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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 20-F



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(Mark One):

| ̈ | Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934;
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or



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended September 30, 2005;



or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from  to



or



| ̈ | Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of event requiring this shell company
report



Commission file number 000-31116



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CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC

(Exact name of registrant as specified in its charter)



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England and Wales

(Jurisdiction of Incorporation or Organization)



Milstein Building

Granta Park

Cambridge CB1 6GH UK

(Address of Principal Executive Offices)



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Securities to be registered pursuant to Section 12(b) of the Act:

None



Securities to be registered pursuant to Section 12(g) of the Act:



American Depositary Shares

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None



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Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the
annual report.



American Depositary Shares: 3,044,179 as
of September 30, 2005

Ordinary Shares: 51,639,868 as of September 30, 2005



Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:     Yes  x    No ̈Not Applicable ̈



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    Yes ̈No  x



Indicate by check mark which financial statement item the registrant has
elected to follow:     Item 17 ̈Item 18  x



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Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended, certain information for
the Annual Report on Form 20-F of Cambridge Antibody Technology Group plc (the Company or CAT) as indicated below is being incorporated by reference from the Companys Annual Report and Accounts for the year ended
September 30, 2005 (the Annual Report), portions of which are filed as Exhibit 15.1 to this Form 20-F.



Where information is being incorporated by reference as described above, unless otherwise indicated, references below to major headings in the Annual
Report include all information under such major headings, including subheadings, unless such reference is part of a reference to a subheading, in which case such reference includes only the information contained under such subheading.



Information from CATs Reports of Foreign Private Issuer on Form 6-K
filed with the Securities and Exchange Commission on November 25, 2005, November 28, 2005, December 1, 2005, December 5, 2005, December 20, 2005, January 3, 2006 and February 9, 2006 are being incorporated by reference into this
Form 20-F as indicated below. The exhibits to such reports containing the information being incorporated by reference herein are filed as Exhibits 15.2, 15.3, 15.4, 15.5, 15.6, 15.7 and 15.8 to this Form 20-F.



Unless otherwise indicated, all financial information in the Form 20-F is
presented in accordance with generally accepted accounting standards in the United Kingdom (U.K. GAAP).



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FORWARD-LOOKING STATEMENTS



This document includes forward-looking statements. All statements other than statements of historical facts included in this
document, including any statements preceded by, followed by or that include the words targets, plans, believes, expects, aims, intends, will, may,
anticipates or similar expressions or the negative thereof, are forward-looking statements. Forward-looking statements include statements relating to the following:



| |  | future capital expenditures, expenses, revenues, economic performance, financial condition, dividend policy, losses and future prospects;
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| |  | future performance in clinical trials of the product candidates that were developed using CATs technology;
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| |  | the ability of CAT and its collaborators to commercialize products;
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| |  | business and management strategies and the expansion and growth of CATs operations;
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| |  | the effects of government regulation on CATs business;
|- |  | -------------------------------------------------------



| |  | expansion and other development trends of CATs current and future customers and its industry; and
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| |  | acquisitions, including the timing, nature, availability, location and significance of those acquisitions.
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These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of CAT, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements are based on numerous assumptions regarding CATs present and future business strategies and the environment in which CAT will operate in the future. Certain factors that could cause CATs
actual results, performance or achievements to differ materially from those in the forward-looking statements are described in Item 3.D (Risk Factors). These forward-looking statements are being made as of the date hereof. CAT is under no duty
to update any of these forward-looking statements after the date hereof, other than as required by law.



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ITEM 1 -IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not applicable.



ITEM 2 -OFFER STATISTICS AND EXPECTED TIMETABLE



Not applicable.



ITEM 3 -KEY INFORMATION



Selected Financial Data



See Item 5 under the caption Selected Financial Data.



Capitalization and Indebtedness



Not applicable.



Reason for the Offer and Use of Proceeds



Not applicable.



Risk Factors



An investment in CATs ordinary shares and American Depositary Receipts
(ADRs) is subject to certain risks and shareholders should consider the risk factors described below.



The following describes the material risks known to CAT that could affect CAT. Additionally, some risks may be unknown to CAT and other risks, currently
believed to be immaterial, could turn out to be material. All of these could materially adversely affect CATs business, turnover, profits, assets, liquidity and capital resources.



CAT has a history of losses and expects to continue to incur losses for the foreseeable future.



For the year ended September 30, 2005, CATs consolidated losses
were approximately £1.6 million and its consolidated accumulated deficit on profit and loss account at that time was approximately £161.0 million. These losses result principally from the costs incurred in the research and development of
potential products and also from general and administrative costs associated with operations. While CAT will continue to receive royalties from the sales of HUMIRA®, no other product developed using CATs technology has yet been marketed and thus has not generated royalties from
sales. CAT expects to incur further substantial losses for the foreseeable future as research and development activities continue. CAT may not be able to generate meaningful revenue or achieve or sustain profitability. If CAT is unable to do so, it
may be required to seek additional financing in the future. Additional financing may not be available on acceptable terms or at all.



It is difficult to evaluate CATs business and prospects.



With the exception of HUMIRA, CAT and its collaborative partners have yet to begin commercial sales of CATs products. Accordingly, CATs
revenue and profit potential are unproven. CATs technology may not result in any meaningful benefits to CATs current or potential collaborative partners. Further, CAT has difficulty accurately forecasting its revenue. In addition,
because the number of product candidates to which CAT and CATs collaborative partners can devote development effort is



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limited by the availability of financial and scientific resources, CAT is exposed to the risk that the delay or failure of individual product development
programs will adversely affect the content and delivery over time of CATs product development pipeline. Investors should consider CATs business and prospects in light of the heightened risks and unexpected expenses and problems CAT may
face as a company in an early stage of development in a new and rapidly evolving industry.



The unpredictability of CATs financial results may cause CATs operating results to fail to meet market expectations.



CAT expects that the majority of its revenues for the near future will result from payments pursuant to collaborative
arrangements in the form of contract research payments, license fees and technical performance and product development milestone payments, plus royalties from the sales of HUMIRA. Payments pursuant to CATs collaborative arrangements will be
subject to significant fluctuation in both timing and amount. CATs revenues may not be indicative of its future performance or of its ability to continue to achieve milestones and other performance criteria on which CATs revenues depend.
CATs revenues and results of operations for any period may also not be comparable to the revenues or results of operations for any other period. It is possible that in some future periods, CATs operating results may be below expectations
of analysts and investors. If this happens, the price of CATs shares and ADRs is likely to decrease.



CATs financial performance is reliant to a significant extent on the revenues it receives from a small number of companies. In the event that payments of these revenues were to cease, CATs business
could be materially harmed.



CAT depends on a small number
of companies for the revenues it receives. In the event that one or more of these companies were to cease to pay these revenues in a timely manner, or even at all, this could materially impact on the ability of CAT to continue to develop its
business.



Additional funding may be required to give CAT time to reach
profitability.



Raising such additional funding could
entail restrictions on the rights of holders of CATs shares. If CAT is unable to raise additional funds it may have to curtail its operations. In general, researching new compounds and conducting pre-clinical and clinical trials requires
significant investment. CATs need for capital at any given time will be dependent on a number of factors, including:



| |  | CATs degree of success in commercializing products;
|- |  | ----------------------------------------------------



| |  | its ability to enter into collaborations to support its research and development programs;
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| |  | the amount, and timing, of milestone payments CAT receives from its collaborators;
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| |  | the rate of progress and cost of CATs research activities;
|- |  | -----------------------------------------------------------



| |  | the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights;
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| |  | the emergence of competing products, technology and other adverse market developments; and
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| |  | changes in, or termination of, CATs existing collaborations and licensing arrangements.
|- |  | ----------------------------------------------------------------------------------------



Additional funding may be required to give CAT time to reach profitability. If it is unable to raise additional funds when
it needs them, CAT may be required to delay, reduce or eliminate some or all



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of its programs. CAT may also be forced to license compounds or technology to others that it would prefer to develop internally until a later and potentially
more financially lucrative stage. If CAT raises additional funds through collaborations and other licensing arrangements, it may have to relinquish its rights to some of its compounds or technologies or grant licenses on unfavorable terms.



CAT may not obtain adequate legal protection over its technology.



CAT must obtain adequate legal protection for the
technology that it develops. CATs success thus depends on its ability to:



| |  | obtain patents;
|- |  | ---------------



| |  | protect trade secrets;
|- |  | ----------------------



| |  | operate without infringing the proprietary rights of others; and
|- |  | ----------------------------------------------------------------



| |  | prevent others from infringing its proprietary rights.
|- |  | ------------------------------------------------------



CAT will be able to protect its proprietary rights from unauthorized use by third parties only to the extent that its proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets. CAT tries to protect its proprietary position by filing patent applications related to its proprietary technology, inventions and improvements that are important to the
development of its business. CAT owns or co-owns or has licensed patents, and has applied for patents, covering its core technology. CATs patents are described in Item 4.B in Intellectual Property  Key Patents.



The patent position of biopharmaceutical companies involves
complex legal and factual questions and, therefore, enforceability cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patents that CAT owns or licenses from third parties may not provide
any protection against competitors. CATs pending patent applications, those it may file in the future or proprietary rights it may license from third parties, may not result in patents being issued. Also, patent rights may not provide CAT with
adequate proprietary protection or competitive advantages against competitors with similar technologies.



CAT has entered into a number of collaborative arrangements which are central to meeting its strategic objectives. Such collaborative arrangements
typically involve the sharing of data, know-how and/or documentation which is necessary to progress the collaboration. In the event that this data, know-how and/or documentation is used by CATs collaborative partners to advance those parts of
their business which fall outside the scope of the collaborative arrangements, CATs competitive position could be materially harmed.



If CAT is unable to obtain sufficient legal protection of its technology, other companies may use similar technology to develop and produce products,
which may deprive CAT of the competitive advantages provided by its technology.



CAT has been involved in litigation with third parties regarding the validity of its key patents and may be involved in litigation in the future.



CATs strategy includes vigorously enforcing its intellectual property rights, including its patents. CAT has been
involved in litigation involving its key patents. This litigation has included suits to invalidate certain of CATs key patents. If CAT was involved in similar litigation in the future and does not successfully defend any suits, CATs
competitors may gain access to technology that CAT believes is proprietary to it. CATs competitors may use this technology to assist their research and development



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efforts, which would deprive or weaken one of CATs primary competitive advantages. In addition, if some or all of CATs key patents were
invalidated, this could impact on CATs ability to obtain royalties from its current and future collaborations.



The biotechnology and pharmaceutical industries have been characterized by extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property suits, interference and opposition proceedings and related legal and administrative proceedings involve complex legal and factual questions. As a result, such proceedings are costly and
time-consuming to pursue and their outcome is uncertain. Litigation may be necessary to:



| |  | enforce patents that CAT owns or licenses;
|- |  | ------------------------------------------



| |  | protect trade secrets or know-how that CAT owns or licenses; or
|- |  | ---------------------------------------------------------------



| |  | determine the enforceability, scope and validity of the proprietary rights of others.
|- |  | -------------------------------------------------------------------------------------



CAT may be denied access to important technology and subject to costly litigation if it infringes the intellectual property
rights of third parties.



CAT may not be able to enforce its rights under
contracts with collaborators or licensees.



The
relationships between CAT and its collaborators and licensees are governed by contracts. These contracts are generally complex, particularly in relation to intellectual property issues, and, due to the varied nature of the relationships, are not in
a standardized form.



The parties may interpret the terms of
such contracts differently and it may not be possible to resolve such differences without recourse to legal proceedings which may be lengthy, involve significant costs and which may not ultimately be successful.



If this or any other legal proceedings in which CAT may become involved were
to be unsuccessful, this may impact the value of the Company and the ability of CAT to enforce other contractual terms or enter into new contractual arrangements.



CATs commercial success depends significantly on its ability to operate without infringing the patents and other proprietary rights
of third parties.



CATs technologies may
unintentionally infringe the patents or violate other proprietary rights of third parties. In addition, in developing products for particular targets or uses CAT and its collaborative partners may infringe the patents or violate the intellectual
property of others. If CAT is found to infringe the intellectual property rights of third parties, CAT and its collaborative partners may be prevented from pursuing product development or commercialization based on the infringing technology, target
or use and may be subject to significant liabilities.



To gain
access to such technology, targets or uses, CAT may be required to seek licenses that may not be available from third parties on acceptable terms, if at all. Costs associated with license arrangements may be substantial and may include ongoing
royalties payable by CAT.



CAT depends on entering into a range
of contractual arrangements in order to conduct its business.



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CAT depends on collaborators for product development, manufacturing and marketing. Failure to identify collaborators,
failure to enter into collaborative arrangements or failure of CATs collaborators to perform adequately under existing arrangements will harm CATs ability to develop and market products and earn revenue.



CATs strategy depends on entering into arrangements with collaborators
and licensees. CAT currently does not plan to develop significant manufacturing, marketing or sales capabilities and will rely heavily on collaborators for these functions. Collaborations are necessary in order for CAT to:



| |  | access proprietary disease targets against which CAT intends to generate drug products;
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| |  | access skills and information that it does not possess;
|- |  | -------------------------------------------------------



| |  | fund its research and development activities;
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| |  | fund pre-clinical testing, clinical trials and manufacturing of product candidates;
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| |  | seek and obtain regulatory approvals for product candidates; and
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| |  | successfully market and sell existing and future product candidates.
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CATs success, therefore, will depend on the ability and efforts of these outside parties in performing their responsibilities. Many of these
collaborative arrangements give the partner the exclusive right to market and sell certain products developed in the collaboration. These collaborators will have significant discretion over the resources they devote to these efforts. CATs
ability to earn revenues, including royalties based on products sales and certain milestones, depends on these efforts. These collaborators may not devote sufficient resources to collaborations with CAT.



In addition, collaborative arrangements are governed by legal agreements
which are often complex and may be subject to differing interpretations of their various terms by the parties which may in turn lead to a dispute between the parties.



CAT has limited financial, scientific and human resources. Identifying the most appropriate partner with whom to work is
therefore essential to ensure that these limited resources are effectively utilized to ensure an optimal outcome from the collaboration. For the same reasons it is also extremely important to ensure that the objectives of the collaboration are
clearly articulated and that there is a commitment from the parties to achieving the objectives.



Failure to attract the most appropriate partners with whom to enter into a collaborative arrangement or failure to manage the resources required to
achieve the objectives which have been set for the collaboration may materially impact on CATs business and could mean that other more appropriate opportunities for collaboration are missed.



If CAT is not able to establish further collaborative arrangements, if any
collaborator fails to adequately perform its responsibilities under a collaborative arrangement or if any or all of CATs existing collaborative arrangements are terminated, then CAT may be required to seek new collaborative arrangements or to
undertake product development and commercialization at its own expense. CAT may not be able to develop and commercialize the relevant product candidates without the collaborators. If CAT must seek new arrangements or undertake these matters itself:



| |  | the number of product candidates that CAT will be able to develop and commercialize may be limited;
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| |  | the likelihood of successful product introduction may be reduced;
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| |  | the collaborative arrangements may not be on terms favorable to CAT; and
|- |  | ------------------------------------------------------------------------



| |  | CATs capital requirements may be increased significantly.
|- |  | ----------------------------------------------------------



Any of the above would harm CATs ability to earn revenues from its products and recover its research and development expenditures.



CATs partners may change their own strategic direction and/or cease to exist.



CAT typically enters into contractual terms with its
partners on the basis that the pooling of resources and knowledge will create certain synergies and will assist all parties to progress the objectives which they have determined for themselves. In the event that these objectives should change, for
example as the result of a takeover or change in the business, the principles which underpin the contractual arrangement may cease to exist and may materially impact on the willingness and commitment of the other parties to the contractual
arrangement to fulfill their original commitment. This will also be the case if the other party to a contractual arrangement ceases to exist altogether, for example because it becomes insolvent.



CAT may be ineffective at managing costs relating to the activities to which it has
contractually committed with a partner.



CAT is a loss
making biopharmaceutical company with a significant number of products at very early stages in development. If CAT fails to effectively manage its cash resources in the development of these early stage products, it may not be able to afford to
fulfill the obligations to which it is contractually committed and CAT may not be able to secure sufficient funds to secure the necessary resources. This could result in reputational damage and expose CAT to claims for breach of contract.



Clinical trials for product candidates based on CATs technology will
be lengthy and expensive and may not be successful.



Before obtaining regulatory approvals for the commercial sale of any products, CAT or its licensees or collaborative partners (alone or with CAT) must demonstrate through pre-clinical testing and clinical trials that its therapeutic
products are safe and effective for use in humans. Part of CATs strategy is to conduct its own pre-clinical trials and clinical trials over some potential product candidates prior to entering into a collaborative arrangement concerning the
further development and marketing of these candidates. Conducting clinical trials is a lengthy and expensive process. CAT will incur substantial expense for, and devote a significant amount of time to, pre-clinical testing and clinical trials.
Moreover, CAT will continue to be subject to the pre-clinical testing and clinical trials over certain product candidates conducted by its licensees and collaborative partners over which CAT has no control.



Historically, the results from pre-clinical testing and early clinical trials
have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and effectiveness data to obtain
necessary regulatory approvals. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections may be
encountered as a result of many factors, including changes in regulatory policy during the period of product development.



Completion of clinical trials may take several years or more. The length of time generally varies substantially according to the type, complexity, novelty
and intended use of the product candidate. CATs commencement and rate of completion of clinical trials may be delayed by many factors, including:



| |  | inability to manufacture sufficient quantities of materials for use in clinical trials;
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| |  | slower than expected rate of patient recruitment;
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| |  | inability to adequately follow patients after treatment;
|- |  | --------------------------------------------------------



| |  | unforeseen safety issues;
|- |  | -------------------------



| |  | lack of effectiveness during the clinical trials; or
|- |  | ----------------------------------------------------



| |  | government or regulatory delays.
|- |  | --------------------------------



If CAT fails to identify the right targets upon which to work, it may end up investing significant time and money into activities that do not translate into any
commercial benefits.



Identifying targets where CATs
know-how and technology are likely to bring specific advantages and identifying areas of medical need is important in order to maximize CATs chances of success. Identifying inappropriate targets on which to work or not identifying early enough
that certain targets may not result in tangible benefits to CAT may result in significant time and resources being absorbed by activities which may not lead to any commercial benefit.



Obtaining required regulatory approvals for drug candidates is a lengthy, expensive and uncertain process. CAT or its collaborators may
not obtain, or may be required to expend substantial resources to obtain, the necessary regulatory approvals to market products.



The pre-clinical and clinical evaluation, manufacture and marketing of the product candidates based on CATs technology are all subject to regulation
administered and enforced by the governmental and other competent regulatory agencies in countries where CAT and any of its potential partners or licensees intend to test, manufacture or market such products. CAT or its collaborative partner will be
required to obtain from the relevant regulatory authority an approval, called a marketing authorization, to market a drug in the territory which is subject to the regulatory authoritys jurisdiction. The grant of a marketing authorization for a
drug requires the detailed evaluation of data relating to the quality, safety and effectiveness of the drug in the proposed use or uses submitted by the applicant in accordance with regulatory requirements. Many countries, including member states of
the European Union and the United States, impose extensive data requirements and have very high standards of technical appraisal. Accordingly, pre-clinical testing and clinical research of medicinal products can be a very lengthy and costly process.
The manufacture of drugs is also subject to specific authorization and to the regular inspection of premises, staff and procedures by regulatory authorities.



One product candidate based on CATs technology, HUMIRA, is approved for marketing as a treatment for rheumatoid arthritis in 57 countries and is
also approved for psoriatic arthritis and early rheumatoid arthritis. Similar product candidates that CAT or its licensees and collaborative partners identify and pursue now or in the future may not receive required regulatory approvals to
manufacture and market such product candidates. Furthermore, different regulatory authorities worldwide may impose their own differing conditions upon marketing (by, for example, restricting a products indicated uses). Regulatory authorities
may refuse to grant, or may require CAT or its collaborative partners to supply additional data before granting, a marketing authorization, even though the relevant product may have been approved by another regulatory authority. If an authorization
is obtained, the product and its manufacture are subject to regular review. Approvals may be withdrawn or restricted at some point in the future. Changes in applicable legislation or regulatory policy, serious breaches of regulatory requirements or
the discovery of problems related to the safety, quality or effectiveness of the product or to the production process, site or manufacture may result in the imposition of restrictions upon sale, supply or



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manufacture including, at worst, the withdrawal of the product from the market or the loss of the relevant authorizations, or may otherwise harm CATs
business or income from licensees and collaborative partners.



CAT may not
have sufficient clinical development experiences.



CAT
employs approximately 300 people. CAT has limited clinical development experience and expertise in-house, including in the area of oncology. While CAT will typically utilize consultants and other experts to supplement its internal teams and to
support the management of its clinical programs, it has limited experience in clinical development. Failure to adequately manage its clinical programs may result in missed opportunities and product delays.



If CAT is not able to procure manufacturing of its products and product candidates on
acceptable terms, its clinical trials may be delayed and it may be unable to provide products on a cost effective basis.



CAT and its collaborators often rely on third parties to manufacture product candidates for clinical trial and marketing purposes. CAT may rely on third
party manufacturers for the production of certain product candidates (e.g., CAT-354) for clinical trials. Suitable manufacturers that are able to produce products on a timely and competitive basis on acceptable terms may not be available.
Manufacturers may not have the capacity to produce the products demanded by CAT and its collaborators to meet the schedule required by clinical trials or to satisfy commercial demand. Manufacturing runs of products may fail for technical or other
reasons which may delay CAT from conducting clinical trials or from supplying products for commercial purposes. Suitable manufacturing processes may be proprietary to other persons. CAT may be required to pay amounts to license these manufacturing
processes or may not have access to these processes at all.



The manufacture of product candidates and products will be subject to authorization and to the Good Manufacturing Practice standards prescribed by the appropriate regulatory agencies. Compliance with these regulatory
requirements will be expensive and could further limit the number of suitable manufacturers available to CAT and its collaborators.



CATs competitors may market products before CAT does or produce superior products.



The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological
change. CAT is aware of several pharmaceutical and biotechnology companies that are actively engaged in research and development in areas related to antibody therapy. These companies have begun clinical trials of antibody products or have
successfully commercialized antibody products and may succeed in marketing products before CAT does. Many of these companies, either alone or together with their collaborative partners, have substantially greater financial resources and larger
research and development staffs than CAT has and may have greater expertise in product development and marketing activities.



Many of these companies are addressing the same diseases and disease indications as CAT or CATs collaborative partners. HUMIRA is competing for the
treatment of rheumatoid arthritis with Enbrel, a TNF inhibitor developed by Immunex (now Amgen) and American Home Products, which was approved in the United States in 1998 and in Europe in 2000, with Remicade, a TNFaantibody developed by Centocor, which was approved in the United States in 1998 and Europe in 2000 and with Kineret, an IL1 receptor antagonist developed by
Amgen, which was approved in the United States and Europe in November 2001. CAT is aware that other potentially competitive products are in late stage development for rheumatoid arthritis. Celltech/UCB and other companies each have antibody products
in clinical trials. Consumers and physicians may choose to use these or other products of CATs competitors rather than CATs products. Additionally, as with all marketed products, unforeseeable safety considerations can restrict the
amount of product used.



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There are many organizations which are actively engaged in the commercial exploitation of drugs in the
oncology area and competition is therefore intense. This, coupled with the fact that these are specific technical difficulties related to the development of drugs in oncology, means that there is risk that CAT will either be unsuccessful in the
development of oncology drugs or that once marketed such drugs will fail to attract market share.



CAT also competes with companies that offer antibody generation services to companies that have antigens. These competitors have specific expertise or
technology related to antibody development. These companies include Medarex, Medarexs joint venture partner, Kirin Brewing Co., Ltd, Abgenix Inc., Protein Design Labs, Inc., Crucell N.V., MorphoSys AG, BioInvent and Dyax Corporation. CAT also
faces, and will continue to face, competition from academic institutions, government agencies and research institutions, many of whom have substantial available resources.



