the part of the directors remuneration report described as having been audited in accordance with
relevant United Kingdom legal and regulatory requirements and auditing standards.
We report to you our opinion as to whether the financial statements give a true and fair view and
whether the financial statements and the part of the directors remuneration report described as having
been audited have been properly prepared in accordance with the Companies Act 1985. We also report to
you if, in our opinion, the directors report is not consistent with the financial statements, if 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 transactions
with the company and other members of the group is not disclosed.
We review whether the corporate governance statement reflects the companys compliance with the seven
provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services
Authority, and we report if it does not. We are not required to consider whether the boards statements on
internal control cover all risks and controls, or form an opinion on the effectiveness of the groups
corporate governance procedures or its risk and control procedures.
We read the directors report and the other information contained in the annual report for the above year
as described in the contents section including the unaudited part of the directors remuneration report and
consider the implications for our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Independent auditors report 
to the members of Alizyme plc Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing standards 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 and the part of the directors remuneration report described as
having been audited. 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 circumstances of the company and the group, 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 and the part of the directors remuneration report described as having been audited
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 and the part of the directors remuneration report described as having been audited.
Opinion
In our opinion: 
n the financial statements give a true and fair view of the state of affairs of the company and the
group as at 31 December 2003 and of the loss of the group for the year then ended; and
n the financial statements and part of the directors remuneration report described as having been
audited have been properly prepared in accordance with the Companies Act 1985.
Chartered Accountants and Registered Auditors
Cambridge
1 April 2004
Alizyme plc Annual Report & Accounts 2003 33 The Directors present their annual report and audited financial statements for Alizyme plc and its
subsidiary for the year ended 31 December 2003.
Principal activities
The Group s principal activity is the discovery, development and commercialisation of pharmaceutical
products for the treatment of obesity, diseases related to obesity (such as diabetes) and disorders of the
gastrointestinal tract.
Results and dividends
The Group s loss for the year after taxation was £10,008,000 (2002 — £9,762,000), which is to be set
against reserves. The Directors do not recommend the payment of a dividend (2002 — nil).
Research and development
Research and development undertaken by the Group amounted to £11,401,000 (2002 — £9,692,000), all of
which was written off during the year.
Supplier payment policy
It is the Group s policy to settle debts with its creditors on a timely basis, taking into consideration the
terms and conditions offered by each supplier. The number of supplier days outstanding at the year end
for the Group, based on the average monthly outstanding creditor balances, was 41 days (2002 — 40
days). Supplier days outstanding for the Company was 10 days (2002 — 30 days).
Employee involvement
The Group places considerable importance on the contribution that is made by its employees and is
committed to open and effective communication and involvement with them. Their contribution is a key
element to the future success of the Group and accordingly the employees are given the opportunity of
participating in the Company s share capital by joining one or more of the share option schemes operated
by the Company. Details of share options issued under these plans are set out in note 15b to the financial
statements.
Directors and Directorsinterests
The Directors who served throughout the year were as follows:
Executive Directors Non-Executive Directors
Dr Richard Palmer (Chief Executive Officer) Sir Brian Richards (Chairman)
Tim McCarthy (Finance Director) John Gordon
William Edge
Richard Forrest
(i) All the Directors of the Company are also Directors of Alizyme Therapeutics Limited, the subsidiary
undertaking. All the Directors have served on the Board of the subsidiary undertaking for the same period
as they have served as Directors of the Company.
(ii) Directors interests
Details of the Directors interests in the share capital of the Company together with details of share
options granted to them are disclosed in the Remuneration report on pages 42 to 49.
Directorsreport
Alizyme plc Annual Report & Accounts 2003 34 Alizyme plc Annual Report & Accounts 2003 35
(iii) Retirement of Directors
In accordance with the Articles of Association, one third of the Directors will retire from office at the
Annual General Meeting and will be eligible for re-appointment. At the forthcoming Annual General
Meeting, Dr Richard Palmer and John Gordon will retire and being eligible, offer themselves for re-
appointment.
Share Option Schemes
The Company has four Share Option Schemes; Alizyme plc Unapproved Share Option Scheme, The Alizyme
plc 1996 Unapproved Executive Share Option Scheme, The Alizyme plc 1996 Inland Revenue Approved
Executive Share Option Scheme and The Alizyme plc 2001 Unapproved Executive Share Option Scheme. In
addition, the Company s subsidiary Alizyme Therapeutics Limited operates the Alizyme Limited Unapproved
Share Option Scheme, a scheme which runs in parallel with the Alizyme plc Unapproved Share Option
Scheme.
Further details of the share option schemes are set out in note 15b to the financial statements and in
respect of share options held by Directors, on pages 47 and 48 of the Remuneration report.
