CeNeS Pharmaceuticals plc
ANNUAL REPORT AND ACCOUNTS 2005 CORPORATE STATEMENT
CENES PHARMACEUTICALS PLC (LSE: CEN) IDENTIFIES AND DEVELOPS NOVEL 
DRUGS THAT ARE DESIGNED TO IMPROVE PATIENT OUTCOMES IN THE 
THERAPEUTIC AREAS OF PAIN, ANAESTHESIA AND NEUROLOGY . EACH CENES 
PROGRAMME ADDRESSES A CLINICALLY VALIDATED TARGET, HAS A WELL 
UNDERSTOOD CLINICAL DEVELOPMENT PATHWAY AND OFFERS AN ATTRACTIVE 
MARKET OPPORTUNITY .
CENES AIMS TO BUILD A PROFITABLE, EUROPEAN SPECIALITY PHARMACEUTICAL 
COMPANY BY DEVELOPING, PARTNERING AND MARKETING A PORTFOLIO OF NEW 
PHARMACEUTICAL PRODUCTS WHICH OFFER SIGNIFICANT IMPROVEMENTS OVER 
THE EXISTING ‘GOLD STANDARD’ TREATMENTS.
CENES HAS CONSIDERABLE EXPERIENCE IN DEVELOPING CENTRAL NERVOUS 
SYSTEM (“CNS”) AND PAIN PRODUCTS UP TO CLINICAL PROOF OF CONCEPT 
AND BEYOND.
 01 HIGHLIGHTS
 01 AT A GLANCE
 02 CHAIRMAN’S STATEMENT 
 04 CHIEF EXECUTIVE’S REVIEW 
 14 FINANCIAL REVIEW  
 15 BOARD OF DIRECTORS AND SENIOR MANAGEMENT
 16 CENES SCIENTIFIC ADVISORY BOARD (SAB)
 17 DIRECTORS’ REPORT 
 19 CORPORATE GOVERNANCE 
 22 REMUNERATION REPORT 
 25 INDEPENDENT AUDITORS’ REPORT 
 26 CONSOLIDATED PROFIT AND LOSS ACCOUNT
 26 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
 27 CONSOLIDATED AND COMPANY BALANCE SHEETS 
 28 CONSOLIDATED CASH FLOW STATEMENT
 28 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
 29 NOTES TO THE FINANCIAL STATEMENTS
 IBC DIRECTORS, ADVISORS AND CONTACTS 01 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
HIGHLIGHTS
CeNeS has a balanced portfolio of late  
stage compounds and pre-clinical projects 
comprising morphine-6-glucuronide (M6G) in 
pivotal Phase III clinical trials for the treatment 
of post-operative pain; CNS5161 in Phase II 
clinical trials for the treatment of neuropathic 
pain; and CNS7056X in pre-clinical development 
as a short acting sedative for day case surgery. 
CeNeS also has a discovery programme to 
identify novel COMT inhibitors for the treatment 
of Parkinson’s disease and schizophrenia.
CeNeS is focused primarily upon drugs that 
are administered by a hospital-based specialist 
such as an anaesthetist or neurologist, and 
that can eventually be promoted to the  
end-user by a small, focused hospital sales force. 
OPERATIONAL
➡  M6G post-operative pain
Pivotal European Phase III trial for post-operative pain commenced 
in September 2005. Recruitment is underway and results are expected  
in H2 2006.
US Phase III M6G – FDA meeting scheduled for mid 2006 with aim  
of obtaining IND later in 2006.
Discussions being held with EU and US Regulators on additional studies 
required to expand product claims.
M6G intellectual property (“IP”) position strengthened in March 2006 
by the acquisition of an additional patented synthetic method.
➡  CNS5161 neuropathic pain
Successfully completed a Phase II study in neuropathic pain 
in June 2005.
Phase II trial protocols being developed for:
 – Diabetic neuropathic pain
 – Post-traumatic neuropathic pain
 – Post-operative pain
 – Opioid refractory cancer pain
➡  CNS7056X sedation and anaesthesia
Filing of US IND planned for 2006.
Very encouraging pre-clinical studies reveal rapid onset and offset  
of sedative action and rapid metabolism.
Pre-clinical studies support the potential to expand indications 
for CNS7056X into anaesthesia. Further studies in anaesthesia 
have been initiated at the University of Strasbourg, the University 
of Adelaide and under a Material Transfer Agreement with a major 
pharmaceutical company.
➡  COMT Parkinson’s disease and schizophrenia
Pre-clinical development candidate for Parkinson’s disease on plan  
to be selected from lead series in 2006.
New academic publications point to the use of COMT inhibitors  
to improve the profound cognitive deﬁcits of schizophrenia –  
an additional multi billion dollar market.
FINANCIAL 
➡  Cash resources at period end of £8.5 million 
(2004: £14.3 million)
➡  Loss for 2005 of £6.6 million (2004: £4.9 million) 
in line with expectations. The increase is due 
to planned expenditure on M6G’s clinical 
development and our other development  
and discovery projects
CORPORATE
➡  New Scientiﬁc Advisory Board established 
in April 2005
➡  CeNeS wins “Breakthrough of the Year Award” 
at the London Stock Exchange techMARK 
Mediscience awards in June 2005
➡  Canaccord Adams appointed Nominated 
Advisor (NOMAD) and stockbroker in  
February 2006
AT A GLANCE
M6G post-operative pain 
TARGET
ASSESSMENT
LEAD
IDENTIFICATION
LEAD
OPTIMISATION
PRE-CLINICAL
DEVELOPMENT
PHASE 
I
PHASE 
II
PHASE
III
POTENTIAL 
REGISTRATION 
CNS5161 neuropathic pain
CNS7056X short acting sedative
COMT inhibitor Parkinson’s/
schizophrenia
2007
2009
2009
2012 02 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
BUSINESS REVIEW
I am pleased to report on another year of 
excellent progress for CeNeS. The progress 
made has confirmed my view that the 
Company’s focused development and 
discovery pipeline has the potential to deliver 
much needed new drugs to the commercially 
attractive Central Nervous System (“CNS”) 
market. Over the next two years our four 
main programmes are planned to reach 
signiﬁcant clinical or pre-clinical milestones 
and the progression made to date in all four 
of our programmes is reﬂected by the 
signiﬁcant interest potential partners are 
expressing in them.
Our lead programme for the treatment 
of post-operative pain is M6G. This compound 
entered a pivotal Phase III clinical trial in 
Europe in the second half of 2005. Recruitment 
is underway and results from this study are 
due in the second half of 2006. If this trial  
is successful, CeNeS plans to complete 
negotiations for a European partnering  
deal. Our European partner would then be 
expected to complete the registration process 
to enable a European launch thereafter.  
A positive Phase III result from this trial will 
also signiﬁcantly increase the value CeNeS 
will be able to obtain from a North American 
licensing deal. 
Independent marketing studies have conﬁrmed 
that the potential peak market sales for M6G 
in post-operative pain could be approximately 
£200 million in the main European territories 
and the US. If M6G is successful in treating 
post-operative pain using the current i.v. 
formulation there is potential for further use 
in other pain indications such as chronic pain 
and also for the epidural delivery of M6G. 
Such expansion would signiﬁcantly increase 
the potential peak market sales of M6G.
In June 2005 successful results were announced 
from a Phase IIa study of CNS5161, a potent 
and selective NMDA antagonist, in neuropathic 
pain. In the study, which was designed to 
establish the therapeutic window of CNS5161, 
the product was associated with a clear trend 
to improvement in pain levels and was 
well tolerated with no instances of the 
psychotomimetic side effects associated with 
some NMDA antagonists. This latter ﬁnding 
conﬁrms CeNeS’ understanding that CNS5161 
occupies a unique position in its class.
To plan the next stage of CNS5161’s 
development, CeNeS has entered into a 
collaboration with Ergomed Clinical Research 
Limited to ﬁnalise the design and planning of 
Phase II trials of this novel compound. The 
trials will be designed to test the compound’s 
potential as a new treatment for diabetic 
and post-trauma neuropathic pain, 
opioid-refractory cancer pain and 
post-operative pain. 
In January 2005 our clinical development  
team successfully applied for and gained  
a Manufacturing Authorisation for 
Investigational Medicinal Products from  
the UK Medicines and Healthcare Products 
Regulatory Agency. CeNeS is now authorised 
to manufacture and release clinical trial 
products for use in the studies that it is 
conducting, in compliance with European 
directive 2001/20/EC. This EU legislation, 
also known as the Clinical Trials Directive, 
came into force in 2004 and governs 
the conduct of clinical trials across 
Europe. This is an important step in the 
development of CeNeS and demonstrates 
its commitment to the highest standards 
of Good Manufacturing Practice and 
Good Clinical Practice.
Additionally, CeNeS continues to make 
good progress in the development of its 
earlier stage programmes in sedation and 
Parkinson’s disease and is greatly encouraged 
by corroborating external evidence that 
supports the potential to expand these 
programmes into signiﬁcant new markets. 
CHAIRMAN’S STATEMENT
A REDUCED RISK APPROACH
“ OVER THE NEXT TWO YEARS OUR FOUR 
MAIN PROGRAMMES ARE PLANNED 
TO REACH SIGNIFICANT CLINICAL OR 
PRE-CLINICAL MILESTONES.”  03 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CNS7056X, a short acting sedative, is the lead 
compound of a series that was assigned to 
CeNeS from GlaxoSmithKline (“GSK”) in 
November 2003. The pre-clinical development 
work is ongoing with the intention of ﬁling an 
IND in the US in 2006. CeNeS is planning to 
conduct the ﬁrst proof of concept Phase I study 
under a US IND. The US is a major potential 
market for short acting sedatives. The intellectual 
property position around CNS7056X was 
recently strengthened when the European 
Patent Ofﬁce granted the patent for a series 
of sedative compounds, including CNS7056X.
On the basis of very encouraging pre-clinical 
data, revealing a rapid onset and offset of 
sedative action and rapid metabolism by 
human liver samples, CeNeS is now evaluating 
the potential of CNS7056X for the additional 
indications of the induction and maintenance 
of anaesthesia. This could double the potential 
market opportunity to over £400 million. 
The pre-clinical proﬁle of CNS7056X suggests 
that it may overcome some of these 
limitations, and could offer a new paradigm 
for intravenous anaesthesia.
Parkinson’s disease is the second most 
common neurodegenerative disease after 
Alzheimer’s disease. CeNeS has identiﬁed a 
novel series of COMT inhibitors using our 
leading edge understanding of the chemistry 
of Parkinson’s disease. Their design proﬁle 
includes the ability to act both centrally and 
peripherally as COMT inhibitors. This is an 
important feature as the current leading 
COMT inhibitor drug, a nitrocatechol, does 
not act centrally. A number of compounds are 
now being evaluated in the lead optimisation 
process with the target of identifying a 
pre-clinical development candidate in 2006.
In addition to Parkinson’s disease, a number 
of new academic publications point to the 
potential use of a COMT inhibitor that acts 
in the brain to improve the profound 
cognitive deﬁcits of schizophrenia. CeNeS 
novel COMT inhibitors have the potential 
to address this unmet need and to potentially 
enter a multi billion dollar market.
STRATEGY
CeNeS has an experienced management team 
that continues to deliver on its stated goals 
and has a clear vision and strategy for the 
future. The Company has a strong discovery 
and development pipeline with the capacity 
to deliver signiﬁcant shareholder value. 
The CNS market is one of the largest  
and fastest growing segments of the 
pharmaceutical market. By focusing on  
CNS opportunities with well understood 
mechanisms of action, CeNeS is well 
positioned to deliver new products to 
neurologists, anaesthetists and pain specialists 
in order to improve the treatment of patients 
and to deliver signiﬁcant returns to our 
investors. We shall continue to evaluate  
other opportunities which we believe will 
complement this strategy and further 
enhance shareholder value.
In the short term the successful development 
of M6G will enable us to drive the growth of 
the Company with the goal of becoming a 
focused specialty pharmaceutical business.
The Board and management of CeNeS are 
committed to the development of the 
Company and are excited about the prospects 
for further signiﬁcant success. Our ﬂexible 
business model means we are well placed to 
take advantage of opportunities arising that 
will enhance shareholder value.
ALAN GOODMAN
Chairman
SUMMARY OF THE CHAIRMAN’S STATEMENT
➡  Key programmes poised to deliver proof 
of concept data
➡  Pivotal Phase III clinical trial for M6G underway
➡  Successful results from CNS5161 
Phase IIa study
➡  Flexible business model
TO CNS DRUG DEVELOPMENT 04 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CHIEF EXECUTIVE’S REVIEW
M6G for the treatment of post-operative pain
M6G FOR THE TREATMENT OF POST-OPERATIVE PAIN
Post-operative pain
Post-operative pain is an acute condition 
directly caused by a surgical procedure. The pain 
typically lasts for a few days and can range in 
intensity from mild to severe pain depending on 
the type and duration of the operation. There 
are over 90 million operations in the US and 
Europe each year, and patients are treated 
with a variety of different drugs to manage 
post-operative pain. 
Morphine remains the ‘gold standard’ for the 
management of severe pain despite well known 
undesirable side effects
The most potent class of known analgesic 
(pain-relieving) drugs are the opiates, derived 
from the opium poppy. Opiates act centrally 
in the brain where they mimic the actions of 
neuromodulators called endogenous opioids 
and ‘switch off’ the sensation of pain centrally. 
Morphine is an opiate and is one of the most 
effective analgesics known, remaining the 
standard treatment used for the management 
of moderate to severe pain. However, like many 
drugs it can be associated with undesirable 
side effects. These side effects can be distressing 
for patients, may lead to medical complications 
and can impose an economic burden on 
healthcare providers. 
Nausea and vomiting are amongst the most 
common side effects of morphine and up 
to 50% of patients receiving morphine can 
experience this distressing side effect. Patients 
have been reported to be willing to suffer 
a degree of pain rather than experience 
post-operative nausea and vomiting. 
“Acute post-operative pain and post-operative 
nausea and vomiting (PONV) are the negative 
outcomes commonly associated with surgery 
that patients are most anxious to avoid.” 
(Macario, A and Pergolizzi, J Pain and Nausea 
Management after Surgery, The International 
Journal of Pain Medicine and Palliative Care 
vol3 no3 2004).
Sedation is another common side effect of 
morphine treatment, and in the post-operative 
period it is complicated by the sleepiness 
caused by the anaesthetic. If patients are 
excessively sedated, it may be difﬁcult for 
doctors to accurately assess their well being. 
Respiratory depression (a reduction in breathing 
rate) is a rarer, but potentially dangerous side 
effect of morphine treatment. The body’s normal 
response to lack of oxygen or the build up 
of excessive carbon dioxide is to increase the 
“ A DRUG WITH EQUIVALENT ANALGESIA TO 
MORPHINE BUT WITH INTRINSICALLY FEWER 
SIDE EFFECTS IS OF ENORMOUS ADVANTAGE TO 
THE PATIENT AND MAY IN THE FUTURE REPLACE 
MORPHINE AS THE MOST IMPORTANT DRUG 
FOR TREATMENT OF SEVERE PAIN.”  
(Anesthesia and Analgesia 2006 V102, pp 1789–1797)
“ CeNeS has a balanced portfolio of late 
stage compounds and pre-clinical projects 
comprising morphine-6-glucuronide 
(M6G) in pivotal Phase III clinical trials 
for the treatment of post-operative pain; 
CNS5161 in Phase II clinical trials for the 
treatment of neuropathic pain; and 
CNS7056X in pre-clinical development 
as a short acting sedative for short 
surgical and non-surgical procedures. 