CAT faces and will continue to face intense competition from other companies for establishing collaborative arrangements
with pharmaceutical and biotechnology companies, for establishing relationships with academic and research institutions and for licenses to proprietary technology. CAT relies heavily on these types of arrangements in its product development and
marketing efforts and for access to technology.



Even if CATs products
are approved they may still face later regulatory difficulties.



Even if CAT receives regulatory approval to sell any of its products, the Food and Drug Administration (FDA) within the U.S. Department of Health and Human Services, the U.K. Medicines & Healthcare Products Regulatory
Agency or comparable foreign regulatory agencies could require CAT to conduct post-marketing trials or could prevent CAT from using the labeling claims which CAT would like to use to promote its products. Regulators will undertake periodic reviews
and inspections and if they discover previously unknown problems with a product or its manufacturing facility or if CAT fails to comply with regulatory requirements, regulators could:



| |  | impose fines against CAT;
|- |  | -------------------------



| |  | impose restrictions on the product, its manufacturer, or on CAT;
|- |  | ----------------------------------------------------------------



| |  | require CAT to recall or remove a product from the market;
|- |  | ----------------------------------------------------------



| |  | suspend or withdraw its regulatory approvals;
|- |  | ---------------------------------------------



| |  | require CAT to conduct additional clinical trials;
|- |  | --------------------------------------------------



| |  | require CAT to change its product labeling; or
|- |  | ----------------------------------------------



| |  | require CAT to submit additional marketing applications.
|- |  | --------------------------------------------------------



If any of these events occur, CATs ability to sell its products will be impaired and CAT may incur substantial additional expense to comply with the
regulatory requirements. In addition, in certain countries, even after regulatory approval, CAT is still required to obtain price reimbursement approval. This may delay the marketing of CATs products or, when approval cannot be obtained, mean
that the product cannot be sold at all.



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CATs product candidates will compete with established therapies and may compete with newer, more effective products. As a result, CATs
products may not be successful in the market.



Any product
candidate that CAT successfully develops may compete with existing therapies that have long histories of safe and effective use. For example, HUMIRA may face competition from many products, including Disease Modifying Anti-Rheumatoid Drugs (DMARDs),
for the treatment of rheumatoid arthritis. Competition may also arise from:



| |  | other drug development technologies and methods of preventing or reducing the incidence of a disease;
|- |  | -----------------------------------------------------------------------------------------------------



| |  | new small molecules; or
|- |  | -----------------------



| |  | other classes of therapeutic agents.
|- |  | ------------------------------------



Developments by competitors may render CATs product candidates or technologies obsolete or uncompetitive. CATs collaborative partners may
pursue other technologies. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or products that are more effective than CATs. If they do, then products based on CATs technology
will be obsolete or become uncompetitive and CAT will fail to earn expected revenue.



CAT may fail to integrate acquired entities and businesses.



CATs strategic objectives may be met in part by the acquisition of pre-existing businesses or other entities. In order to realize the value of these acquisitions, it may be important that know-how and expertise
is effectively integrated into CATs current business structures. Failure to integrate such acquisitions may result in CAT not realizing the potential value and synergies of such acquisitions within a commercially acceptable time frame or even
at all.



If CAT fails to manage its human resources appropriately, its
business may be harmed.



CAT depends significantly on its
management and scientific personnel. The loss of the services of any key employee could cause harm to CATs business. CATs strategy depends on hiring key scientific and management personnel. CAT faces significant competition in the hiring
and retention of key employees. If CAT fails to recruit scientific and managerial employees in the future or loses any of its key employees, CATs business, financial condition and results of operations may be harmed.



Furthermore, as CATs business continues to develop, the skills of
existing personnel may not be appropriate to meet the future needs of the business and it may not be possible to redeploy such personnel to alternative activities. Additionally, if the level of available staff resources exceeds that necessary for
current activity levels then consideration will be given as to whether it is in the interests of the business to retain certain personnel. Either circumstance could result in the need for redundancies with attendant costs and the potential for
litigation from ex-employees.



If CATs license agreements violate the
competition provisions of the Treaty of Rome, then some terms of its key agreements may be unenforceable.



Certain license agreements that CAT has entered into, may enter into, will grant or may grant exclusive worldwide licenses of patents, patent applications
and know-how, which are or may be arguably restrictive of competition under Article 81(1) of the Treaty of Rome. Article 81(1) prohibits agreements which restrict competition within the European Community and affect trade between member states of
the European Union. CAT determines on an agreement-by-agreement basis where an exemption from the



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application of Article 81(1) applies to the agreement and, if it does not, whether to apply to the European Commission for an individual exemption from the
application of Article 81(1). If an exemption is not applicable and CAT does not apply for, or is unsuccessful in obtaining, an exemption from the European Commission, provisions of any license agreement which are restrictive of competition under
Article 81(1), including those relating to the exclusivity of rights, may be unenforceable and CAT could lose the benefit of the rights granted under the provision.



CAT may be subject to product liability claims, which are expensive to insure against and, if successful, may force CAT to incur
unforeseen expenditures.



As a designer and developer of
drug products, CAT is exposed to potential product liability risks which are inherent in the research and development, pre-clinical study, clinical trials, manufacturing, marketing and use of these products. Consumers, healthcare producers or
persons selling products based on CATs technology may be able to bring claims against CAT based on the use of CATs products in clinical trials and the sale of products based on CATs technology. In addition, it may be necessary for
CAT to secure certain levels of insurance as a condition to the conduct of clinical trials. Insurance coverage may not be available to CAT at an acceptable cost, if at all. In the event of any claim, CATs insurance coverage may not be
adequate.



CATs operations involve the use of potentially hazardous
materials. An accident involving these materials could subject CAT to liability.



As a biopharmaceutical company, CAT is subject to environmental and safety laws and regulations, including those governing the use of potentially hazardous materials. The design, development and testing of CATs
products involves the use of hazardous materials. Although CAT believes that its procedures for handling and disposing of such materials comply with the standards prescribed by applicable laws and regulations, the risk of accidental contamination or
injury from these materials cannot be eliminated. In the event of an accident, CAT may incur unforeseen liabilities.



The market for CATs securities is volatile, which may cause unexpected changes in CATs share price.



The share prices of publicly traded biotechnology and pharmaceutical
companies can be highly volatile. The market prices and trading volumes of CATs shares and ADRs are volatile, and it is expected that the price of the Companys securities will be volatile for the foreseeable future. The price at which
the CATs shares and ADRs are quoted and the price which investors may realize for their securities will be influenced by a large number of factors, some specific to CAT and its operations and some which may affect the quoted healthcare and
pharmaceutical sector, or quoted companies generally. These factors could include the performance of CATs research and development program, large purchases or sales of CATs shares and ADRs, currency fluctuations, legislative changes in
the healthcare environment, litigation, in particular intellectual property litigation, and general economic conditions.



The ability of investors to enforce civil liabilities obtained against CAT in the United States may be limited.



CAT is a public limited company incorporated under the laws of England and
Wales. None of CATs directors and senior management are residents of the United States. Substantially all of the assets of such persons and a substantial majority of the assets of CAT and its subsidiaries are located outside the United States.
As a result, it may not be possible for investors to effect service of process within the United States upon such person or CAT or to enforce against them judgments of courts of the United States predicated upon civil liability provisions of the
U.S. federal or state securities laws.



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Investors will not receive cash dividends in the foreseeable future.



CAT has not paid cash dividends on its ordinary shares (including the
ordinary shares which underlie its ADRs) and does not plan to pay cash dividends on its ordinary shares in the foreseeable future.



Foreign exchange rate fluctuations may adversely affect CATs results of operations and financial condition.



Movements in the foreign exchange markets, particularly sterling/dollar,
will affect the value of underlying assets and liabilities denominated in foreign currencies and the value of incomes and expenditures. These movements may in turn adversely affect reported results.



If CAT fails to maintain its computer hardware, software and related infrastructure,
market acceptance could be delayed and revenues lost.



CATs research and development programs involve the analysis of large amounts of data. CAT depends on the continuous, effective, reliable and secure operation of its computer hardware, software and related infrastructure. If CATs
hardware or software malfunctions, or if its operations are interrupted by forces beyond CATs control, CAT may experience reduced productivity.



CAT may be unable to secure insurance at an acceptable cost.



CATs business either does or may in the future expose it to potential product liability, and professional indemnity and other risks which are
inherent in the research and development, pre-clinical studies, clinical trials, manufacturing, marketing and use of pharmaceutical products. No assurance can be made that product liability, clinical trials or any future necessary insurance cover
will be available to CAT at an acceptable cost, if at all, or that, if there is any claim, the level of the insurance CAT carries now or in the future will be adequate or that a product liability, professional indemnity or other claim would not
materially and adversely affect CATs business. In addition, it may be necessary for CAT to secure certain levels of insurance as a condition to the conduct of clinical trials. In the event of any claim, CATs insurance coverage may not be
adequate.



CAT may be subject to actions by
special interest groups and adverse public opinion.



Government bodies and regulatory agencies require that potential pharmaceutical products are subject to pre-clinical studies, including animal testing, prior to conducting human trials. CAT arranges for such work either directly or through
its collaborators. Such work can be subject to adverse public opinion and has attracted the attention of special interest groups, including those of animal rights activists. Such special interest groups have not targeted CAT in the past. There can,
however, be no assurance that such groups will not, in the future, focus on CATs activities or those of its licensees or collaborators, or that any such public opinion would not adversely affect CATs operations.



The pharmaceutical industry is frequently subject to adverse publicity on
many topics, including corporate governance or accounting issues, product recalls and research and discovery methods, as well as to political controversy over the impact of novel techniques and therapies on humans, animals and the environment.
Adverse publicity about CAT, its collaborators, its products, or any other part of the industry may hurt CATs public image, which could harm its operations, cause its share price to decrease or impair its ability to gain market acceptance for
its products.



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ITEM 4 -INFORMATION ON THE COMPANY



History and Development of the Company



Incorporation and History



CAT was incorporated and registered under the laws of England and Wales on August 5, 1996, under the name Intercede 1186 Limited as a private company
limited by shares. CAT changed its name from Intercede 1186 Limited to Cambridge Antibody Technology Group Limited on August 22, 1996 and was re-registered as a public limited company under the name Cambridge Antibody Technology Group plc on
December 20, 1996. CATs principal business address is:



Milstein Building

Granta Park

Cambridge CB1 6GH

UK



The telephone number of CATs registered office is 44 (0)12 2347 1471.



Capital Expenditures



For information regarding capital expenditures for the last three financial years, please see Item 5 in Operating and Financial Review and
Prospects.



Public Takeover Bids



CAT is not aware of any public takeover bids made in respect of its shares
during the 2005 financial year or since the beginning of the 2006 financial year.



Business Overview



Overview



CAT is a biopharmaceutical company focused on the
discovery and drug development of human monoclonal antibodies as new treatments for human disease. CAT has an advanced proprietary platform technology for rapidly isolating human monoclonal antibodies using Phage Display and Ribosome Display
systems. CAT has extensive phage antibody libraries, currently incorporating more than 100 billion distinct antibodies. These libraries form the basis for CATs capability to develop a portfolio of antibody-based drugs.



Based near Cambridge, Cambridgeshire, UK, CAT was established in 1990 by
Dr. David Chiswell, the former Chief Executive Officer, and leading scientists from the Medical Research Council. As of September 30, 2005, CAT employed approximately 290 people. In March 1997, CAT completed its initial public offering and
listing on the London Stock Exchange, raising approximately £38.4 million (net of expenses). In April 2000, CAT raised a further £89.5 million (net of expenses) in a share offering. In June 2001, CAT listed ADRs representing its shares
on the NASDAQ Stock Market.



Background to Antibodies



The Function of Antibodies



Antibodies are part of the bodys principal defense mechanism against
disease-causing organisms and other foreign molecules. They are proteins made naturally by the immune system and each recognizes



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and binds to a specific molecular structure on a target known as an antigen. The specificity of antibodies is such that they are capable of distinguishing
the subtlest of molecular differences. They serve to recognize, bind to and eliminate disease-causing organisms and to neutralize toxins. Antibodies are naturally present in the blood and can survive in the circulation for extended periods in order
to perform their surveillance and defense functions.



Each
individual B-cell (which is the class of human white blood cell that produces antibodies) produces a unique antibody that can be capable of recognizing and binding to one type of antigen. A monoclonal antibody is derived from a single clone of
cells, all molecules of which have identical target (antigen) binding sites.



The basic structure of an antibody comprises four polypetides of two different sizes, designated as heavy chain and light chain. Each chain has a variable domain, which contains the binding
site for an antigen and gives the antibody its specificity, and a constant domain which interacts with other parts of the immune system to facilitate the removal of the pathogen or foreign molecule.



Different antibodies are produced, in part, as a result of the random pairing
of genes for the variable domains. As a result, the immune system is able to adapt and produce antibodies against virtually any antigen. When an antibody encounters an antigen to which it binds, the B-cell which produces the antibody proliferates to
generate more antibodies against the target antigen.



Antibodies as Drugs



Monoclonal antibodies are an increasingly important
class of drugs. They represent a very active and rapidly growing market which CAT estimates to be worth in excess of U.S.$12 billion in 2005.



There are 17 monoclonal antibodies approved and marketed in one or more commercial territories by industry participants today. They include Rituxan®/MabThera®, Zevalin® and Bexxar® for non-Hodgkins lymphoma, Orthoclone®, Simulect® and Zenapax® for transplant rejection, Campath® and Mylotarg® for
leukemia, Reopro® for use in angioplasty,
Synagis® for prevention of RSV infection,
Remicade® for rheumatoid arthritis and Crohns
disease, Herceptin® for breast cancer and more
recently Xolair® for asthma, HUMIRA® for rheumatoid arthritis, Avastin® for colo-rectal cancer and Erbitux® for colo-rectal cancer.



Development in the class is very active with well over 150 products at
various stages of clinical studies.



Early efforts to develop
monoclonal antibodies into human therapeutic products were based on immunizing mice with a target antigen and isolating the mouses B-cells that produce the antibodies that bind to the antigen. Those B-cells were then used to produce the
desired monoclonal antibodies. This process generally took between two and six months. Mouse-derived monoclonal antibodies were limited as drugs, however, because when administered, they were recognized as foreign by the human immune system, thus
causing an adverse immune reaction. Generally this reaction increases in severity with repeat dosing, which reduces or negates the effectiveness of the antibody and may be harmful to recipients. The mouse-derived antibodies were also poorly
effective at interacting with other components of the human immune system.



In an attempt to make mouse-derived monoclonal antibodies better tolerated and more effective, monoclonal antibodies were designed to be more human. Monoclonal antibodies were therefore developed composed of variable
regions from mouse antibodies and constant regions from human antibodies, which are known as chimaeric antibodies. Subsequently, mouse antibodies were converted into a human form by grafting the mouse amino acid sequences which comprise
the antigen-binding



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regions of the antibody into a human framework. These antibodies are known as humanized or CDR-grafted antibodies. These techniques reduce the
mouse genetic content from 100% to approximately 30% in the case of chimeric antibodies and 10% in the case of humanized antibodies. A number of chimeric and humanized monoclonal antibodies have been approved for marketing as therapeutic products.
However, these antibodies still contain elements derived from mouse genes.



CAT has developed a process to isolate quickly and effectively human monoclonal antibodies of the required specificity from CATs libraries of antibodies. CATs libraries are derived from antibody-producing
cells from human donors and other sources of human antibody genes. This system does not require immunization of mice or humans. Human monoclonal antibodies should reduce or remove adverse human immune response, such as that caused by
foreign mouse protein. Companies other than CAT have developed alternative methods for obtaining human monoclonal antibodies, such as those involving the use of transgenic mice, whereby immunization with antigens causes them to produce
genetically human antibodies.



Antibody Libraries



CAT has created extensive human monoclonal antibody libraries for the
discovery and identification of drug candidates. CAT has developed its libraries primarily using Phage Display technology. All antibodies share the same basic structure, being a large Y shaped protein molecules. The tips of the forked
region, which come into contact with the antigen, are highly variable in structure, enabling the antibody to be specific for a particular antigen. The backbone of the molecule is reasonably consistent between different antibodies and has
an important role in activating the next steps in the bodys process to neutralize or eliminate the foreign molecule or pathogen. CATs libraries are derived from the combination of human heavy chain and light chain
genes, which encode the antigen binding parts (variable domain) of the antibody.



Phage Display is the process by which a phage is made to display human proteins on its surface. A phage, which is a bacterial virus that is harmless to humans, can be engineered, when combined with human antibody
genes, to display functional antibody proteins  in this case fragments of human antibodies capable of specifically recognizing and binding to an antigen. Genes from the human antibody libraries are inserted into a population of phage. Each
phage carries the genes for an antibody and thus displays that antibody protein on its surface. These genes can be recovered and made available for use in the onward development and potential manufacture of antibody products.



A large and diverse antibody library has a greater chance of containing high
quality antibodies that will bind to any given target molecule. Each of CATs phage antibodies contains a combination of human antibody genes, giving each one its specificity. CAT has engineered combinations of these to produce libraries that
currently incorporate around 100 billion distinct antibodies allowing it to isolate antibodies to potential disease targets rapidly and efficiently.



CATs antibody libraries are contained in phage particles and stored under refrigeration. A copy of the library has the appearance of a clear fluid.
One teaspoon of this fluid would represent approximately 400 copies of the libraries. When testing the libraries against a target antigen, the target is typically bound to a solid surface, such as a plastic microplate, and incubated with the
antibody libraries. The antibody libraries are so large that in a typical case many phage antibodies will bind the target, whatever the target is. A simple wash removes those phage antibodies which do not bind to the target. The bound phage
antibodies are recovered and allowed to infect bacteria, one phage entering a single bacterium. These infected bacteria are spread on agar plates where each bacterial cell grows into a colony of identical bacterial cells. Each colony produces small
quantities of a single monoclonal antibody. All of CATs libraries can be selected against a target molecule (antigen) in less than a week to provide a panel of antibodies that bind the antigen. Sophisticated screening and protein engineering
technology is then



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used to characterize the antibodies as leads for drug development and to develop antibody drug candidates. CAT believes that no other antibody isolation
technology can match the speed and capacity of this approach.



As the phage antibody contains the genes that code for the antibody protein, the genes are available for use in the onward development and potential manufacture of human monoclonal antibody therapeutic products.



CAT believes that it has strengthened its position in antibody display
technology through its July 1998 acquisition of Aptein, giving CAT key patents in the field of Ribosome Display. Ribosome Display involves the use of ribosomes, a type of molecular complex responsible for protein synthesis within living organisms,
to display functional antibody proteins in a laboratory environment. Using Ribosome Display technology, the selection of antibodies binding to antigens does not require phage particles and bacteria to generate antibodies as described above. Since
its acquisition of Aptein, CAT has continued to refine the Ribosome Display technology. The ability to generate even larger antibody libraries by Ribosome Display consolidates CATs leading position in combinatorial libraries.



Advantages of CATs Technology



CAT believes that its platform technology has a number of advantages over
alternative techniques for obtaining antibodies.



CATs
technology:



| |  |  | avoids the need for immunization in animals, which is lengthy; and
| | - |  | ------------------------------------------------------------------



| |  |  | enables the rapid identification and isolation of antibodies, usually within days.
| | - |  | ----------------------------------------------------------------------------------



CATs platform technology enables the isolation of:



| |  |  | antibodies to a large number of target antigens simultaneously and cost effectively;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | a broad spectrum of antibodies to each target antigen;
| | - |  | ------------------------------------------------------



| |  |  | antibodies to a diverse range of target antigens directly (including naturally occurring proteins that the immune system would not normally respond to);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | antibodies of completely human origin, reducing the likelihood of an adverse immunological response; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | antibodies which can be further engineered, if required, to optimize potential utility as the basis for a human therapeutic product.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



CATs technology processes can be automated in many areas which allows
CAT to screen potential antibody drug candidates rapidly and efficiently.



CATs Product Candidates and Product Development Activities



Product Development



There are
currently three CAT human therapeutic antibody products in clinical development and one CAT product candidate in pre-clinical development.



HUMIRA, which is licensed to Abbott and which was isolated and optimized in collaboration with



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Abbott, has been approved for marketing as a treatment for rheumatoid arthritis, early rheumatoid arthritis and psoriatic arthritis. Six further licensed
CAT-derived human therapeutic antibodies are in clinical development, with six further licensed product candidates in pre-clinical development.



CAT Product Candidates



Trabio®



Trabio (lerdelimumab) is a fully human anti-TGFß2monoclonal antibody developed by CAT as a potential
treatment for improving the outcome of glaucoma surgery. Trabio failed to demonstrate efficacy in two Phase III clinical trials (in November 2004 and March 2005). CAT has now terminated all further development of Trabio, subject only to continuing
with its minimum obligations in completing an ongoing United States clinical trial.



CAT-192



CAT-192
(metelimumab), a fully human anti-TGFß1monoclonal antibody, was jointly developed by CAT and Genzyme as a
potential treatment for scarring and fibrotic conditions, including scleroderma. Following a study in 45 scleroderma patients and subsequent discussion with experts, suitable endpoints for a further trial in scleroderma could not be identified, and
Genzyme and CAT have no further plans for the development of CAT-192.



GC-1008



GC-1008 is a pan-specific
fully human anti-TGFß monoclonal antibody being developed by CAT and Genzyme. In October 2005, a Phase I clinical trial of GC-1008 in Idiopathic Pulmonary Fibrosis commenced. The objectives of the trial are to evaluate the safety, tolerability
and pharmacokinetics of single intravenous infusions of GC-1008 in patients with Idiopathic Pulmonary Fibrosis. The trial, which is an open-label, single dose, dose-escalating study will be in 25 patients in five centers in the United States.
Preliminary results are expected to be available in 2007.



The
companies are planning to file an investigational new drug (IND) application for a Phase I clinical trial in oncology early in 2006.



CAT-213



CAT-213 (bertilimumab) is a fully human anti-eotaxin1monoclonal antibody, which CAT had been evaluating as a treatment for severe allergic disorders. CATs investment in CAT-213 ceased in 2003 and some partnering discussions regarding the licensing
of CAT-213 took place in 2004.



CAT-354



CAT-354 is a fully human anti-IL13 monoclonal
antibody being developed by CAT, initially as a potential treatment for severe asthma. CAT commenced a Phase I clinical trial in the United Kingdom in September 2004 to assess safety, tolerability and pharmacokinetics. The trial was a double-blind,
placebo-controlled, rising single dose intravenous study in 34 mild asthmatic patients. In June 2005, CAT announced preliminary results which showed that CAT-354 was well tolerated at all doses and there were no identified safety concerns;
pharmacokinetics met expectations. The trial results will be submitted to an appropriate scientific meeting in due course.



Based on these results, CAT is now planning to start a further clinical trial in the first quarter of 2006. This is being planned as a repeat-dose safety
study in patients with mild/moderate asthma. The trial will study safety, tolerability and pharmacokinetics, and is likely to take place in the United Kingdom.



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Given the size of the market and complexity of the likely development plan for CAT-354, CAT has decided
that the program will benefit from having a partner experienced in developing drugs for major respiratory indications prior to commencing Phase III clinical trials. Accordingly, CAT has started to assess interest in the product candidate from a
limited number of potential licensees.



CAT-3888 and
CAT-8015



In November 2005, CAT announced the
acquisition of CAT-3888 (formerly GCR-3888) and CAT-8015 (formerly GCR-8015) from Genencor, a subsidiary of Danisco, based in Palo Alto, California.



CAT-3888 and CAT-8015 are anti-CD22 immunotoxins. Each comprises a disulphide-linked antibody fragment that targets the CD22 receptor, fused with a
specifically engineered toxin molecule (Pseudomonas exotoxin PE38) that minimizes non-targeted toxicity, potentially resulting in a highly specific therapeutic molecule. CD22 is a cell surface receptor expressed in a variety of B-cell malignancies.
CAT-3888 and CAT-8015 act by releasing the toxin intracellularly, after the whole immunotoxin has been internalized via the CD22 receptor.