Substantial shareholdings
As of 30 March 2004, Alizyme plc had been notified, in accordance with Sections 198 to 208 of the
Companies Act 1985, of the following interests of more than 3% in its issued ordinary share capital:
Number of Percentage
Shareholder shares holding
ISIS Asset Management plc 15,803,055 10.94%
FMR Corp. / Fidelity International Limited / Mr Edward C. Johnson 3d 11,683,123 8.09%
Universities Superannuation Scheme Limited 6,302,255 4.36%
Annual General Meeting
The notice convening the Annual General Meeting of the Company is set out in the separate shareholders
circular together with details of items of business. The meeting will be held at 11:30am on 3 June 2004 at
Buchanan Communications Limited, 107 Cheapside, London EC2V 6DT.
Auditors
On 1 August 2003, Deloitte & Touche, the Company s auditors transferred their business to Deloitte &
Touche LLP, a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000.
The Company s consent has been given to treating the appointment of Deloitte & Touche as extending to
Deloitte & Touche LLP with effect from 1 August 2003 under the provisions of section 26(5) of the
Companies Act 1989. A resolution to re-appoint Deloitte & Touche LLP as the Company s auditors and to
authorise the Directors to determine the auditors remuneration will be proposed at the forthcoming
Annual General Meeting.
By order of the Board
Tim McCarthy
Company Secretary
1 April 2004 The Board is committed to maintaining the highest standards of corporate governance. The Board follows
the rules on corporate governance required for companies listed on the Official List of the UK Listing
Authority. Those rules are contained in a code of corporate governance known as the Combined Code.
The Board acknowledges the requirements of the Revised Combined Code on Corporate Governance
published in July 2003, which applies to reporting years beginning on or after 1 November 2003, and the
related guidelines produced by Sir Derek Higgs and Sir Robert Smith. The Company has taken steps to
implement the Revised Combined Code for future reporting periods in order to adhere to best practice
and maintain the highest standard of corporate governance.
The following sets out the main principles of good governance of the Combined Code that have been
followed by the Board of Alizyme and how those principles have been applied.
Statement of application of the Principles of Good Governance and compliance with the Code of Best
Practice
Having reviewed the Code, the Directors believe that the Company and the Group have complied
throughout the year with the Provisions of the Code of Best Practice, as set out in section 1 of the
Combined Code.
An explanation as to how the Principles of the Combined Code have been applied is set out below and, in
connection with Directors remuneration, in the Remuneration Report of the Board of Directors.
The Board
The Board of Directors has overall responsibility for the Group. Its aim is to represent the interests of the
Group s shareholders and to provide leadership and control in order to ensure the growth and
development of a successful business.
The Board currently consists of a non-executive Chairman, three further non-executive Directors and two
executive Directors. All non-executive Directors are considered to be independent.
There is a clear separation of the roles of Chairman and Chief Executive Officer. The Chairman is
responsible for overseeing the running of the Board, ensuring that no individual or group dominates the
Board s decision-making and ensuring that the non-executive Directors are properly briefed on matters.
The Chief Executive Officer has responsibility for implementing the strategy of the Board and managing
the day-to-day business activities of the Group through his chairmanship of the Executive Committee.
There is a strong independent non-executive element to the Board, which maintains an independent
judgement in respect of strategy, performance and standards of conduct. New non-executive Directors
receive an appropriate introduction to the business, meeting with the executive management team for
detailed discussions on the activities of the Group. John Gordon performs the role of the recognised senior
independent non-executive Director, to whom any concerns that arise may be conveyed. All Directors have
access to the advice and services of the Company Secretary and, should they wish to, may take
independent advice at the expense of the Company.
Combined Code report
Alizyme plc Annual Report & Accounts 2003 36 Alizyme plc Annual Report & Accounts 2003 37
The Board meets monthly to consider matters specifically reserved for its consideration; setting and
monitoring the Group s strategy, financing arrangements, appraising investment opportunities, approving
major transactions, reviewing the operating performance of the Group and reporting to shareholders. To
ensure that Directors are properly briefed on issues arising at Board meetings, procedures have been
established for distributing Board papers with appropriate information in advance of meetings. The
adequacy of that information is considered prior to making decisions and the Directors may make further
enquiries when considering proposals, as they deem appropriate.
The Board delegates the responsibility for considering and implementing items not specifically reserved for
it, to the following committees:
Audit Committee
The Audit Committee is responsible for monitoring and reporting of the Group s financial performance and
reviewing the Group s Annual Report and Accounts and Interim and Preliminary Statements before their
approval by the Board. In addition, the Committee is responsible for reviewing the scope and cost
effectiveness of the audit undertaken by the auditors and their independence and objectivity.