CeNeS also has a discovery programme 
to identify novel COMT inhibitors for 
the treatment of Parkinson’s disease 
and schizophrenia. CeNeS is focused 
primarily upon drugs that are 
administered by a hospital-based 
specialist such as an anaesthetist or 
neurologist, and that can eventually 
be promoted to the end-user by a 
small, focused hospital sales force.” 
 
This section reviews each of our four 
programmes in detail.
MORPHINE’S SUCCESSOR FOR 05 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
breathing rate to compensate. This response 
is inhibited by morphine. This can be particularly 
dangerous in the post-operative period since 
anaesthetic drugs often reduce the patient’s 
breathing rate.
Morphine metabolism 
When morphine is taken into the body it 
is broken down in the liver to two main 
metabolites, morphine-6-glucuronide (M6G) 
and morphine-3-glucuronide (M3G). M6G is 
a potent active metabolite of morphine and is 
an effective analgesic, whereas M3G is ineffective. 
However, the breakdown into each of the two 
metabolites varies from patient to patient and 
can be affected by liver function and other 
factors outside the doctors’ control. Therefore, 
the amount of each metabolite that patients 
are exposed to will vary between individuals.
M6G – for the treatment of post-operative pain
CeNeS is developing a potent active metabolite 
of morphine, M6G, for the management 
of moderate to severe post-operative pain. 
Phase II and III studies have shown that M6G 
may have clinical advantages over morphine. 
These studies have shown that M6G, in 
addition to having an equivalent analgesic 
effect, may have an improved side effect 
proﬁle with a reduced tendency to cause 
respiratory depression, nausea and vomiting. 
Speciﬁcally, the M6G015 Phase III and earlier 
Phase II clinical trials have shown that M6G 
produces effective analgesia compared to 
morphine to combat post-operative pain. 
Additional Phase II clinical studies have also 
shown that M6G reduced the incidence of 
nausea and vomiting by more than 50% 
when compared directly with morphine. 
M6G also has a longer duration of action 
than morphine.
M6G clinical development 
CeNeS has continued the development of 
intravenous formulations of M6G for the 
treatment of moderate to severe post-operative 
pain and has reached the advanced stages of 
clinical development (Phase III). One Phase III 
study (M6G015) comparing effects of various 
single doses of M6G with a placebo has 
already been completed as treatment of 
post-operative pain following knee replacement 
surgery. A further, pivotal Phase III study 
(M6G022) is ongoing and is designed to 
investigate comparative treatments of M6G 
or morphine for both pain relief and side effects 
over a 24 hour period following major 
abdominal surgery.
The considerable number of studies that 
have been carried out with M6G have also 
produced a considerable safety database for 
the compound.
Patients who have been administered 
morphine will have been exposed normally 
to M6G as a result of the metabolic 
processes; approximately 10% of morphine 
is converted to M6G in the human. This is 
particularly relevant when there has been 
prolonged treatment with high doses of 
morphine, e.g. to manage cancer related 
pain. When morphine is given over a short 
period of time (e.g. 24 hours) to control 
post-operative pain, M6G is not believed 
to contribute to the analgesia obtained 
with morphine treatment.
CeNeS, therefore, is working toward compiling 
the considerable efﬁcacy and safety data that 
is required by the Regulatory Authorities for 
Market Authorisation Application in Europe. 
CeNeS has also successfully completed the 
additional pre-clinical work required by the 
Food and Drug Administration (“FDA”) for  
the US market with a view to submitting an 
Investigational New Drug (“IND”) application 
in 2006. 
POST-OPERATIVE PAIN RELIEF?
SUMMARY OF M6G FOR POST-OPERATIVE PAIN
➡  CeNeS lead clinical candidate
➡  Potentially as effective as morphine 
but with a superior side effect proﬁle
➡  First Phase III trial (completed H2 2004) 
conﬁrms M6G as an effective analgesic
➡  Second Phase III trial underway – results 
due H2 2006 06 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CHIEF EXECUTIVE’S REVIEW
M6G for the treatment of post-operative pain
GLOBAL MARKETS FOR M6G
PHASE III STUDIES 
Completed Phase III study (M6G015)
The ﬁrst Phase III trial of M6G was completed 
in 2005. This initial Phase III trial (designated 
M6G study M6G015) was carried out in three 
European countries, recruiting 168 hospitalised 
patients suffering from post-operative pain 
following knee replacement surgery carried 
out under spinal anaesthesia. The prime objective 
of the study was to compare the analgesic 
efﬁcacy and duration of action of a range 
of doses of M6G compared with placebo. 
M6G015 conﬁrmed that a single dose of M6G 
administered intravenously at 30mg/70kg 
body weight is an effective analgesic agent 
for the treatment of post-operative pain 
following knee replacement surgery. The study 
also showed a clear dose response relationship, 
with a decrease in the amount of morphine 
consumed as the dose of M6G increased. 
The study results also showed that M6G is 
safe and well tolerated.
M6G015 was not designed to produce deﬁnitive 
evidence on the side effect proﬁle of M6G. 
This aspect of the drug’s profile is more 
important to compare against that of morphine, 
which was not a test drug in this study. However, 
the incidence of nausea and vomiting over early 
time periods after M6G was low and similar to 
placebo, indicating that a single dose of M6G 
that can provide pain relief does not appear 
to induce nausea or vomiting. This supports 
observations from earlier studies.
Ongoing Phase III study (M6G022)
This study is designed primarily to provide key 
information on a comparison of effective 
intravenous pain management regimens of M6G 
or morphine treatment for a minimum of 
24 hours (and up to 48 hours) following major 
abdominal surgery. As shown in the schematic 
above, initial pain management will be achieved 
by administration of a loading dose and 
titration of either M6G or morphine to 
achieve acceptably low levels of pain for the 
patient to go onto the ward. In the ward, 
pain management treatment is achieved by 
patient controlled analgesia (PCA), whereby the 
patient is allowed to self administer a dose of 
M6G or morphine as required to control 
their pain. The study is randomised and double 
blind so that neither patient nor carer is aware 
of which treatment is being administered.
The main purpose of the study is to demonstrate 
statistically that:
➡  treatment with either M6G or morphine, 
particularly during PCA, results in similar 
levels of pain management
➡  the effective analgesic treatment during 
PCA will result in lower levels of nausea 
in patients receiving M6G compared to 
those receiving morphine. 
In addition, other efﬁcacy and safety features 
will be determined throughout the study.
This study is ongoing at present in a number 
of countries in Europe and results are 
expected in H2 2006.
Additional Phase I studies (M6G023 and M6G024)
T o provide the relevant Regulatory Authorities 
with additional clinical safety information 
for a Marketing Authorisation Application, 
two further small studies are being planned.
➡  M6G023 is a mass balance study and 
is designed to show the metabolic fate 
of an intravenous injection of M6G. 
T o carry out this study, low doses of 
radio-labelled (14
c
) M6G will be 
administered to six healthy volunteers. 
The disappearance of radio-labelled 
material from the blood and its 
appearance in urine and faeces will 
be determined.
➡  M6G024 is a pharmacokinetic study 
in mild and moderate renally impaired 
patients. M6G is excreted from the body 
by the kidney. Deterioration of kidney 
function, therefore, may cause 
accumulation of M6G in that organ. 
Volunteers with normal, mild or 
moderate renal impairment will receive 
an intravenous injection of M6G and the 
relative plasma and urine levels of M6G 
will be determined and compared 
between these groups.
Ongoing Phase III study (M6G022)
30mg M6G/70Kg + M6G titration
10mg morphine/70Kg + morphine titration
Study summary: 428 patients, in two arms, undergoing surgical procedures such as 
hysterectomy, bowel, gastro-intestinal or urological surgery under general anaesthesia
M6G 2mg/ml
Morphine sulphate  
1mg/ml
Post-op (IV bolus)
Rescue medication/ 
PCA 24 (48) hours 07 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
The markets for M6G
If CeNeS is able to conﬁrm in Phase III clinical 
trials that M6G causes fewer side effects than 
morphine, but has equal analgesic efﬁcacy, 
then it should represent an attractive 
alternative for patients and healthcare 
providers with potentially signiﬁcant 
pharmaco-economic beneﬁts including 
a reduction in the use of anti-emetics, nursing 
time and length of hospital stay. CeNeS has 
commissioned two independent studies 
researching the market for M6G in Europe 
and the US. These studies have conﬁrmed 
CeNeS’ understanding that there is a 
signiﬁcant global market for M6G of around 
£200 million and that the planned price 
premium is likely to be acceptable to 
physicians and pharmacists in hospitals and 
also the various government reimbursement 
authorities. These assumptions are based on 
the successful delivery of M6G’s potential 
clinical and health economic beneﬁts. 
Partnering: regulatory submission and launch
Results from the ongoing pivotal Phase III 
clinical trial M6G022 are expected in the 
second half of 2006. If this trial is successful 
CeNeS plans to subsequently complete 
negotiations for a European partnering deal 
for M6G. The European partner would then 
be expected to complete the registration 
process to enable launch in multiple European 
markets thereafter. 
CeNeS has met with a number of Regulatory 
Agencies in Europe during 2006 to discuss 
the overall clinical development plan for M6G 
in relation to label claims. It is anticipated that 
these discussions will enable CeNeS or its 
Licensee to optimise submissions to the 
European Agencies for a Marketing 
Authorisation Application (“MAA”). It is currently 
anticipated that an MAA submission could be 
made by CeNeS or its licensee during 2007 .
A positive result from M6G 022 will also 
signiﬁcantly increase the value CeNeS will be able 
to obtain from a North American licensing deal. 
A detailed review has been undertaken of the 
likely clinical trials requirements in the US for 
M6G development. CeNeS is scheduled to meet 
with the FDA in mid 2006 to seek consultation 
on a suitable Clinical Development Plan and 
to achieve an Investigational New Drug (IND) 
application in the US later during the year. 
Subject to these discussions with the FDA, it 
is now anticipated that M6G could enter into 
pivotal Phase III studies in the US at an earlier 
date than previously planned. Clarity of the 
US clinical trial requirements is an important 
component of the M6G data package that 
will be considered by potential US partners 
in their evaluation of the M6G opportunity.
Intellectual property
CeNeS has established a signiﬁcant intellectual 
property portfolio comprising patents covering 
novel synthetic routes for the manufacture 
of M6G, as well as key intermediates, salts 
and know-how. The Company has two GMP 
compliant manufacturing contractors in place, 
and the primary manufacturer has produced 
validation batches of M6G at the multi-kilogram 
scale. The synthetic process currently used 
by CeNeS is expected to be the least-cost 
manufacturing route for M6G. In addition, 
CeNeS acquired rights to another proprietary 
synthetic method for the manufacture of M6G 
from Innovata plc in March 2006. This agreement 
further strengthened CeNeS’ intellectual property 
position around M6G. CeNeS also expects to 
beneﬁt from data and marketing exclusivity 
provisions accorded to companies that undertake 
clinical trials, representing a period of ten years 
following ﬁrst approval in Europe, and at least 
ﬁve years following approval in the US.
Additional formulations and markets
If M6G is successful in treating post-operative 
pain using the current intravenous formulation 
there will be potential for use in other pain 
indications such as chronic pain and also by other 
routes of administration such as epidural and 
oral delivery. Such expansion would signiﬁcantly 
increase the potential peak market sales of M6G. 
An oral formulation could potentially be used 
to treat many of the 2.7 million patients who 
develop cancer each year in the US and Europe. 
The market for oral morphine formulations is 
currently estimated at £600 million annually.
COULD BE £200 MILLION 08 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CHIEF EXECUTIVE’S REVIEW
CNS5161 for the treatment of neuropathic pain
CNS5161: A NOVEL NMDA
CNS5161 – FOR THE TREATMENT 
OF NEUROPATHIC PAIN
Neuropathic pain represents a signiﬁcant unmet 
medical need and a large, growing market 
opportunity currently worth over $2 billion 
globally. It arises from a range of primary diseases 
or conditions (including cancer, diabetes, shingles 
and HIV/AIDS) that can result in nerve damage 
and subsequently chronic pain. Neuropathic 
pain is difﬁcult to treat and current analgesics 
do not provide adequate relief for many patients. 
This ‘neuropathic pain’ can be described by 
patients as burning, stinging, shooting, aching 
or electric-shock-like sensations, and it can last 
for many months or years. Common features 
of these abnormal conditions include increased 
temporal summation of pain in response 
to repeated stimulation (“wind-up” pain), 
hyperalgesia (reduced pain threshold and 
exaggerated response to mild noxious stimuli), 
and allodynia (painful response to non-noxious 
stimuli). Drug treatments for neuropathic pain 
represent a signiﬁcant area of unmet medical 
need and a growing market opportunity.
One of the most common forms of neuropathic 
pain is associated with diabetes. It is estimated 
that there are over 13 million patients in the 
US and Europe with diabetes and that over 
30% of these experience neuropathic pain, 
which can last for many years. In addition, herpes 
zoster infections can lead to shingles and up 
to 20% of the one and a half to two million 
patients in the US and Europe with shingles 
experience neuropathic pain, which is often 
resistant to current treatments and can last 
for many months. 
Current drug treatment of neuropathic pain
Some patients with mild to moderate 
neuropathic pain may respond to simple 
analgesics or non-steroidal anti-inﬂammatory 
drugs (“NSAIDs”), but most patients will require 
more specialist drug therapy. Due to the difﬁculty 
in treating neuropathic pain, it can account for 
up to 40% of patients referred to specialist pain 
clinics. The more common treatments 
include tricyclic anti-depressant drugs and 
anti-convulsant drugs, though their side 
effects can be problematic. Additionally, 
many of these drugs are not licensed for 
the treatment of neuropathic pain.
Newer drugs like gabapentin have a more 
favourable side effect proﬁle than some other 
anti-convulsants, but do not work in many 
neuropathic pain patients. Capsaicin cream, 
commercially prepared from dried chilli peppers, 
is also licensed for some types of neuropathic 
pain and may be applied topically. However it 
can cause initial stinging and this deters some 
patients. Local anaesthetic drugs can also be 
used to provide short term soothing relief from 
neuropathic pain. Opioid analgesics are effective 
for some patients, especially when combined 
with other drugs. In extreme cases nerve blocks, 
nerve ablation and spinal analgesia may be 
required to ease this distressing condition. 
There remains a clear need for an effective agent 
with a favourable side effect proﬁle for the 
treatment of neuropathic pain.
Glutamate and neuropathic pain
Glutamate is a major excitatory transmitter in 
the brain, and binds to N-methyl-D-aspartate 
(“NMDA”) receptors on nerves in the spinal cord. 
This mechanism has been implicated in the 
sensitisation of long term pain responses.
Drugs that block the NMDA receptor have 
been shown to be effective in models of 
persistent pain, and some of the older 
non-speciﬁc NMDA antagonists have shown 
promise in the treatment of neuropathic pain. 
However, they are often associated with 
unacceptable side effects.
CNS5161 
CNS5161 is a novel and selective non-competitive 
NMDA receptor antagonist. It acts by binding 
to a site within the ion-channel associated 
with the NMDA receptor, rather than 
competing with glutamate at the agonist 
recognition site.