CAT-3888 and CAT-8015 were discovered and initially developed by the U.S. National Cancer Institute (NCI), which is part of the US National
Institutes of Health (NIH). Genencor licensed the candidates for hematological malignancies and entered into a co-operative research and development agreement with the NIH, which is now being continued by CAT. Under the original license
agreement with the NIH, CAT has rights to a portfolio of intellectual property associated with the programs and will pay future royalties to the NIH.



The NCI has demonstrated significant efficacy of CAT-3888 in patients with hairy cell leukemia in a Phase I clinical trial. The trial was carried out in
46 patients and performed at the NCI. The patients suffered from one of three types of CD22 positive B-cell tumors: four patients with non-Hodgkins lymphoma, 11 patients with chronic lymphocytic leukemia and 31 patients with hairy cell
leukemia. The results were published in the Journal of Clinical Oncology (Vol. 23 No. 27 September 20, 2005) and included data from 265 cycles of treatment. Results showed that CAT-3888 was active in hairy cell leukemia, with 19
complete remissions (61%) and six partial responses (19%) in 31 patients. Lower, but significant, activity occurred in chronic lymphocytic leukemia. The publication concluded that the drug was well tolerated and highly effective in hairy
cell leukemia even after one cycle of treatment.



CAT-3888 is
currently in a Phase II clinical trial for the treatment of hairy cell leukemia in 25 patients. The trial started in October 2003. There are also two ongoing Phase I clinical trials. In February 2004, a trial commenced in pediatric refractory
CD22-positive leukemias and lymphomas in up to 54 patients. In September 2005, a Phase I study in 20 patients with chronic lymphocytic leukemia and NHL commenced. All the clinical trials are in patients who are resistant/refractory to conventional
treatment and all are being run at the NCI. CAT will support the NCIs ongoing development of CAT-3888 in all these indications. Data are expected to be available from all three trials by the end of 2006.



CAT-8015 is an optimized version of CAT-3888 with increased affinity for
CD22, and is currently in pre-clinical development as a potential treatment for B-cell malignancies including non-Hodgkins lymphoma and chronic lymphocytic leukemia.



CAT intends to file an IND application for CAT-8015 in various CD22 positive B-cell malignancies, including
non-Hodgkins lymphoma and chronic lymphocytic leukemia, following a period of manufacturing development that is expected to be complete by the end of 2006.



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Licensed Product Candidates



HUMIRA®



HUMIRA (adalimumab) is a fully human anti-TNFamonoclonal
antibody, isolated and optimized by CAT in collaboration with Abbott and now approved for marketing as a treatment for rheumatoid arthritis in 57 countries and is also approved for psoriatic arthritis and early rheumatoid arthritis.



In August 2005, Abbott announced that it had received approval from the
European Commission to market HUMIRA as a treatment for psoriatic arthritis and early rheumatoid arthritis in Europe. In October 2005, Abbott announced that the FDA had approved HUMIRA as a first-line treatment of recent onset moderate to severe
rheumatoid arthritis and for reducing the signs and symptoms of active arthritis in patients with psoriatic arthritis.



Also in October 2005, Abbott announced that it had simultaneously submitted a supplemental Biologics License Application with the FDA and a Type II
Variation to the European Medicines Agency (EMEA) seeking approval to market HUMIRA as a treatment for ankylosing spondylitis, an inflammatory disease of the spine and spinal joints and in January 2006, stated that it anticipates
approval in the second half of 2006.



In December 2005, Abbott
announced that it had filed an application for rheumatoid arthritis in Japan.



Phase III clinical trials in chronic plaque psoriasis commenced at the end of 2004 and Abbott has stated that it expects to submit a regulatory application for this indication in 2006 or early 2007.



In October 2005, Abbott announced new data in Crohns disease from a
Phase III extension study. It showed that of the 55 patients who initially achieved remission in the Phase III study who were maintained on HUMIRA, approximately three-quarters were still in remission after one year. Of those not initially in
remission, 43% who stayed on HUMIRA therapy had achieved remission within one year. Abbott has stated that they intend to file a BLA for Crohns disease in 2006.



Abbott reported worldwide sales of HUMIRA of U.S.$852 million in 2004 and U.S.$1,400 million in 2005. Abbott has forecast
revenues from HUMIRA of more than U.S.$1.9 billion in 2006.



ABT-874



ABT-874 is a fully human
anti-IL12 monoclonal antibody, isolated and optimized by CAT in collaboration with Abbott, and licensed to Abbott. Abbott is developing ABT-874 as a potential treatment for Crohns disease, psoriasis and multiple sclerosis. A Phase II clinical
trial continues in multiple sclerosis. In January 2006, Abbott stated that it is encouraged by the early data for the class of molecule in both psoriasis and Crohns disease. Also in January 2006, Abbott stated that
anticipates publishing data from a Phase II study in multiple sclerosis later in the year.



LymphoStat-BTM



LymphoStat-BTM(belimumab) is a fully human anti-BLyS monoclonal antibody, licensed by CAT to Human Genome Sciences, Inc (HGSI).
HGSI is developing LymphoStat-B as a potential treatment for systemic lupus erythematosus and rheumatoid arthritis. In July 2005, HGSI announced that GlaxoSmithKline had exercised its option to develop and commercialize LymphoStat-B jointly with
HGSI.



In April 2005, HGSI announced positive Phase II results
of LymphoStat-B in a 283-patient trial in rheumatoid arthritis and, in November 2005, the results were presented at the 69th Annual Meeting of



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the American College of Rheumatology/Association of Rheumatology Health Professionals in San Diego. The results show that LymphoStat-B met the primary
efficacy and safety endpoints, and demonstrate that it is safe and well tolerated, biologically active and reduces rheumatoid arthritis activity at a level of statistical significance.



In October 2005, HGSI announced the results of a Phase II trial of LymphoStat-B in 449 patients with systemic lupus
erythematosus. LymphoStat-B was shown to be safe and well tolerated and, although the drug did not meet the overall primary efficacy endpoints, showed signs of statistically significant clinical effect in seropositive patients representing 75% of
the patient population in the study. Based on the results, HGSI stated that it now has a path forward to Phase III for LymphoStat-B in systemic lupus erythematosus and planning is underway. In January 2006, HGSI stated that, with its collaborator
GlaxoSmithKline, it expects to initiate Phase III development of LymphoStat-B in systemic lupus erythematosus in 2006.



HGS-ETR1



HGS-ETR1 (mapatumumab) is a fully human anti-TRAIL Receptor-1 monoclonal antibody licensed by CAT to HGSI. HGSI is developing HGS-ETR1 as a potential
treatment for multiple cancer indications. In August 2005, HGSI announced that GlaxoSmithKline had exercised its option to develop and commercialize HGS-ETR1 jointly with HGSI.



Three Phase II clinical trials of HGS-ETR1 have been initiated: in non-Hodgkins lymphoma, non-small cell lung cancer and
colorectal cancer.



In July 2005, HGSI announced that the
results of a Phase II clinical trial of HGS-ETR1 demonstrated that HGS-ETR1 was well tolerated and could be administered safely and repetitively in patients with advanced non-small cell lung cancer. Stable disease was observed in nine out of 32
patients and the results support continued evaluation of HGS-ETR1 in non-small cell lung cancer patients in combination with chemotherapeutic agents.



In November 2005, at the European Cancer Conference in Paris, HGSI announced results of a Phase II clinical trial of HGS-ETR1 in patients with advanced
colorectal cancer. In the open-label study in 38 patients conducted in Germany, HGS-ETR1 was found to be well-tolerated and could be administered safely and repetitively to patients with advanced colorectal cancer. The results support the continued
evaluation of HGS-ETR1 in combination with chemotherapy for the treatment of colorectal cancer.



In December 2005, HGSI announced results from a Phase II trial of HGSI-ETR1 in patients with advanced non-Hodgkins lymphoma, which demonstrated that it is
well tolerated and shows signs of clinical activity. HGSI stated that the results support additional studies in combination with agents active in lymphoma.



Additionally, two Phase Ib open-label, dose escalation clinical studies are currently underway to evaluate the safety and tolerability of HGS-ETR1 in
combination with chemotherapeutic agents in the treatment of patients with advanced solid malignancies. The first is being conducted in the United States, the second in The Netherlands. Interim results of both studies were presented in November 2005
at the AACR-NCI-EORTC International Conference on Molecular Therapeutics in Philadelphia. The results to date demonstrate that HGS-ETR1 in combination with chemotherapy was well tolerated and could be administered safely and repetitively at the
doses and schedules evaluated. Partial response was observed in a number of patients in each of the studies. HGSI stated that these results support further evaluation of HGS-ETR1 in combination with chemotherapy in Phase II trials. In January 2006,
HGSI reported that it plans to initiate Phase II development of HGSI-ETR1 in combination with chemotherapy in hematopoietic cancers.



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HGS-ETR2



HGS-ETR2 is a fully human anti-TRAIL Receptor-2 monoclonal antibody licensed by CAT to HGSI and being developed by HGSI as a
potential treatment for cancer.



In January 2005, HGSI reported
plans to initiate Phase II clinical trials of HGS-ETR2. At the AACR-NCI-EORTC International Conference on Molecular Therapeutics in Philadelphia in November 2005, HGSI presented results from two Phase I clinical trials that demonstrate that HGS-ETR2
is well tolerated and can be administered safely and repetitively in patients with advanced solid tumors. Stable disease was observed in a number of patients in each of the studies. HGSI stated that these data support further evaluation of HGS-ETR2
in Phase II trials and, in January 2006, stated that the results of recently completed Phase I clinical trials warrant additional Phase II trials. It a stated that it plans to reach go/no go decisions in 2006 regarding Phase II
development of HGS-ETR2 as a single agent and/or in combination with chemotherapy.



ABthraxTM



ABthraxTMis a fully human monoclonal antibody licensed by CAT to HGSI. ABthrax was isolated and developed by HGSI from antibody libraries licensed from CAT and HGSI is
developing it as a potential treatment for anthrax disease.



In
October 2005, HGSI announced that it had been awarded a two-phase contract to supply ABthrax, a human monoclonal antibody developed for use in the treatment of anthrax disease, to the U.S. Government. Under the first phase of the contract, HGSI will
supply ten grams of ABthrax to the U.S. Department of Health and Human Services for comparative in vitro and in vivo testing. Under the second phase of the contract, under the Project BioShield Act of 2004, the U.S. Government has the option to
place an order within one year for up to 100,000 doses of ABthrax for the Strategic National Stockpile, for use in the treatment of anthrax disease. The U.S. Department of Health and Human Services comparative testing results, along with HGSIs
own preclinical and clinical study results, will form the basis of the U.S. Governments decision process for exercising its option for additional product for the Strategic National Stockpile. In January 2006, HGSI stated that it is working to
achieve an order from the U.S. Government to supply ABthrax for the Strategic National Stockpile.



MYO-029



MYO-029 is a fully human monoclonal antibody that neutralizes the effects of GDF-8 (a protein which is associated with reduced skeletal muscle mass). The
antibody was discovered by CAT in collaboration with Wyeth and is licensed to Wyeth, which is studying it as a potential therapy for muscle-wasting diseases such as muscular dystrophy. In February 2005, Wyeth announced a Phase I/II clinical trial in
adult patients with muscular dystrophy. The trial, which will take place in 12 clinical sites, is a prospective, randomized, placebo-controlled study in 108 patients, including equal numbers of patients with facioscapulohumeral muscular dystrophy,
Becker muscular dystrophy and limb-girdle muscular dystrophy. Results of the study are expected to be available in late 2006.



Markets



Information regarding markets can be found in the fourth table under Note 4 to the financial statements included in this Form 20-F.



Key Contractual Arrangements



CAT seeks to develop products independently and in collaboration with partners, using its capabilities and technologies in the discovery and development
of antibody medicines in selected therapeutic areas. CAT also seeks to license its technologies to enable others to develop new medicines.



If a product based on CATs technology is developed solely by CATs collaborative partner, CAT will typically receive royalties until the later
of (1) the expiration of the last to expire patent originating from use of CATs technology or CATs intellectual property under the relevant agreement; (2) the expiration of the last to expire of CATs patents upon which
the product is based; or (3) within a reasonable time frame from



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the first commercial sale of the product. Where CAT is responsible for product development, either on its own or with a partner, it can expect to receive a
higher share of the revenues derived from the product.



Our
significant key contractual arrangements are described below.



AstraZeneca



CAT entered into a
collaboration agreement with AstraZeneca in November 2004. The collaboration agreement offers CAT the opportunity to build a substantial pipeline of antibody products in collaboration with a leading pharmaceutical company and the potential to
receive enhanced financial returns. Under the terms of the collaboration agreement, CAT and AstraZeneca jointly undertake the discovery and development of human monoclonal antibodies as drugs, principally in the field of inflammatory diseases. CAT
will have the opportunity to co-promote selected products in the United States. AstraZeneca may opt-in, and jointly fund, certain of CATs existing and future discovery programs.



The alliance includes a five year discovery initiation phase during which the partners will jointly initiate a minimum of 25
discovery programs. The committed joint research investment will be a minimum of U.S.$175 million during this phase which the parties will fund 50:50. CAT will contribute the greater part of the resource in this discovery phase and expects to commit
between 100 and 150 scientists per year to the program at its peak, most if not all of which will come from existing resources. The principal focus of the discovery programs will be in inflammatory disorders. However, the research may extend to
other therapeutic areas as well.



Following the completion of
the discovery phase, the parties may each elect to continue funding programs into development. If both parties so elect, the program will be jointly funded until Clinical Proof of Concept (end of Phase IIb trials), unless either party opts-out
earlier. In addition, CAT has the option to continue to fund jointly the development of one in every five products that reach Clinical Proof of Concept up to product launch.



CATs financial participation reflects its level of investment in the program. CAT has the option of co-investing in
all programs through to Clinical Proof of Concept, and of continuing to fund jointly the development of one in every five product candidates that reach Clinical Proof of Concept up to product launch. If CAT opts-out after the discovery phase it
receives milestones and royalties. If CAT opts-out at Clinical Proof of Concept it receives milestones and royalties at a higher level. For those programs which it funds to product launch, CAT receives higher royalties, sales milestones and an
option to co-promote these products in the United States. If AstraZeneca opts-out of programs, it receives milestones and royalties.



AstraZeneca will receive the rights to opt-in to, and develop jointly, CAT discovery programs existing at the commencement of this alliance and also
certain future discovery programs that CAT may independently initiate. CAT has rights to co-promote products resulting from these programs in the United States.



CAT is principally responsible for antibody discovery, manufacturing process development and the supply of material for exploratory clinical trials.
AstraZeneca is principally responsible for translational biology, clinical development programs, regulatory filings and commercialization. Joint teams have been established to oversee the full discovery and development process.



CAT and AstraZeneca are working on six discovery projects consisting of one
pre-existing CAT discovery program adopted into the alliance and five new programs, all of which had progressed to lead isolation stage on schedule by June 2005. Selection of the next targets for alliance discovery projects is already underway and
during the next year, the companies intend to commence a further five programs.



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CAT anticipates that its investment in the alliance will be the principal focus of its research
investment through the end of 2009 and will account for the majority of CATs research expenditure over the next five years. In the 2006 financial year, CAT expects up to approximately 45% of its scientific resource to be working on the
AstraZeneca collaboration.



In connection with the
collaboration agreement, CAT also entered into a subscription agreement with AstraZeneca pursuant to which AstraZeneca agreed to subscribe in cash for 10,217,983 CAT shares at a price of £7.34 per share for a total investment of £75
million. The subscription agreement between AstraZeneca and CAT contains certain restrictions on AstraZenecas ability to increase its stake or to sell shares. AstraZeneca has agreed, except in certain specified circumstances, not to sell or
otherwise dispose of the subscription shares for a period of 12 months following the date of the subscription agreement and, subject to certain exceptions, not to increase its percentage holding of CAT shares (when aggregated with any holding of its
affiliates) above 19.9% of CATs issued ordinary share capital for a period of 36 months following the date of the subscription agreement. AstraZeneca has further agreed, except in certain specified circumstances not to make (or act in concert
with another party to make) an offer to acquire any shares in the capital of CAT under The City Code on Takeovers and Mergers unless such offer is recommended by a majority of the board, during this same 36-month period.



Genzyme



CAT, through its wholly owned subsidiary Aptein, and Genzyme are collaborating under an agreement entered into in September
2003 which replaces their original strategic alliance entered into in September 2000. Under the collaboration, Genzyme has received an exclusive worldwide license to CATs human antibodies targeted against TGFbfor all uses except in the eye. CAT and Genzyme have focused initially on developing a human monoclonal antibody-based treatment for diffuse systemic sclerosis; a second human monoclonal
antibody has been developed for ideopathic pulmonary fibrosis. Other potential clinical indications of anti-TGFbtreatment include post-surgical
scarring, fibrosis of other major organs such as the liver and kidneys and certain forms of cancer. The collaboration has so far given rise to two antibody product candidates at clinical development stage (CAT-192 and GC-1008) though development of
CAT-192 has now ceased.



The parties jointly fund the research,
development and commercialization activities and will share profits resulting from the sale of commercialized products. Genzyme will manage the clinical and regulatory development of any products developed by the collaboration, and will also be
responsible for worldwide marketing and sales. CAT is responsible for antibody optimization and will co-develop antibodies with Genzyme. Under the September 2003 amendment to the agreement, CAT has increased its commitment to the program by agreeing
to fund 50% of program costs through to at least early 2006. In addition, CAT will receive an additional credit in the formula by which profits arising from the program are apportioned between the parties, which significantly enhances CATs
position with respect to its share of profits from the program.



CAT and Genzyme entered into a further subscription agreement in September 2003. Under this subscription agreement, Genzyme made a further equity investment in CAT of approximately £22.9 million through a cash purchase of
4.3 million shares. This purchase was effected in two tranches; an initial purchase of 1.8 million shares and a subsequent purchase of 2.5 million shares.



Either party may terminate the alliance at any time upon one years notice after the earlier of (1) the date that
Genzyme receives final marketing approval for the first collaboration product and (2) December 31, 2006. CAT may terminate the alliance upon six months notice if Genzyme has not



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filed a Biologics License Application for a collaboration product on or before September 30, 2010. If the alliance is terminated as described above, the
continuing party has the ability to produce and market products developed in the collaboration after termination, subject to the payment of a payout amount. The September 2003 amendment to the agreement also amends the rights of the parties in the
event of a change of control, giving the party not subject to the change of control the right to purchase the others interest in the program for fair value.



Additionally, Genzyme has received a non-exclusive worldwide license for non-antibody antagonists of TGFbin exchange for milestones and royalties. CAT may receive fixed milestone payments with respect to non-antibody products conditional upon the occurrence of certain
events. No such milestones have been received to date.



In
April 2004, CAT granted Genzyme a library license. Genzyme will use CATs phage antibody libraries in its research and development of antibody-based treatments across a range of medical areas. Genzyme also received option rights to develop
therapeutic and diagnostic products on an exclusive basis.



Under the library license granted in April 2004, CAT has recognized £0.5 million in revenues under U.K. GAAP during the three years ended September 30, 2005.



Pfizer



In December 1999, CAT entered into a strategic alliance with Pharmacia for the development of human monoclonal antibody-based therapeutic drugs, focusing
particularly on the field of cancer. Pfizer has since acquired Pharmacia. CAT and Pfizer both committed technology, intellectual property and expertise to the alliance. Pfizer supplied target proteins and CAT isolated human monoclonal antibodies
directed to those targets.



Subject to CATs obligations
existing at the time of exercise, the agreement provides that Pfizer may obtain exclusive licenses to produce and market products against selected targets in return for which CAT is entitled to receive technical performance and clinical development
milestones (which together amount up to U.S.$15 million per product) and a royalty on product sales. CAT has also granted Pfizer multi-site options to license CATs library technology for use in-house.



Over the initial three years of the research collaboration, CAT received
research funding and Pfizer had the option to extend the research collaboration for additional one-year periods on similar terms. An amended version of the agreement extended the collaboration through to September 2003 and the parties subsequently
agreed to extend the agreement by means of side letters on four separate and subsequent occasions until August 31, 2004 in order to cover the completion of a particular research program. The agreement has now expired. Pfizer remains obligated
to pay milestones and royalties on product sales governed by the agreement.



CAT has recognized £4.3 million in revenues under U.K. GAAP pursuant to this arrangement during the three years ended September 30, 2005.



Human Genome Sciences, Inc. (HGSI)



In August 1999, CAT entered into a collaborative agreement with HGSI for up to three target human proteins identified by
HGSI. HGSI may obtain exclusive licenses to produce and sell products directed to these targets.



CAT will be entitled to receive contract research funding, milestone payments and royalties.



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In March 2000, CAT and HGSI expanded their arrangement by entering into a ten year collaboration
agreement. The 1999 arrangement was not terminated as a result of this agreement. HGSI and CAT will collaborate to develop and sell therapeutic antibody products. CAT may access selection gene sequence and biological information derived by HGSI and
has the right to select up to 24 antigens proprietary to HGSI for pre-clinical development. CAT has an option to obtain an exclusive license to develop six such products on its own. CAT is obligated to pay HGSI clinical development milestones and
royalty payments on such products. HGSI has the option to share clinical development costs and to share the profits equally with CAT on up to 18 such products.



Subject to CATs obligations at the time of exercise, the agreement gives HGSI the right to obtain exclusive licenses to develop and sell human
antibodies against selected targets for therapeutic and diagnostic purposes. HGSI will pay CAT license fees, milestone payments and royalties. HGSI also has rights to use CATs antibody technology for the use and sale of research tools
incorporating antibodies. CAT will receive a proportion of revenues on any such sales. HGSI paid an initial licensing fee to CAT, which included consideration for research support at CAT for a period of three years to develop human antibody
products.



Under the 1999 and 2000 agreements, four exclusive
license options have been exercised, namely Lymphostat-B for use in systemic lupus erythematosus and rheumatoid arthritis in October 2000, HGS-ETR1 for use in the treatment of certain cancers in January 2002, HGS-ETR2 for use in the treatment of a
number of solid tumors (including prostate, lung and breast tumors) in May 2002 and ABthrax, a human anti-protective antigen monoclonal antibody for use in protecting against anthrax exposure. HGSI has stated that large-scale development and
manufacture of ABthrax is dependent on U.S. government funding.



In addition to royalties on sales of products, CAT may receive milestone payments of up to between U.S.$8 million and U.S.$10 million for each therapeutic product developed pursuant to the arrangements.



CAT has recognized £2.8 million in revenues under U.K. GAAP under
both the 1999 and 2000 agreements with HGSI during the three years ended September 30, 2005.



Wyeth-Ayerst



In
March 1999, CAT entered into a strategic alliance with Wyeth-Ayerst. Under the agreement, CAT received contract research funding and was entitled to possible library option payments, product license fees, milestones and royalties. The term of the
contract research arrangement was initially three years but was extended to four years and then extended further in relation to certain services.



Wyeth-Ayerst and CAT also collaborated for an initial three years, the term of which was later extended to four years, to validate and develop a portfolio
of antibody product candidates directed at proprietary Wyeth-Ayerst targets. The companies shared equally the initial target and product validation costs. After this stage, each company had the opportunity to select candidates from this portfolio
for further development and obtain a license to commercialize these products. For products developed by Wyeth-Ayerst, CAT was entitled to receive milestone fees and royalties on product sales. For products developed by CAT, CAT could pay
Wyeth-Ayerst license fees, royalties on product sales and clinical milestone payments. Wyeth-Ayerst had limited rights to partner products developed by CAT after those products completed Phase II clinical trials.



Under the agreement, in 2000 and 2002, CAT has granted two exclusive product
licenses to human monoclonal antibodies identified by CAT against targets supplied by Wyeth Research. CAT received license fees and clinical milestones under the agreement. The collaboration and contract research elements of the alliance have now
terminated but CAT may receive clinical



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milestones and royalties.