The Committee consists of non-executive Directors: John Gordon (Chairman), Sir Brian Richards and
Richard Forrest and meets as often as required, but at least twice a year. The Committee also holds
meetings with the Group s auditors, Deloitte & Touche LLP, to discuss the results of their audit and review
of the financial statements. Provision is made to meet with the auditors at least once a year without any
executive Director being present.
The Committee is authorised to seek such information of the executive Directors and senior employees as
it requires. It is also authorised to obtain outside legal and other independent forms of advice if it
considers it necessary, for which the Company reimburses expenses incurred.
Appointments Committee
The purpose of the Appointments Committee is to make recommendations to the Board and oversee the
selection and appointment process in relation to Directors and senior management. The Committee is
authorised by the Board to obtain outside legal or other independent professional advice, as it considers
necessary, for which the Company reimburses expenses incurred.
The Committee currently consists of the Chairman of the Company, Sir Brian Richards, a non-executive
Director, William Edge, and the Chief Executive Officer, Dr Richard Palmer.
Remuneration Committee
The Remuneration Committee is responsible for making recommendations to the Board on the Company s
policy for remuneration packages for each of the executive Directors, senior management and the other
employees of the Group, having due regard to the interests of shareholders.
In making such recommendations to the Board, the Committee must ensure that those recommendations
reflect a policy such that all executive Directors, senior management and employees have every
encouragement to enhance their own performance, and that of the Group and to ensure that they are
fairly, but responsibly, rewarded for their individual contributions. The Committee s responsibility extends to recommending to the Board annual remuneration, terms of service, entitlement to share options and
compensation on termination of contracts of service, consulting with the Finance Director or Chief
Executive Officer as appropriate.
It is the responsibility of the Board as a whole to determine non-executive Director remuneration and not
the Committee.
Membership of the Remuneration Committee consists of the non-executive Directors of the Company as
appointed by the Board to the Committee. Currently the Committee s members are John Gordon
(Chairman), Sir Brian Richards, William Edge and Richard Forrest.
The Committee meets at least once a year and as deemed appropriate. It is authorised by the Board to
seek outside legal and other independent professional advice if it considers it necessary, for which the
Company reimburses expenses incurred.
The Combined Code specifies that it is the Board that must report on the remuneration of its members
and not the Committee. Accordingly the Remuneration Committee has reported to the Board on the
remuneration of the Directors of the Company and in turn the Board presents its report on pages 42 to
49.
Executive Committee
The Executive Committee has responsibility for running the day-to-day operations of the Group and
implementing the Board s operational strategy. It is chaired by the Chief Executive Officer, Dr Richard
Palmer, and consists of the executive Directors of the Group. The other member of the Committee is Tim
McCarthy, Finance Director.
Communication with shareholders
The Board attaches great importance to communications with both institutional and private shareholders.
Regular communication is maintained with all shareholders through Company announcements, the Annual
Report and Accounts, Preliminary Results and the Interim Report. The Company posts copies of Company
announcements to all shareholders and provides shareholders with the opportunity to meet the Company
at conferences for both institutional and private investors.
The Directors seek to build on a mutual understanding of objectives between the Company and its
shareholders, especially considering the long-term nature of the business. Institutional shareholders are in
contact with the Directors through presentations and meetings to discuss issues and to give feedback
regularly throughout the year. With private shareholders this is not always practical. The Board has
therefore sought to use the Company s Annual General Meeting (AGM) as the opportunity to meet
private shareholders, who are encouraged to attend the AGM, after which the Chief Executive Officer gives
a presentation on the activities of the Group. Following the presentation there is also an opportunity to
ask questions of Directors on a formal and informal basis and to discuss development of the business. In
particular there is an opportunity to ask questions of the Chairmen of the Audit, Remuneration and
Appointment Committees.
Combined Code report (continued)
Alizyme plc Annual Report & Accounts 2003 38 Alizyme plc Annual Report & Accounts 2003 39
In addition the Company operates a web site, which can be found at www.alizyme.com. It contains further
details on the Group and its activities, details of regulatory announcements and Company announcements,
Preliminary Results and the Interim Report, and details on the Company s share price, share trading
activity and share graphs.
The Company continues to observe the difficulty in communicating with shareholders who hold their
investments through nominee companies. The Company understands that the administrators of nominee
companies do not always provide facilities to forward the Company s reports and announcements to the
beneficial shareholders. In response to this and to ensure shareholders are kept informed of the Group s
activities, the Company encourages shareholders with nominee accounts to provide it with details of their
name and address in order to arrange for announcements to be forwarded directly to them.
The Company also distributes Company announcements electronically. Shareholders and other interested
parties wishing to receive announcements via e-mail are invited to forward their request together with
details of their e-mail address to enquiries@alizyme.com.