CNS5161 clinical development 
Following a successful small initial study in 
patients with neuropathic pain (CNS5161 003), 
CeNeS has carried out a further similar ‘proof 
of concept’ study (CNS5161 003A) which 
reported positive results in June 2005. In the 
study, which was designed to establish 
“ NEUROPATHIC PAIN IS ONE OF THE 
MOST COMMON TYPES OF PAIN, 
BUT IS OFTEN UNDER-RECOGNISED 
AND UNDER-TREATED.”  
(Deﬁned Health Insight Brieﬁng – Neuropathic Pain  
March 2006 – Pg 8) 09 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
SUMMARY OF CNS5161 FOR NEUROPATHIC PAIN
➡  NMDA antagonist
➡  Positive results from Phase IIa trials 
announced H1 2005
➡  Further ‘proof of concept’ Phase II 
trials planned in neuropathic and 
other pain conditions
➡  Market size for neuropathic pain 
drugs more than $2 billion
the therapeutic window of CNS5161, the 
product was associated with a clear trend 
to improvement in pain levels and was well 
tolerated with no instances of the 
psychotomimetic side effects associated 
with some NMDA antagonists. This latter 
ﬁnding conﬁrms CeNeS’ understanding that 
CNS5161 occupies a unique position in its class.
Completed Phase II study (CNS5161 003A)
The Phase IIa study CNS5161 003A was a 
48-patient, European, multi-centre, double blind, 
cross-over design with escalating doses of 
CNS5161 (0.125, 0.25, 0.5 & 0.75mg) being 
compared with placebo in patients with long 
standing neuropathic pain conditions (e.g. 
arising from diabetic neuropathy, post-herpetic 
pain, post-traumatic nerve injury, complex 
regional pain syndrome I or II).
Initially twelve patients came into investigator 
sites and received an intravenous infusion over 
six hours of either CNS5161 0.125mg or placebo. 
Pain levels and side effects were monitored 
over a 24 hour period. After a period of two 
weeks, patients returned and received the 
alternate medication to that received previously 
(CNS5161 0.125mg or placebo). After a safety 
review, a further group of twelve patients 
entered into the study and received a higher 
dose of CNS5161 (0.25mg) or placebo in a 
similar cross over manner. This process continued 
until a dose of CNS5161 0.75 mg was reached.
Infusion of CNS5161 (0.25 – 0.75mg) appeared 
to be associated with a rise in blood pressure 
in a dose related manner. Due to a rising 
incidence of hypertension, recruitment to the 
study was terminated after two patients had 
been treated with CNS5161 0.75mg. As is 
common in these types of studies, after placebo 
infusion patients showed a general improvement 
of their painful condition over twelve hours. 
However, following CNS5161 0.5mg there was 
a marked further reduction in pain levels after 
CNS5161 0.5mg compared to placebo. The 
improvement of pain levels was found to be 
greater in patients with diabetic neuropathy 
compared with other neuropathies.
CNS5161 was well tolerated and was not 
associated with psychotomimetic effects.
CeNeS plans to pursue two development routes 
for CNS5161 in parallel; an intravenous/
subcutaneous infusion presentation for the 
treatment of refractory pain in patients with 
cancer or AIDS, and an adhesive patch 
presentation that can be applied to the skin 
and so provide pain relief over a number of 
days. Initial studies have conﬁrmed the feasibility 
of administering CNS5161 by the patch route. 
The Company has also contracted the 
manufacture of supplies of CNS5161 material 
sufﬁcient for the next set of clinical trials. It is 
not currently planned to commence the next 
Phase II trials with CNS5161 until the results 
of the ongoing pivotal Phase III study of M6G 
have been announced.
The markets for CNS5161
CNS5161 is being developed for a poorly treated 
population of around eight million patients 
suffering from neuropathic pain in the major 
pharmaceutical markets. The neuropathic pain 
market is currently estimated to exceed $2 billion 
worldwide, but existing drugs are believed to 
work in only about 30% of patients with 
neuropathic pain. The total available market 
should therefore be signiﬁcantly larger. If CeNeS 
is able to conﬁrm the efﬁcacy of CNS5161 in 
the treatment of neuropathic pain and is able 
to establish that it is well tolerated by patients 
this could prove to be a valuable 
commercial opportunity.
Although neuropathic pain is the lead 
therapeutic indication for CNS5161, clinical 
observations and pre-clinical ﬁndings with 
NMDA antagonists suggest that this drug 
candidate has the potential to prevent or 
treat a wide range of neurological disorders 
that involve neuronal degeneration, altered 
neuronal activity or neuro-inﬂammation. 
These diseases include Parkinson’s disease, 
Huntington’s disease, epilepsy, addiction, 
multiple sclerosis, AIDS, dementia and the 
neurological complications of certain central 
nervous system injuries and infections.
RECEPTOR ANTAGONIST CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CNS7056X – SHORT ACTING SEDATIVE
Sedation is required for a wide range of 
surgical and non-surgical procedures. The high 
cost of overnight hospital stays means that 
there is a trend towards day case procedures. 
This creates a requirement for intravenous 
sedative agents that permit a rapid and 
predictable recovery. CNS7056X has the 
potential to ﬁt this proﬁle. CNS7056X works 
via a clinically validated mechanism as an 
agonist at the benzodiazepine site of the 
GABA
A
 receptor. Agents with a similar 
mechanism of action have been used for 
many years as sedatives (e.g. midazolam) but 
suffer from relatively long and variable 
durations of action, primarily due to active 
metabolites. CNS7056X was developed by 
GlaxoSmithKline (GSK) to have equivalent 
sedative effects to agents such as midazolam 
but, uniquely, the compound is designed to 
be rapidly broken down in the body to an 
inactive metabolite and consequently to have 
a very short duration of action (see table above). 
CNS7056X is the lead compound of a series that 
was assigned to CeNeS from GSK in November 
2003. The compound ﬁts very well with the 
CeNeS focus on precedented mechanisms and 
builds on the expertise built in the peri-operative 
area with the development of M6G. 
The design of CNS7056X leveraged the 
experience gained at GSK with the short 
acting opiate, remifentanil. CNS7056X is an 
ester-based drug that is rapidly hydrolysed in 
the body by esterases to an inactive 
metabolite. An attractive potential advantage 
offered by this mechanism of deactivation 
is a predictable onset and offset proﬁle, in 
contrast to midazolam. Pre-clinical studies 
reveal that this compound has a signiﬁcantly 
shorter duration of action than midazolam 
(see table above). The lack of reliance on a 
cytochrome P450 for metabolism means 
less scope for drug to drug interactions 
compared to midazolam and should permit 
its use in patients with reduced liver 
function. This is frequently important in 
the intensive care setting.
Sedation for non-surgical and surgical procedures
Sedation is important in a number of settings, 
both non-surgical and surgical. Non-surgical 
procedures where sedation is required include 
endoscopies, bronchoscopies, manipulations 
(such as the re-setting of dislocated limbs) and 
wound dressing. Surgical procedures include 
those performed under local and general 
anaesthesia. Long term treatment with 
sedatives is also employed in the intensive 
care unit. Agents acting as agonists at the 
benzodiazepine site of the GABA
A
 receptor 
such as lorazepam, diazepam and especially 
midazolam are the most commonly used 
sedative agents.
Current short acting sedative agents
As the ﬁrst water-soluble benzodiazepine, 
midazolam was seen as a major breakthrough 
when introduced to the market in the early 
1980s. As with other benzodiazepines  
and unlike anaesthetics such as propofol, 
midazolam induces a controlled sedation and 
has amnesic properties. However, midazolam 
has a number of notable drawbacks. These 
include respiratory depression and a 
prolonged and variable duration of action. 
The latter is due to the existence of an active 
metabolite. Prolonged sedation can result  
in extended hospital conﬁnement with 
attendant increase in costs. Another drawback 
of midazolam is that it is mainly metabolised 
in the liver by a major drug-metabolising 
enzyme (cytochrome P450 3A4). This means 
that drug-drug interactions can be problematic 
as is its administration to patients with 
compromised liver function. 
Anaesthesia as an additional indication
On the basis of new and very encouraging 
pre-clinical data, revealing a rapid onset and 
CHIEF EXECUTIVE’S REVIEW
CNS7056X short acting sedative
10
4.50
47 .50
4.00
4.60
Time (min) to onset and offset of sleep: Midazolam and CNS7056X
Midazolam – onset
Midazolam – offset
CNS7056X – onset
CNS7056X – offset
CNS7056X pre-clinical data indicates a short acting proﬁle
CNS7056X: A NOVEL SHORT 11 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
offset of sedative action and rapid metabolism 
by human liver samples, CeNeS is now evaluating 
the potential of CNS7056X for the additional 
indications of the induction and maintenance 
of anaesthesia. Pre-clinical studies to evaluate 
the potential of CNS7056X in these additional 
indications are being undertaken at the 
University of Strasbourg, the University of 
Adelaide and at a major pharmaceutical 
company. The evaluation will complete in the 
second half of 2006. Propofol is used widely 
for the induction and maintenance of 
anaesthesia. Whilst propofol is an extremely 
successful intravenous anaesthetic, its 
limitations include pain on injection and 
cardiovascular depression (lowering of heart 
rate and blood pressure). The pre-clinical 
proﬁle of CNS7056X suggests that it may 
overcome some of these limitations, and could 
offer a new paradigm for intravenous anaesthesia.
A leading anaesthetist, Professor Pierre 
Diemunsch (Strasbourg, France) who has 
conducted pre-clinical studies on CNS7056X, 
commented “CNS7056X is a very interesting 
molecule with the desirable pre-clinical proﬁle 
of a rapid onset and offset of sedative action 
and minimal cardiovascular depression. The 
control that this proﬁle provides means that 
CNS7056X has great potential for use not 
only as a short acting sedative but also as an 
agent for the induction and maintenance 
of anaesthesia using the established regime 
of intravenous infusion in combination with  
an opiate”.
CNS7056X development status
The intellectual property position around 
CNS7056X was recently strengthened when 
the European Patent Ofﬁce granted the patent 
for a series of sedative compounds, including 
CNS7056X. CNS7056X is progressing through 
pre-clinical development. CeNeS is undertaking 
the pre-clinical development work with the 
intention of ﬁling an IND in the US in 2006. 
CeNeS is planning to conduct the ﬁrst proof 
of concept Phase I study under a US IND 
because the Company has identiﬁed the US 
as a major potential market for short acting 
sedatives. Unlike many CNS indications, it is 
planned that the clinical proof of concept for 
this compound will be evaluated in the Phase I 
trials, where the onset and offset of sedation 
for CNS7056X will be examined and compared 
with that of midazolam. Sedative effects can 
readily be monitored in volunteers by 
measuring parameters such as reduction of 
awareness and movement or changes in the 
electrical activity of the brain. 
The markets for CNS7056X
A large and growing number of surgical 
and non-surgical procedures are conducted in 
hospitals and surgeries worldwide. Many of these 
procedures are conducted under sedation 
rather than general anaesthesia. The worldwide 
sedative/hypnotic market for anaesthesia 
is greater than $1 billion and the US holds 
a 60% share of the value. Midazolam sales reveal 
that this agent is used in a large proportion of 
procedures. Midazolam became generic in mid 
2000 (US). Prior to becoming generic, sales in 
1999 were $450 million. The additional use of 
CNS 7056X as an agent for the induction and 
maintenance of anaesthesia could double the 
potential market opportunity. Propofol is used 
widely for the induction and maintenance of 
anaesthesia in the US, Europe and Japan, and 
its sales during 2004 exceeded US $750 million 
(source: IMS Health). 
ACTING SEDATIVE
➡  GABA
A
 agonist
➡  Acquired from GSK in November 2003
➡  Pre-clinical development progressing well
➡  New indication of anaesthesia being pursued
➡  Market size for i.v. sedatives/hypnotics 
more than $1 billion
SUMMARY OF CNS7056X FOR SEDATION 12 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CATECHOL-O-METHYLTRANSFERASE (COMT) 
INHIBITORS FOR PARKINSON’S DISEASE
Parkinson’s disease
Parkinson’s disease is the second most 
common neurodegenerative disease after 
Alzheimer’s. It affects approximately 2%  
of the population over the age of 65.  
The symptoms of Parkinson’s disease such as 
tremor, rigidity and slowness of movement 
result from the loss of neurones containing 
the neurotransmitter dopamine in parts of the 
brain responsible for controlling movement. 
Many early stage research efforts are focusing 
on novel therapies for the treatment of 
Parkinson’s disease such as stem cells or gene 
therapy. In line with our stated lower risk 
approach, CeNeS has examined the continuing 
use of L-DOPA as the main treatment of 
Parkinson’s disease and selected a discovery 
opportunity that could signiﬁcantly enhance 
its effectiveness.
Working from our leading edge 
understanding of the treatment of 
Parkinson’s disease CeNeS has identiﬁed 
novel series of COMT inhibitors which, 
unlike existing agents, do not belong to 
the problematic nitrocatechol chemical  
class. Hence our novel compounds have 
the potential to provide a significantly 
superior proﬁle compared with current 
agents. This programme is now in the 
lead optimisation phase.
Replacement therapy with L-DOPA remains the 
‘gold standard’ therapy for Parkinson’s disease
Replacement therapy using the precursor 
of dopamine, L-DOPA combined with a 
DDC (dopa-decarboxylase) inhibitor 
(carbidopa or benserazide) is the mainstay 
of therapy in Parkinson’s disease. After 
prolonged use, the beneﬁcial effects of 
L-DOPA become reduced (with larger 
doses required) and patients develop motor 
ﬂuctuations and uncontrolled movements 
(dyskinesias). These represent the biggest 
single problem in the long term management 
of a patient with Parkinson’s disease.
COMT inhibitors are used to ‘smooth’  
the pharmacokinetics of L-DOPA 
Catechol-O-Methyltransferase (COMT) is an 
enzyme that metabolises catecholamines  
such as L-DOPA and dopamine and causes a 
signiﬁcant depletion of L-DOPA in the brain 
and periphery, limiting its efﬁcacy. COMT 
inhibitors essentially smooth out the 
pharmacokinetics of L-DOPA, giving patients  
a longer ‘on’ or functional time each day.  
They also have a sparing effect on the dose 
of L-DOPA required and thus may delay  
the development of motor ﬂuctuations  
and dyskinesias.
Current COMT inhibitors
In the mid to late 1990s two COMT inhibitors 
were introduced to the market, tolcapone 
and entacapone. These COMT inhibitors 
were shown to reduce fluctuations and 
dyskinesias in patients receiving L-DOPA. 
Tolcapone was withdrawn from the EU 
market in late 1998 due to liver toxicity, 
which is unrelated to COMT inhibition. 
T olcapone has recently been re-introduced 
to the market in Europe but, as in the US, 
its use is severely restricted and frequent liver 
monitoring required of patients using it. 
As such, entacapone (co-marketed by Orion 
and Novartis) is the only unrestricted COMT 
inhibitor available in the major markets. 
However, entacapone has a number of 
drawbacks, namely a short half-life, low oral 
bioavailability and minimal brain penetration. 
CHIEF EXECUTIVE’S REVIEW
COMT inhibitors for Parkinson’s disease
COMT INHIBITORS: A CHEMICAL
Source: Evaluate 2005
$107m
$167m
$269m
$367m
Worldwide sales of COMT inhibitors, 2002–2005
2005
2004
2003
2002 13 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
COMT inhibitor discovery programme
T olcapone and entacapone, in common with 
the majority of known potent COMT inhibitors, 
contain the undesirable 3-nitrocatechol unit that 
is associated with poor oral absorption, short 
plasma half-life and extensive metabolism 
issues. The primary goal of breaking away 
from this nitrocatechol series has been 
achieved by CeNeS scientists, and a number 
of discrete chemical series without the 
nitrocatechol group have been identified. 