In February 2004, Wyeth (acting through its pharmaceutical division) exercised an option to license CATs libraries for in-house use to support
Wyeths activities in therapeutic antibody drug discovery and development across a broad range of therapeutic areas. In addition to royalties, CAT may receive license fees and milestone payments of up to U.S.$7 million for each therapeutic
product developed under the library license agreement.



Under
both the collaboration and library license agreement, CAT has recognized £1.7 million in revenues under U.K. GAAP during the three years ended September 30, 2005.



Abbott



In 1993, CAT entered into a collaborative agreement with Knoll AG. This agreement was amended in 1995. Knoll was acquired by Abbott Laboratories in 2001.
Abbott may select up to six target antigens against which CAT will develop antibodies. Abbott has the right to obtain an exclusive license to produce and sell products against these antigens. CAT in conjunction with Abbott, has isolated and
optimized human monoclonal antibodies against the first two targets selected by Abbott. The first product, known as HUMIRA, received approval from the FDA in December 2002. The second product, known as ABT-874, is now in clinical trial. During 2002,
CAT amended its agreement with Abbott to allow Abbott to internally develop antibodies in the case of the remaining four available antibody targets. CAT may receive a license fee at the time Abbott obtains an exclusive license and further milestones
based on clinical developments and royalties on product sales. In addition to royalties, CAT may receive payments of up to between £5 million and £5.6 million in license fees and milestones for each product developed pursuant to this
arrangement.



The outcome of recent litigation with Abbott
regarding HUMIRA is described in Item 8 in Financial Information  Legal Proceedings.



CAT has recognized £49.4 million in revenues under U.K. GAAP under the 1995 agreement during the three years ended September 30, 2005.



Chugai Pharmaceutical Co., Ltd. (Chugai)



In September 2002, CAT entered into an agreement with Chugai. Under the
terms of the agreement, CAT granted to Chugai a non-exclusive research license to use the CAT antibody library technology for which a license fee was payable, contingent upon the successful completion of preliminary work by CAT. The license fee is
being recognized as revenue over between three and six years, the preliminary work having been completed. Chugai has the right to obtain exclusive royalty bearing licenses under the CAT antibody library technology to develop and commercialize
potential therapeutic and diagnostic products to targets, and non-exclusive licenses in relation to potential products that are not derived from CATs antibody libraries. The non-exclusive research license is for a period of three years which
may be extended by Chugai for up to a further three years upon payment of additional fees.



Chugai may terminate this agreement for convenience at any time on thirty days notice. In addition to royalties and the above initial license fee, CAT may receive payments of up to U.S.$11.5 million in license
fees and milestones for each therapeutic product developed from the CAT antibody library pursuant to this arrangement.



CAT has recognized £3.8 million in revenues under U.K. GAAP pursuant to this arrangement from inception to the end of the 2005 financial year.



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Amgen



In December 2000, CAT entered into a library license agreement with Immunex to license CATs proprietary antibody Phage Display library for the
discovery, development and potential commercialization of human monoclonal antibodies. Under the terms of the agreement , CAT received a license fee from Immunex. In addition, Immunex received exclusive therapeutic antibody product options in
relation to which CAT was entitled to receive clinical milestone and royalty payments on product sales.



In May 2001, CAT entered into an antibody development and marketing collaboration agreement with Immunex Corporation (subsequently acquired by Amgen
Inc.). Under the terms of the agreement, the two companies shared equal responsibility for all research and development, and split equally any potential profits generated by product sales.



In December 2003, CAT restructured its marketing and collaboration agreement
with Immunex (which had been acquired by Amgen), with Immunex taking over responsibility for the further development and marketing of the therapeutic antibody candidates isolated by CAT against two targets identified by Immunex and covered by the
earlier collaborations between CAT and Immunex. In return, CAT received from Amgen an initial fee and potential milestone payments and royalties on future sales.



CAT has recognized £4.4 million in revenues under U.K. GAAP under these arrangements in the three financial years
ended September 30, 2005.



Merck and Co., Inc.



In October 2001, CAT entered into a collaboration and license agreement
with Merck & Co., Inc (Merck) for the research and development of products specific for a key target involved in disease mediated by HIV.



In October 2002, CAT entered into a further agreement with Merck in respect of its proprietary human antibody technologies. Under the terms of this
second agreement, CAT granted to Merck a license to its human phage antibody libraries.



Pursuant to these arrangements, CAT has recognized £2.0 million under U.K. GAAP in the three financial years ended September 30, 2005.



Technology License Agreements



Medical Research Council



CAT initially developed its technology in cooperation with the Medical Research Council (MRC). CATs rights in respect of this technology
are governed by a license agreement of January 7, 1997 with the MRC. Under this agreement, CAT receives exploitation rights to key underlying intellectual property and know-how relating to the production and screening of phage antibody display
libraries. The agreement grants CAT exclusive rights, subject to certain rights retained by the MRC, to exploit the technology for the development of therapeutic, diagnostic or prophylactic entities arising from gene sequencing data, including:



| |  | to identify, develop, manufacture and commercially exploit antibodies for human use;
|- |  | ------------------------------------------------------------------------------------



| |  | to provide antibody isolation services on behalf of customers; and
|- |  | ------------------------------------------------------------------



| |  | to use the molecules isolated by the technology for use in the manufacture of pharmaceutical products or intermediaries.
|- |  | ------------------------------------------------------------------------------------------------------------------------



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CAT pays the MRC royalties of 3% of the net invoice price on the sale by CAT of products made using the
patent rights and technology licensed under this agreement. Where CATs sub-licensees sell such products, CAT is obligated to pay the MRC between 1% and 2.3% of the net invoice price, calculated in accordance with a specified formula. This may
be reduced under certain circumstances. CATs license with the MRC includes the Winter II, McCafferty and Griffiths patent families (discussed below in  Intellectual Property).



The outcome of the recent litigation with Abbott regarding HUMIRA is
described in Item 8 in Financial Information Legal Proceedings.



Dyax



Under
agreements originally entered into in 1997 and revised in 2003, CAT also has a non-exclusive license from Dyax Corporation (Dyax) for rights under certain of its Ladner Phage Display patents and CAT has granted certain rights to Dyax
under antibody Phage Display patents controlled by CAT. Under the terms of the revised agreement, CAT granted Dyax worldwide non-exclusive licenses for research and certain other purposes under certain of the antibody Phage Display patents
controlled by CAT as well as options to take up licenses (together with a right to sub-license those licenses) to develop therapeutic and diagnostic antibody products. In return, CAT may receive milestone payments and royalties on antibody products
which are advanced into clinical trials by Dyax and Dyaxs customers. CAT has also been granted the option to co-fund and co-develop with Dyax antibodies discovered by Dyax, as well as the right to share in Dyaxs revenues from certain
other applications of antibody Phage Display.



In January 2005,
Dyax announced that two fully human monoclonal antibodies from Dyaxs proprietary phage display libraries, IMC-11F8 and IMC-1121B, entered Phase I clinical development at its partner, ImClone Systems.



Xoma



Under agreements entered into in 2002 between CAT and Xoma, CAT, and its
collaborators, received the non-exclusive rights to use the Xoma antibody expression technology for developing products using CATs phage-based antibody technology, in return for, in certain circumstances, license payments to Xoma. Under the
same agreements, Xoma received the non-exclusive right to use CATs phage antibody libraries for its target discovery and research programs, with an option to develop antibodies into therapeutics. Should any therapeutic antibodies derived from
CATs libraries be identified and developed by Xoma, license payments and royalties will be made by Xoma to CAT.



Micromet and Enzon



Under an agreement entered into in 2003, CAT, Micromet AG, and Enzon Pharmaceuticals, Inc. entered into a non-exclusive cross-license agreement, under
which all three parties obtained substantial freedom to conduct research using certain of each others intellectual property, as well as the right to develop a defined number of therapeutic and diagnostic antibody-based products. Under the
agreement, CAT obtained expanded access to Micromets and Enzons joint patent estate in the field of single-chain antibody technology (SCA) and both Micromet and Enzon gained rights to intellectual property in antibody Phage
Display controlled by CAT. Micromet and Enzon obtained the non-exclusive right to use CATs intellectual property in Phage Display to develop and commercialize antibody products against a defined number of targets. In return, CAT received
options to develop and commercialize diagnostic and therapeutic SCA products and broad rights to SCA-based technologies for research, including the right to sublicense to collaboration partners.



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In addition, CAT granted Micromet a patent license for the development and commercialization of
Micromets human therapeutic antibody candidate MT201 (adecatumumab), specific for the epithelial tumor target Ep-CAM. In December 2004, Micromet and Serono signed an exclusive collaboration and license agreement for the development and
commercialization of MT201, which is currently being tested in two multi-center Phase II clinical trials. CAT may receive milestone and royalty payments on human antibody-based products developed against the Ep-CAM target by Micromet and its
partners. The first milestone payment would be due on filing for product approval.



MorphoSys



In
2002 following earlier patent litigation CAT entered into a settlement agreement with MorphoSys where the parties agreed to settle all litigation and patent disputes between them. CAT has recognized £1.5 million in revenues under U.K. GAAP
under this agreement in the three financial years ended September 30, 2005.



Intellectual Property



Key Patents



CAT has a patent portfolio of approximately 40 patent families comprising
over 300 patents. There are three key patent families: (i) Winter II and Winter/Lerner/Huse, which covers production of expression libraries of antibody genes; (ii) McCafferty, which protects CATs Phage Display method used to obtain
specific antibodies from these libraries; and (iii) Griffiths, which covers human antibodies specific for human self antigens isolated from CATs libraries.



Winter II covers CATs processes for generating the collections of antibody genes that comprise CATs libraries.
Patents from the Winter II family have been granted in Europe (upheld following opposition and appeal proceedings), the United States, Japan, South Korea, Australia and Canada. The Winter II patent is co-owned by MRC, Scripps and Stratagene.
Pursuant to CATs agreements with those parties, CAT has exclusive commercial exploitation rights over Winter II, subject to certain rights held by MRC, Scripps and Stratagene and their pre-existing licensees.



McCafferty covers CATs Phage Display technology. Patents from the
McCafferty family have been granted in Europe, the United States, Japan, South Korea and Australia. A patent application is pending in Canada. These patents are co-owned by CAT and MRC. CAT may use the related technology to develop and commercialize
products under the terms of the MRC license agreement. Further patents in the McCafferty family were granted in Europe in January 2002 and in the United States in 2004, with claims covering a filamentous phage particle containing a phagemid genome
and displaying a Fab or scFv on its surface. A further patent was granted in the United States in 2005 with claims relating to phage display of synthetic antibody libraries.



Griffiths covers the use of Phage Display technology to isolate human anti-self antibodies that bind to
molecules found in the human body. Six patents have been granted in the United States. Patents have also been granted in Europe and Australia. CAT has patent applications pending in Canada and Japan. This patent is co-owned by CAT and MRC. CAT may
use the related technologies and develop and commercialize products under the terms of the MRC license agreement.



In connection with its acquisition of Aptein in the 1998 financial year, CAT acquired patents covering Ribosome Display technology, under which human
monoclonal antibody fragments can be displayed in a laboratory environment without the use of a phage. Patents have been granted in Europe, the United States, South Korea, Japan, Australia and Canada.



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CAT has a number of pending or granted patent applications in relation to its antibody products.



CAT has a policy of defending its patents forcefully. Details
of recent litigation relating to CATs patents are set forth in Item 8 in Financial Information  Legal Proceedings.



Other Intellectual Property



In addition to patents, CAT relies on trade secrets and proprietary know-how. CAT seeks protection, in part, through confidentiality and proprietary
information agreements. These agreements may not provide meaningful protection or adequate remedies for CATs technology in the event of unauthorized use or disclosure of confidential and proprietary information. The parties to these agreements
may breach them. Also, CATs trade secrets may otherwise become known to, or be independently developed by, its competitors.



Competition



CAT is aware of several pharmaceutical and biotechnology companies that are actively engaged in research and development in areas related to therapeutic
antibodies. These companies have commenced clinical trials of antibody products or have successfully commercialized antibody products. Also, CAT competes in business with companies that offer therapeutic antibody generation services to companies
that have target antigens. These competitor companies may have specific expertise or technology related to antibody development. These companies include, but are not limited to, Abgenix, BioInvent, Crucell, Dyax, Genmab, Kirin Brewing Co., Medarex,
Protein Design Labs and MorphoSys. Products based on CATs technology will also face competition from established therapies and other non-antibody products in development.



The competition for HUMIRA is briefly described below.



HUMIRA. HUMIRA (adalimumab) is primarily competing in the market for the treatment of rheumatoid arthritis with a
number of other biological drugs, most notably with Enbrel (etanercept), marketed by Amgen, which was approved in the United States in 1998 and in Europe in 1999, with Remicade (infliximab), marketed by Johnson & Johnson and
Schering-Plough, which was approved in the United States in 1998 and Europe in 1999, and with Kineret (anakinra), marketed by Amgen, which was approved in the United States in November 2001 and in Europe in March 2002. CAT is aware that other
potentially competitive products are in late stage development for rheumatoid arthritis. Amgen, Celltech/UCB, Genmab, Roche, Genentech and other companies have antibody product candidates in clinical trials in rheumatoid arthritis. Many other
non-antibody products are also potentially competitive with HUMIRA.



Manufacturing Arrangement



In January 2004,
CAT and Lonza Biologics plc announced the extension of their November 2001 agreement, confirming that Lonza will manufacture and supply clinical grade antibody drugs to CAT through to the end of 2006. This will enable CAT to plan further ahead with
confidence and will guarantee that CAT and its collaborators have access to Lonzas world-class manufacturing capability at production scale (up to 2,000L), for both ongoing programs and future projects, in a cost-effective way.



Environmental and Safety



CAT is subject to environmental and safety laws and regulations, including
those governing the use of hazardous materials. The cost of compliance with these and similar future regulations is substantial. Although CAT believes that its procedures for handling and disposing of such materials comply with the standards
prescribed by applicable laws and regulations, the risk of accidental contamination or injury from these materials cannot be eliminated.



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CAT believes it is in compliance in all material respects with applicable health and safety and
environmental regulations. CAT believes that it deals with health and safety and environmental legislation in a responsible, proactive and professional manner in order to safeguard personal and environmental safety. The organization and management
of health and safety at CAT is clearly stated in a CAT policy document which is available to all staff. The board of directors receives formal reports on health and safety from the safety manager on a quarterly basis and has given one executive
director, Diane Mellett, special responsibility for health and safety.



The primary umbrella legislation dealing with health and safety in the U.K. is the Health and Safety at Work Act 1974, as amended, which is now supplemented by the Management of Health and Safety at Work Regulations 1999, as amended.



In order to facilitate providing a safe working environment,
regulation 3 of the Management of Health and Safety at Work Regulations 1999, as amended, requires employers to make a suitable and sufficient assessment of the risks to the health and safety of both their employees while at work and to
other people arising out of or in connection with their businesses. This process requires CAT to undertake stringent risk assessments to systematically identify hazards in the workplace and put in place any preventative or control measures
necessary. Other regulations also contain requirements for risk assessment specific to the hazards they cover (for example, the Control of Substances Hazardous to Health Regulations 2002, as amended, or the Genetically Modified Organisms (Contained
Use) Regulations 2000, as amended). Where assessments have already been carried out and are up-to-date under those other regulations, they need not be repeated for the purpose of the Management of Health and Safety at Work Regulations 1999 (as
amended).



These assessments, once completed, are available as
paper copy held by the relevant line manager, or as electronic copy to all staff via CATs company intranet. Assessments are reviewed when work practices change or on a regular basis, whichever occurs sooner.



CAT believes that the overall processes involved in its scientific operations
do not require an integrated environmental authorization under U.K. environmental legislation. However, it does hold certain permits relating to specific aspects of its operations. These include a discharge consent under the U.K. Water Resources Act
1991, as amended, and an authorization for the use and disposal of radioactive substances under the U.K. Radioactive Substances Act 1993, as amended. CAT also has in place a standard operating procedure to ensure the proper disposal of waste
regulated under the Special Waste Regulations 1996, as amended.



Regulatory
Background



Introduction



In most countries, the development of drug products is subject to relatively
high levels of regulation. By setting detailed and specific requirements for data which must be generated and evaluated before a product can be placed on the market, most systems of regulation ensure that such products are subject to extensive
testing and evaluation before being made widely available.



The
testing required once a potential product candidate has been identified involves both pre-clinical and clinical research. The precise tests undertaken and methods used vary according to the products under development, but basic principles and
requirements must be addressed. The performance of preclinical and clinical research is generally subject to legal provisions which are additional to, and separate from, those setting out the data requirements for the purposes of applying for
approval to market a product.



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In most jurisdictions, any dealings in drug products at any point in the chain of distribution will be
regulated through a system of authorization. In order to place a product on the market, a marketing authorization is required. This is a fundamental requirement since, subject to fairly limited exemptions and the provisions for clinical research,
all dealings must be undertaken in relation to authorized products. Manufacturers and wholesalers must have appropriate authorizations covering their activities. Manufacturing, which includes assembly of products into their final dosage forms and
packaging operations, is generally strictly regulated. Wholesalers, who supply to the trade, must meet certain criteria both as to staff and premises in order to obtain authorization. Supply at retail level to members of the public is generally
controlled through the limitations and conditions placed upon retail outlets through, for example, pharmacy registration and the imposition of statutory limitations, conditions and obligations upon other retail suppliers. Exemptions from the
requirements for authorization tend to be extremely limited.



Regulation by
the European Community



The system of regulation of
medicinal products for human use at the European Community (EC) level dates back to 1965. There is a broad range of EC legislation which has been implemented by European Union (EU) member states governing all aspects of
dealing in medicinal products. It is supplemented by numerous guidelines which are not legally binding in most cases. However, failure to comply with, or departure from, their provisions in practice requires justification. In 2004, the EU introduced
several new Directives resulting from a review of the regulation of medicinal products, including introducing a new regime (Directive 2004/24/EC) to cover traditional herbal medicinal products.



Pre-clinical Research



European legislation imposes certain specific requirements for pre-clinical
testing where the data to be generated will be used for an application for a product marketing authorization in the EC. The main provisions are contained in Directive 2001/83/EC, but on April 30, 2004, Directive 2004/27/EC was adopted which
substantially revises Directive 2001/83/EC. Most of the provisions of the new Directive are due to take effect at the end of 2005. The basic provisions in legislation may also be expanded upon in guidance issued by the Committee for Medicinal
Products for Human Use (CHMP) (previously the Committee for Proprietary Medicinal Products) which, while not usually formally incorporated into the legislation, are important. Deviation by companies from such guidance would generally
require a strong justification upon application for a marketing authorization. Aspects of pre-clinical research involving animal testing are subject to the provisions of Directive 86/609/EEC (as amended by Directive 2003/65/EC) setting down
standards to be met by animal testing institutions and those conducting the research. These provisions are enforced through registration and inspection. High standards of practice are also laid down for laboratories in Directives 2004/9/EC and
2004/10/EC and associated legislation which contain requirements as to good laboratory practice. Compliance with these Directives is monitored through a system of inspection.



Clinical Research



Directive 2001/83/EC (as amended by Directive 2004/27/EC) also establishes the data requirements in respect of research undertaken in humans where the
data is intended to be utilized in a marketing authorization application. There are also any number of guidance documents issued by the CHMP. In particular, these include guidelines addressing the conduct of trials in particular therapeutic
categories and



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patient groups and on Good Clinical Practice (GCP). The GCP guideline was developed by the International Conference for Harmonisation. These
guidelines came into force in early 1997 and took account of earlier CHMP guidelines on GCP adopted in 1990. In addition, some general legislation, such as the Directive concerning the Protection of Individuals with regard to the Processing of
Personal Data (95/46/EEC), is also relevant to the conduct of clinical research.



The conduct of research in the EC is largely now governed by Directive 2001/20/EC, adopted on May 1, 2001, which aims to increase harmonization within the EU in the conduct of both commercial and non-commercial
clinical trials on medicinal products which involve human subjects. The Directive requires the setting up of ethics committees and introduces standards designed to protect clinical trials subjects. Member states had until May 1, 2004 to adopt
the necessary measures to comply with the Directive. While most member states (including the United Kingdom) have done so, some may have not yet done so and in the meantime, the national laws and practices of those member states will continue to
govern research conducted within the local jurisdiction, although in practice the requirements of the Directive will be taken into account. Until the Directive is fully implemented, the variation in the laws and practices limits the extent to which
the conduct of research projects can be streamlined across multiple sites throughout the EC.



Whether as required by Directive 2001/20/EC or otherwise as implemented in practice in those member states which have not yet fully adopted the Directive, clinical studies may only be commenced after notification to
and/or approval by, an independent ethics committee. The process of application for and authorization of a clinical study by the regulatory authorities varies from state to state. Where the results of earlier phase studies do not justify ongoing
research, neither ethical nor regulatory approval (where required) will be granted.



The completion of Phase I, II and III clinical studies is a lengthy process and can take up to six years or more to achieve. Adverse, poor or inconclusive results at any stage can lead to the abandonment of a research
program.



Marketing



A medicinal product must have a marketing authorization to be marketed in an
EC member state. In 1995, the so-called New Systems for authorization of medicinal products were introduced in Europe.



Council Regulation 2309/93 established a process of European authorization for, and supervision of, particular types of biotechnology and high technology
products. This has now been replaced by Council Regulation 726/2004. The centralized application system requires an application for a marketing authorization to be made by the person who will be responsible for placing the product on the market (who
must be established in the Community) to the EMEA (previously the European Agency for the Evaluation of Medicinal Products). The EMEA co-ordinates the assessment process and procedure, while the CHMP, as a body of experts drawn from the
member states, undertakes (with the assistance of nominated external experts drawn from the EC) the scientific assessment of the product dossier and produces an opinion as to whether a product satisfies the criteria for authorization. The final
decision as to the grant or refusal of a marketing authorization is taken by the Commission. If successful, an application results in a single authorization for the product which is valid in all member states. The time limits set for the assessment
procedure are intended to ensure that a product is thoroughly and expeditiously evaluated to ensure the availability to the public as soon as possible of high quality new products. It is possible for an applicants schedule to slip, for
example, where the applicant delays in responding to queries or provides additional data, and also in the later stages of the process where there are no specific set time limits and bureaucratic procedures can be time consuming. Accelerated
evaluation of a marketing authorization application may be initiated by the CHMP in exceptional cases when a product is intended to provide an answer to major public health need defined by: (a) the seriousness of the disease; (b) the
absence or insufficiency of an alternative therapy; and (c) the anticipation of high therapeutic benefit.



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The legislation also introduced a mutual recognition procedure and a decentralized procedure. Both aim at
facilitating access to a single market by relying upon the principle of mutual recognition. Thus, with the exception of those medicinal products which are subject to the centralized procedure and those for which a purely national marketing
authorization is sought, a marketing authorization or the assessment in one member state (the so-called reference member state) ought in principle to be recognized by the competent authorities of the other member states (the so-called concerned
member states). Exceptions may apply where a concerned member state raises grounds that the medicinal product presents a potential serious risk to public health. In the case of such objections, the coordination group will refer the matter for
arbitration with a detailed reasoning for the disagreement (Arbitration) Arbitration may significantly lengthen the time elapsing between the initial application and approval in the nominated member states. Arbitrations are handled by
the EMEA CHMP whose decision on the matters subject to dispute, when it has been adopted by the Commission, is binding in all member states. The outcome of an Arbitration may adversely affect marketing authorizations obtained prior to the
Arbitration in cases where the result is a decision limiting the terms of, or refusing, a marketing authorization.



Some companies will have the option under the rules to use either procedure to authorize a new product. In some cases, the relative flexibility of certain
aspects of the Mutual Recognition system may recommend that system above the centralized process. In others, the perceived benefits of a single EC-wide authorization and the relative simplicity of a single application in Europe will influence the
system of choice.