Internal Control
The Board acknowledges its responsibility for safeguarding the shareholders investments and the Group s
assets. In applying this principle, the Board recognises that it has overall responsibility for ensuring that
the Group maintains a system of internal control to provide it with reasonable assurance regarding
effective and efficient operations, internal financial control and compliance with laws and regulations. The
system of internal control is designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not absolute assurance against material
misstatement or loss.
Through the Audit Committee and their meetings with the auditors, the Directors have reviewed the
effectiveness of the internal controls. The key features of the internal control system that operated
throughout the period covered by the financial statements are described below.
n Control procedures and environment — the Group has an organisational structure with clearly drawn
lines of accountability and authority. Employees are required to follow clearly laid out internal
procedures and policies appropriate to the business and their position within the business, and
management promotes the highest levels of professionalism and ethical standards.
n Identification and evaluation of risks — the Group employs Directors and senior executives with the
appropriate knowledge and experience required for a bio-pharmaceutical Group. Identification and
evaluation of risk is a continuous procedure running in parallel with the development of the Group s
research and development portfolio. A review of risks is undertaken as part of the annual strategic
and budgeting exercise.
n Financial information — the Group prepares annually detailed budgets and working capital forecasts
which are based upon the strategy of the Group and which are approved by the Board. Detailed
management accounts are prepared each month and are compared to budgets, with any variances
being investigated thoroughly. Each month a detailed working capital re-forecast is undertaken, with
a summary provided to the Board. n Management of liquid resources — the Board is extremely risk averse when investing the Group s
surplus cash funds and accordingly investments are made only in money market deposits. Clear
written instructions setting out the parameters for investing funds are given by the Company at the
time of each investment.
n Monitoring — the Board monitors the activities of the Group through the supply of monthly
information from various areas of the business as contained in the Board papers. The Executive
Committee performs a more detailed review, taking corrective action if required. The Board, through
the Audit Committee, reviews the effectiveness of the internal systems of control.
The Turnbull Report
During September 1999 the Turnbull Working Party on Internal Control published its final guidance (the
Turnbull Report) for companies listed on the Official List of the UK Listing Authority.
The purpose of the Turnbull Report is to help management of listed companies report on:
n how the Company has applied Principle D.2 of the Combined Code that calls for companies to
maintain a sound system of internal control;
n whether the Company has complied with the Code Provision that requires a review of the
effectiveness of the system of internal control to be conducted at least annually; and
n whether the Company has complied with the Code Provision that requires management to review
the need to have an internal audit function from time to time.
The Board complies with principle D.2 of the Combined Code in having a continuous process for
identifying, evaluating and managing the significant risks the Group faces. The Board reviews regularly the
process that has continued to be applied throughout the year and to the date of the approval of this
report, and which is in accordance with Internal Control: Guidance for Directors on the Combined Code,
published in September 1999. Assessments consider the external environment, the industry in which the
Group operates, the internal environment and non-financial risks such as operational and legal risks. The
risks identified are ranked based on significance and likelihood of occurrence. The Board reviews the
controls in place to mitigate those risks and improvements are made where required. The Board
undertook a review in December 2003 from which no improvements were deemed necessary.
Given the Group s relatively small size, the Board does not consider it either necessary or practical to have
its own internal audit function at present. The Board will continue to monitor the requirement to have an
internal audit function.
Compliance with the BioIndustry Association (BIA) Code of Best Practice
The BIA, of which Alizyme is a member, adopted a code of best practice on 20 October 1999 (the BIA
Code). The BIA Code includes principles and provisions relating to corporate governance matters, access
to external advice, confidentiality, dealings in a company s shares and standards of public announcements.
The BIA Code is intended to operate by reference to the particular circumstances of bioscience companies
in support of the Combined Code, Principles of Good Governance and Code of Best Practice (the Turnbull
Report).
Combined Code report (continued)
Alizyme plc Annual Report & Accounts 2003 40 Alizyme plc Annual Report & Accounts 2003 41
The BIA Code was obligatory for all BIA members as from 1 January 2000. The Board of Alizyme complies
with the principles in the BIA Code and maintains procedures to support compliance with its specific
provisions, according to the particular circumstances of Alizyme.
Corporate Social Responsibility (CSR)
The Board is aware of guidelines produced by the Association of British Insurers on socially responsible
investment and recognises the level of public interest in CSR. The Board also recognises CSR as a
significant area to be addressed by the Group and are in the process of taking steps to formalise relevant
policies, structures and procedures in order to adhere to best practice. The Board anticipates being in a
position to report back to shareholders on progress in the Annual Report for 2004.