The COMT inhibitor programme was carefully 
chosen by CeNeS in line with our strategy 
to have a low risk proﬁle and to address a 
clear commercial opportunity. A number 
of compounds are now being evaluated in 
the lead optimisation process. It is anticipated 
that a development candidate will be 
identiﬁed during 2006.
The potential use of COMT inhibitors  
in schizophrenia
In addition to Parkinson’s disease, a number  
of new academic publications point to the 
potential use of a COMT inhibitor that acts in 
the brain to improve the profound cognitive 
deﬁcits of schizophrenia. Schizophrenia is a 
debilitating mental illness characterised 
by disturbances such as hallucinations and 
delusions as well as a range of negative 
symptoms, including cognitive disturbances. 
Cognitive disturbances often prevent 
schizophrenia patients from re-adjusting 
to society and require patients to be under 
medical care for their entire lives. Despite the 
availability of a variety of current anti-psychotic 
drugs, cognitive disturbances are poorly 
addressed by existing therapies. 
In a recent review of the area, the  
world-renowned psychiatrist, Professor  
Daniel Weinberger (NIMH, Bethesda, US) 
made the following concluding comment:  
“On theoretical and practical grounds, COMT 
is a prime candidate for ameliorating the 
cognitive deficits of patients with 
schizophrenia, and empirical data to 
support this are beginning to emerge.” 
Tunbridge EM, Harrison PJ, Weinberger DR. 
Catechol-O-Methyltransferase, Cognition, 
and Psychosis: Val (158) Met and Beyond. 
Biol Psychiatry. 2006 (in press).
The market for COMT inhibitors
The global market of drugs for Parkinson’s 
disease was $1.7 billion in 2003 and is predicted 
to grow to $3 billion by 2012. The growth will 
arise largely due to the increased prevalence 
of the disease, as a result of the ageing 
population. The use of COMT inhibitors is 
currently growing rapidly (see table on page 12). 
COMT inhibitors currently have a 20% share 
of the Parkinson’s disease market. 
The worldwide sales of drugs used to treat 
schizophrenia is $12 billion. Cognitive 
disturbances are poorly addressed by existing 
therapies and represent a large unmet medical 
need in schizophrenia therapy. CeNeS novel 
COMT inhibitors have the potential to address 
this signiﬁcant unmet need. 
NEIL CLARK
Chief Executive
➡  Chemical breakthrough achieved by CeNeS
➡  A number of compounds are being 
evaluated in the lead optimisation process
➡  COMT inhibitor market growing rapidly
➡  Potential for use to treat cognitive 
impairment in schizophrenia
SUMMARY OF COMT INHIBITORS 
FOR PARKINSON’S DISEASE
BREAKTHROUGH 14 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
FINANCIAL REVIEW
RESULTS OF OPERATIONS
The loss for the year ended 31 December 2005 
was £6.6 million (2004: £4.9 million).  
The increased loss is due to a planned increase 
in expenditure associated with the increased 
clinical development and discovery activities. 
Net cash and short term investments as at  
31 December 2005 were £8.5 million 
(2004: £14.3 million). 
Turnover from out-licensing activities was  
less than £0.1 million in the year ended  
31 December 2005 (2004: less than  
£0.1 million).
Research and development costs rose to  
£4.9 million (2004: £3.5 million) as a result of 
clinical trial costs associated with the M6G 
Phase III and CNS5161 Phase II clinical trials. 
Administrative expenses for the year to  
31 December 2005 increased to £3.1 million 
(2004: £2.4 million) including amortisation  
of goodwill of £1.0 million in the year to  
31 December 2005 (2004: £1.0 million).
Other operating income for the year ended  
31 December 2005 of £0.2 million (2004:  
£0.1 million) includes rents receivable on 
property sublet in Irvine, Scotland. 
Net interest receivable for the year ended  
31 December 2005 was £0.5 million 
(2004: £0.3 million).
CeNeS has estimated that the research and 
development tax credit claim for 2005 will be 
£0.6 million. This amount has yet to be agreed 
with the HMRC. HMRC enquiries into the 
amounts claimed for 2002, 2003 and 2004 have 
been concluded and ﬁnal payments for those 
years have been received since the year end.
FIXED ASSETS
The decrease in intangible assets to £6.5 million 
(2004: £7 .5 million) is a result of goodwill 
amortisation of £1.0 million. T angible ﬁxed assets 
have increased to £36,000 (2004: £18,000).
DEBTORS AND CREDITORS
T otal debtors as at 31 December 2005 were 
£1.5 million (2004: £1.4 million).
Creditors due within one year were £1.5 million 
(2004: £1.6 million).
PROVISIONS FOR LIABILITIES AND CHARGES
The Company has reviewed and recalculated 
the onerous lease provision of £1.0 million  
(31 December 2004: £0.9 million) which 
reﬂects the discounted expected liability 
relating to the leases of premises in Scotland 
that are no longer required or utilised by the 
Group. This provision was previously included 
in accruals.
CASH RESOURCES
Net cash and short term investments as 
at 31 December 2005 were £8.5 million 
(2004: £14.3 million), comprising cash at bank and 
in hand of £8.5 million (2004: £4.3 million) and 
short term deposits of £nil (2004: £10.0 million). 
Net funds decreased by £5.8 million in 2005 
(2004: increased by £6.5 million). The increase 
in 2004 included proceeds of £10.6 million 
raised under a placing and open offer in 
November 2004. 
NEIL CLARK
Chief Executive
12 June 2006 15 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
BOARD OF DIRECTORS
ALAN GOODMAN 
Chairman (55) 
Alan is a chartered management accountant with 
over 20 years’ experience in the biotechnology and 
healthcare industries. He joined Medeva in 1989 to 
create a new independent pharmaceutical group by 
acquisition. More recently he has been a founder of 
a number of listed biopharmaceutical companies 
including Acambis, Oxford Biomedica and CeNeS. 
Alan also runs Avlar Bioventures, a venture capital 
fund that invests in early stage life science companies.
NEIL CLARK 
Chief Executive (43) 
Neil has a life sciences degree and is a Chartered 
Accountant with over ten years’ international 
professional experience working for Coopers & Lybrand. 
Neil joined CeNeS in 1997 and was made Finance 
Director in July 2000. Neil became Chief Operating 
Ofﬁcer in October 2001 and led the restructuring 
of CeNeS. Neil was promoted to Chief Executive 
in January 2005.
RONALD IRWIN 
Non-executive Director (70) 
Ronald has had a number of positions with ICI, 
Wellcome Foundation, Sterling Winthrop, Marion 
Merrell Dow (chairman and managing director) and 
British Biotechnology. He is currently a non-executive 
director of Echo International Health Services and 
Pharmovation Limited.
DR PETER JOHNSON 
Non-executive Director (70) 
Peter has extensive R&D and management experience 
with ﬁve major international pharmaceutical companies: 
Wellcome, Hoechst, SmithKline, Fisons and Astra. 
He is currently Chairman of Oxford BioMedica plc. 
In the last ﬁve years he has also been non-executive 
director of Quadrant Healthcare plc, chairman 
of CBAMS Limited and executive chairman of 
Sterix Limited.
ALAN SMITH 
Non-executive Director (61) 
Alan is a member of the Chartered Institute of Public 
Finance and Accountancy. He joined the board of 
Acambis plc as a non-executive director in 1995 and 
was appointed non-executive chairman in 1999. He 
was group managing director of Anglian Water plc 
until December 1997 and is currently chairman 
of Avlar BioVentures Limited and chairman of 
Medical Device Innovations Limited.
SENIOR MANAGEMENT
DR TERRY SMITH 
Development Director 
Terry trained as a pharmacologist at the University 
of London followed by a postdoctoral position at the 
Unit for Research on Addictive Drugs, University of 
Aberdeen. This has been followed by over 25 years’ 
experience in research, development and commercial 
positions within the pharmaceutical industry, 
including Wellcome Research Laboratories, British 
Technology Group and CeNeS. The majority of this 
experience has been within the neuroscience area, 
with a particular emphasis on pain and analgesia. 
Terry joined CeNeS in 1997.
SIMON KERR 
Commercial Director 
Simon has worked in the pharmaceutical and 
biotechnology sectors for over 20 years in business 
development, marketing and sales roles. He initially 
held a number of commercial roles with Beecham 
Pharmaceuticals, Wellcome plc and Scotia 
Pharmaceuticals, prior to moving into the 
biotechnology sector in 1996. He has subsequently 
held board-level positions in four biotechnology 
companies: Gemini Genomics (1996), Cambridge 
Genetics (1998), Circassia Limited (2001) and 
TheraSci Limited (2002). He joined CeNeS in 
November 2003 upon completion of the acquisition 
of TheraSci Limited by CeNeS.
DR GAVIN KILPATRICK 
Director of Drug Discovery 
After completing his PhD in pharmacology at  
the Institute of Psychiatry, University of London,  
in 1985, Gavin joined Glaxo, UK, and worked on  
the development of novel drugs for CNS and 
gastrointestinal disorders. In 1995, he moved to 
Roche, Basel, Switzerland as Head of Psychiatry 
Research. In 1999 Gavin joined CeNeS as Research 
Director. In 2002 Gavin co-founded the drug 
discovery company, TheraSci. TheraSci was acquired 
by CeNeS in 2003. He is an author/co-author of more 
than 80 academic publications, an editor of the 
journals ‘Neuropharmacology’ and ‘Current Opinion 
in Investigational Drugs’ and a member of the 
Scientiﬁc Advisory Board for the charity ‘Ataxia UK’.
TONY OSBORNE 
Group Financial Controller  
and Company Secretary 
T ony has over ten years’ experience working for 
biotechnology companies, both private and public. 
After qualifying as a Chartered Accountant in 1993 
T ony joined Cobra Therapeutics (formerly Therexsys) 
in 1994 as ﬁnancial controller. T ony joined CeNeS  
as Group Financial Controller in July 2000 and was 
appointed Company Secretary in January 2004. 16 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CENES SCIENTIFIC ADVISORY BOARD (SAB) 
The role of the SAB is to review and provide advice 
on the scientiﬁc work conducted in CeNeS. The SAB 
provides guidance to individual projects and also at 
a strategic (portfolio) level. The SAB meets annually 
and its members are detailed below. They have been 
selected on the basis of recognised expertise in  
CNS drug discovery and development and/or 
expertise in pain, anaesthesia and Parkinson’s  
disease. The SAB is chaired by Dr Ann Hayes.
ANN HAYES PHD 
For 22 years Ann Hayes worked for GlaxoWellcome 
specialising in the areas of CNS and pain. She was 
a director in Drug Discovery, with particular expertise 
in determining long term discovery strategy, in 
portfolio management and in discovery project 
management. After leaving GSK in 2001, Ann set  
up a business as an independent pharmaceutical 
consultant. In this capacity she has co-founded two 
companies, Ionix Pharmaceuticals, and TheraSci, 
which has since been bought by CeNeS. Ann is a 
non-executive director of Plethora and Curidium,  
a director of Theradeas, a member of the Scientiﬁc 
Advisory Boards for Biowisdom, BrainCells Inc, 
Novasite Inc and Paradigm and has also been  
non-executive director at TheraSci, Ionix and Sirus. 
DAVID BROOKS MD DSC FRCP FMED SCI 
David Brooks is Hartnett Professor of Neurology and 
Head of the Department of Sensorimotor Systems  
in the division of Neuroscience, Faculty of Medicine, 
Imperial College, London. He is also Head of the 
Neurology Group at the Medical Research Council 
Clinical Sciences Centre, Hammersmith Hospital, 
London. Additionally, he is Chief Medical Ofﬁcer 
of Imanet, GE Healthcare PLC. David is a member 
of the International Research Advisory Board of several 
organisations including the Michael J Fox Foundation 
for Parkinson’s disease research and the Medical 
Research Council Neuroscience and Mental Health 
board. David is on the editorial boards of several 
journals. In 2001 he was elected a Fellow of the 
Academy of Medical Science, UK. His research 
involves the use of positron emission tomography 
and magnetic resonance imaging to study cerebral 
control of movement and performance of therapeutic 
trials in Parkinson’s, Huntington’s, and Alzheimer’s 
disease. T o date, he has published over 250 reports  
in peer reviewed journals, including Nature. 
MICK SERPELL, MB CHB, FSCHP, ECFMG, FRCA 
Mick Serpell graduated from medical school at the 
University of Dundee in 1983. He completed his 
training in anaesthesia and pain management 
in Dundee, Orebro in Sweden and Dartmouth 
Hitchcock Medical Centre in New Hampshire, US. 
He took up his consultant post in Glasgow in 1993 
and became senior lecturer at the University 
Department of Anaesthesia, Glasgow in 1999.  
His research interests include pharmacological and 
regional analgesia management of acute and chronic 
pain. He is particularly interested in the diagnosis and 
early treatment of neuropathic pain. He leads the 
Clinical Trials Unit at the Pain Clinic in Gartnavel.  
He has undertaken 24 commercial studies over the 
past six years, and is on the Advisory Board of four 
commercial companies. He is chairman of the 
Research and Priority Programme for Pain & Acute 
Medicine for the Glasgow Acute Hospital Trusts. 
Mick is lead clinician in Chronic Pain for North 
Glasgow and chairs the Neuropathic Pain SIG  
(British Pain Society). 
DAVID BROWN PHD, FRSC 
David Brown has over 30 years’ experience in the 
pharmaceutical/biotechnology industry both in research 
and in senior executive roles. From 1974 to 2002 he 
served with Zeneca, Pﬁzer, Glaxo, and most recently 
with F Hoffman La-Roche as Global Head of Drug 
Discovery. In this role he had responsibility for the 
output of clinical candidate drugs from approximately 
2000 scientists across Roche’s ﬁve research sites. 
From 2002 to 2004 David was President and CEO 
of Cellzome AG, a Biotechnology company 
headquartered in Heidelberg Germany. David has 
extensive experience of pharmaceutical R&D. Whilst 
at Pﬁzer he was named co-inventor on the patent 
for Viagra, a treatment for male impotence, and led 
the team that developed Viagra through to proof 
of clinical efﬁcacy in man. He also played a key role 
in the discovery of Relpax, a treatment for migraine. 17 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
DIRECTORS’ REPORT
The Directors present their Annual Report on the affairs of CeNeS Pharmaceuticals plc (“the Company”) together with the Consolidated Financial
Statements of the Company and its subsidiaries (“the Group”) for the year ended 31 December 2005.
PRINCIPAL ACTIVITY AND BUSINESS REVIEW
The principal activity of the Group is the discovery and development of drug products for the treatment of disorders of the central nervous
system (CNS) including the treatment of pain and sedation.
RESULTS, DIVIDENDS AND FUTURE PROSPECTS
Turnover for the year was less than £0.1 million (2004: less than £0.1 million) and comprises revenues from licence fees. The loss of the Group for
the year after taxation was £6.6 million (2004: £4.9 million).
The Directors do not recommend the payment of a dividend (2004: nil). The Group’s performance and future prospects are discussed in the
Chairman’s Review on pages 2 to 3, and the Chief Executive’s Review on pages 4 to 13 and the Financial Review on page 14.