The EC also legislates in respect of
orphan drugs (i.e., products for the treatment of serious diseases affecting not more than five in 10,000 people in the Community), providing a regime based on the submission of more limited data and providing a faster authorization
process than would otherwise be the case. Once a marketing authorization for an orphan drug has been granted, subject to very limited exceptions no further applications by third parties for the authorization of similar products for the same
indications will be accepted for a period of 10 years. This period may be reduced to six years in the event the product reaches certain profit levels within five years from authorization. Licensing charges may be waived in whole or in part.



After an authorization has been granted (for an initial period
of five years), and a product has been brought to market, numerous obligations are imposed upon the marketing authorization holder by the legislation. These include the obligation to ensure that the product keeps pace with the state of scientific
and technical knowledge, in particular, in terms of its manufacture and control. This means applying to vary the marketing authorization when the circumstances and technical knowledge warrant updating and amendment. Requirements for
pharmacovigilance and the reporting of adverse reactions and events to products are central to the legislation and have been extended and tightened by Directive 2004/27/EC. Advertising and the production of labeling and patient information leaflets
are each specifically regulated by Directives, with local codes of conduct and practice also in place and, in some cases, providing additional controls on corporate activity. The provisions of the legislation (which include the requirement, in
relation to the function of pharmacovigilance and information services, to have a nominated individual within CAT responsible for compliance) require significant resourcing in terms of staff and expertise, which may be sourced in-house and/or from
external providers.



The regulatory authorities have power to
suspend, revoke or vary a marketing authorization after grant if they are no longer satisfied as to product safety, quality or efficacy or any combination of these. The requirements for the performance of comprehensive pharmacovigilance and frequent
reporting and assessment in respect of marketed products are of central importance and are designed to enable companies and regulators to detect product safety concerns as early as possible and take appropriate action in the interest of public
health in the EC.



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The harmonization and streamlining of decision-making on such matters in the EC through the CHMP means
that a concern arising in one member state in relation to a product which is marketed in several will be examined at the European level and the outcome of the examination will affect the product and its authorization across all members states in
which it is sold and supplied.



Manufacturing



Manufacturing conducted within the EC must meet Good Manufacturing Practice
(GMP) requirements (Directive 2003/94/EC) which lays down principles and guidelines of good manufacturing practice with respect to medicinal products for human use and investigational medical products for human use. The Directive was to
be implemented fully by member states by April 30, 2004, and although a number of member states may not yet have done so, it is followed in practice. The Directive applies both to marketed products and products intended for clinical research
purposes. The legislation (Directive 2001/83/EC, as amended) imposes precise obligations upon manufacturers, in particular with regard to control, batch testing and release of products onto the European market and the qualifications, which must be
held by the personnel authorized to undertake such activities. Inspection of manufacturing site facilities and validation of procedures are a prerequisite to a product gaining a marketing authorization and to a manufacturer being authorized to
produce or assemble medicinal products and are regularly undertaken by regulatory authorities, both by local inspectors and by inspectors representing other countries in which the products in question are to be sold. The failure of an inspection can
be a serious matter. Product supplies may be interrupted and/or a recall required. In the most serious cases, plant closure, pending rectification of defects may be ordered. The legislation also requires clear, contractual documentation concerning
the provision of manufacturing services by one company to another, in particular, where aspects of the manufacturing process are contracted out by the main manufacturer to others.



Wholesaling



As with manufacturing operations, all wholesalers must be authorized by the authorities in the country in which they operate. Wholesale distribution in
the EC is governed by Directive 2001/83/EC, as amended, and the Good Distribution Practice Guidelines cross-referenced in it. Wholesalers must meet minimum requirements in terms of staff, facilities and procedure in order to obtain and retain
an authorization.



Pricing



In a number of member states, it is not possible to market a product until
pricing negotiations with the responsible government authorities have been concluded. Authorization by the regulatory authorities does not guarantee the negotiation of a satisfactory price, or of reimbursement status under national public health
systems, for the products concerned.



Supplementary Protection
Certificates



The time taken to research and develop
medicinal products eats into the marketing time protected by a product patent or patents and can therefore reduce the period available to the developer in which to recoup its investment through sales. In 1992, the EC introduced Regulation 1768/92
creating a Supplementary Protection Certificate (SPC) for authorized products. While this does not constitute an extension to the patent from which a product derives, it does confer certain rights of a similar nature in respect of the
product(s) derived from the patent after that patent has expired. The period during which the certificate is effective depends on calculations based upon the date of the application for the patent and the grant of the first marketing authorization
within the EC for a product derived from the patent, with an upper limit of five years.



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Abridged Applications  Market Exclusivity



Especially in cases where the patent and SPC have expired (or are not
available), medicinal products can benefit from EC provisions which are commonly described as the rules of data exclusivity, but which in fact govern the making of so-called abridged applications for marketing authorizations. An abridged
application is one in which the full data requirements are relaxed, allowing the submission of a more limited dossier provided that the conditions under Directive 2001/83/EC as amended by Article 10 of Directive 2004/27/EC are met.



Most significantly, under EC law, a third party whose product is said to be
essentially similar to one already on the market is effectively prevented for a period of eight years (from authorization) from relying upon pre-existing data submitted in support of a prior full application by another company, and for an additional
two years from placing is generic product on the market. The ten-year period shall be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or
more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. The rules do not, however, prevent a competitor from
making a marketing authorization application by relying upon a full data package compiled by the applicant, or by reference to published literature, or, with the consent of the owner of the original data, by cross reference to the data held on file
by the regulatory authorities.



The rules are only intended to
limit the circumstances in which a marketing authorization may be granted without a full data package on the basis of cross reference to existing data generated by someone other than the applicant, in order to protect the interests of the originator
of the filed data who undertook and resourced the original research necessary to support a full application to market.



The rules previously established by Directive 2001/83/EC were unfortunately unclear in some respects and their interpretation has been subject to
variation and dispute. Divergent views have been taken by regulatory authorities on the availability of protection, for example, where new data was generated in respect of a variation to an existing product involving substantial
investment by the originator. There has been significant litigation as a result.



CATs Product Candidates



Many, if not the majority, of therapeutic products developed through the application of CATs technology fall within the ambit of Regulation 2309/93, as amended. All products developed by means of DNA technology,
controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes including transformed mammalian cells and hybridoma and monoclonal antibody methods will be subject to compulsory centralized authorization for the
purposes of marketing within the EC. In the remaining cases, there will be an option as to the approval process. Ten years data exclusivity will apply across all member states in either case where centralized procedures are applied.
Clinical research programs must be conducted according to local and EC requirements to ensure the acceptability



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of data generated for EC regulatory purposes. These products will also fall within the new regime introduced by Regulation 726/2004 in November 2005, from
which point the eight year data protection plus two year marketing protection rules will apply.



Competition Regulation



CATs activities are subject to EU and U.K. competition law, including Article 81(1) of the EC Treaty. Article 81(1) prohibits agreements which restrict competition within the EC and affect trade between member states. Provisions of
agreements restricting competition (within the meaning of Article 81(1)) are void and unenforceable. In certain cases, subject to exceptions, parties entering into agreements restrictive of competition under Article 81(1) may be subject to fines
imposed by the European Commission of up to 10% of their respective annual worldwide revenue and to claims of damages from those who claim to have suffered loss by reason of the anti-competitive restriction.



Certain license agreements that CAT has entered into, or may enter into, will
grant or may grant exclusive worldwide licenses of patents, patent applications and know-how, which are or may be arguably restrictive of competition under Article 81(1). CAT determines on an agreement-by-agreement basis whether agreements fall
within Article 81(1) and if they do, whether a block exemption Regulation from the application of Article 81(1) applies to the agreement. If the agreement is still likely to fall within Article 81(1), CAT determines on an agreement-by-agreement
basis whether the general exemption under Article 81(3) applies.



U.S.
Regulation



Regulatory Authorities



The development and marketing of drug products for human use in the United
States is extensively regulated by the federal and state governments. The principal federal regulatory agency is the FDA. Although most states maintain one or more agencies with power to regulate drug products, they generally defer to the FDA in
matters relating to product development and approval. Some of CATs products may be subject to state regulation as well as FDA regulation.



Cost of Pre-market Testing



Due to the requirements imposed by the FDA, the development process for new pharmaceuticals in the United States is lengthy, expensive and commercially
risky. The great majority of compounds screened for possible development are ultimately rejected at some stage in the pre-market testing process. Total development time for successful compounds often exceeds ten years.



Under the provision of legislation establishing user fees (e.g.,
registration fees) for human drug applications (including new drug applications and biological license applications), the FDA has made commitments to reduce the review time for marketing authorization applications. Although the agency has achieved
some reductions, especially for high-priority medicines, the review process remains lengthy and complex and approval is never certain. There has been little or no reduction in the testing required before applications are submitted, which consumes
most of the time spent in developing new drug products for the U.S. market.



Clinical Trials



All clinical trials of
investigational drug products in the United States must be carried out under IND exemptions, in accordance with FDA regulations. Those regulations impose requirements for documenting the safety of proposed clinical studies, provide for submissions
to the FDA before clinical



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studies can commence and authorize the FDA to suspend or withdraw permission to continue clinical studies. Sponsors of clinical studies must maintain records
and make reports to the FDA, including reports of adverse events from human use and significant findings from studies in animals. Although the FDA affords sponsors some discretion in the design of early phase clinical studies, it is common for
sponsors to confer with the agency on the design of later phase studies, especially pivotal Phase III clinical studies that will provide the principal evidence of safety and effectiveness for marketing approvals.



Advertising and commercial distribution of investigational products are
ordinarily prohibited, but in certain circumstances, the FDA will permit sponsors to charge patients for investigational medicines. There are special procedures for treatment INDs to allow for compassionate use while controlled clinical
studies are underway.



FDA regulations impose requirements for
Good Clinical Practice (GCP) and protection of human subjects in clinical studies. Informed consent of study subjects is required, and studies must be reviewed and approved by Institutional Review Boards (IRBs) which are
subject to inspection and regulation by the FDA. Clinical studies in vulnerable populations (e.g., prisoners, children, mental incompetents and pregnant women) are subject to special scrutiny.



Approval Procedures and Criteria



U.S. drug law establishes different procedures and criteria for the approval
of biological products (product license applications and establishment license applications, or PLAs and ELAs, respectively, and a unified biological license application, or BLA, for well-characterized biological products), other new drugs (new drug
applications, or NDAs) and antibiotic drugs (antibiotic drug applications). Monoclonal antibody products are subject to regulation as biologics generally. In practice, however, the FDA applies essentially the same requirements for approval of all
products, proof of safety and effectiveness, demonstration of adequate controls in the manufacturing process and conformity with requirements for labeling. Effectiveness must ordinarily be demonstrated on the basis of two adequate and
well-controlled clinical studies carried out in accordance with FDA regulations. In addition, the FDA has issued guidelines for clinical studies of specific types of pharmaceutical products.



The FDA has substantial discretion to determine whether the data submitted in
support of a drug product is adequate for approval. The agency is not required to consult with independent experts when it reviews new products, but, in practice, it often seeks the opinion of an advisory committee. Applicants have the right to an
opportunity for an administrative hearing and judicial review of the refusal to approve a pharmaceutical product, but the FDAs decisions on issues relating to safety and effectiveness are nearly always conclusive.



Regulation of Software and Other Medical Devices



The FDA also regulates software and other medical devices used to diagnose
and treat illnesses and other medical conditions. To the extent that CATs products are or become medical devices, they will or would be subject to FDA review and regulation.



Accelerated Approval



FDA regulations authorize accelerated approval of pharmaceutical products that offer a significant improvement in the treatment of fatal or
life-threatening conditions. Approval can be based on clinical studies using surrogate end-points, but applicants must ordinarily agree to continue clinical studies after approval and to accept other conditions, including simplified procedures for
withdrawal of approval.



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Acceptance of Foreign Clinical Data



The FDA will accept applications that include reports of foreign clinical studies if they meet requirements for GCP and are
deemed relevant to U.S. medical practice. It is, however, uncommon for the agency to approve a new pharmaceutical product without some evidence from clinical studies conducted in the United States, and most sponsors carry out at least one pivotal
study in that country. Studies conducted outside the United States are subject to special audits by the FDA and may be rejected if U.S. requirements for record-keeping, protection of human subjects and other matters relating to GCP are not met.



Non-patent Market Exclusivity



U.S. drug law creates two forms of non-patent market exclusivity. First, the
law prohibits approval of abbreviated new drug applications (ANDAs) or literature-based applications for copies of innovative products for a period of five years after the approval of a new chemical entity and three years after the
approval of a new indication or dosage form for which substantial clinical studies were required. These provisions do not preclude approval of competitive applications based on original data, and they apply only to new drugs, rather than antibiotics
or biological products.



Secondly, the law provides for a
special seven year period of protection for orphan drugs (e.g., drugs for diseases that affect fewer than 200,000 persons in the United States or that are unlikely to repay development costs). During this period, the FDA is ordinarily
precluded, subject to complex exceptions, from approving any application for the same drug, even if it is based on original data. These provisions apply to all drugs, including antibiotics and biological products as well as new drugs.



Manufacturing Controls



The FDA inspects pharmaceutical manufacturing establishments for compliance
with requirements of its Current Good Manufacturing Practice (CGMP) regulations and conformity with specifications in marketing approvals. In addition, biological manufacturing establishments must be licensed by the FDA, although for
specified products the facility is approved within the BLA. The agency inspects foreign manufacturing facilities that supply bulk or finished products for the U.S. market; if companies cannot meet FDA requirements, their products may be excluded
from the United States.



Export Controls



U.S. drug laws restrict exports of unapproved new drugs and biological
products for commercial distribution and clinical investigation outside the United States. Such drugs can only be exported for commercial use if they have been approved in designated jurisdictions (including the EC and the individual member states).
Exports are also permitted for clinical studies in the designated countries after notification to the FDA, but exports for clinical studies in other countries may require prior approval. Less restrictive rules apply to exports of unapproved
antibiotics.



Advertising and Promotion



The FDA closely regulates advertising, promotion and marketing of
prescription drugs. Promotion for unapproved uses is prohibited, and sponsorship of medical symposia and publications is restricted. Financial incentives to prescribers are regulated under federal and state civil and criminal laws as well as codes
of practice for the medical professions. Advertising of over-the-counter drugs is chiefly regulated by the Federal Trade Commission.



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Enforcement Powers



The U.S. federal government has extensive powers to compel compliance with medicines laws. Violative products are subject to
seizure, and imported products may be detained. Companies and individuals that violate the law are subject to sanctions, including injunctions and criminal penalties with no requirement for proof of negligence or intent. Persons and companies
convicted of certain offenses can be temporarily or permanently barred from involvement in the drug approval process. The U.S. federal government can suspend or withdraw approval of products if questions arise concerning safety or effectiveness.



Product Liability



Companies that market drug products in the United States are subject to suit
in state and federal courts for personal injuries caused by their products. The risk of product liability is significantly greater than in most European jurisdictions, and damage awards can be substantial. FDA approval is seldom a defense to
liability, but failure to comply with FDA requirements may constitute evidence of negligence or conduct warranting punitive or exemplary damages.



Potential Limitations on U.S. Third-party Reimbursement and U.S. Health Care Reform



Sales of CATs products will depend in part on the availability of reimbursement from third party payors and the U.S.
federal and state governments. Revenues also may be negatively impacted by ongoing U.S. healthcare reform efforts which seek to contain costs and may limit or prescribe treatments and/or services reimbursed by the government.



Organizational Structure



Please see Note 12 (under the heading Fixed asset investments)
and Basis of Consolidation under Note 1 to the financial statements included in this 20-F.



Property, Plants and Equipment



CATs principal establishments, and summary details of them, are as follows:



|                                                                      |  |                                              |  |                    |  |                 |  |                      
|--------------------------------------------------------------------- |  | -------------------------------------------- |  | ------------------ |  | --------------- |  | ---------------------
|Property                                                              |  | Principal activity                           |  | Size (square feet) |  | Nature of title |  | Unexpired term       
|The Franklin Building Granta Park Cambridge Cambridgeshire CB2 6HR UK |  | Laboratories andoffices                      |  | 20,000             |  | Leasehold       |  | Approximately16 years
|                                                                      |  |                                              |  |                   
|Milstein Building Granta Park Cambridge Cambridgeshire CB1 6GH UK     |  | Laboratories andoffices andregistered office |  | 66,000             |  | Leasehold       |  | Approximately15 years



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ITEM 5 -OPERATING AND FINANCIAL REVIEW AND PROSPECTS



Selected Financial Data:



Our audited historical consolidated financial statements are presented in British pounds
sterling and are prepared in accordance with U.K. GAAP. U.K. GAAP differs in certain respects from U.S. GAAP. A reconciliation of certain amounts from U.K. GAAP to U.S. GAAP, as well as a summary of principal differences between U.K. GAAP and U.S.
GAAP applicable to us, are presented in Note 28 to our audited historical consolidated financial statements included in this Form 20-F.



The following summary financial data should be read in conjunction with the information set forth under the heading -Operating and Financial Review below, and
our historical consolidated financial statements, including the notes thereto. The summary statement of income data set forth below for the fiscal years ended September 30, 2005, 2004 and 2003, and the consolidated balance sheet data at
September 30, 2005 and 2004 have been derived from our audited historical consolidated financial statements included in this Form 20-F. The summary statement of income data for the fiscal years ended September 30, 2002 and 2001, and the
consolidated balance sheet data at September 30, 2003, 2002 and 2001 were derived from our historical consolidated financial statements which are not included in or incorporated by reference in this Form 20-F.



|                                                     |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|---------------------------------------------------- |  | ---------- | --- |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | -
|Income statement                                     |  | 2005 £000 |     |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000 |   |  | 2001 £000 |  
|UK GAAP                                              |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|Turnover                                             |  | 49,242     | (2) |  | 15,925     |   |  | 8,743      |   |  | 9,471      |   |  | 7,121      |  
|Gross profit                                         |  | 38,739     |     |  | 12,902     |   |  | 8,053      |   |  | 9,391      |   |  | 6,770      |  
|Research and development expenses                    |  | 39,170     |     |  | 44,125     |   |  | 44,981     |   |  | 31,307     |   |  | 21,393     |  
|General and administration expenses                  |  | 8,834      |     |  | 10,969     |   |  | 9,196      |   |  | 16,234     |   |  | 6,443      |  
|Operating Loss                                       |  | (9,265     | )   |  | (42,192    | ) |  | (46,124    | ) |  | (38,150    | ) |  | (21,066    | )
|Net loss on ordinary activities before taxation      |  | (530       | )   |  | (38,062    | ) |  | (41,764    | ) |  | (31,764    | ) |  | (11,771    | )
|Taxation on loss on ordinary activities              |  | (1,047     | )   |  | (64        | ) |  | 2,573      |   |  | 3,557      |   |  |           |  
|Net loss                                             |  | (1,577     | )   |  | (38,126    | ) |  | (39,191    | ) |  | (28,207    | ) |  | (11,771    | )
|Net loss per share (basic and diluted) (in pence)(1) |  | (3.2p      | )   |  | (93.3p     | ) |  | (107.5p    | ) |  | (78.7p     | ) |  | (33.3p     | )
|                                                     |  |            |     |  |           
|US GAAP                                              |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|Turnover                                             |  | 49,664     |     |  | 16,347     |   |  | 9,165      |   |  | 9,893      |   |  | 7,543      |  
|Operating loss                                       |  | (9,226     | )   |  | (40,751    | ) |  | (46,552    | ) |  | (41,234    | ) |  | (28,860    | )
|Net loss                                             |  | (1,538     | )   |  | (36,685    | ) |  | (39,619    | ) |  | (31,291    | ) |  | (19,565    | )
|Basic and diluted net loss per share (in pence)(1)   |  | (3.1p      | )   |  | (89.8p     | ) |  | (108.7p    | ) |  | (87.3p     | ) |  | (55.4p     | )
|                                                     |  |            |     |  |           
|Balance sheet                                        |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|                                                     |  |            |     |  |           
|UK GAAP                                              |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|Cash and investments in liquid resources             |  | 176,361    |     |  | 95,237     |   |  | 108,972    |   |  | 129,775    |   |  | 156,813    |  
|Total assets                                         |  | 207,825    |     |  | 121,335    |   |  | 138,551    |   |  | 156,908    |   |  | 172,470    |  
|Current liabilities                                  |  | (29,804    | )   |  | (15,603    | ) |  | (12,657    | ) |  | (12,563    | ) |  | (8,335     | )
|Long term liabilities                                |  | (18,615    | )   |  | (20,650    | ) |  | (18,152    | ) |  | (8,580     | ) |  | (8,085     | )
|Net assets                                           |  | 159,406    |     |  | 85,082     |   |  | 107,742    |   |  | 135,765    |   |  | 156,050    |  
|Shareholders funds  all equity                     |  | 159,406    |     |  | 85,082     |   |  | 107,742    |   |  | 135,765    |   |  | 156,050    |  
|Number of ordinary shares outstanding                |  | 51,639,868 |     |  | 41,109,938 |   |  | 38,338,320 |   |  | 36,214,349 |   |  | 35,455,865 |  
|                                                     |  |            |     |  |           
|US GAAP                                              |  |            |     |  |            |   |  |            |   |  |            |   |  |            |  
|Cash and investments in liquid resources             |  | 176,361    |     |  | 95,237     |   |  | 108,972    |   |  | 129,775    |   |  | 156,813    |  
|Total assets                                         |  | 214,698    |     |  | 126,923    |   |  | 138,768    |   |  | 157,035    |   |  | 172,613    |  
|Current liabilities                                  |  | (32,293    | )   |  | (15,020    | ) |  | (12,985    | ) |  | (12,904    | ) |  | (8,428     | )
|Long term liabilities                                |  | (19,302    | )   |  | (21,759    | ) |  | (19,683    | ) |  | (10,533    | ) |  | (10,460    | )
|Net assets                                           |  | 163,103    |     |  | 90,144     |   |  | 106,100    |   |  | 133,598    |   |  | 153,725    |  
|Shareholders funds  all equity                     |  | 163,103    |     |  | 90,144     |   |  | 106,100    |   |  | 133,598    |   |  | 153,725    |  

---

|(1) | Under U.K. GAAP and U.S. GAAP, potentially dilutive issuable shares are only included in the calculation of fully diluted earnings per share if their issue would decrease net profit
per share or increase net loss per share. Since CAT has reported losses, its basic and fully diluted loss per share are therefore equal.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Restated, see Note 2 to the financial statements included in this 20-F.
|--- | -----------------------------------------------------------------------



44



---

Exchange Rate Information



The table below sets forth, for the periods and dates indicated, information
concerning the noon buying rates in New York City for pounds sterling expressed in U.S. dollars per £1.00. Fluctuations in the exchange rate between the pound sterling, as certified by the Federal Reserve Bank of New York for customs purposes,
and the U.S. dollar will affect, among other things, the U.S. dollar equivalent of the pound sterling price of CATs shares on the Daily Official List of the London Stock Exchange plc and the market price of CATs American Depositary
Shares on the NASDAQ Stock Market. Averages represent the average of the noon buying rates in New York City on the last day of each full month during the period.



|                          |  |        |  |        |  |         |  |           
|------------------------- |  | ------ |  | ------ |  | ------- |  | ----------
|Years ended September 30, |  | High   |  | Low    |  | Average |  | Period end
|2001                      |  | 1.5045 |  | 1.3730 |  | 1.4410  |  | 1.4691    
|2002                      |  | 1.5800 |  | 1.4074 |  | 1.4701  |  | 1.5700    
|2003                      |  | 1.6840 |  | 1.5418 |  | 1.6055  |  | 1.6620    
|2004                      |  | 1.9045 |  | 1.6598 |  | 1.7927  |  | 1.8090    
|2005                      |  | 1.9482 |  | 1.7303 |  | 1.8512  |  | 1.7696    



The following table
sets forth the high and low noon buying rate for pounds sterling expressed in U.S. dollars per £1.00 for each of the previous six months. On March 2, 2006, the exchange rate was $1.7493 to £1.00.



|               |  |        |  |       
|-------------- |  | ------ |  | ------
|               |  | High   |  | Low   
|September 2005 |  | 1.8420 |  | 1.7620
|October 2005   |  | 1.7855 |  | 1.7484
|November 2005  |  | 1.7720 |  | 1.7138
|December 2005  |  | 1.7740 |  | 1.7188
|January 2006   |  | 1.7885 |  | 1.7404
|February 2006  |  | 1.7807 |  | 1.7343



45



---

Operating and Financial Review



Overview



The majority of CATs revenue is generated from royalties received from Abbott, on sales of HUMIRA, and from license fees. Going forward, it is
expected that the primary source of revenue in the short to medium term will be royalties from sales of products by collaborators and licensees. In the past, a significant part of CATs revenue has been generated from contract research fees
whereby CAT has provided research and development services to certain corporate collaborators. This business stream has become less material over time, as CAT transforms from a technology company to a product company.