Statement of Directorsresponsibilities
Financial statements
United Kingdom company law requires the Directors to prepare financial statements for each financial year,
which give a true and fair view of the state of affairs of the Company and Group as at the end of the
financial year, and of the profit or loss of the Group for that period.
In preparing the 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; and state
whether applicable accounting standards have been followed.
Going concern
Company law requires the Board of Directors to assess whether the Group has adequate resources to
continue operations for the foreseeable future.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial statements.
Other matters
The Directors are responsible for keeping proper accounting records, which disclose with reasonable
accuracy at any time the financial position of the Company and Group and enable them to ensure that the
financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the
assets of the Company and Group and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. This report has been prepared in accordance with the requirements of the Directors Remuneration Report
Regulations 2002 concerning disclosure of directors remuneration in respect of periods ending on or after
31 December 2002. The report also meets the relevant requirements of the Listing Rules of the Financial
Services Authority and describes how the Board has applied the Principles of Good Governance relating to
directors remuneration. As required by the Regulations, Resolution 6 to approve the report will be
proposed at the Annual General Meeting of the Company at which the financial statements of the
Company will be approved.
The Regulations require the auditors to report to the Company s members on the  auditable part of the
Directors remuneration report and to state whether in their opinion that part of the report has been
properly prepared in accordance with the Companies Act 1985 (as amended by the Regulations). The
report has therefore been divided into separate sections for audited and unaudited information.
Unaudited information
The Remuneration Committee
The Remuneration Committee comprises John Gordon (Chairman), Sir Brian Richards, William Edge and
Richard Forrest. The main responsibilities of the Remuneration Committee are to make recommendations
to the Board on the Company s policy on remuneration and to make recommendations on the specific
remuneration, benefits and terms of employment of the Chief Executive Officer and other executive
Directors. The fees paid to the non-executive Directors are determined annually, by the Board.
Policy on Director remuneration
In forming the Group s policy on remuneration the Board has given, and will continue to give, full
consideration to Schedule A of the Combined Code appended to the Listing Rules of the Financial Services
Authority, that sets out the guidelines for dealing with the design of performance-related remuneration.
The Board s policy has been designed to ensure that Directors should receive appropriate incentive and
reward given their performance, responsibility and experience. In determining this, the Board has regard
to:
n ensuring that the Group s remuneration policy attracts, retains and motivates directors of the quality
required for the continued business, while avoiding remunerating those directors more than is
necessary;
n ensuring that Directors remuneration is consistent with the compensation of directors holding
comparable positions in other companies, but being aware of the relative performances of those
companies;
n ensuring that the Company s policy is sensitive to the salary and employment terms across the
Group, especially when determining annual salary increases; and
n ensuring that the policy aligns the interests of Directors with those of the shareholders.
Remuneration report
For the year 31 December 2003
Alizyme plc Annual Report & Accounts 2003 42 Alizyme plc Annual Report & Accounts 2003 43
Remuneration package
Directors remuneration packages are considered annually and comprise a number of elements. Packages
are reviewed towards the end of each financial year. Before packages are finally decided upon for the
following year, the Chairman of the Board undertakes an appraisal of each of the executive Directors
against their objectives for the year and considers the contribution of each individual to the Group. The
Remuneration Committee considers these appraisals when making their recommendations to the Board of
Directors.
The remuneration package of Directors comprises:
(i) Basic salary
Basic salaries are reviewed annually on 1 January. The review process is undertaken having regard to the
development of the Group and the contribution that individuals will continue to make. Consideration is
also given to the need to retain and motivate individuals and information on the salary levels in
comparable organisations. In this respect the Remuneration Committee draws on the findings of a number
of external salary surveys and undertakes its own research.
(ii) Annual performance incentive
Directors are awarded an annual bonus, at the discretion of and as recommended to the Board by the
Remuneration Committee. Bonus awards are reviewed at the end of the financial year and based upon the
Group s overall performance together with individual achievements against objectives that are set at the
beginning of the year. Those objectives are intended to deliver excellence and align individual
achievements with the Board s strategy for the Group and shareholder interests. The awards are limited to
a maximum of 50% of basic salary for executive Directors.
(iii) Pensions and other benefits
The Group does not operate a Group pension scheme. Instead the Group makes contributions representing
20% of the basic salary of Directors, to their individual private pension arrangements.
Other benefits provided are life assurance, permanent health insurance and private medical insurance. No
company car is provided. Instead, the Group contributes 10% of the basic salary towards the cost of
executive Directors running their own cars. The cost of car fuel is also provided.