RESEARCH AND DEVELOPMENT
The Group was involved in an active programme of research and development of CNS and pain products. The costs of research and
development are expensed to the Profit and Loss Account as incurred.
Research and development costs in continuing operations have increased to £4.9 million (2004: £3.5 million). The majority of this spend relates to
the clinical development of M6G which commenced a pivotal Phase III clinical trial in H2 2005.
DIRECTORS
The present membership of the Board is set out on page 15 together with brief biographies.
The Directors who served during the year were:
Mr Alan G Goodman (Chairman)
Mr Neil R Clark 
Mr T Ronald Irwin 
Dr Peter Johnson 
Mr Alan Smith
Mr Alan Smith and Dr Peter Johnson will retire at the next Annual General Meeting and offer themselves for re-election.
DIRECTORS’ SHAREHOLDINGS AND SERVICE CONTRACTS
Details of the Directors’ contracts and their beneficial interests in the shares of the Company are shown in the Remuneration Report on pages 
22 to 24. 
POLICY ON PAYMENT OF CREDITORS
The Group seeks the best possible terms from suppliers consistent with consideration of quality, delivery price and discounts. In many cases these
are agreed with the supplier as part of the process of placing an order. Provided that the supplier has met its contractual obligations, then the
Group endeavours to ensure that payment is made on these terms. This policy is known to all staff who handle payments to suppliers.
The average number of creditor days of the Group at 31 December 2005 was 59 (2004: 62 days). The average number of creditor days of the
Company at 31 December 2005 was 33 (2004: 63 days).
EMPLOYMENT POLICY
The Group is aware of its obligations to disabled persons and makes every effort to ensure they receive equal opportunities and are not
discriminated against on the grounds of their disability.
The Group will make every effort to assist any individual who becomes disabled during the course of their employment.
All employees are kept informed about the Group’s progress and objectives through regular meetings. The Directors believe that it is important
that the Group’s employees’ interests are closely aligned with the Group.
To this end all employees either already hold, or are eligible to receive options under the current and/or any new share option schemes.
GOING CONCERN
The Group is engaged in the development of biopharmaceutical products and expects those activities to absorb liquid resources until such
products begin to be commercialised. After having made due enquiries the Directors have a reasonable expectation that the Group will have
adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern
basis in the Financial Statements. 
DIRECTORS’ RESPONSIBILITIES
Company law requires the Directors to prepare Financial Statements for each financial year that give a true and fair view of the state of affairs
of the Group and the Company and of the profit or loss of the Group for that period. The Directors are required to prepare the Financial
Statements on the going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business.
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 17 18 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
DIRECTORS’ RESPONSIBILITIES (CONTINUED)
The Directors confirm that suitable accounting policies have been used and applied consistently. They also confirm that reasonable and prudent
judgments and estimates have been made in preparing the Financial Statements for the year ended 31 December 2005 and that applicable
accounting standards have been followed.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position 
of the Group and the Company 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 Group and the Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Group’s website; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial
Statements since they were initially presented on the website. Information published on the Internet is accessible in many different countries
with different legal requirements. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
FINANCIAL RISK MANAGEMENT
The Group’s operations expose it to a variety of financial risks that include credit risk, liquidity risk and interest rate risk. The Group has in place a risk
management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring levels of debt finance and
the related finance costs. The Group does not use derivative financial instruments to manage financial risks and as such, no hedge accounting is applied.
Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of
the Board, although risk management is reviewed by the Audit Committee. The policies set by the Board of Directors are implemented by the
Group’s finance department. The department has policies and procedures in place that set out guidelines to manage interest rate risk, credit risk,
and the circumstances where it would be appropriate to use financial instruments to manage these.
a) Price risk
The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Group’s operations, the costs of
managing exposure to the commodity price risk exceed any potential benefits. The Directors will revisit the appropriateness of this policy should
the Group’s operations change in size or nature. The Group has no material exposure to equity securities price risk. The Group has one equity
investment in an unlisted company, Xention Limited, which has been written down to £1 in the Financial Statements. 
b) Credit risk
Where debt finance is utilised, this is subject to pre-approval by the Board of Directors. The amount of exposure to any individual counterparty is
subject to a limit, which is reassessed annually by the Board. The Group has no exposure to credit concentration risk as it has no third party sales.
Currently the Group has no material debt finance.
c) Liquidity risk
The Group does not currently have any material short or long term debt finance other than trade creditors which arise under the normal course
of business.
d) Interest rate cash flow risk
The Group has interest bearing assets. Interest bearing assets include only short term deposits, which earn interest at fixed rates, and cash
balances, which earn interest at floating rates. The Directors will revisit the appropriateness of this policy should the operations of the Group
change in size or nature.
SUBSTANTIAL SHAREHOLDINGS
As at 5 June 2006, under Section 198 of the Companies Act 1985, the Company had been notified of the following interests amounting to 3%
or more of the ordinary share capital of the Company.
Name Number % holding
Avlar Bioventures Fund II 26,807,760 6.5
Gandhara Capital Master Fund Limited 26,252,626 6.4
UBS AG 22,146,632 5.4
R G Robb 17,000,000 4.1
Alan Goodman 15,843,866 3.9
GlaxoSmithKline plc 13,284,508 3.2
AUDITORS
A resolution to reappoint PricewaterhouseCoopers LLP as auditors to the Company will be proposed at the Annual General Meeting.
ANNUAL GENERAL MEETING
The notice of the Annual General Meeting, which will take place at 10.00am on 13 July 2006 at the offices of Morrison and Foerster, CityPoint,
One Ropemaker Street, London EC2Y 9AW, was sent to shareholders on Tuesday 20 June 2006.
By order of the Board
TONY OSBORNE
Company Secretary
12 June 2006 
DIRECTORS’ REPORT
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 18 The Company is committed to the highest standards of corporate governance.
The Company’s shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange. The Group is therefore subject 
to the AIM Admission Rules of the London Stock Exchange and is consequently not required to comply with the best practice corporate governance
provisions contained within the Combined Code. However, the Board is committed to the highest standards of Corporate Governance and has
conducted a review of how its practices comply with the Combined Code on Corporate Governance. The Company has implemented procedures
to ensure that it complies with the rules where practical for a small sized AIM listed company.
Set out below is how the principles of the Combined Code have been applied and the extent of the Group’s current compliance.
STATEMENT OF COMPLIANCE WITH THE CODE OF BEST PRACTICE
The Company has complied throughout the year with the provisions of the Code of Best Practice set out in Section 1 of the Combined Code
except as follows:
• Provision C.3.1 requires that the Board should satisfy itself that at least one member of the Audit Committee should have recent and relevant
financial experience. The Board has determined that the combined qualifications and experience of the Committee members, when taken
together with its modus operandi, gives the Committee collectively the financial expertise necessary to discharge its responsibilities.
BOARD OF DIRECTORS
The Board of Directors currently consists of two Executive Directors and three Non-executive Directors. The biographies of the Directors are set out
on page 15. The Board is responsible for providing leadership within a framework of controls for managing risk and also the following main areas:
• Approving the Company’s scientific and commercial strategy
• Approving budgets and funding plans
• Approving treasury policies
• Overseeing membership of Board Committees and their terms of reference
• Monitoring performance against key financial and non-financial indicators
• Overseeing the system of risk management
• Setting corporate governance policies
• Setting Health, Safety and Environmental policies
• Approving Annual and Interim Financial Statements
• Approving shareholder communications
• Reviewing and approving major financial commitments and substantial transactions
In line with best practice the Board has also discussed and approved a detailed list of Matters for the Attention of the Board which is
reviewed periodically.
The Board meets formally at least six times a year and there is also frequent contact between meetings as required to discuss ongoing issues
and to maintain a dialogue between Board members. During the year all the Directors were present in person or by telephone for all of the
meetings of the Board with the exception of Mr A Smith and Mr TR Irwin who were absent for one meeting each. These absences arose due
to unavoidable late changes to the timing of the meetings. Board meetings are held at the Cambridge offices of the Company or at a suitable venue.
The Board has shown its commitment to dividing responsibilities for running the Board and running the Company’s business by appointing 
Mr Neil Clark and Mr Alan Goodman as the Chief Executive and Executive Chairman respectively. Mr Clark was promoted to Chief Executive in
January 2005, having served as Finance Director and Chief Operating Officer, and has overall responsibility for the running of the Company
and financial matters. The Executive Chairman has a significant role in the strategic direction of the Company. The Company Secretary and
Group Financial Controller, Mr Antony Osborne, is also closely involved in the management of financial matters.
Other senior executives are invited to Board meetings to present on specific issues relevant to their departments as required. The whole Board
and senior management team plans to meet off site annually to carry out a broad review of the Company’s operations and possible strategic
opportunities. The Executive Directors of the Company are fully involved with the management of the Group at all levels, and the direction and
control of the Company. 
The Board undertakes an annual evaluation of its own performance and that of its Committees and individual directors. The evaluation
includes a review of the effectiveness of the composition of the Board and its Committees. The Non-executive Directors also meet without
the Chairman being present, at least annually, to appraise the Chairman’s performance.
All Directors bring individual judgment to bear on matters of strategy, resources, performance and standards of conduct. Appropriate training 
is made available to Directors to assist them in the discharge of their duties as required. The Directors receive reports on the current and prospective
activities of the Group and have full and timely access to any other relevant information they may require.
All Directors have direct access to the services and advice of the Company Secretary who is responsible for ensuring relevant procedures, rules
and regulations are complied with. The Board as a whole determines the appointment and removal of the Company Secretary. Directors may,
at the Company’s expense, seek independent legal advice on any matter relating to the discharge of their duties.
The Non-executive Directors ensure that actions proposed by the Executive Directors are critically examined and thoroughly discussed. The
Non-executive Directors therefore fulfil a vital role in corporate accountability. The Board considers that Mr T Ronald Irwin and Dr Peter Johnson
are independent of management and free from any business or relationship that could jeopardise the exercise of independent judgment.
Mr Alan Smith is not considered to be independent because he is also Chairman of Avlar Bioventures Limited – Avlar Bioventures Limited manages 
19 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CORPORATE GOVERNANCE
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 19 20 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CORPORATE GOVERNANCE
BOARD OF DIRECTORS (CONTINUED)
Avlar Bioventures Fund II Limited Partnership which is a shareholder in the Company. Mr Alan Goodman has the role of Executive Chairman and
so does not rank as a Non-executive Director. Mr Goodman is also Chief Executive of Avlar Bioventures. Mr T Ronald Irwin is the senior independent
Non-executive Director to whom any relevant concerns should be addressed. 
The Company has arranged appropriate insurance cover in respect of legal action against its Directors.
All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment, and are required to submit
themselves for re-election at least every three years thereafter. The Executive Directors have contracts of service that can be terminated
by either party with a notice period of twelve months. The Non-executive Directors have contracts of service that can be terminated by
either party on three months notice. Further details of the contracts of service are given in the Remuneration Report.
AUDIT COMMITTEE
The Audit Committee is comprised of two independent Non-executive Directors, Mr T Ronald Irwin (the Committee Chairman) and 
Dr Peter Johnson. 
The Audit Committee examines and reviews, on behalf of the Board, internal controls, financial and accounting policies and practices, the 
form and content of financial reports and statements, the requirement for an internal audit function and the scope of work, appointment, 
re-appointment and removal of external auditors. The Committee is also responsible for establishing a ‘whistle blowing’ policy designed to
enable the anonymous reporting by staff of any suspected financial impropriety, fraud or wrong doing. It meets at least once a year with
representatives of the Company’s auditors without any Executive Directors being present. The Committee has the power to call for information
from management and to consult directly with the external auditors. The detailed terms of reference of the Audit Committee have been
established in a document which has been approved by the Board. The terms of reference are available on request from the Company Secretary.
The Committee has reviewed the requirement for an internal audit function and has decided that after careful consideration it is not appropriate
for the Company due to the small size of the Group’s operations. The Audit Committee undertakes an annual risk appraisal which includes a
review of the internal financial controls of the Company.
The Committee also reviews the levels of audit and non-audit services that are provided by the external auditors and reviews the type of 
work to ensure that auditor independence and objectivity are maintained. The Committee has also discussed with the external auditors their
independence, and has received and reviewed written disclosures from the external auditors as required by the Auditing Practice Board’s
International Standard on Auditing (ISA)(UK and Ireland) 260 “Communication of audit matters with those charged with governance”.
The Audit Committee met four times in 2005 and all members were present.
INTERNAL CONTROL
The Group fully complies with the Combined Code’s provisions on internal control, having established procedures to implement the guidance
issued in September 1999 as the Turnbull Report, and by reporting in accordance with that guidance.
The Board has established a continuous process for identifying, evaluating and managing the significant risks faced by the Group. Identification
and evaluation of risks is an integral part of the Board’s business planning process.
The Board is also responsible for ensuring that the Group maintains a sound system of internal control to address those risks and, therefore
to safeguard shareholders’ investments and the Group’s assets. In compliance with the Combined Code, the Board undertakes a specific review,
which will be revisited at least annually, to evaluate the effectiveness of the process of identifying, evaluating and managing risks. The review
covers all controls, including financial, operational and risk management controls. The Board also reviews the effectiveness of the Group’s system
of internal control.
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 20 Monitoring internal controls have and will continue to include the scrutiny and in depth review of reports prepared by management. These
include detailed annual budgets and monthly analyses of variance to budget. The composition of the Board and of senior management is aimed
at providing an appropriate range of knowledge, skill and experience in scientific, clinical and commercial matters. The management of the Company
actively promotes the values of integrity and professionalism, and the maintenance of high ethical standards. All weaknesses identified will be
reviewed. As part of this process the Audit Committee will consider and report to the Board on any matters arising from the work undertaken
by the external auditors and will undertake a periodic review to consider the need to establish an internal audit function.
There are inherent limitations in any system of internal control. Internal controls can only manage and not eliminate the risk of a failure to achieve
business objectives or of other losses. Internal controls can therefore provide only reasonable, and not absolute, assurance against material
misstatement or loss.
REMUNERATION COMMITTEE
The Remuneration Committee is comprised of two independent Non-executive Directors, Dr Peter Johnson (the Committee Chairman) and 
Mr T Ronald Irwin. The Company Chairman, Mr Alan Goodman is an ex officio member and exempts himself when his remuneration is being
discussed. It makes recommendations to the Board on the Group’s policy for Executive Directors and senior management remuneration and
determines the individual remuneration packages on behalf of the Board for the Executive Directors and senior management of the Company.
The remuneration of Non-executive Directors is made by the Board as a whole. The detailed terms of reference of the Remuneration Committee
have been established in a document which has been approved by the Board. Further matters are covered in the Report of the Board to
Shareholders on Directors’ Remuneration. Meetings are held as and when necessary although there will be at least one meeting a year. There
were four meetings in 2005 and all members were present.
NOMINATIONS COMMITTEE
The Nominations Committee, which is chaired by Mr T Ronald Irwin, makes recommendations to the Board regarding all new Board appointments.
The Nominations Committee members are Mr Alan Goodman, Mr T Ronald Irwin and Dr Peter Johnson. The Committee assesses candidates of
suitable knowledge and quality for consideration by the Board as potential Directors of the Company. The Committee also considers succession
planning at Board level. In addition, the Committee makes recommendations to the Board relating to the membership of the Audit and
Remuneration Committees. The detailed terms of reference of the Nomination Committee have been established in a document which has been
approved by the Board. The terms of reference are available on request from the Company Secretary. There were no meetings in 2005.