About a quarter of CATs operating costs are external development
expenses reflecting the significant rise in spend on clinical trial activity over the last few years. Due to the nature of CATs business, its staff are a key resource and staff and staff-related expenditure continues therefore to represent
approximately a third of operating costs.



As of
September 30, 2005, CAT had net cash and liquid resources of £175.6 million. CAT has procured cash funding through revenue streams and equity financings, either with institutional investors or with corporate partners in conjunction with
business collaborations.



CAT is still a relatively young
company in an industry where the material returns on investment are generated over the longer term. One of the key challenges facing CAT is the need to balance its expenditure against available resource, while still investing sufficient funds into
product development that, if successful, will generate significant future income.



The following review is based on CATs consolidated financial statements which are prepared under U.K. GAAP. A summary of the significant differences between U.K. and U.S. GAAP is given at the end of this review
and more detailed information is provided in Note 28 to the financial statements included within this Form 20-F.



Results of operations



Years ended September 30 2005, 2004 and 2003



The following information is extracted from the UK GAAP financial statements.



The following table details the components of CATs profit and loss account for the years ended September 30, 2005, 2004 and 2003. The financial
information contained in the financial statements included within this Form 20-F separately presents the exceptional item relating to the settlement with Abbott for the year ended September 30, 2005.



|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|------------------------------------------- | -- | ----- | ---- | -- | ----- | - | -- | ----- | - | -- | --------- | - | - | --------- | - | -- | ---- | - | - | ---- | -
|                                            |    |       |      |    |       |   |    |       |   |    | Variance  |  
|                                            |    | 2005  |      |    | 2004  |   |    | 2003  |   |    | 2005/2004 |   |   | 2004/2003 |  
|                                            | £m |       |      | £m |       |   | £m |       |   | £m |           |   | % |           |   | £m |      |   | % |     
|Turnover                                    |    | 49.2  | (i)  |    | 15.9  |   |    | 8.7   |   |    | 33.3      |   |   | 209       |   |    | 7.2  |   |   | 83   |  
|Direct costs                                |    | (10.5 | )(i) |    | (3.0  | ) |    | (0.7  | ) |    | (7.5      | ) |   | (247      | ) |    | (2.3 | ) |   | (329 | )
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|Gross profit                                |    | 38.7  |      |    | 12.9  |   |    | 8.0   |   |    | 25.8      |   |   | 200       |   |    | 4.9  |   |   | 61   |  
|Operating expenses                          |    | (48.0 | )    |    | (55.1 | ) |    | (54.2 | ) |    | 7.1       |   |   | 13        |   |    | (0.9 | ) |   | (2   | )
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|Operating loss                              |    | (9.3  | )    |    | (42.2 | ) |    | (46.2 | ) |    | 32.9      |   |   | 78        |   |    | 4.0  |   |   | 9    |  
|Profit on sale of fixed asset investments   |    | 1.5   |      |    |      |   |    |      |   |    | 1.5       |   |   | 100       |   |    |     |   |   |     |  
|Finance income (net)                        |    | 7.3   |      |    | 4.1   |   |    | 4.4   |   |    | 3.2       |   |   | 76        |   |    | (0.3 | ) |   | (7   | )
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|Loss on ordinary activities before taxation |    | (0.5  | )    |    | (38.1 | ) |    | (41.8 | ) |    | 37.6      |   |   | 99        |   |    | 3.7  |   |   | 9    |  
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|Taxation on loss on ordinary activities     |    | (1.1  | )    |    |      |   |    | 2.6   |   |    | (1.1      | ) |   | (100      | ) |    | (2.6 | ) |   | (100 | )
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  
|Loss for the financial year                 |    | (1.6  | )    |    | (38.1 | ) |    | (39.2 | ) |    | 36.5      |   |   | 96        |   |    | 1.1  |   |   | 3    |  
|                                            |    |       |      |    |       |   |    |       |   |    |           |   |   |           |   |    |      |   |   |      |  

---

|(i) | Restated, see Note 2 to the financial statements included in this 20-F.
|--- | -----------------------------------------------------------------------



46



---

Revenues



Revenues consist of the following for the three years ended September 30, 2005, 2004 and 2003:



|                       |  |      |  |      |  |      |  |           |   |  |           |  
|---------------------- |  | ---- |  | ---- |  | ---- |  | --------- | - |  | --------- | -
|                       |  |      |  |      |  |      |  | Variance  |  
|                       |  | 2005 |  | 2004 |  | 2003 |  | 2005/2004 |   |  | 2004/2003 |  
|                       |  | £m   |  | £m   |  | £m   |  | £m        |   |  | £m        |  
|Royalties              |  | 40.5 |  | 6.3  |  |     |  | 34.2      |   |  | 6.3       |  
|License fees           |  | 5.2  |  | 4.6  |  | 2.6  |  | 0.6       |   |  | 2.0       |  
|Technical milestones   |  | 1.1  |  | 1.6  |  | 0.2  |  | (0.5      | ) |  | 1.4       |  
|Clinical milestones    |  | 1.1  |  | 1.1  |  | 1.8  |  |          |   |  | (0.7      | )
|Contract research fees |  | 0.4  |  | 1.8  |  | 3.9  |  | (1.4      | ) |  | (2.1      | )
|Other                  |  | 0.9  |  | 0.5  |  | 0.2  |  | 0.4       |   |  | 0.3       |  
|                       |  |      |  |      |  |      |  |           |   |  |           |  
|Total                  |  | 49.2 |  | 15.9 |  | 8.7  |  | 33.3      |   |  | 7.2       |  
|                       |  |      |  |      |  |      |  |           |   |  |           |  



Royalties
Royalty income is generated by sales of products which use CATs proprietary technology. Royalty revenues are recognized once the amounts due can be reliably estimated based on the sale of the underlying products and collectibility is assured.
Where there is insufficient historical data on sales and returns to fulfil these requirements, for example in the case of a new product, the royalty revenue will not be recognized until CAT can reliably estimate the underlying sales. This may be
considerably later than when the payment is received if subsequent adjustments for product returns are possible under the terms of the relevant contract. In situations where there is adequate historical information on sales figures, royalties are
recorded based on the reports received from the licensee or based on estimated sales if the information has not been received.



In November 2003, CAT announced that it had commenced legal proceedings against Abbott in the High Court in London regarding the royalty rate payable on
sales of HUMIRA under a license agreement between the parties. In October 2005, CAT announced it had reached an agreement with Abbott regarding royalties payable to CAT under this license agreement. The terms of this agreement with Abbott are
summarized below:



| |  |  | Abbott will pay CAT royalties at 2.688% on sales of HUMIRA from January 1, 2005. CAT will retain all of these royalties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | CAT will retain all royalties received from Abbott in respect of sales of HUMIRA up to December 2004, net of approximately £7.6 million which will be paid to its licensors,
the MRC, the Scripps Institute and Stratagene.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Abbott paid CAT the sum of U.S.$255 million, which CAT immediately paid to its licensors in lieu of their entitlement to royalties arising on sales of HUMIRA from January 1,
2005 onwards. This was both received from Abbott and paid to CATs licensors in October 2005.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



---

| |  |  | CAT refunded to Abbott approximately £9.2 million for royalties paid in respect of sales of HUMIRA from January 1, 2005 through to June 30, 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Abbott will pay CAT five annual payments of U.S.$9.375 million commencing January 2006, contingent on the continued sale of HUMIRA. From each of these payments, CAT will pay U.S.$2
million to its licensors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The settlement
agreement was an extension of the long running litigation process. In the audited UK GAAP financial statements issued by CAT on November 28, 2005, all aspects of the settlement agreement were treated as an adjusting post balance sheet event, and as
such were treated as occurring during the year ended September 30, 2005. For the purposes of this 20-F filing, one element of the settlement agreement, namely the US$255 million payment from Abbott to CAT and the subsequent payment of this amount by
CAT to its licensors referred to above, in lieu of their entitlement to royalties arising on sales of Humira from January 1, 2005 onwards, has not been treated as an adjusting post balance sheet event. As a result, turnover (royalties) and direct
costs have been restated from the amounts previously reported in the audited UK GAAP financial statements issued on November 28, 2005, to exclude this element of the settlement. This restated UK GAAP treatment is in line with the treatment
subsequently adopted under IFRS whereby these amounts will be included as revenue and direct costs in CATs financial statements for the year ended September 30, 2006.



Prior to settlement being reached, the royalty arrears received from Abbott in January 2005, pursuant to the High Court
Judgment, and the royalties received in March 2005 in excess of the two percent argued by Abbott, were not recognized as revenue. These receipts were held in other creditors on the balance sheet pending resolution of the appeal. These amounts have
been released to revenue in CATs results for the full year as a result of the settlement. Of the royalty payment received from Abbott in September 2005 (in respect of sales of HUMIRA for the six months to 30 June 2005), £9.2 million
due back to Abbott has been recognized in other creditors. The remainder, equating to 2.688% of sales, has been recognized as revenue.



Royalty income for 2005 is comprised of the following, all in respect of HUMIRA:



|                                                                                    |  |                                             |  |                                   |  |                 
|----------------------------------------------------------------------------------- |  | ------------------------------------------- |  | --------------------------------- |  | ----------------
|                                                                                    |  | 2005 Excluding Settlement with Abbott £000 |  | 2005 Settlement with Abbott £000 |  | 2005 Total £000
|Royalties                                                                           |  |                                             |  |                                   |  |                 
|Sales: 6 months to December 31, 2004 - at 2%, adjusted to 5-6%                      |  | 5,167                                       |  | 8,114                             |  | 13,281          
|Sales: 6 months to June 30, 2005  at 2%, adjusted to 2.688%                        |  | 6,529                                       |  | 2,346                             |  | 8,875           
|Accrued royalty on sales 3 months to September 30, 2005  at 2%, adjusted to 2.688% |  | 4,041                                       |  | 1,390                             |  | 5,431           
|Release of back dated royalties for sales to June 30, 2004  excess of 5-6% over 2% |  |                                            |  | 12,934                            |  | 12,934          
|                                                                                    |  |                                             |  |                                   |  |                 
|Total                                                                               |  | 15,737                                      |  | 24,784                            |  | 40,521          
|                                                                                    |  |                                             |  |                                   |  |                 



As reflected above,
royalties due on sales of HUMIRA have been accounted for on an accruals basis for the first time, resulting in an accrual of income for the final quarter of the 2005 financial year. This means that the results of 2005 reflect five quarters of
royalty income.



Royalties recognized during the 2004 financial
year relate to HUMIRA. Abbott announced that it had received FDA approval to market HUMIRA in the United States in December 2002 and, that it had received approval to market HUMIRA in the EU during September 2003. Sales of HUMIRA commenced in
January 2003. The three royalty payments received during the 2004 financial year, and recognized as revenue, represent Abbotts calculation of the 2% royalties due on HUMIRA sales in the period from January 2003 to June 30, 2004.



48



---

License fees License fees are typically one off up front payments. Under CATs revenue
recognition policy license fees are deferred and are typically recognized over the period of the license term. Agreements entered into between October 1, 2002 and September 30, 2005 include the following:



| |  |  | Library license granted to Merck in October 2002
| | - |  | ------------------------------------------------



| |  |  | Agreement signed with MorphoSys in December 2002
| | - |  | ------------------------------------------------



| |  |  | Grant of five exclusive product licenses during 2002 (three to HGSI, one to Amgen and one to Wyeth Research)
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | Library license granted to Wyeth in February 2004
| | - |  | -------------------------------------------------



| |  |  | Library license granted to Genzyme in April 2004
| | - |  | ------------------------------------------------



| |  |  | Grant of six product licenses during 2004 (four to Dyax and two to Amgen)
| | - |  | -------------------------------------------------------------------------



| |  |  | Library license granted to NovImmune in December 2004
| | - |  | -----------------------------------------------------



| |  |  | Patent license granted to BioInvent in June 2005
| | - |  | ------------------------------------------------



| |  |  | Patent license granted to Symphogen in July 2005
| | - |  | ------------------------------------------------



License fees increased between 2003 and 2004 primarily as a result of a full years revenue being recognized under the Chugai library license
(granted in September 2002) for the first time during 2004, as well as revenue being recognized under the new licenses granted to Wyeth and Genzyme. A full years revenue was recognized under the Genzyme library license for the first time
during 2005 which, with the new license granted to NovImmune, accounts for the majority of the increase between 2004 and 2005.



Milestones Under certain research and development agreements CAT receives milestone payments when certain defined technical criteria are met.
Similarly CAT receives clinical development milestone payments when a licensee or corporate partner achieves key stages in clinical trials of a product derived using CATs proprietary technology. The following significant milestones were
received:



Year ended September 30,
2003:



| |  |  | Clinical milestone payment received from Abbott following product license approval of HUMIRA in Switzerland
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Clinical milestone payments from HGSI on initiation of Phase I trials for ABthrax and HGS-ETR2
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Technical milestone payments from Pfizer
| | - |  | ----------------------------------------



Year ended September 30, 2004:



| |  |  | A milestone payment was received from Wyeth Research with the initiation of a Phase I clinical trial for MYO-029. Fifty percent of the value of this royalty payment is creditable
against any future royalties payable by Wyeth Research and therefore, only half the value has been recognized as revenue in the year
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



49



---

| |  |  | A clinical milestone payment was received from Abbott during the 2003 financial year following FDA approval of HUMIRA. The milestone was not recognized as revenue during the 2003
financial year as it is creditable against the royalties receivable from Abbott. Three fifths of this milestone were released as revenue during the 2004 financial year
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A technical milestone payment was received from Amgen
| | - |  | -----------------------------------------------------



Year ended September 30, 2005:



| |  |  | A technical milestone payment was received from Amgen
| | - |  | -----------------------------------------------------



| |  |  | The final two fifths of the HUMIRA clinical milestone payment noted above, were released in 2005
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | Two clinical milestones were received from Dyax.
| | - |  | ------------------------------------------------



Unless otherwise stated, the above milestone receipts have been recognized in full as revenue under CATs accounting policy.



Contract research feesCAT has provided research and development
services to certain corporate collaborators, usually in the form of a defined number of CATs staff working with the collaborator to identify and optimize drug candidates to be licensed by the collaborator. Contract research fees were generated
from ongoing collaboration agreements with the following customers.



|                             |  |                               |  |                              
|---------------------------- |  | ----------------------------- |  | -----------------------------
|Year ended September 30 2005 |  | Year ended September 30, 2004 |  | Year ended September 30, 2003
|Merck                        |  | Merck                         |  | Merck                        
|                            |  | Amgen                         |  |                             
|                            |  | Pfizer                        |  | Pfizer                       
|                            |  | Wyeth Research                |  | Wyeth Research               
|                            |  |                              |  | HGSI                         



The decrease in
revenues since 2003 reflects CATs strategy to focus on higher value programs with a consequent declining level of activity in this area.



Other revenues CAT receives a percentage of certain revenues generated by MorphoSys under the terms of an agreement signed in December 2002 and a
percentage of certain revenues generated by Dyax under the terms of a licensing agreement. The majority of the increase in other revenues, both between 2003 and 2004 and between 2004 and 2005, arose as a result of an increase in such revenues
received from MorphoSys and Dyax.



Direct costs



CATs direct costs are typically payments made to third parties as a
proportion of certain CAT revenues. The majority of direct costs for the 2005 and 2004 financial years comprised royalties payable to the MRC and other licensors, primarily arising from the payments received from Abbott regarding sales of HUMIRA.
The amounts due to CATs licensors on royalties received from Abbott regarding sales of HUMIRA were dependant on the outcome of the legal proceedings between CAT and Abbott.



50



---

Prior to the resolution of the litigation proceedings with Abbott, royalties due to CATs licensors were provided for at the mid-point of the expected
possible outcomes. Subsequent to the settlement agreement reached with Abbott, final amounts due to CATs licensors have been agreed between the parties and provided for in CATs full year results for 2005, resulting in the adjustments
shown below. As part of the settlement agreement reached with Abbott, Abbott paid CAT U.S.$255 million, which CAT immediately paid to its licensors in lieu of their entitlement to royalties arising on sales of HUMIRA from January 1, 2005
onwards. This one off payment due to CATs licensors has not been treated as an adjusting post balance sheet event, and therefore has not been recorded in direct costs in 2005.



|                                                                                                                         |  |                                             |  |                                   |   |  |                  |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------- |  | --------------------------------- | - |  | ---------------- | -
|                                                                                                                         |  | 2005 Excluding Settlement with Abbott £000 |  | 2005 Settlement with Abbott £000 |   |  | 2005 Total £000 |  
|Direct costs                                                                                                             |  |                                             |  |                                   |   |  |                  |  
|On royalty in respect of sales six months to December 31, 2004  at 0.75%                                                |  | 2,035                                       |  |                                  |   |  | 2,035            |  
|On royalty in respect of sales six months to June 30, 2005  0.75% adjusted to 0%                                        |  | 2,560                                       |  | (2,560                            | ) |  |                 |  
|On accrued royalty in respect of sales three months to September 30, 2005  at 0.75% adjusted to 0%                      |  | 1,515                                       |  | (1,515                            | ) |  |                 |  
|Payments on account made to the MRC on sales of HUMIRA to December 31, 2004                                              |  |                                            |  | 2,302                             |   |  | 2,302            |  
|Payments made to licensors pursuant to settlement (October 2005)                                                         |  |                                            |  | 7,606                             |   |  | 7,606            |  
|Excess of amounts accrued (0.75%) over amounts paid to licensors (0.5%) (prior to payments on account referred to above) |  |                                            |  | (1,584                            | ) |  | (1,584           | )
|                                                                                                                         |  |                                             |  |                                   |   |  |                  |  
|Other (non HUMIRA)                                                                                                       |  | 144                                         |  |                                  |   |  | 144              |  
|                                                                                                                         |  |                                             |  |                                   |   |  |                  |  
|Total                                                                                                                    |  | 6,254                                       |  | 4,249                             |   |  | 10,503           |  
|                                                                                                                         |  |                                             |  |                                   |   |  |                  |  



In the 2004 financial
year, direct costs included an amount payable to the MRC and in the 2003 financial year included an amount payable to The Scripps Research Institute and Stratagene, all arising following CATs settlement of all pending litigation with
MorphoSys. Direct costs for the 2003 and 2004 financial years included agency fees incurred in obtaining new contracts.



Operating expenses



Operating expenses consist of the following for the three years ended September 30, 2005, 2004 and 2003:



|                           |  |       |   |  |       |   |  |       |   |  |           |  |           |  
|-------------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- |  | --------- | -
|                           |  |       |   |  |       |   |  |       |   |  | Variance  | 
|                           |  | 2005  |   |  | 2004  |   |  | 2003  |   |  | 2005/2004 |  | 2004/2003 |  
|                           |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |  | £m        |  
|Research and development   |  | (39.2 | ) |  | (44.1 | ) |  | (45.0 | ) |  | 4.9       |  | 0.9       |  
|General and administrative |  | (8.8  | ) |  | (11.0 | ) |  | (9.2  | ) |  | 2.2       |  | (1.8      | )
|                           |  |       |   |  |       |   |  |       |   |  |           |  |           |  
|Total                      |  | (48.0 | ) |  | (55.1 | ) |  | (54.2 | ) |  | 7.1       |  | (0.9      | )
|                           |  |       |   |  |       |   |  |       |   |  |           |  |           |  



51



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Research and development expenses



|                                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|------------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | -
|                                           |  |       |   |  |       |   |  |       |   |  | Variance  |  
|                                           |  | 2005  |   |  | 2004  |   |  | 2003  |   |  | 2005/2004 |   |  | 2004/2003 |  
|                                           |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | £m        |  
|External development expenses              |  | (11.5 | ) |  | (18.5 | ) |  | (15.2 | ) |  | 7.0       |   |  | (3.3      | )
|Staff costs and laboratory consumables (i) |  | (15.5 | ) |  | (15.1 | ) |  | (16.5 | ) |  | (0.4      | ) |  | 1.4       |  
|Infrastructure and depreciation            |  | (8.0  | ) |  | (6.5  | ) |  | (6.9  | ) |  | (1.5      | ) |  | 0.4       |  
|Other                                      |  | (4.2  | ) |  | (4.0  | ) |  | (6.4  | ) |  | (0.2      | ) |  | 2.4       |  
|                                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Total                                      |  | (39.2 | ) |  | (44.1 | ) |  | (45.0 | ) |  | 4.9       |   |  | 0.9       |  
|                                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Average staff numbers                      |  | 210   |   |  | 231   |   |  | 249   |   |  | (21       | ) |  | (18       | )

---

|(i) | Staff costs includes training costs, employee benefits, the charge for the cost of shares to be allocated under employee share schemes and the profit and loss charge reflecting the
intrinsic value of any options granted at less than market value.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



External development expenses (ii):



|                  |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |                    
|----------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | - |  | -------------------
|                  |  |       |   |  |       |   |  |       |   |  | Variance  |   |  |          
|                  |  | 2005  |   |  | 2004  |   |  | 2003  |   |  | 2005/2004 |   |  | 2004/2003 |   |  | Total costs to date
|                  |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | £m        |   |  | £m                 
|Trabio            |  | (4.2  | ) |  | (11.1 | ) |  | (9.0  | ) |  | 6.9       |   |  | (2.1      | ) |  | 30.5               
|CAT-192 / GC-1008 |  | (3.9  | ) |  | (3.4  | ) |  | (3.7  | ) |  | (0.5      | ) |  | 0.3       |   |  | 14.2               
|AstraZeneca       |  | 1.1   |   |  |      |   |  |      |   |  | 1.1       |   |  |          |   |  | 1.1                
|CAM-3001          |  | 0.5   |   |  |      |   |  |      |   |  | 0.5       |   |  |          |   |  | 0.5                
|Other (iii)       |  | (5.0  | ) |  | (4.0  | ) |  | (2.5  | ) |  | (1.0      | ) |  | (1.5      | ) |  |                    
|                  |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |                    
|Total             |  | (11.5 | ) |  | (18.5 | ) |  | (15.2 | ) |  | 7.0       |   |  | (3.3      | ) |  |                    
|                  |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |                    

---

|(ii) | ABT-874, LymphoStat-B, HGS-ETR1, HGS-ETR2, ABthrax, MYO-029, IMC-11F8, IMC-1121B, BI-201, Sym001 and MT201 are being developed by third party licensees of CAT and therefore, CAT
does not bear any costs associated with the research and development of such products.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | Other external development expenses includes expenses for CAT-213, CAT-354 and expenses that are not allocated to any particular product candidate (due to the early stage of
development or nature of spend) and therefore CAT is unable to calculate total program costs to date for this category.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The decrease in external development costs between 2004 and 2005 is due to lower spend on the Trabio program. In March 2005, CAT terminated further
development of Trabio as a potential treatment for improving the outcome of glaucoma surgery. The increase in external development costs between 2003 and 2004 reflected a significant rise in spend on clinical trials on CAT-funded programs,
particularly Trabio and CAT-354.