(iv) Share options
The Group operates a number of share option schemes that enable Directors to participate in the success
of and growth in the share price of the Company. Options are granted for either nine or ten years and
may only be exercised in certain circumstances. Options cannot be exercised unless the share price of the
Company s ordinary shares have increased by a percentage greater than the percentage increase in the
FTSE All-Share Index over a period ending on the third anniversary of the date of grant of the option or
any longer period not exceeding the expiry date of the options. The FTSE All-Share Index has been
selected as it represents, for this purpose, the performance index against which both shareholder return
and Company performance can be measured. The grant of share options to Directors is at the discretion
of the Remuneration Committee. Total shareholder return
Total shareholder return looks at the value at 31 December 2003, of £100 invested in the Company on 1
January 1999 compared with the value of £100 invested in the FTSE All-Share Index over the same period.
The FTSE All-Share Index has been chosen as a comparator as this is a performance index against which
both shareholder return across a wide selection of companies and the Company s own performance can be
measured.
Source: Bloomberg
Terms of appointment
Service contracts for the executive Directors can be terminated by either party giving twelve months
written notice. Non-executive Directors do not have service contracts. The non-executive Directors who
served throughout the year have letters of appointment under which their services can be terminated by
either party, giving three months notice. In the case of William Edge his service may be terminated by
either party giving one month s written notice. Richard Forrest s appointment was for a one-year period to
20 May 2003 after which his appointment may be terminated at any time by either party giving one
month s written notice.
Upon the termination of employment of any of the Directors or employees, the Group s policy is to
minimise its financial exposure while adhering to all of its contractual obligations.
Executive Directors Date of Service Agreement
Dr Richard Palmer 2 September 1996
Tim McCarthy 1 April 1996
Remuneration report (continued)
Alizyme plc Annual Report & Accounts 2003 44
Alizyme vs. FTSE All-Share
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£500
£600
£700
£800
£900
£1,000
1 January 1999 31 December 1999 31 December 2000 31 December 2001 31 December 2002 31 December 2003
Relavice investment
Alizyme
FTSE All-Share Alizyme plc Annual Report & Accounts 2003 45
Audited information
Full details of the Directors remuneration, interests in the ordinary shares of the Company together with
options granted are set out below:
Directorsremuneration
The Directors received the following remuneration during the year:
2003 2002
—————————————————————————————————————————————————— ———————————————————————————————————————————————
Fees/Basic Taxable Annual Fees/Basic Taxable Annual
Name of Director salary benefits bonus Total salary benefits bonus Total
£000s £000s £000s £000s £000s £000s £000s £000s
Executive Directors
Dr Richard Palmer 242 44 121 407 230 39 109 378
Tim McCarthy 158 19 79 256 150 16 71 237
Dr Trevor Jarman (i) — — — — 113 4 — 117
Non-Executive Directors
Sir Brian Richards 41 — — 41 39 — — 39
John Gordon 25 — — 25 24 — — 24
William Edge 25 — — 25 24 — — 24
Richard Forrest (ii) 25 — — 25 15 — — 15
Aggregate emoluments 516 63 200 779 595 59 180 834
(i) Dr Trevor Jarman resigned on 11 April 2002. His salary for 2002 includes £81,000 as compensation
for loss of employment.
(ii) Richard Forrest was appointed on 21 May 2002.
Non-Executive remuneration
The Chairman received an annual fee of £31,846 (2002 — £30,327) and £3,180 (2002 — £3,029) for each of
the three committees to which he provided services. The other non-executive Directors received an annual
fee of £19,108 (2002 — £18,197) and £3,180 (2002 — £3,029) for each of the two committees to which they
provided services. These amounts are included in the table above. Directors shareholdings
The Directors held the following interests in the ordinary shares of the Company during the year:
Ordinary shares of 2p each
Number Number
of shares of shares
1 January 31 December
2003 2003
Director
Dr Richard Palmer 141,351 248,493 (i)
Tim McCarthy 937,605 983,155 (ii)
Sir Brian Richards 376,373 472,301(iii)
John Gordon 301,875 391,312(iv)
William Edge 453,873 605,566
Richard Forrest 20,000 40,000 (v)
2,231,077 2,740,827
(i) Includes 20,271 ordinary shares registered in the name of Mrs Jacqueline Palmer and 78,212
ordinary shares registered in the name of Pershing Keen Nominees Limited, 30,070 ordinary
shares of which Dr Palmer has a beneficial interest in and 48,142 ordinary shares of which Mrs
Palmer has a beneficial interest in.
(ii) Includes 22,500 ordinary shares registered in the name of Mrs Susan McCarthy and 846,505
ordinary shares registered in the name of Unnamed Limited, a private company controlled by
Mr McCarthy.
(iii) Includes 50,000 ordinary shares registered in the name of the Dr Brian Richards 1995 UK
Settlement, of which Sir Brian Richards is the settlor, and 6,642 ordinary shares registered in the
name of Lady June Richards.