RELATIONS WITH SHAREHOLDERS
The Board attaches a high priority to effective communications with all shareholders. The announcement of interim and full year results is used
as an opportunity for shareholders to enter into a dialogue with the Company. Major shareholders are encouraged to meet and talk to the Chairman
and the Non-executive Directors at any time. The Chairman and Chief Executive had regular dialogue with major shareholders during the year. 
In addition the Company has established an Internet website (www.cenes.com) to further aid communications. All of the Company’s press
releases, as well as other information on the Company including the current share price can be accessed through the website.
The Directors seek to build on a mutual understanding of objectives between the Company and its institutional shareholders by making regular
presentations, obtaining feedback and providing training to those involved in investor relations. The relationship with, and views of, the Company’s
shareholders are discussed at all Board meetings.
The Board actively encourages participation at the Annual General Meeting which is the principal forum for dialogue with private shareholders.
The Board is available at the Annual General Meeting to present and comment on recent developments in the business and the implementation
of the business strategy.
21 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 21 The principal function of the Remuneration Committee is to determine, on behalf of the Board, the remuneration and other benefits of the
Executive Directors, including pension contributions, share options, bonus payments and service contracts. The fees paid to Non-executive Directors
are determined by the Board as a whole. Non-executive Directors do not receive bonuses or pension contributions.
The Committee gives full consideration to the provisions set out in Schedule B of the Combined Code in determining appropriate 
remuneration packages.
THE REMUNERATION PACKAGE
The Remuneration Committee is aware that it must attract and retain individuals of the highest calibre by continuing to offer packages that
are fair and reasonable for the responsibilities involved. The Committee endeavours to ensure that such packages are sufficiently dependent on
achievement to motivate individuals to continue to contribute to the success of the Company. The Remuneration Committee is sensitive to the
pay and employment conditions elsewhere in the Company when considering executive pay and annual salary increases. The Chairman of the
Remuneration Committee is Dr Peter Johnson.
Basic salary – the basic salary of each Executive Director is determined by the Remuneration Committee, taking into account the individual’s
performance, the achievement of personal objectives and basic salaries in companies whose activities and size are comparable to those of 
CeNeS Pharmaceuticals plc.
Bonus arrangements – Director’ bonuses are discretionary and are approved by the Remuneration Committee. The bonuses are linked to
performance against specific targets for the Group. The maximum achievable bonus is not normally to be above 50% of basic salary. Details 
of bonuses awarded for 2005 are shown in the table on page 23.
Pension contributions – the Group makes defined contributions to personal pension arrangements on behalf of the Executive Directors at
a defined percentage of 10% of salary, excluding bonus, car allowance or other forms of remuneration.
Share options – all Executive Directors are entitled to participate in the Company’s share option schemes. The performance criteria for the share
option schemes are disclosed on page 24. Any options granted thereunder are approved by the Remuneration Committee.
SERVICE CONTRACTS
Each of the Directors has a service agreement or letter of appointment with the Company. Details of the terms of employment (including salary)
are set out below:
Alan Gilbert Goodman
Alan Gilbert Goodman has a service contract with the Company dated 17 November 1999. Mr Goodman is currently Chairman of the Company
and his salary in 2005 was £108,950. The agreement provides that Mr Goodman spends two days per week working on the Group’s business.
The agreement is for an initial term of twelve months and thereafter may be terminated by either party on twelve months’ notice. 
Mr Goodman is also entitled to a pension contribution equal to 10% of his salary, permanent health insurance, life insurance cover, private
medical insurance and a company car. There are no provisions in the service agreement for compensation upon early termination of 
Mr Goodman’s contract. 
Neil Robert Clark
Neil Robert Clark has a service contract with the Company dated 14 August 2000. Mr Clark is currently Chief Executive of the Company and 
his salary in 2005 was £176,769. The agreement is for an initial term of twelve months and thereafter may be terminated by either party on 
twelve months’ notice. Mr Clark is also entitled to a pension contribution equal to 10%. of his salary, permanent health insurance, life insurance
cover, private medical insurance and a car allowance of £5,000. There are no provisions in the service agreement for compensation upon early
termination of Mr Clark’s contract. 
T Ronald Irwin
T Ronald Irwin was appointed a Non-executive Director of the Company by a letter of appointment with effect from 13 December 1999
receiving Directors’ fees of £22,000 per annum. Mr Irwin’s total fees in 2005 were £29,500, including fees for his roles as Chairman of the Audit
Committee and as a member of the Remuneration Committee. The appointment as a Non-executive Director may be terminated by either party
on three month’s notice.
Dr Peter Johnson
Dr Peter Johnson was appointed a Non-executive Director of the Company by a letter of appointment with effect from 16 October 2003
receiving Directors’ fees of £22,000 per annum. Dr Johnson’s total fees in 2005 were £29,500, including fees for his roles as Chairman of the
Remuneration Committee and as a member of the Audit Committee. The appointment as a Non-executive Director may be terminated by
either party on three month’s notice.
Alan Smith
Alan Smith was appointed a Non-executive Director of the Company by a letter of appointment with effect from 8 January 2004 receiving
Directors’ fees of £22,000 per annum. Mr Smith’s total fees in 2005 were £22,000. The appointment may be terminated by either party on 
three month’s notice.
Each Non-executive Director is also entitled to reimbursement of out of pocket expenses.
22 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
REMUNERATION REPORT
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 22 23 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
TOTAL SHAREHOLDER RETURN
The graph below shows the Total Shareholder Return performance of the Company in comparison to the FTSE All Share, FTSE AIM and the 
UK Bloomberg Biotech indices over the past five years.
The FTSE All Share is chosen as an appropriate index because it is used to measure the Company’s performance in assessing the exercising of
share options under the Company schemes. CeNeS is listed on the Alternative Investment Market (“AIM”). The UK Bloomberg Biotech index is
composed of biotechnology companies listed on the London Stock Exchange.
DIRECTORS’ SHAREHOLDINGS
The Directors’ beneficial interests in the shares of the Company are shown below. None of the Directors has any other beneficial interest in the
shares of any other group companies.
Interest in Interest in 
ordinary shares ordinary shares
of 1p each of 1p each 
31 December 31 December 
2005 2004
Note Number Number
Mr T R Irwin 404,333 344,333
Mr N R Clark 434,968 314,968
Mr A G Goodman 1, 2 15,843,866 14,743,866
Dr P Johnson 133,333 133,333
Notes:
(1) 4,638,176 (2004: nil) of these ordinary shares are held by ATM Investments Limited, a company limited by shares with Mr Goodman as a
Director. During the year 4,638,176 ordinary shares were transferred to ATM Investments Limited from ATM Global Investments Limited.
1,600,000 of these ordinary shares are held by Avlar Bioventures Limited, a company controlled by Alan Goodman.
(2) Mr Goodman, the Chairman of CeNeS, is also a Director of Avlar Bioventures Limited and a Limited Partner in the funds it manages. One 
of the funds managed by Avlar Bioventures Limited has an interest in 26,807,760 ordinary shares in CeNeS as a result of the acquisition of
TheraSci Ltd by CeNeS in November 2003.
(3) Mr Smith, a Non-executive Director of CeNeS, is also Chairman of Avlar Bioventures Limited. One of the funds managed by Avlar Bioventures
Limited has an interest in 26,807,760 ordinary shares in CeNeS as a result of the acquisition of TheraSci Ltd by CeNeS in November 2003.
AUDITABLE INFORMATION
The following information has been audited by the Company’s auditors, PricewaterhouseCoopers LLP, as required by Schedule 7A to the
Companies Act 1985.
DIRECTORS’ REMUNERATION
The remuneration paid in respect of Directors who served during the year was as follows:
Taxable Pension
benefits Pension Total Subtotalcontributions Total
Fees Basic salary Bonus Note (3) contributions 2005 2004 2004 2004
Director £££££ £ £££
Executive
Mr N R Clark (Note 4) — 176,769 30,625 1,740 17,194 226,328 204,174 13,505 217,679
Mr A G Goodman — 108,950 19,066 — 10,895 138,911 155,477 10,145 165,622
Non-executive
Mr T R Irwin (Note 1) 29,500 — — — — 29,500 26,625 — 26,625
Dr P Johnson (Note 2) 29,500 — — — — 29,500 26,625 — 26,625
Mr A Smith 22,000 — — — — 22,000 21,000 — 21,000
Total 81,000 285,719 49,691 1,740 28,089 446,239 433,901 23,650 457,551
Notes:
(1) These amounts represent fees payable to Irwin Associates International on behalf of Mr T R Irwin’s services.
(2) These amounts represent fees payable to Johnson Partners on behalf of Dr P Johnson’s services.
(3) Non-pensionable taxable benefits include medical insurance.
(4) Basic salary for Mr Clark includes a car allowance of £5,000 (2004: £5,000).
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 23 24 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
INTEREST IN SHARE OPTIONS
As at Granted Exercised Lapsed As at 
1 January during during during 31 December Earliest  
2005 the year the year the year 2005 Exercise Exercise Expiry 
Directors’ options Note Number Number Number Number Number price date date
Mr N R Clark 2,5 100,961——— 100,961 £1 in aggregate 30-Jun-03 03-Jul-10
2,5 1,176,563——— 1,176,563 £1 in aggregate 31-Dec-04 31-Dec-11
2,5 1,647,500——— 1,647,500 £1 in aggregate 01-Aug-06 01-Aug-13
2,5 1,500,000——— 1,500,000 £1 in aggregate 20-Apr-07 20-Apr-14
3,673,170——— 73,170 82p 11-May-03 11-May-07
115,230——— 15,230 4.9p Note 1 02-Mar-06
1 101,538——— 101,538 4.9p Note 1 27-Oct-06
3,6 1,172,000——— 1,172,000 7.8p 22-Dec-07 22-Dec-11
5,786,962——— 5,786,962
Mr A G Goodman 1 2,023,864——— 2,023,864 4.9p Note 1 14-Jan-09
2,5 126,923——— 126,923 £1 in aggregate 19-Jun-03 30-Jun-10
2,5 928,125——— 928,125 £1 in aggregate 31-Dec-04 31-Dec-11
2,5 1,299,375——— 1,299,375 £1 in aggregate 01-Aug-06 01-Aug-13
2,5 800,000——— 800,000 £1 in aggregate 20-Apr-07 20-Apr-14
3,6 476,334——— 476,334 7.8p 22-Dec-07 22-Dec-11
5,654,621——— 5,654,621
Notes:
(1) Each of Mr A G Goodman, Mr A G Goodman’s spouse, Mrs E Goodman and Mr N R Clark have entered into option agreements with 
CeNeS Limited pursuant to which they have a right to subscribe at par for a number of shares in CeNeS Limited. In the event that the
option is exercised (the end date for exercising being seven years from the date of grant of the option) the optionholder will be under 
an obligation to transfer his ordinary shares in CeNeS Limited to CeNeS Pharmaceuticals plc in return for approximately 20.31 1p ordinary
shares for each CeNeS Limited ordinary share.
(2) These options have been granted under the CeNeS Pharmaceuticals plc Executive Share Option Plan and have a performance target linked
to the FTSE All-Share 900 companies’ performance over a period of three years (see note 5).
(3) Options granted under the CeNeS Pharmaceuticals plc Unapproved Share Option Scheme (see note 6).
(4) Subject to the rules of the relevant option scheme and the agreement of the Remuneration Committee, Directors and employees may have
the right to exercise their options awarded under the relevant schemes within a six month period following the termination of their
employment contracts.
(5) Performance condition schedule for the CeNeS Pharmaceuticals plc Executive Share Option Plan – The Performance Target is that the
growth in the Company’s share price over a three year period (starting with the date of grant of the Option) must exceed the growth in
total shareholder return (“TSR”) for the FTSE A All-Share 900 companies (excluding investment companies) over that period. Options may be
exercised in full only if the growth of the Company’s share price over a three year period commencing on the date of grant would put the
Company at the same level or above the Company which is ranked 225th (with the Company being granted 1st) of the FTSE A All-Share
900 companies (excluding investment companies) ranked according to the growth in TSR over that period. Options may be exercised over
half the number of shares in the Company to which they relate if the growth in the Company’s share price over a fixed three year period
commencing on the date of grant would put the Company at the same level or above the median company of the FTSE A All-Share 900
companies (excluding investment companies) ranked according to growth in TSR over that period. If the Performance Target is not met
over the fixed three year period, it shall be re-tested over a four year period or a five year period (each period having the same start date).
If the Performance Target is not met, the Option will lapse.
(6) Performance condition schedule for the CeNeS Pharmaceuticals plc Approved and Unapproved Share Option schemes – The exercise of the
option will be subject to the satisfaction of a performance target. The performance target is that the growth in the Company’s share price
over a three year period (starting with the date of the grant of the option) must exceed the growth in total shareholder return (“TSR”) for
the FTSE A All-Share 900 (excluding investment companies) over that period. Options may be exercisable in full only if the growth in the
Company’s share price over a fixed three year period commencing on the date of grant would put the Company at the same level or above
the median company of the FTSE All-Share 900 Companies (excluding investment companies) ranked according to the growth in TSR over
that period. If the performance target is not met over the fixed three year period, it may be re-tested over a four year period or a five year
period (each period having the same start date).
The market price of the Company’s shares at 31 December 2005 was 8 pence.
The highest and lowest prices during the year were 10.25 pence and 6.63 pence respectively.
DR PETER JOHNSON
Chairman of the Remuneration Committee
12 June 2006
REMUNERATION REPORT
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 24 We have audited the Group and parent company Financial Statements (the ‘’Financial Statements’’) of CeNeS Pharmaceuticals Plc for the year
ended 31 December 2005 which comprise the Consolidated Profit and Loss Account, the Consolidated and Company Balance Sheets, the
Consolidated Cash Flow Statement, the Consolidated Statement of Total Recognised Gains and Losses and the related notes. These Financial
Statements have been prepared under the accounting policies set out therein.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors’ responsibilities for preparing the Annual Report and the Financial Statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the Financial Statements in accordance with relevant legal and regulatory requirements and International Standards
on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Company’s members as a body in
accordance with Section 235 of the Companies Act 1985 and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Financial Statements give a true and fair view and are 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 other transactions is not disclosed.
We read other information contained in the Annual Report, and consider whether it is consistent with the audited Financial Statements.
This other information comprises only the Highlights, the Chairman’s Statement, the Chief Executive’s Review, the Financial Review, Board
of Directors and Senior Management, Scientific Advisory Board, the Directors’ Report, Corporate Governance, the unaudited part of the
Remuneration Report and Company Information Advisors and Contacts. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the Financial Statements. Our responsibilities do not extend to any other information.
We also, at the request of the Directors (because the Company applies the Financial Services Authority listing rules as if it were a listed
Company), review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions of the 2003 
FRC 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 Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness 
of the Group’s corporate governance procedures or its risk and control procedures.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. 
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Statements. It also includes 
an assessment of the significant estimates and judgments made by the Directors in the preparation of the Financial Statements, and of whether 
the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide 
us with sufficient evidence to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the
Financial Statements.
OPINION
In our opinion the Financial Statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, 
of the state of the Group’s and the parent company’s affairs as at 31 December 2005 and of the Group’s loss and cash flows for the year then
ended and have been properly prepared in accordance with the Companies Act 1985.