Trabio is a fully human
anti-TGFb2monoclonal antibody developed by CAT as a potential treatment for improving the outcome of glaucoma surgery. Trabio failed to demonstrate efficacy in two Phase III clinical trials (in November 2004 and March 2005). CAT has now terminated all further
development of Trabio, subject only to continuing with its minimum obligations in completing an ongoing United States clinical trial. In the 2006 financial year CAT expects to incur costs related to Trabio of approximately £0.5 million, such
costs being committed to by CAT prior to the termination of further development with respect to Trabio.



GC-1008 is a pan-specific fully human anti-TGFbmonoclonal antibody being developed by CAT and Genzyme. In October 2005, a Phase I clinical trial of GC-1008 in idiopathic pulmonary fibrosis (IPF) commenced. The objectives of the trial are to



52



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evaluate the safety, tolerability and pharmacokinetics of single intravenous infusions of GC-1008 in patients with IPF. The trial, which is an open-label,
single dose, dose-escalating study will be in 25 patients in five centers in the United States. Preliminary results are expected to be available in 2007. Subject to ongoing discussions with the FDA, the companies are planning to file an IND for a
Phase I clinical trial in oncology early in 2006.



CAT-192, a
fully human anti-TGFb1monoclonal antibody, was jointly developed by CAT and Genzyme as a potential treatment for scarring and fibrotic conditions, including scleroderma. Following a study in 45 scleroderma patients and subsequent discussion with experts,
suitable endpoints for a further trial in scleroderma could not be identified, and Genzyme and CAT have no further plans for the development of CAT-192.



Under the terms of the collaboration with Genzyme, as of October 1, 2005, CAT expects to fund the alliance with a further U.S.$25 million over the
course of fiscal years 2006, 2007 and part of 2008, though the timing of such funding may vary depending on the progress of product development under the collaboration. CAT and Genzyme have yet to determine the level of funding beyond that point.



In November 2004, CAT and AstraZeneca commenced a major
strategic alliance for the joint discovery and development of human monoclonal antibody therapeutics, principally in the area of inflammatory disorders. As part of the alliance, it was agreed that CAT and AstraZeneca would fund on a 50:50 basis the
cost of a minimum of 25 discovery programs that will be initiated over the first five-year discovery phase.



To date, CAT and AstraZeneca are working on six discovery projects consisting of one pre-existing CAT discovery program adopted into the alliance and five
new programs, all of which had progressed to lead isolation stage on schedule by June 2005. Selection of the next targets for alliance discovery projects is already underway and during the next year, the companies intend to commence a further five
programs. The total for 2005, as shown above, reflects the reimbursement due back from AstraZeneca so as to reapportion total alliance costs on a 50:50 basis. Due to the early stage of development the alliance costs have not been split by program.
In the 2006 financial year, CAT expects a net credit of £0.4 million with respect to current programs with AstraZeneca.



CAT and Zenyth are co-developing human antibody antagonists to the GM-CSF receptor for potential therapeutic use in inflammatory diseases. CAT and Zenyth
have selected a lead antibody, CAM-3001. Preliminary safety studies are ongoing and scale-up of production prior to pre-clinical development is underway. The development costs are split on a 50:50 basis and the balance for 2005 reflects the
contribution received from Zenyth to bring CATs contribution back to 50%. In the 2006 financial year, CAT expects a net credit of £0.2 million with respect to the alliance with Zenyth.



Staff costs remained constant between 2004 and 2005 (reflecting some
relocation of staff from research to general and administration), consumable costs increased with the high levels of activity on the AstraZeneca programs.



The fall in staff costs between 2003 and 2004 relates to a decline in staff numbers, with the termination of the antibody microarray project in 2003, and
also reflects some reallocations of staff between departments.



Actual staff costs are not allocated to particular product candidates. Instead, a standard pre-determined full time equivalent rate which includes appropriate overhead costs, is used for internal project reporting. Full time equivalents
charged to particular product candidates were as follows:



53



---

Full time equivalents charged to named programs:



|                       |  |        |  |        |  |        |  |           |   |  |           |  
|---------------------- |  | ------ |  | ------ |  | ------ |  | --------- | - |  | --------- | -
|                       |  |        |  |        |  |        |  | Variance  |  
|                       |  | 2005   |  | 2004   |  | 2003   |  | 2005/2004 |   |  | 2004/2003 |  
|                       |  | Number |  | Number |  | Number |  | Number    |   |  | Number    |  
|Trabio                 |  | 5.9    |  | 21.4   |  | 24.4   |  | (15.5     | ) |  | (3.0      | )
|CAT-192/GC-1008        |  | 8.1    |  | 13.4   |  | 14.9   |  | (5.3      | ) |  | (1.5      | )
|AstraZeneca            |  | 33.0   |  |       |  |       |  | 33.0      |   |  |          |  
|CAM-3001               |  | 12.4   |  | 3.8    |  | 7.3    |  | 8.6       |   |  | (3.5      | )
|Licensed Products (iv) |  |       |  |       |  | 3.8    |  |          |   |  | (3.8      | )
|Other (v)              |  | 40.1   |  | 37.2   |  | 40.0   |  | 2.9       |   |  | (2.8      | )

---

|(iv) | Assigned to ABT-874, LymphoStat-B, HGS-ETR1, HGS-ETR2, ABthrax and MYO-029. These programs are now being developed by third party licensees of CAT and therefore, CAT no longer
assigns any full time equivalents to work on such product candidates.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(v) | Other includes full time equivalents assigned to CAT-213, CAT-354, product collaborations with Elan and Amgen and other CAT-funded product development activities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



At present, most of CATs product
candidates are at relatively early stages of development and there is considerable uncertainty in predicting future research and development costs as well as the timing of various stages of development associated therewith.



Infrastructure and depreciation expenses decreased between 2003 and 2004 with
the completion of the fit out of the Milstein Building, in early 2003. The increase between 2004 and 2005 is due to the impairment provision of £2.9 million made in 2005 against an intangible asset.



Other research and development expenditures in 2003 included the one-off cost
of the cross-licensing arrangement with Xoma for antibody related technologies, entered into during December 2002.



Neither infrastructure and depreciation expenses nor other research and development expenditures are allocated to particular product candidates.



General and administration expenses



|                      |  |      |   |  |       |   |  |      |   |  |           |   |  |           |  
|--------------------- |  | ---- | - |  | ----- | - |  | ---- | - |  | --------- | - |  | --------- | -
|                      |  |      |   |  |       |   |  |      |   |  | Variance  |  
|                      |  | 2005 |   |  | 2004  |   |  | 2003 |   |  | 2005/2004 |   |  | 2004/2003 |  
|                      |  | £m   |   |  | £m    |   |  | £m   |   |  | £m        |   |  | £m        |  
|Staff costs (i)       |  | (4.9 | ) |  | (3.8  | ) |  | (3.1 | ) |  | (1.1      | ) |  | (0.7      | )
|Litigation            |  | 0.7  |   |  | (2.5  | ) |  | (0.9 | ) |  | 3.2       |   |  | (1.6      | )
|Exceptional costs     |  |     |   |  |      |   |  | (0.6 | ) |  |          |   |  | 0.6       |  
|Foreign exchange      |  | 0.4  |   |  | (1.1  | ) |  | (0.8 | ) |  | 1.5       |   |  | (0.3      | )
|Other                 |  | (5.0 | ) |  | (3.6  | ) |  | (3.8 | ) |  | (1.4      | ) |  | 0.2       |  
|                      |  |      |   |  |       |   |  |      |   |  |           |   |  |           |  
|Total                 |  | (8.8 | ) |  | (11.0 | ) |  | (9.2 | ) |  | 2.2       |   |  | (1.8      | )
|                      |  |      |   |  |       |   |  |      |   |  |           |   |  |           |  
|Average staff numbers |  | 74   |   |  | 52    |   |  | 47   |   |  | 22        |   |  | 5         |  

---

|(i) | Staff costs includes training costs, employee benefits, the charge for the cost of shares to be allocated under employee share schemes and the profit and loss charge reflecting the
intrinsic value of any options granted at less than market value.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The increase in staff costs year to year reflects the reallocations of staff from research, and between 2003 and 2004 some increase in staff numbers.



54



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Litigation expenses of £3.9 million were incurred during 2005 prior to recovery of costs from
Abbott. The increase year to year in litigation expenses is due to the legal proceedings commenced by CAT against Abbott in the High Court in London. CAT received £2.85 million towards its legal costs from Abbott in January 2005, pursuant to
the High Court Judgment. In October 2005, CAT received an additional £1.73 million towards its legal costs. Following resolution of the litigation process, the total received from Abbott, of £4.6 million, has been credited against
litigation within general and administration expenses in CATs full year results for 2005. Under the terms of its accounting policy, CAT has not accrued in 2005 for any legal costs incurred in relation to the litigation process with Abbott that
arose subsequent to September 30, 2005.



Exceptional costs
for 2003 relate to the offer made for Oxford GlycoSciences Plc (OGS). This comprised costs incurred of £1.7 million offset by a break fee of £1.1 million received from OGS.



The foreign exchange costs in all three years relate primarily to the
non-cash charge, credit in 2005, arising from the conversion from U.S. Dollars to Pound Sterling of CATs trading balances with its U.S. subsidiary, Aptein Inc. This accounting charge increased between 2003 and 2004 due to the depreciation
of the U.S. Dollar compared to Pound Sterling, and decreased between 2004 and 2005 due to the appreciation of the U.S. Dollar compared to Pound Sterling.



Finance income



Interest income increased between 2004 and 2005 due to the increase in CATs cash and liquid resources during the period (2005: £175.6 million;
2004: £93.7 million) as a result of the £75 million subscription monies received from AstraZeneca in December 2004, and the receipt of backdated royalties received from Abbott in January 2005. Interest income fell between 2003 and 2004
as average balances of cash and liquid resources decreased during the period (2004: £93.7 million; 2003: £107.8) as cash was consumed by operating activities.



Taxation



CAT has accounted for significant revenues in the 2005 financial year arising from the settlement reached with Abbott. As a result, CAT Limited has
insufficient current year taxable losses to be offset against the taxable profit generated in CAT Group plc. Therefore, a tax charge of £1.0 million has arisen in the 2005 financial year. If CAT Limited makes a trading loss in the 2006
financial year, then a significant proportion of this tax charge is potentially recoverable.



CAT submitted one claim in the 2003 financial year under the research and development tax credit scheme for Small and Medium sized Enterprises in the United Kingdom. CAT chose to surrender tax losses created through
qualifying research and development expenditure in exchange for a cash refund. A claim of £3.1 million was made for the 2002 financial year. CAT no longer qualifies as a Small and Medium Sized Enterprise and hence no further claims for cash
refunds under this scheme can be made. Tax of £0.6 million and £0.1 million was withheld on the license payments received from Chugai during the 2003 and 2004 financial years respectively.



Liquidity and capital resources



Since formation, CAT has incurred trading losses and expects to incur
additional losses for a number of future years as a result of costs incurred in performing research and development and from general and administrative costs associated with CATs operations.



CATs future liquidity and capital requirements will depend on many
factors, including:



| |  |  | continued progress in research and development programs conducted by CAT alone, CAT with its collaborators and by CATs corporate partners affecting costs incurred and the
realization of incomes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



55



---

| |  |  | the scope and results of preclinical testing and clinical trials;
| | - |  | -----------------------------------------------------------------



| |  |  | the retention of existing, and establishment of further, collaborative arrangements, if any;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the time and expense involved in obtaining regulatory approvals;
| | - |  | ----------------------------------------------------------------



| |  |  | competing technological and market developments;
| | - |  | ------------------------------------------------



| |  |  | investment in, or acquisition of, other companies;
| | - |  | --------------------------------------------------



| |  |  | purchase of intellectual property; and
| | - |  | --------------------------------------



| |  |  | other factors not within CATs control.
| | - |  | ---------------------------------------



In addition, CAT may be required to expend substantial funds if unforeseen difficulties arise in the course of completing required additional development
of product candidates or other aspects of its business.



As of
September 30, 2005, CAT had cash and liquid resources of approximately £175.6 million. CAT has invested funds that are surplus to its current requirements in highly liquid short-term securities managed on a discretionary basis by a third
party. The principal purpose of CATs liquid resources is for future funding and hence their safeguarding is considered to be a greater priority than the return made on the investments. This is reflected in the criteria within the mandate under
which the fund manager operates. As the majority of CATs funds are placed in short-term investments and investments are generally held to maturity, realization of losses from interest rate movements is unlikely. Declines in interest rates over
time would, however, reduce CATs interest income.



Since
formation, CAT has financed its operations primarily through:



| |  |  | the initial public offering of ordinary shares in 1997
| | - |  | ------------------------------------------------------



| |  |  | an ordinary share offering in April 2000
| | - |  | ----------------------------------------



| |  |  | subscriptions for ordinary shares in connection with strategic collaborations by corporate partners
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | revenue from collaborative arrangements
| | - |  | ---------------------------------------



| |  |  | private placements of its ordinary shares prior to its initial public offering
| | - |  | ------------------------------------------------------------------------------



Taking into account existing facilities, cash balances and investments in liquid resources, CAT believes that the working capital available to CAT is
sufficient for its requirements for at least the next twelve months. However, CAT may need additional financing in the future. It may seek to raise additional funds through public or private financing, collaborative relationships or other
arrangements. CAT cannot assure investors that such additional funding, if needed, will be available on terms acceptable to CAT, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants. Collaborative arrangements may require CAT to relinquish its rights to certain of its technologies, products or marketing territories. CATs failure to raise capital when needed may have a material
and adverse effect on its business, financial condition and results of operations.



Historical cash flows



|                                                |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|----------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | -
|                                                |  |       |   |  |       |   |  |       |   |  | Variance  |  
|                                                |  | 2005  |   |  | 2004  |   |  | 2003  |   |  | 2005/2004 |   |  | 2004/2003 |  
|                                                |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | £m        |  
|Net cash outflow from operating activities      |  | (0.1  | ) |  | (31.1 | ) |  | (35.8 | ) |  | 31.0      |   |  | 4.7       |  
|Returns on investments and servicing of finance |  | 6.2   |   |  | 4.2   |   |  | 5.1   |   |  | 2.0       |   |  | (0.9      | )
|Taxation                                        |  |      |   |  | (0.1  | ) |  | 5.2   |   |  | 0.1       |   |  | (5.3      | )
|Capital expenditure and financial investment    |  | 0.1   |   |  | (1.0  | ) |  | (8.1  | ) |  | 1.1       |   |  | 7.1       |  
|Management of liquid resources                  |  | (63.5 | ) |  | 15.4  |   |  | 18.8  |   |  | (78.9     | ) |  | (3.4      | )
|Financing                                       |  | 75.6  |   |  | 13.9  |   |  | 11.7  |   |  | 61.7      |   |  | 2.2       |  
|                                                |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Increase/(decrease) in cash                     |  | 18.3  |   |  | 1.3   |   |  | (3.1  | ) |  | 17.0      |   |  | 4.4       |  
|                                                |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  



56



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CAT stated in November 2004 that it expected net cash outflow for 2005 before financing to be
approximately £32 million. In May 2005, CAT stated that, pursuant to the payments received from Abbott as a result of the High Court judgment in CATs favor, this would now equate to a net cash inflow before financing of approximately
£2 million for 2005. The actual result of £6.2 million net cash inflow before financing reflects lower levels of expenditure than anticipated, most notably in external development, plus a favorable effect from currency rate movement.



Operating activitiesCATs net cash used by
operating activities has principally resulted from operating losses, offset by depreciation, amortization and other non-cash movements. In all three years, operating losses were also offset by increases in creditors. In 2003 and 2004 this was
primarily due to the increase in deferred income resulting from new license agreements. In 2005, the significant increase in creditors arose from the settlement agreement reached with Abbott in October 2005. Creditors in 2005 included an amount of
£9.2 million due back to Abbott under the terms of the settlement agreement, regarding the royalty payment for sales of HUMIRA in the six months to June 30, 2005. Creditors in 2005 also included amounts of £7.6 million due to
CATs licensors regarding sales of HUMIRA to December 31, 2004. In October 2005, these amounts were paid to Abbott and the licensors respectively.



Investments and servicing of finance Interest income increased between 2004 and 2005 as a result of increased cash balances and liquid resources
arising as a result of the AstraZeneca subscription monies and receipt of back-dated royalties from Abbott. Interest income fell between 2003 and 2004 as cash was consumed by operating activities. CAT established a finance leasing facility in 2003,
under which equipment with a cost of £1.4 million has been financed. This is repayable over four years.



Taxation CAT received a £5.7 million research and development tax credit during the 2003 financial year. The credit received in the 2003
financial year was based on the claim for the 2002 and 2001 financial years. CAT no longer qualifies for cash refunds under this scheme and hence no further tax credits were received during the 2004 and 2005 financial years.



Capital expenditure and financial investment CATs capital
expenditure is primarily for laboratory equipment, laboratory facilities and related information technology equipment. CAT has also invested in office and administrative facilities. The fall in capital expenditure from 2003 to 2004 was due to lower
spend on fixtures and fittings and laboratory equipment following the completion of the fit out of the Milstein Building early in 2003. There was an increase in capital expenditure from 2004 to 2005 as a result of increased spend on laboratory
equipment. CAT sold some of its shares held in MorphoSys during 2005 resulting in a cash inflow of £2.1 million during the year, which offset the capital expenditure and resulted in a net cash inflow of £0.1 million in capital
expenditure and financial investment.



Financing
CATs net cash inflows from financing activities primarily resulted from the issuance of ordinary shares. In the 2003 financial year Genzyme increased its equity stake in CAT through a subscription of £9.6 million for 1.8 million
shares. This subscription for shares was the first of two tranches. The second tranche was a further 2.5 million shares with a value of £13.3 million, issued during the 2004 financial year following shareholder approval at the
Extraordinary General Meeting held in October 2003. In the 2005 financial year, CAT received £75 million from AstraZeneca for 10,217,983 CAT shares. No dividends or shares were announced during the year.



57



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Post balance sheet event



In addition to the settlement agreement reached with Abbott, which, other than in respect of the royalty buy-out from CATs licensors has been
accounted for as an adjusting post balance sheet event, the following post balance sheet event occurred, which has not been accounted for in results for the year ended September 30, 2005.



On November 1, 2005, CAT announced the acquisition of product candidates
CAT-3888 (formally GCR-3888) and CAT-8015 (formally GCR-8015) from Genencor, a subsidiary of Dansico, based in Palo Alto, California. CAT has also hired ten key former staff of Genencor who will continue to be responsible for the development of
these programs, and has therefore established a CAT operation (CAT Inc.) in the United States for the first time. This operation will be based in Palo Alto, California.



The consideration for the acquisition is up to U.S.$16 million, of which U.S.$14 million was paid by CAT on closing on November 4,
2005. Simultaneously, Genencor subscribed U.S.$14 million for 1,170,277 new CAT shares. CAT may be required to pay Genencor additional consideration of up to U.S.$2 million payable in either cash or shares at CATs option, contingent on the
availability for use in a clinical trial of bulk product material of CAT-8015 produced by Genencor.



Financial outlook for 2006



Further royalty income from Abbott in respect of HUMIRA is expected in the 2006 financial year. Royalties will be credited at the rate of 2.688% on HUMIRA sales from October 2005 to September 2006. Cash royalty receipts are in March and
September, representing royalties for the preceding calendar half year. In addition, Abbott made a payment of US$9.375 million in January 2006, U.S.$2 million of which is payable to CATs licensors. Recurring revenues, representing release of
deferred income from licensing arrangements entered into prior to September 30, 2005 are expected to be approximately £5 million for 2006 (this is a non-cash item). Additional revenues may arise from technical and clinical milestone
receipts and any further licensing arrangements.



External
development costs are expected to show an increase over 2005, reflecting higher spend on the collaborative program with Genzyme and on CAT-354, plus spending on CAT-3888 and CAT-8015.



The establishment of CAT Inc. will also give rise to additional costs in the period. Capital expenditure is also expected to
be higher than in 2005 with planned purchases of significant items of laboratory equipment and information technology expenditure.



The settlement with Abbott gave rise to a one-off net cash outflow of £15.3 million in the early part of this financial year. It is expected that
CATs spend represents (under International Financial Reporting Standards (IFRS)) net cash used in operating activities plus capital expenditure for 2006, assuming current exchange rates, will be of the order of £20 million
plus the outflow of £15.3 million referred to above.



58



---

Critical accounting policies and estimates



Critical accounting policies are those policies that require the application of managements most challenging,
subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that
are sufficiently sensitive to result in materially different results under different assumptions and conditions. Management believe that CATs significant critical accounting policies, which apply to both U.K. and U.S. GAAP, are those set out
below. For a detailed discussion of these and other policies, refer to Note 1 and Note 28 of the financial statements included in this Form 20-F.



Revenue recognition



Revenues consist of income derived in the normal course of business from license fees, technical milestones, clinical milestones, fees for research and
development services, purchased rights and royalties.



The
principal area in which management is required to use estimates is in the recognition of license fees and royalties. License fees received are deferred and recognized as revenues over the period of the license term or associated research and
development agreement. In circumstances where no such defined period exists, the license fee is deferred and recognized over the period to expiration of the relevant patents. These estimates represent managements assessment of the period over
which the licensee will realize value from the relationship.



This estimate may change as the associated products, to which the license relates, progress through clinical development and relevant product approvals. The impact of revised estimates could result in revenues being recognized over a
revised term in future periods but without retrospective adjustment.



In addition, management is required to make judgments in the recognition of royalties, in particular, in relation to sales of HUMIRA. CATs accounting policy states that royalty revenues are recognized once the amounts due can be
reliably estimated based on the sale of underlying products and collectibility is assured. Where there is insufficient historical data on sales and returns to fulfil these requirements, for example in the case of a new product, the royalty revenue
will not be recognized until CAT can reliably estimate the underlying sales. During the final quarter of the 2005 financial year, royalties due on sales of HUMIRA have been accounted for on an accruals basis for the first time. Consistent with
CATs accounting policy, management has evaluated whether it can reliably estimate the underlying sales of HUMIRA. Management consider the criteria for recognition have been met because an additional year of historical data is available. In
addition, the settlement of litigation in October 2005 brought further clarity to this judgment. As a result, royalties of £5,431,000 for the three months ended September 30, 2005 were recognized during the 2005 financial year.



Contingent liabilities



CAT is involved in one case of litigation, the litigation with Abbott having been settled in October 2005. Further
information on litigation is given in Note 27 to the financial statements included within this Form 20-F. Management has estimated there to be no requirement to provide for liabilities in respect of this case. In making these estimates, management
has considered the nature of the litigation (and in particular that the current litigation does not involve a material claim against CAT for damages) as well as the probability of various outcomes. Should facts and circumstances surrounding this
litigation case change in the future there may be a requirement for management to revise estimates as to future liabilities and to record them in future financial statements.



Contractual obligations and commitments



CAT has various contractual obligations to make future payments including operating and finance lease obligations and other contractual commitments.



59



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The following table summarizes CATs annual future obligations (as of September 30, 2005) under
these contracts due by financial year:



|                        |  |                        |  |                   |  |                   |  |                         |  |            
|----------------------- |  | ---------------------- |  | ----------------- |  | ----------------- |  | ----------------------- |  | -----------
|                        |  | Payments due by period
|Contractual obligations |  | Less than 1 year £000 |  | 1  3 years £000 |  | 3  5 years £000 |  | More than 5 years £000 |  | Total £000
|Debt (finance leases)   |  | 425                    |  | 41                |  |                  |  |                        |  | 466        
|Operating leases        |  | 2,084                  |  | 4,104             |  | 3,914             |  | 18,700                  |  | 28,802     
|Purchase obligations    |  | 2,882                  |  | 381               |  |                  |  |                        |  | 3,263      
|                        |  |                        |  |                   |  |                   |  |                         |  |            
|Total                   |  | 5,391                  |  | 4,526             |  | 3,914             |  | 18,700                  |  | 32,531     
|                        |  |                        |  |                   |  |                   |  |                         |  |            



In addition to the
commitments above, as of October 1, 2005 CAT expects to fund the alliance it has with Genzyme a further U.S.$25 million over the course of fiscal years 2006, 2007 and part of 2008, under an amended collaboration agreement with Genzyme. Due to
the nature of this collaborative arrangement it does not give rise to specified cash outflows and the timing of such funding may vary depending on the progress of product development under the collaboration. CAT and Genzyme have yet to determine the
level of funding beyond that point.