(iv) Includes 268,312 ordinary shares registered in the name of Ferlim Nominees Limited, in which
Mr Gordon has a beneficial interest.
(v) Includes 15,000 ordinary shares registered in the name of The Bank of New York (Nominees)
Limited, in which Mr Forrest has a beneficial interest.
Remuneration report (continued)
Alizyme plc Annual Report & Accounts 2003 46 Alizyme plc Annual Report & Accounts 2003 47
Directorsshare options
The Directors of the Group hold options under four share option schemes. The movements in the schemes
during the year were as follows:
At At Exercise Earliest date Expiry
1 January Granted Lapsed 31 December price Exercisable date
Director Scheme 2003 2003
Dr Richard Palmer (i) 250,000 — — 250,000 40p 18/07/1996 20/06/2005 (vi)
(ii) 100,000 — — 100,000 60p 07/11/1999 06/11/2005(v), (iv)
(ii) 100,000 — — 100,000 60p 06/04/2000 05/04/2006(v), (iv)
(ii) 300,000 — — 300,000 30p 19/10/2000 28/04/2007(v), (iv)
(ii) 150,000 — — 150,000 38p 19/10/2000 20/07/2008(v), (iv)
(ii) 100,000 — — 100,000 64p 27/01/2003 26/01/2009 (iv)
(ii) 129,655 — — 129,655 145p 21/09/2003 20/09/2009 (iv)
(iii) 26,785 — — 26,785 112p 02/05/2004 01/05/2011
(iv) 599,810 — — 599,810 112p 02/05/2004 01/05/2011
(iv) 1,000,000 — — 1,000,000 82p 11/04/2005 10/04/2012
(iv) — 731,817 — 731,817 49.5p 08/08/2006 07/08/2013
Tim McCarthy (i) 625,000 — — 625,000 30p 18/07/1996 19/06/2003 (vi)
(i) 350,000 — — 350,000 80p 18/07/1996 19/06/2003 (vi)
(ii) 100,000 — — 100,000 60p 19/07/1999 18/07/2003(v), (vi)
(ii) 50,000 — — 50,000 32.5p 19/10/2000 12/05/2005(v), (vi)
(ii) 150,000 — — 150,000 38p 19/10/2000 20/07/2006(v), (vi)
(ii) 20,000 — — 20,000 64p 27/01/2003 26/01/2007 (vi)
(ii) 110,000 — — 110,000 145p 21/09/2003 20/09/2007 (vi)
(iii) 26,785 — — 26,785 112p 02/05/2004 01/05/2011
(iv) 84,822 — — 84,822 112p 02/05/2004 01/05/2011
(iv) 201,342 — — 201,342 74.5p 02/05/2005 01/05/2012
(iv) — 477,271 — 477,271 49.5p 08/08/2006 07/08/2013
Sir Brian Richards (i) 175,000 — — 175,000 30p 18/07/1996 19/06/2005 (vi)
(i) 100,000 — — 100,000 80p 18/07/1996 19/06/2005 (vi)
John Gordon (i) 50,000 — — 50,000 80p 18/07/1996 19/06/2005 (vi)
No share options were exercised during the year.
As disclosed in previous years, the non-executive Directors hold shares in the Company. Certain non-
executive Directors also hold options to subscribe for shares in the Company. The Board considered that,
prior to flotation in 1996, the grant of options was necessary to attract and retain a high calibre of non-
executive Director. It is satisfied that all the non-executive Directors exercise independent judgement and
are independent of management. (i) Alizyme plc Unapproved Share Option Scheme.
This scheme runs in parallel with the Alizyme Limited Unapproved Share Option Scheme, such that a
participant who exercises options granted under either one of these schemes may not exercise options
granted under the other. These two schemes were established with the intention of rewarding participants
in the event the Company was floated or the business was disposed of. No further options will be granted
under these schemes.
(ii) The Alizyme plc 1996 Unapproved Executive Share Option Scheme
(iii) The Alizyme plc 1996 Inland Revenue Approved Executive Share Option Scheme
(iv) The Alizyme plc 2001 Unapproved Executive Share Option Scheme
During the year The Alizyme plc 2001 Unapproved Executive Share Option Scheme was amended by the
Remuneration Committee of the Company by passing a resolution to allow the Scheme to cover options
that qualify as an Enterprise Management Incentive (EMI) for the purposes of section 527 of, and schedule
5 to, the Income Tax (Earnings and Pensions) Act 2003. Of the 731,817 options granted to Dr Richard
Palmer during the year 141,414 were issued as EMI options. Of the 477,271 options granted to Tim
McCarthy during the year 141,414 were issued as EMI options.