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants and Registered Auditors
Cambridge
12 June 2006
25 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
INDEPENDENT AUDITORS’ REPORT 
to the members of CeNeS Pharmaceuticals plc
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 25 2005 2004
Notes £’000 £’000
Turnover 2 55 54
Gross profit 55 54
Research and development costs (4,893) (3,475)
Administrative expenses (3,103) (2,434)
Other operating income 3 174 147
Operating loss (7,767) (5,708)
Net interest receivable 4 535 327
Loss on ordinary activities before taxation 5 (7,232) (5,381)
Tax credit on ordinary activities 9 625 469
Loss for the year 19 (6,607) (4,912)
Loss per ordinary share - basic and diluted 10 (1.6p) (1.7p)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2005
2005 2004
£’000 £’000
Loss for the year (6,607) (4,912)
Loss on foreign currency translation — (3)
Total recognised gains and losses for the year (6,607) (4,915)
26 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT 
for the year ended 31 December 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 26 Group
Group 2004 Company Company
2005 Restated 2005 2004
Notes £’000 £’000 £’000 £’000
Fixed assets
Intangible assets 11 6,513 7,502 — —
Tangible assets 12 36 18 — — 
Investments 13 — — 11,297 11,333
6,549 7,520 11,297 11,333
Current assets
Debtors 14 1,535 1,437 11 153
Short term investments — 10,000 — 5,000
Cash at bank and in hand 8,464 4,320 14 269
9,999 15,757 25 5,422
Creditors: amounts falling due within one year 15 (1,471) (1,644) (178) (125)
Net current assets 8,528 14,133 (153) 5,297
Total assets less current liabilities 15,077 21,633 11,144 16,630
Creditors: amounts falling due after more than one year — (7) — —
Provisions for liabilities and charges 17 (1,009) (915) — — 
Net assets 14,068 20,711 11,144 16,630
Capital and reserves
Called up share capital 18 4,098 4,098 4,098 4,098
Share capital to be issued 18 3,899 3,935 3,899 3,935
Share premium account 19 113,080 113,080 113,080 113,080
Capital redemption reserve 19 15,697 15,697 15,697 15,697
Other reserves 19 10,396 10,396 26 26
Profit and loss account 19 (133,102) (126,495) (125,656) (120,206)
Equity shareholders’ funds 20 14,068 20,711 11,144 16,630
These Financial Statements were approved by the Board of Directors on 12 June 2006 and were signed on its behalf by:
NEIL CLARK ALAN GOODMAN
Chief Executive Chairman
27 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
CONSOLIDATED AND COMPANY BALANCE SHEETS
as at 31 December 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 27 2005 2004
Notes £’000 £’000
Net cash outflow from operating activities 21 (6,855) (4,805)
Returns on investments and servicing of finance
Interest received 563 328
Interest paid (5) (7)
Net cash inflow from returns on investment and servicing of finance 558 321
Taxation
Research and development tax credit 516 102
Capital expenditure
Payment to acquire tangible fixed assets (28) (24)
Receipts from sale of tangible fixed assets — 1
Net cash outflow from capital expenditure (28) (23)
Acquisitions
Proceeds from sale of pharmaceutical products — 220
Net cash inflow from acquisitions — 220
Cash outflow before use of liquid resources and financing (5,809) (4,185)
Decrease/(increase) in short term deposits with banks 10,000 (2,300)
Net cash inflow/(outflow) before financing 4,191 (6,485)
Financing
Issue of ordinary share capital — 10,674
Repayment of loans (47) (64)
Net cash (outflow)/inflow from financing (47) 10,610
Increase in cash 22 4,144 4,125
2005 2004
Notes £’000 £’000
Increase in cash in the period 22 4,144 4,125
Cash outflow due to changes in debt and finance leasing 47 64
Movements in deposits (10,000) 2,300
Movement in net funds (5,809) 6,489
Net funds brought forward 14,266 7,777
Net funds carried forward 22 8,457 14,266
28 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
for the year ended 31 December 2005
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 28 29 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
1. ACCOUNTING POLICIES
The Financial Statements have been prepared in accordance with applicable accounting standards in the United Kingdom. A summary of the
more important accounting policies, which have been reviewed by the Board of Directors in accordance with Financial Reporting Standard 
(‘FRS’) 18 ‘Accounting policies’, is set out below, together with an explanation of where changes have been made to previous policies on the
adoption of new accounting standards in the year.
The Financial Statements are prepared in accordance with the historical cost convention.
Changes in accounting standards
The Group has adopted FRS 21 ‘Events after the balance sheet date’, FRS 22 ‘Earnings per share’ and FRS 25 ‘Financial Instruments: Disclosure and
presentation’ in these Financial Statements.
a) Basis of consolidation
The Group Financial Statements consolidate the Financial Statements of CeNeS Pharmaceuticals plc and its subsidiary undertaking, CeNeS Drug
Delivery Limited, under merger accounting principles and its subsidiary undertakings CeNeS Limited, CeNeS Pharmaceuticals Inc., Cambridge
Cognition Guarantee Limited, CeNeS (Bermuda) Limited and TheraSci Limited under acquisition accounting principles.
b) Intangible fixed assets
Goodwill, arising on the acquisition of subsidiary undertakings and businesses, representing the excess of the fair value of the consideration
given over the fair value of the identifiable assets and liabilities acquired, is capitalised as an asset on the balance sheet and amortised over its
useful economic life which the Directors estimate to be as follows:
CeNeS Limited 15 years
TheraSci Limited 5 years
Provision is made for any impairment.
c) Intangible assets – licences
Licences with an immediate defined revenue stream are included at cost and depreciated in equal instalments over a period of five years which
is their estimated useful economic life. Provision is made for any impairment.
Other licences acquired are expensed immediately as part of research and development costs.
d) Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on 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:
Leasehold improvements over the shorter of the lease term or 10 years
Fixtures, fittings and computers over 2 – 7 years
Plant and machinery over 5 – 10 years
Laboratory equipment over 3 – 5 years
e) Investments
Investments in subsidiary companies which are accounted for under merger accounting principles are shown at the nominal value of shares
issued in accordance with the provisions of the Companies Act 1985.
Investments in subsidiary companies which are accounted for under acquisition accounting principles are shown at cost less any provision
for impairment.
Short term investments comprise bank deposits which are not repayable on demand. Movements in such investments are included under
“use of liquid resources” in the Group’s Cash Flow Statement.
f) Foreign currency
The assets and liabilities of subsidiaries denominated in foreign currencies have been translated into sterling at rates of exchange ruling at the
balance sheet date. Profit and loss accounts of overseas subsidiary undertakings are translated at the monthly exchange rates during the year.
Differences on exchange arising from the retranslation of the opening net investment in subsidiary companies are taken to reserves and
reported in the Consolidated Statement of Total Recognised Gains and Losses.
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 this date.
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 29 30 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
1. ACCOUNTING POLICIES (CONTINUED)
g) Leasing and hire purchase commitments
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.
Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term, except
where the period to the review date on which the rent is first expected to be adjusted to the prevailing market rate is shorter than the full
lease term, in which case the shorter period is used.
Provisions are made in respect of onerous leases to the extent that the Directors believe that costs will be incurred under the terms of the lease
with no benefit to the Group.
h) Taxation
Current tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantially
enacted by the balance sheet date.
Provision is made for deferred taxation, in accordance with FRS 19, ‘Deferred Tax’ on all material timing differences. Deferred tax assets are
recognised to the extent that they are regarded as recoverable. Deferred tax assets and liabilities are not discounted.
i) Turnover
Turnover represents amounts receivable from product sales and licence fees net of VAT and other sales related taxes.
Revenue is recognised when there is evidence of an arrangement, delivery of the product has occurred, the selling price is determinable and
recovery of the debt is reasonably assured.
i. Product sales are recognised as revenue upon shipment to customers.
ii. Licence fees are deferred and recognised over the period of the associated research and development agreement.
iii. Revenue is recognised immediately in respect of sales of technology where there are no further obligations to provide any services under
the terms of the sale.
j) Research and development
Fixed assets used for research and development are included as tangible fixed assets and written off in accordance with the depreciation policy
above. Other research and development expenditure is charged to the Profit and Loss Account as incurred and includes relevant staff costs as
well as an apportionment of occupancy costs, general overheads and depreciation.
k) Pensions
The Company operates defined contribution schemes for its employees. The amount charged to the Profit and Loss Account in respect of
pension costs is the contributions payable during the year. Differences between contributions payable in the year and contributions actually 
paid are shown either as accruals or prepayments in the balance sheet.
l) Share options
In accordance with the requirements of UITF 17, “Employee share schemes”, a charge is made in the Profit and Loss Account representing the 
intrinsic value at the date of grant of share options awarded under the Group’s Long Term Incentive Plan. As the awards are conditional on certain
performance conditions being met, this is reflected in the number of shares on which the charge is calculated. The charge is credited back to reserves.
m) Financial instruments
The Group’s financial instruments comprise cash, liquid resources, trade debtors and trade creditors, which arise directly from its operations. The
main purpose of these financial instruments is to raise finance for the Group’s operations. The Group does not enter into derivative transactions
for speculative purposes. It has been, throughout the year under review, the Group’s policy that no trading in financial instruments shall be
undertaken. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk and foreign currency risk. The Board
reviews and agrees policies for managing each of these risks and they are summarised in note 27. These policies have remained unchanged
during the year.
2. TURNOVER AND SEGMENTAL INFORMATION
Turnover comprises licence fees. All turnover is derived from the principal activities of the Group, originates in the UK and arises in North America.
3. OTHER OPERATING INCOME
2005 2004
£’000 £’000
Rental income 137 147
Other income 37 —
174 147
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 30 31 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
4. NET INTEREST RECEIVABLE
2005 2004
£’000 £’000
Interest receivable 540 333
Interest on loans (5) (6)
535 327
5. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
The loss on ordinary activities before taxation is stated after charging/(crediting):
2005 2004
£’000 £’000
Auditors’ remuneration:
Audit services
– statutory audit (Company: £9,000 (2004: £9,000)) 33 32
Non-audit services
– reporting accountant fees — 60
– tax compliance and advisory work 19 8
Depreciation of owned assets 9 2
Amortisation of intangible fixed assets 953 953
Operating lease rentals: land and buildings 447 370
Operating lease rentals: other 18 —
Profit on sale of tangible fixed assets — (1)
6. STAFF COSTS
The number of employees (including Executive Directors) at 31 December 2005 was 17 (2004: 14). The average monthly number of employees
during the year (including Executive Directors) was:
2005 2004
Number Number
Administration 8 8
Research and development 8 6
16 14
Their aggregate remuneration comprised:
2005 2004
£’000 £’000
Wages and salaries 1,359 1,272
Social security costs 150 147
Other pension costs (see note 24) 95 81
1,604 1,500
The Company had no employees in 2005 or 2004 and no staff costs were incurred by the Company during the year ended 31 December 2005
(2004: £nil).
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 31 32 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
7. DIRECTORS’ REMUNERATION
2005 2004
£’000 £’000
Aggregate emoluments 418 434
Pension costs 28 24
446 458
Highest paid Director
Aggregate emoluments 209 204
Pension costs 17 14
226 218
The disclosure of individual Directors’ remuneration, share options, pension contributions and pension entitlements are shown in the
Remuneration Report on pages 22 to 24.
Retirement benefits are accruing to two Directors (2004: two) under defined contribution pension schemes.
8. LOSS FOR THE FINANCIAL YEAR
As permitted by Section 230 of the Companies Act 1985, the parent company’s Profit and Loss Account has not been included in these Financial
Statements. The parent company’s loss for the financial year was £5,450,000 (2004: £5,055,000).
9. TAX CREDIT ON LOSS ON ORDINARY ACTIVITIES
2005 2004
£’000 £’000
UK corporation tax – research and development tax credits (625) (450)
Adjustment in respect of prior periods — (19)
(625) (469)
Current taxation
The tax result for the period is different from the standard rate of corporation tax in the UK (16%) (2004: 16%).
The differences are explained below:
2005 2004
£’000 £’000
Loss on ordinary activities before tax (7,232) (5,381)
Loss on ordinary activities multiplied by the rate at which UK R&D tax credits may be claimed of 16% (2004: 16%) (1,157) (861)
Effects of:
Expenses not deductible for tax purposes (47) (71)
Accelerated capital allowances and other timing differences 3 (11)
Tax losses unutilised in the year 576 490
Adjustment in respect of prior periods — (19)
Difference in overseas tax rates — 3
Current tax credit for the period (625) (469)
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 32 10. LOSS PER ORDINARY SHARE
The basic and diluted loss per ordinary share is based on a Group loss for the financial year of £6.6 million (2004: £4.9 million) on 409,762,474 
(2004: 282,395,474) ordinary shares, the weighted average number of shares in issue during the year.
11. INTANGIBLE FIXED ASSETS
Licences Goodwill Total
Group £’000 £’000 £’000
Cost
As at 1 January 2005 1,939 50,782 52,721
Adjustment — (36) (36)
As at 31 December 2005 1,939 50,746 52,685
Amortisation
As at 1 January 2005 1,939 43,280 45,219
Charge for the year — 953 953
As at 31 December 2005 1,939 44,233 46,172
Net book value as at 31 December 2005 — 6,513 6,513
Net book value as at 31 December 2004 — 7,502 7,502
The adjustment to goodwill arises as a result of a reduction in the original assessment of the fair value of the contingent consideration payable
(note 18).
The Company has no intangible fixed assets (2004: £nil).
12. TANGIBLE FIXED ASSETS
Computers,
Plant, machinery and office equipment, Furniture
leasehold improvements laboratory equipment and fittings Total
Group £’000 £’000 £’000 £’000
Cost
As at 1 January 2005 1,908 56 305 2,269
Additions —— 27 27
As at 31 December 2005 1,908 56 332 2,296
Depreciation
As at 1 January 2005 1,908 56 287 2,251
Charge for the year — — 9 9
As at 31 December 2005 1,908 56 296 2,260
Net book value as at 31 December 2005 —— 36 36
Net book value as at 31 December 2004 — — 18 18
There are no items held under existing finance lease or hire purchase agreements included within fixed assets.
The Company has no tangible fixed assets (2004: £nil).
33 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 33 13. INVESTMENTS
In subsidiary companies:
Company
Cost £’000
As at 1 January 2005 22,375
Adjustment (36)
As at 31 December 2005 22,339
Amounts written off
As at 1 January 2005 and 31 December 2005 (11,042)
Net book value
As at 31 December 2005 11,297
As at 31 December 2004 11,333
The adjustment to goodwill arises as a result of a reduction in the original assessment of the fair value of the contingent consideration payable
(note 18).
% holding
Country of (all classes
Summary of subsidiary undertakings: incorporation of shares)
Subsidiary undertakings held directly
CeNeS Drug Delivery Limited Scotland 100%
CeNeS Limited England 100%
CeNeS Pharmaceuticals Inc. (formerly Cambridge NeuroScience Inc.) USA 100%
CeNeS (Bermuda) Limited Bermuda 100%
Cambridge Cognition Guarantee Limited England 100%
TheraSci Limited England 100%
The principal activity of CeNeS Limited is the development of pharmaceutical products for the treatment of pain and disorders of the central
nervous system. The activities of CeNeS Drug Delivery Limited and TheraSci Limited have been discontinued. Cambridge Cognition Guarantee
Limited, CeNeS Pharmaceuticals Inc. and CeNeS (Bermuda) Limited are dormant companies.