Options granted under The Alizyme plc 1996 Unapproved Executive Share Option Scheme, The Alizyme plc
1996 Inland Revenue Approved Executive Share Option Scheme and The Alizyme plc 2001 Unapproved
Executive Share Option Scheme are subject to an exercise condition. Options cannot be exercised unless
the share price of the Company s ordinary shares has increased by a percentage greater than the
percentage increase in the FTSE All-Share Index over a period ending on the third anniversary of the date
of grant of the option (Earliest date exercisable) or any longer period not exceeding the expiry date of the
options.
(v) These options, under The Alizyme plc 1996 Unapproved Executive Share Option Scheme, became
unconditionally exercisable following the Company s move from AiM to the Official List on
19 October 2000. 
(vi) At the Extraordinary General Meeting held on 19 February 2003, an ordinary resolution was passed
authorising the amendment of the rules of the Alizyme plc Unapproved Share Option Scheme, The
Alizyme plc 1996 Unapproved Executive Share Option Scheme and the Alizyme Limited Unapproved
Share Option Scheme. This amendment provided that the options would now lapse on the ninth
anniversary of the date of grant (as now shown in the table above under Expiry date), as opposed
to the seventh anniversary of the date of grant.
The market price of the shares of the Company at 31 December 2003 was 173p and the range during the
financial year was 28.25p to 190.75p.
Remuneration report (continued)
Alizyme plc Annual Report & Accounts 2003 48 Alizyme plc Annual Report & Accounts 2003 49
Pension entitlements
The Group made pension contributions during the year to the personal pension arrangements of the
following Directors:
2003 2002
£000s £000s
Name of Director
Dr Richard Palmer 48 46
Tim McCarthy 32 30
Dr Trevor Jarman (i) — 6
Totals 80 82
(i) Dr Trevor Jarman resigned on 11 April 2002.
By order of the Board
John Gordon
Chairman of the Remuneration Committee
1 April 2004 agonist (full) a compound that binds to a receptor on a cell and which, as a consequence,
evokes an active response of similar magnitude to that evoked by the natural
agonist that it mimics
agonist (partial) a compound that binds to a receptor on a cell and which, as a consequence,
evokes an active response of lesser magnitude than that of the natural agonist
that it mimics
antagonist a compound that binds to a receptor on a cell that does not evoke an active
response and also, as a consequence, prevents response to an agonist
clinically obese patients with a Body Mass Index (BMI) greater than 30. BMI = Weight (kg)/Height
squared (m2)
CTX clinical trials exemption; authority given by the Medicines and Healthcare
products Regulatory Agency following application to test drug products in
patients
gastrointestinal tract the stomach and the intestines 
5-HT3 or 4 receptor sub-classes of receptor for 5-hydroxy tryptamine, a neurotransmitter substance
found in the body, also known as serotonin
keratinocyte growth a substance that stimulates the growth of epithelial cells that line the surface of
factor the mouth and gastrointestinal tract
lectins naturally occurring glycoproteins that exist in plants, animals and microorganisms
which are able to bind to specific carbohydrates on cells
lipase any enzyme that catalyses the breakdown of fat 
pharmacokinetic/ Phase I studies designed to study the systemic exposure of a drug in the body
pharmacodynamic  and the effect of a drug on the body
study
Phase I the first trials in humans that test a compound for safety, tolerance and
pharmacokinetics. These trials usually employ normal healthy volunteers 
Phase Ib the second trials in healthy volunteers that test a compound for safety, tolerance
and pharmacokinetics following repeat dosing 
Phase IIa a clinical trial involving the administration of a drug to human beings in which
the primary objective is to obtain a preliminary evaluation of the efficacy of the
drug in patients 
Phase IIb a clinical trial involving the administration of a drug to human beings in which
the primary objective is to establish the appropriate dosing in patients
Phase III a clinical trial of a drug in human beings involving the form, dose and indication
of the drug which is intended to be marketed, in which the primary objective is
to obtain statistical significant evidence of efficacy, and confirmation of safety in
patients
pre-clinical development activities prior to testing in humans including pilot manufacture,
toxicology and metabolism studies
Glossary of terms
Alizyme plc Annual Report & Accounts 2003 50 Alizyme plc Annual Report & Accounts 2003 51
FINANCIAL ADVISOR
Nomura International plc
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Deloitte & Touche LLP
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Barclays Bank PLC
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Capita Registrars
The Registry
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Corporate advisors Shareholder notes
Alizyme plc Annual Report & Accounts 2003 52 Alizyme plc
Granta Park
Great Abington
Cambridge CB1 6GX
United Kingdom
T: 44 (0)1223 896000
F: 44 (0)1223 896001
www.alizyme.com