14. DEBTORS
Group Group Company Company
2005 2004 2005 2004
Debtors: amounts falling due within one year £’000 £’000 £’000 £’000
Trade debtors 6 45 — —
Other debtors 267 288 8 144
Corporation tax recoverable 900 791 — —
Prepayments and accrued income 214 165 3 9
1,387 1,289 11 153
Debtors: amounts falling due after more than one year
Loan note - Xention Limited 148 148 — —
1,535 1,437 11 153
The loan note was issued by Xention Limited to CeNeS Limited in 2002 as part of its consideration for the acquisition of the Channelwork
division from CeNeS Limited. The loan note was valued at £375,000 and is receivable on 31 December 2009.
The fair value assigned to the loan notes is £148,000 to reflect the risk that the full value of the loan note may not be recoverable.
34 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 34 35 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group
Group 2004 Company Company
2005 Restated 2005 2004
£’000 £’000 £’000 £’000
Trade creditors 859 812 43 53
Other taxation and social security 45 38 — —
Other loans 7 47 — —
Other creditors 18 16 — —
Accruals 542 731 135 72
1,471 1,644 178 125
An accrual for future lease costs of £366,000 which was included in accruals in 2004 is now included in provisions (see note 17).
16. CREDITORS: AMOUNTS FALLING AFTER MORE THAN ONE YEAR
Group
Group 2004 Company Company
2005 Restated 2005 2004
Other creditors £’000 £’000 £’000 £’000
Other loans — 7 — —
An accrual for future lease costs of £549,000 which was included in accruals in 2004 is now included in provisions (see note 17).
The maturity of the other loans at the year end was as follows:
Group
Group 2004
2005 Restated
£’000 £’000
Amounts falling due:
Within one year 7 47
Between one and two years — 7
7 54
Loans include amounts due to North Ayrshire Council totalling £7,000 (2004: £17,000). Monthly payments will be made until April 2006 and the
interest rate is 5%. The loan is secured by a floating charge over the assets of the Company and by cross guarantees granted by the Company
and CeNeS Pharmaceuticals plc.
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 35 36 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
17. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred tax assets have not been recognised as the Directors consider that this would be inappropriate as the Group is not expected to realise
sufficient profits in the foreseeable future. This will be reassessed at such time as the Group makes a profit. The amount unrecognised of the
total potential liability/(asset) is as follows:
2005 2004
Amount Amount Amount Amount
recognised unrecognised recognised unrecognised
Group £’000 £’000 £’000 £’000
Tax effect of timing differences:
Excess of capital allowances over depreciation — (130) — (122)
Short term timing differences — (2) ——
Tax effect of losses carried forward — (14,216) — (13,149)
Other provision — (14) — (14)
— (14,362) — (13,285)
2005 2004
Amount Amount Amount Amount
recognised unrecognised recognised unrecognised
Company £’000 £’000 £’000 £’000
Tax effect of timing differences:
Short term timing differences — (2) — (2)
Tax affect of losses carried forward — (1,924) — (1,778)
— (1,926) — (1,780)
The Group has reviewed and recalculated the onerous lease provision of £1.0 million (31 December 2004: £0.9 million) which reflects
the expected liability relating to the leases of premises in Scotland that are no longer required by the Group. Of this provision, £0.5 million
(2004: £0.6 million) is due after more than one year and £0.5 million (2004: £0.4 million) is due within one year.
Lease provision
Restated Total
£’000 £’000
Provision at 1 January 2005 (previously included in accruals) 915 915
Charged to the Profit and Loss Account 94 94
At 31 December 2005 1,009 1,009
The maturity of the provision at the year end was as follows:
Group Group
2005 2004
£’000 £’000
Amounts falling due:
Within one year 525 359
After more than one year 484 556
1,009 915
The Company has no provision for liabilities and charges (2004: £nil).
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 36 37 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
18. CALLED UP SHARE CAPITAL
The share capital of the Company is shown below:
2005 2005 2004 2004
Number £’000 Number £’000
Authorised
Ordinary shares of 1p each 1,013,289,538 10,133 1,013,289,538 10,133
Number Issued Share capital
of ordinary share capital to be issued
1p shares £’000 £’000
Allotted, issued and fully paid
At 1 January and 31 December 2005 409,762,474 4,098 3,935
Lapse of share options — — (36)
409,762,474 4,098 3,899
Shares to be issued
Following the reverse takeover of Core Group plc by CeNeS Limited in December 1999 there are 8,032,747 ordinary 1p shares to be issued 
as deferred consideration to holders of options over ordinary shares in CeNeS Limited. These were valued at 45p per share at the date of the
reverse takeover of Core Group plc by CeNeS Limited giving a value of £3,215,000 after deducting £396,000 receivable by CeNeS on exercise 
of the options. During the year options over 80,212 ordinary 1p shares with a value of £36,000 lapsed.
There are also 868,463 (2004: 868,463) ordinary 1p shares to be issued as deferred consideration to holders of options over shares in Cambridge
NeuroScience Inc. These were valued at approximately 66p per share at the date of the takeover of Cambridge NeuroScience Inc in December
2000 giving them a value of £390,000 after deducting £185,000 receivable by CeNeS on exercise of the options.
On 21 November 2003, the Company acquired the entire share capital of TheraSci Limited (“TheraSci”) for a total consideration of up to £3.7 million
to be satisfied by the allotment of up to 45,726,209 ordinary 1p shares. An initial tranche of ordinary 1p shares were allotted to the TheraSci
shareholders on 21 November 2003. A second tranche of 4,576,719 ordinary 1p shares, valued at £371,000, were allotted on 12 February 2004
and in addition a further allotment of 3,622,558 ordinary 1p shares, valued at £294,000, is due subject to the achievement of a project milestone. 
Schedule of options outstanding as at 31 December 2005
As at
Note 31/12/2005 Exercise price Date of grant
Approved share option scheme 1 400 £0.52 9 November 1998
Unapproved share option scheme 1 103,658 £0.82 11 May 2000
Approved share option scheme 1 63,413 £0.82 11 May 2000
Approved share option scheme 1 9,422 £0.82 26 September 2000
Unapproved share option scheme 1 24,540 £0.82 3 October 2000
Unapproved share option scheme 1 375,000 £0.54 18 December 2000
Unapproved share option scheme 1 2,198,125 £0.08 1 January 2002
Approved share option scheme 1 697,875 £0.08 1 January 2002
Unapproved share option scheme 1 3,640,000 £0.04 1 August 2003
Unapproved share option scheme 1 1,000,000 £0.07 21 November 2003
Unapproved share option scheme 1 6,000,000 £0.10 20 April 2004
Unapproved share option scheme 1 6,018,250 £0.08 22 December 2004
Unapproved share option scheme 1 300,000 £0.09 5 May 2005
Unapproved share option scheme 1 750,000 £0.08 1 November 2005
Unapproved share option scheme 1 100,000 £0.07 30 November 2005
Executive Share Option Plan 2 126,923 £1 in aggregate 30 June 2000
Executive Share Option Plan 2 100,961 £1 in aggregate 3 July 2000
Executive Share Option Plan 2 2,104,688 £1 in aggregate 31 December 2001
Executive Share Option Plan 2 2,946,875 £1 in aggregate 1 August 2003
Executive Share Option Plan 2 2,300,000 £1 in aggregate 20 April 2004
Notes:
1) Subject to the satisfaction of any applicable condition of exercise, options may be exercised in whole or in part at any time and from time 
to time after the earliest of the third anniversary of grant, the death of the option holder, or the option holder ceasing to be a Director or
employee of the Company by reason of injury, disability or redundancy, or retirement, or at the discretion of the Remuneration Committee,
for any reason. No options were excercised (2004: nil) and 120,951 (2004: 212,195) options lapsed during the year.
2) The CeNeS Incentive Plan (the “Plan”) provides for the grant of rights to acquire shares by way of purchase to eligible employees of CeNeS.
Under the Plan options are granted at an aggregate exercise price of £1 and will normally only vest after the third anniversary of the date of
grant and if the Company’s share price has exceeded the growth in total shareholder return for the FTSE All-Share 900 Companies over that
period. Futher information about the performance targets is shown in the Remuneration Report on page 24.
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 37 38 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
19. RESERVES
Capital Profit
Other redemption Share and loss
reserves reserve premium account
The Group £’000 £’000 £’000 £’000
As at 1 January 2005 10,396 15,697 113,080 (126,495)
Loss for the year to 31 December 2005 — — — (6,607)
As at 31 December 2005 10,396 15,697 113,080 (133,102)
Included in other reserves as at 31 December 2005 is a merger reserve of £10,370,000 and a share option reserve of £26,000.
Capital Profit
Other redemption Share and loss
reserves reserve premium account
The Company £’000 £’000 £’000 £’000
As at 1 January 2005 26 15,697 113,080 (120,206)
Loss for the year to 31 December 2005 — — — (5,450)
As at 31 December 2005 26 15,697 113,080 (125,656)
Other reserves comprise a share option reserve.
20. RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS’ FUNDS
Group Group
2005 2004
£’000 £’000
Loss for the financial year (6,607) (4,912)
Loss on foreign currency translation — (3)
Movement in share capital to be issued (36) (1,867)
Issue of shares — 12,238
Net (decrease)/increase in shareholders’ funds for the year (6,643) 5,456
Opening shareholders’ funds 20,711 15,255
Closing shareholders’ funds 14,068 20,711
21. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2005 2004
£’000 £’000
Operating loss (7,767) (5,708)
Depreciation 9 2
Amortisation of intangible fixed assets 953 953
Profit on sale of tangible fixed assets — (1)
Lapse of share options — (271)
Increase in debtors (11) (6)
(Decrease)/increase in creditors (39) 226
Net cash outflow from operating activities (6,855) (4,805)
22. ANALYSIS AND RECONCILIATION OF NET FUNDS
1 January 31 December
2005 Cash flow 2005
£’000 £’000 £’000
Cash in hand and at bank 4,320 4,144 8,464
Debt due after one year (7) 7 —
Debt due within one year (47) 40 (7)
Short term deposits 10,000 (10,000) —
14,266 (5,809) 8,457
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 38 23. CONTINGENT LIABILITIES AND GUARANTEES
The Company has a guarantee in relation to the lease arrangements for 3 Riverside Way, Irvine, entered into by CeNeS Drug Delivery Limited.
The lease has a 25 year term, commencing 12 February 1998, with a break point at year 20. The annual amount payable is £168,000. As a result
of the restructuring this property is no longer required and the Company is actively seeking to sublet the property.
In September 1999, Core Technologies Limited concluded an agreement to take a lease of new, additional premises adjacent to the main site at
Riverside Way, Irvine. The lease term is for ten years and the annual rental is £186,500. The Company sublet the building until March 2006 and is
currently seeking new tennants.
The Company has reviewed and recalculated the onerous lease provision of £1.0 million (31 December 2004: £0.9 million) which reflects
the expected liability relating to the leases of premises in Scotland that are no longer required by the Group. Of this provision, £0.5 million
(2004: £0.6 million) is due after more than one year and £0.5 million (2004: £0.4 million) is due within one year. In previous years the provision
was included in accruals.
The Company has entered into cross guarantees within the Group as part of its banking arrangements. 
24. PENSION COMMITMENTS
CeNeS has a stakeholder pension scheme which is available to all UK based employees. The pension charge for the year was £95,000
(2004: £81,000). At 31 December 2005 contributions totalling £46,000 (2004: £36,000) were payable to these pension arrangements.
The Core Technologies Pension Scheme has been wound up.
25. OPERATING LEASE COMMITMENTS
Annual obligations under non-cancellable operating leases are as follows:
Land and Land and
buildings Other buildings Other
Group 2005 2005 2004 2004
Expiry date £’000 £’000 £’000 £’000
Within one year 96 1 —1
Within two to five years —17 75 17
After five years 354 — 322 —
450 18 397 18
26. RELATED PARTY TRANSACTIONS
The following fees and expenses were incurred during the period from the associated companies of the Non-executive Directors of the Group
as follows:
Group Group
2005 2004
£’000 £’000
Irwin Associates International (Mr T Ronald Irwin) 29 27
Johnson Partners (Dr Peter Johnson) 29 27
The balances due at the year end and included in creditors and accruals were as follows:
Group Group
2005 2004
£’000 £’000
Irwin Associates International (Mr T Ronald Irwin) — 16
Johnson Partners (Dr Peter Johnson) — 6
Alan Goodman, the Chairman of CeNeS, and Alan Smith, a Non-executive Director of CeNeS are also directors of Avlar Bioventures Limited. 
One of the funds managed by Avlar Bioventures Limited holds 26,807,760 CeNeS ordinary shares after the acquisition of TheraSci Limited in
November 2003. The acquisition was treated as a related party transaction (as defined in the AIM rules).
The Company has taken advantage of the exemption available to parent companies under FRS 8 ‘Related Party Disclosures’ not to disclose
transactions and balances with Group entities which have been eliminated on consolidation.
39 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 39 27. FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise cash and liquid resources and various items arising directly from its operations such as trade debtors
and trade creditors. The Group undertakes certain foreign currency transactions in the course of its operations, predominantly in euros and
US dollars. To date the Group has not hedged any transactional currency exposure.
It is, and has been throughout the year, the Group’s policy that no trading in financial instruments shall be undertaken, other than placing funds
on treasury deposit.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk and liquidity risk. The Board and the
Audit Committee review and agree policies for managing each of these risks and they are summarised below.
Short term debtors and creditors have been excluded from all the following disclosures, other than currency risk disclosures.
Interest rate profile
The Group has no short term deposits at the year end (2004: £10.0 million).
Interest rate profile of the Group’s financial liabilities, which all have fixed interest rates, was as follows:
31 December 2005 31 December 2004
£’000 £’000
Sterling
– Borrowings 7 54
Weighted Weighted average
average interest period for which
rate rate is fixed
% Years
Sterling
– Borrowings 5.0 0.3
The weighted average interest rate is 5.0% (2004: 7.1%). See notes 15 and 16 for details of the maturity of the Group’s financial liabilities.
Interest rate profile of the Group’s financial assets:
During the year cash and short term treasury deposits were the only financial asset within the Group. Cash was subject to floating rates of
interest equal to 1% below base rate and the short term deposits were placed for periods of less than three months at fixed rates of interest
between 4.6% and 4.84% (2004: between 3.8% and 4.78%).
Currency risk
At the end of the year the Group’s individual operations had no (2004: £nil) net monetary assets and liabilities in currencies other than their
functional currency.
Liquidity risk
The Board closely monitors the liquidity of the Group through regular review of financial information and takes appropriate action to reduce
liquidity risk in terms of meeting working capital requirements.
Fair values
There is no difference between the fair value and the carrying value of bank and cash balances, short term deposits and obligations under
finance lease agreements (2004: £nil). Carrying values approximate to fair values because of the short maturity periods of these financial
instruments.
The carrying value of the Xention Limited loan note of £148,000 is considered to approximate fair value. The carrying value of this asset has
previously been written down to reflect the risk that the full face value of the loan note may not be recovered.
28. CAPITAL COMMITMENTS
As at 31 December 2005 capital amounts contracted for, but not provided in the accounts, amounted to £nil (2004: £nil).
40 CeNeS Pharmaceuticals plc Annual Report and Accounts 2005
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2005
_0CEN_2005arb.qxd  16/06/2006  12:37  Page 40 T H E D E S I G N P O R T F O L I O
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