As part of the alliance
CAT has with AstraZeneca, it was agreed that both parties would jointly fund the cost of a minimum of 25 discovery programs that will be initiated over the first five-year discovery phase. The research funding is expected to be a minimum of U.S.$175
million that AstraZeneca and CAT would commit to on a 50:50 basis. CAT has the option of co-investing in all programs through to Clinical Proof of Concept, and of continuing to fund jointly the development of one in every five product candidates
that reach Clinical Proof of Concept up to product launch. As of October 1, 2005, CAT has a financial commitment of U.S.$19 million to the alliance over the course of fiscal years 2006 to 2008 in respect of the six discovery projects currently
being worked on in the alliance, based on current program budgets. Again, the timing of such funding may vary depending on the progress of product development under the collaboration. CAT and AstraZeneca intend to commence a further five program
during 2006. CAT will be committed to fund fifty per cent of these program costs in addition to the six currently being worked on. CATs financial commitment is represented in part by an obligation to provide substantial human resource to the
alliance over the next five years.



Differences between U.K. and U.S. GAAP



CATs consolidated financial statements are prepared
in accordance with U.K. GAAP which differs in certain respects from U.S. GAAP reporting requirements.



The principal differences relate to accounting for revenue recognition and stock compensation. More details as to the differences between U.K. and
U.S. GAAP are set out in Note 28 to the to the financial statements included in this Form 20-F.



60



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Recently issued accounting pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123 (revised 2004),
Share-based payment (SFAS 123), which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The revised
statement eliminates the alternative of using APB Opinion No. 25 Intrinsic Value method of accounting that was provided for in SFAS 123 as originally issued. SFAS 123 is effective no later than the beginning of the first fiscal year beginning
after December 15, 2005. CAT has not evaluated what the effect would be on CATs financial position.



In December 2004, the FASB issued SFAS 153, Exchanges of Non-monetary Assets  an amendment of APB Opinion No. 29 (SFAS
153). APB Opinion No. 29 requires that non-monetary exchanges of assets be recorded at fair value with an exception of similar productive assets, which can be recorded on a carryover basis. SFAS 153 eliminates the current exception and
replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS 153 is effective for non-monetary asset exchanges that take place in fiscal periods beginning after June 15, 2005, however earlier application is permitted. It is uncertain what effect, if any, this statement will have on
CAT, adoption is on a prospective basis.



In May 2005, the FASB
issued SFAS 154, Accounting changes and error corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 requires retrospective application to prior periods financial
statements of changes in accounting principle, unless it is impracticable to determine either the period specific effects or the cumulative effect of the change. SFAS 154 is effective for fiscal years beginning after December 15, 2005, however,
earlier application is permitted. Management does not expect the impact of this new statement to be material to CATs financial position, adoption is on a prospective basis.



ITEM 6 -DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



Directors and Senior Management



The information set forth in the Annual Report under the headings The Board of Directors and
Management and filed as Exhibit 15.1 to this Form 20-F is incorporated herein by reference.



Since the date of the Annual Report, Uwe Bicker and Sir Aaron Klug have resigned from CATs Board. On February 3, 2006, each of Paul Nicholson, Peter
Chambré, John Stocker, Ake Stavling, Diane Mellett and John Brown were re-appointed to the Board.



Compensation



The information set forth in the Annual Report under the heading Report on Directors Remuneration under the subheadings
Benefits, Pensions, Variable pay, Non-Executive Directors, Directors emoluments, Directors share options and Share Incentive Plan and filed as Exhibit
15.1 to this Form 20-F is incorporated herein by reference. In addition, please see Note 18 to the financial statements included in this Form 20-F.



Board Practices



The information set forth in the Annual Report under the headings The Board of Directors, Report on Directors
RemunerationService Contracts, Corporate Governance  The Board of Directors, Corporate GovernanceThe Audit Committee and Corporate Governance  The Remuneration Committee and filed as
Exhibit 15.1 to this Form 20-F is incorporated herein by reference.



61



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Employees



Information regarding employees can be found in the first table under Note 7 (under the heading Staff Costs) to
the financial statements included in this Form 20-F.



Share
Ownership



The information set forth in the Annual Report
under the heading Report on Directors Remuneration under the subheadings Directors share options, Directors shareholdings, Options and Share Incentive Plan and filed as
Exhibit 15.1 to this Form 20-F is incorporated herein by reference. Further information regarding share ownership can be found in Note 7 (under the heading Staff Costs) and Note 18 (under the heading Called up share capital and
share premium (in the options table)) to the financial statements included in this Form 20-F.



ITEM 7 -MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



Major Shareholders and U.S. Holdings



The information set forth in the Annual Report under the heading Directors Report-US Shareholdings is incorporated herein by reference.



As of February 27, 2006, the Company estimates that the following shareholders held, directly or indirectly, 3% or more of
the share capital of CAT.



|                                      |  |                      |  |                                   
|------------------------------------- |  | -------------------- |  | ----------------------------------
|Shareholder                           |  | Number of CAT Shares |  | Percentage of issued share capital
|AstraZeneca UK Limited                |  | 10,217,983           |  | 19.25                             
|Genzyme Corporation                   |  | 4,607,982            |  | 8.68                              
|Wellington Management Company LLP     |  | 3,935,765            |  | 7.41                              
|Franklin                              |  | 2,271,350            |  | 4.28                              
|Invesco                               |  | 2,265,686            |  | 4.27                              
|Standard Life                         |  | 2,019,706            |  | 3.80                              
|Legal & General                       |  | 1,824,392            |  | 3.44                              
|Orbimed(i)                            |  | 1,593,600            |  | 3.00                              
|Pioneer Investment management Limited |  | 1,709,782            |  | 3.22                              

---

|(i) | On March 3, 2006, CAT was notified that Orbimed no longer has any interest in the share capital of CAT.
|--- | -------------------------------------------------------------------------------------------------------



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On November 25, 2005, November 28, 2005, December 1, 2005, December 5, 2005, December
20, 2005, January 3, 2006 and February 9, 2006 various directors acquired CAT shares. Details of such acquisitions, and the shareholdings of such directors thereafter, are set forth on Exhibits 15.2, 15.3, 15.4, 15.5, 15.6, 15.7 and 15.8 which are
incorporated herein by reference.



The identified significant
shareholders do not have different voting rights from holders of ordinary shares. To CATs knowledge, CAT is not controlled by any person. CAT is not aware of any current arrangement, the operation of which may result in a change in control of
CAT at a later date.



Related Party Transactions



Please see Item 4.B under the headings Key Contractual
Arrangements  AstraZeneca.



ITEM 8 -FINANCIAL INFORMATION



Please see Item 18.



Legal Proceedings



In November 2003 CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in
London concerning the levels of royalties due to CAT under a license agreement between the parties. In December 2004 the High Court ruled in CATs favor. In January 2005 the judge denied Abbott leave to appeal and further ordered that Abbott
contribute to CATs legal costs. In February 2005 the Court of Appeal granted leave to appeal and a hearing was set for October 2005. Since year end the matter was settled and the hearing did not take place. Financial terms of the settlement
are disclosed in Note 2 to the financial statements included in this Form 20-F. Under the terms of the Settlement Agreement, Abbott will pay CAT a reduced royalty of 2.688% together with five annual payments of US $9.375 million commencing
January 2006 contingent on the continued sale of HUMIRA. $2 million from each of these payments will be payable to CATs licensors. CAT will also retain royalties previously received from Abbott through December 31, 2004 net of £7.6
million which will be paid to CATs licensors. In addition, Abbott paid CAT U.S.$255 million which CAT paid to its licensors the MRC, Scripps Institute and Stratagene in lieu of their entitlement to royalties on sales of HUMIRA. Abbott will
also pay a reduced royalty of 4.75% on any future sales of ABT-874 (a second drug candidate covered by the license agreement) from which CAT will pay a portion to the MRC and other licensors pursuant to CATs prior arrangements with them.



CVC, a former shareholder of CAT Limited, has alleged in U.S.
Federal Court for the Southern District of New York that CAT Limited was required, under the terms of a subscription agreement entered into in 1993, to issue anti-dilution shares to CVC, equivalent to 25,790 ordinary shares. CAT



63



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believes that CVCs claim is groundless. However, CAT cannot assure investors as to the outcome of this litigation.
If CVC was successful in such proceedings, CAT has been advised that it would also be required to issue ordinary shares to certain other shareholders who received shares in 1993 in similar circumstances as CVC. CAT estimates that the total number of
ordinary shares which would be required to be issued in these circumstances would be approximately 763,000. In connection with these proceedings, both parties filed cross motions for summary judgment in 1999, which were denied in May 2000. Since
then there has been no change in the status of proceedings. The Directors continue to believe that the proceedings have no merit, and accordingly, no provision has been made.



As part of normal patent challenge procedure at the European Patent Office, CAT has been and is currently involved in
certain oppositions and appeals on patents granted to it by the European Patent Office. Due to the nature of these types of proceedings and the complexity of the legal and factual questions involved, the outcome of any proceedings or the
significance of any outcome cannot be predicted with any certainty.



ITEM 9 -THE OFFER AND LISTING



CATs
ordinary shares began trading publicly on what was then the Official List of London Stock Exchange Limited on March 25, 1997, under the symbol CAT. CATs ADRs (each of which represents a single ordinary share) commenced trading
on the NASDAQ Stock Market on June 11, 2001 under the symbol CATG. The following table lists information on the price range of CATs ordinary shares and ADRs. It is based on reported closing prices for CATs ordinary
shares on the Official List of London Stock Exchange and closing prices for CATs ADRs as reported by NASDAQ.



|                    |  |       |  |       |  |       |  |      
|------------------- |  | ----- |  | ----- |  | ----- |  | -----
|                    |  | High  |  | Low   |  | High  |  | Low  
|                    |  | U.S.$ |  | U.S.$ |  | £     |  | £    
|Financial year 2001 |  |       |  |       |  |       |  |      
|First quarter       |  |       |  |       |  | 43.88 |  | 26.05
|Second quarter      |  |       |  |       |  | 35.50 |  | 13.38
|Third quarter       |  |       |  |       |  | 26.65 |  | 15.38
|Fourth quarter      |  | 31.44 |  | 13.10 |  | 21.69 |  | 8.70 
|                    |  |       |  |      
|Financial year 2002 |  |       |  |       |  |       |  |      
|First quarter       |  | 30.50 |  | 19.80 |  | 20.00 |  | 13.18
|Second quarter      |  | 26.75 |  | 19.00 |  | 19.28 |  | 12.91
|Third quarter       |  | 22.70 |  | 14.00 |  | 14.90 |  | 9.80 
|Fourth quarter      |  | 16.74 |  | 6.76  |  | 10.05 |  | 4.24 
|                    |  |       |  |      
|Financial year 2003 |  |       |  |       |  |       |  |      
|First quarter       |  | 9.87  |  | 7.20  |  | 6.20  |  | 4.57 
|Second quarter      |  | 9.69  |  | 5.32  |  | 5.90  |  | 3.21 
|Third quarter       |  | 9.81  |  | 5.45  |  | 5.80  |  | 3.30 
|Fourth quarter      |  | 9.35  |  | 6.91  |  | 5.80  |  | 4.15 
|                    |  |       |  |      
|Financial year 2004 |  |       |  |       |  |       |  |      
|First quarter       |  | 9.26  |  | 7.47  |  | 5.50  |  | 4.46 
|Second quarter      |  | 9.53  |  | 8.21  |  | 5.20  |  | 4.47 
|Third quarter       |  | 9.95  |  | 8.56  |  | 5.71  |  | 4.58 
|Fourth quarter      |  | 10.88 |  | 8.33  |  | 6.24  |  | 4.53 
|                    |  |       |  |      
|Financial year 2005 |  |       |  |       |  |       |  |      
|First quarter       |  | 14.38 |  | 10.46 |  | 7.40  |  | 5.64 
|Second quarter      |  | 14.85 |  | 12.07 |  | 7.75  |  | 6.50 
|Third quarter       |  | 12.47 |  | 10.41 |  | 6.75  |  | 5.50 
|Fourth quarter      |  | 14.32 |  | 11.45 |  | 7.70  |  | 6.39 
|September 2005      |  | 14.32 |  | 13.11 |  | 7.70  |  | 7.37 
|October 2005        |  | 13.25 |  | 11.69 |  | 7.55  |  | 6.58 
|November 2005       |  | 12.18 |  | 10.70 |  | 6.85  |  | 6.26 
|December 2005       |  | 12.76 |  | 11.75 |  | 7.27  |  | 6.83 
|January 2006        |  | 12.55 |  | 11.61 |  | 7.06  |  | 6.50 
|February 2006       |  | 13.80 |  | 11.86 |  | 7.73  |  | 6.64 



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ITEM 10 -ADDITIONAL INFORMATION



Share Capital



Not applicable.



Memorandum and Articles of Association



The information set forth under the heading Description of Share Capital in the Companys Registration Statement on Form 20-F/A, as
amended, dated June 5, 2001, is incorporated herein by reference.



Material Contracts



The information required
by this item is contained in Item 4.B. of this Form 20-F.



Exchange Controls



None.



Taxation



United Kingdom Tax Considerations



The following is a brief description of the material United Kingdom tax consequences of the acquisition, ownership and disposition of shares, including
ADRs. The summary is of a general nature and does not address all of the tax consequences that may be relevant to you in light of your particular situation. The analysis assumes that shares and ADRs are taxed in an identical way. There are arguments
which may result in the U.K. tax treatment, in certain circumstances, being less onerous than is described herein. Holders of shares or ADRs should consult with their own tax advisors as to the particular tax consequences to them under United
Kingdom, United States federal, state and local and other foreign laws, of the acquisition, ownership and disposition of shares or ADRs.



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Taxation of Dividends and Distributions



Under current U.K. taxation legislation, no tax will be withheld from cash dividend payments by CAT.



U.S. holders of shares or ADRs will not receive any payment from the U.K.
Inland Revenue in respect of any tax credit on dividends paid by CAT. The taxation treaty between the U.S. and the U.K., which came into effect in 2003, does not provide for a tax credit on a dividend payment made by a U.K. company. Provision was
made in the new treaty for a twelve month transitional period, during which the resident of the U.S. could continue to rely on the terms of the existing treaty if those terms were favorable.



Holders of shares or ADRs should consult with their own tax advisors as to
whether any tax credit or the notional U.K. withholding tax under the income tax treaty will be considered to have been paid with respect to dividends.



United Kingdom Taxation of Capital Gains



U.S. holders of shares or ADRs who are not resident or ordinarily resident in the United Kingdom will not be liable for U.K. tax on capital gains realized
on the disposal of a share or ADR unless, at the time of the disposal, such holder carries on a trade, including a profession or vocation, in the United Kingdom through a branch or agency and such share or ADR is, or has been, held or acquired for
the purposes of such trade or branch or agency.



A holder of
shares or ADRs who is an individual and who has on or after March 17, 1998 ceased to be resident or ordinarily resident for tax purposes in the United Kingdom and continues to be neither resident nor ordinarily resident in the United Kingdom
for a period of less than five years and who disposes of shares of ADRs during that period may also be liable to U.K. tax on capital gains, notwithstanding that he or she is not resident or ordinarily resident in the United Kingdom at the time of
the disposal.



Neither the surrender of ADRs in exchange for
the deposited ordinary shares represented by the surrendered ADRs nor the deposit of ordinary shares for ADRs representing the ordinary shares will be a taxable event for the purposes of U.K. income and corporation tax or U.K. capital gains tax.
Accordingly, U.S. holders will not realize any gain or loss on surrendering ADRs or depositing shares.



United Kingdom Inheritance Tax



Subject to the discussion of the estate tax treaty in the next paragraph, shares or ADRs beneficially owned by an individual will be subject to U.K. inheritance tax on the death of the individual or, in some
circumstances, if the shares or ADRs are the subject of a gift, including a transfer at less than full market value, by such individual. Inheritance tax is not generally chargeable on gifts to individuals or to some types of settlement where the
gift is made more than seven years before the death of the donor. Special rules apply to shares or ADRs held in a settlement.



A share or ADR held by an individual whose domicile is determined to be the United States for purposes of the estate and gift tax treaty and who is not a
national of the United Kingdom, will not be subject to U.K. inheritance tax on the individuals death or on a lifetime transfer of the share of ADR except where the share or ADR:



| |  | is part of the business property of a U.K. permanent establishment of a U.S. enterprise, or
|- |  | -------------------------------------------------------------------------------------------



66



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| |  | pertains to a U.K. fixed base of an individual used for the performance of independent personal services.
|- |  | ---------------------------------------------------------------------------------------------------------



The estate and gift tax treaty generally provides a credit against U.S. federal tax liability for the amount of any tax paid
in the United Kingdom in a case where the share or ADR is subject both to U.K. inheritance tax and to U.S. federal estate or gift tax.



United Kingdom Stamp Duty and Stamp Duty Reserve Tax (SDRT)



U.K. stamp duty or SDRT will, subject to specific exceptions, be payable at the rate of 1.5% rounded up to the nearest
£5 of the amount of the consideration paid for the shares in registered form which are issued or transferred:



| |  | to, or to a nominee or agent for, a person whose business is or includes the provision of clearance services or
|- |  | ---------------------------------------------------------------------------------------------------------------



| |  | to, or to a nominee or agent for, a person whose business is or includes issuing depositary receipts. This would include issues or transfers of shares in registered form to the
Custodian for deposits under the ADR deposit agreement. In circumstances where stamp duty is not payable on the transfer of shares in registered form to the Custodian at the rate of 1.5%, such as where there is no chargeable instrument, SDRT will be
payable to bring the charge up to 1.5% in total.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



No U.K. stamp duty will be payable on the acquisition of any ADR or on any subsequent transfer of an ADR, provided that the instrument of transfer and any subsequent instrument of transfer is executed and remains at all times outside the
United Kingdom. In any other case, the transfer of, or agreement to transfer, an ADR or beneficial ownership of an ADR could, depending on all the circumstances of the transfer, give rise to a charge to ad valorem stamp duty. The current rate of ad
valorem stamp duty is 0.5% of the value of the consideration (rounded up to the nearest £5) (a transfer in contemplation of sale being stampable by reference to the value of the property transferred). Interest will be charged on duty that is
not paid within 30 days of execution of a transfer of securities subject to stamp duty, wherever execution takes place. Interest paid will not be allowable as a deduction in computing profits and losses for U.K. tax purposes. Penalties will also
apply to documents submitted for stamping more than 30 days after the document was executed where the document was executed in the United Kingdom. For documents executed outside the U.K., penalties will apply to documents not submitted for stamping
within 30 days after they are first brought into the U.K. An agreement to transfer an ADR or beneficial ownership of an ADR will not give rise to SDRT.



Subject to some exceptions, a transfer on sale of shares in registered form will attract ad valorem U.K. stamp duty at the rate of 0.5% of the amount or
value of the consideration for the transfer rounded up to the nearest £5. Generally ad valorem stamp duty applies neither to gifts nor on a transfer from a nominee to the beneficial owner, although in cases of transfers where no ad valorem
stamp duty arises, a fixed U.K. stamp duty of £5 will generally be payable. SDRT at a rate of 0.5% of the amount or value of the consideration for the transfer may be payable on an unconditional agreement to transfer shares. If, within six
years of the date of the agreement, an instrument transferring the shares is executed and stamped, any SDRT paid will be repayable or, if the SDRT has not been paid, the liability to pay such tax, but not necessarily interest and penalties, will be
cancelled. SDRT is chargeable whether the agreement is made or effected in the United Kingdom or elsewhere and whether or not any party is resident or situated in any part of the United Kingdom.



67



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Paperless transfers of shares within the U.K. CREST system are generally liable to SDRT, rather than
stamp duty, at a rate of 0.5% of the amount or value of the consideration payable. CREST is obliged to collect SDRT on relevant transactions settled within the CREST system. Deposits of shares into CREST will not generally be subject to SDRT, unless
the transfer into CREST is made for consideration.



United States Federal
Income Tax Considerations



The following summary sets
forth the material U.S. federal income tax considerations related to holders of CAT shares (including ADRs). Unless otherwise stated, this summary deals only with holders that are U.S. Persons (as defined below) who hold their shares as capital
assets within the meaning of section 1221 of the United States Internal Revenue Code of 1986, as amended (the Code). The following discussion is only a discussion of the material U.S. federal income tax matters as described herein
and does not purport to address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder in light of such shareholders specific circumstances. For example, if a partnership holds our ordinary shares, the
tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the shares, you should consult your tax advisors. In addition, the following summary
does not address the U.S. federal income tax consequences that may be relevant to special classes of shareholders, such as financial institutions, insurance companies, regulated investment companies, real estate investment trusts, financial asset
securitization investment trusts, dealers in securities, tax exempt organizations, expatriates or persons who hold the ordinary shares as part of a hedging or conversion transaction or as part of a short-sale or straddle, who may be subject to
special rules or treatment under the Code. This discussion is based upon the Code, the regulations promulgated thereunder and any relevant administrative rulings or pronouncements or judicial decisions, all as in effect on the date hereof and as
currently interpreted, and does not take into account possible changes in such tax laws or interpretations thereof, which may apply retroactively. This discussion does not include any description of the tax laws of any state or local governments
within the United States.



For purposes of this discussion the
term U.S. Person means:



| |  | a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who meets the substantial presence residency
test under the federal income tax laws;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a corporation or other entity treated as a corporation for U.S. federal income tax purposes that is created or organized in or under the laws of the United States, any of the fifty
states or the District of Columbia;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | an estate the income of which is subject to federal income taxation regardless of its source; or
| | - | ------------------------------------------------------------------------------------------------



| |  | a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. Persons have the authority to control
all substantial decisions of the trust;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



and if your status as a U.S. Person is not overridden under the provisions of an applicable tax treaty.



Taxation of Dividends



The gross amount of a distribution paid on a share (including ADRs), including the full amount of any notional U.K. withholding tax thereon, will be a
dividend for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits (as calculated for U.S. tax purposes). To



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the extent that a distribution exceeds CATs current or accumulated earnings and profits, it will be treated as a
nontaxable return of capital and thereafter as a capital gain. Dividends paid by CAT generally will be treated as foreign source income and will not be eligible for the dividends received deduction allowed to corporate shareholders under the Code.



Dividends paid by U.S. corporations and certain foreign
corporations will be taxed in the hands of individuals at the same preferential tax rate as long term capital gains. Dividends paid by CAT will be eligible for this preferential tax rate in any taxable year that CAT is not treated as a PFIC (as
defined below) for that year.



The amount of any distribution
paid in pounds sterling will equal the fair market value in U.S. dollars of the pounds sterling received on the date received by you in the case of shares, or by the Depositary, in the case of ADRs, based on the spot exchange rate on such date. You
will have a basis in any pounds sterling distributed, equal to the dollar value of pounds sterling on the date received by you, in the case of shares, or by the Depositary, in the case of ADRs. Any gain or loss recognized upon a subsequent
disposition of pounds sterling will be U.S. source ordinary income or loss.



Subject to complex limitations, and further subject to changes in the treaty between the U.S. and the U.K., the U.K. notional withholding tax will be treated for U.S. tax purposes as a foreign tax that may be claimed
as a foreign tax credit against your U.S. federal income tax liability. Dividends distributed by CAT will generally be categorized as passive income or, in the case of some holders in taxable years beginning before January 1, 2007,
as financial services income, for purposes of computing allowable foreign tax credits for U.S. tax purposes. The rules relating to the determination of the foreign tax credit are complex and you should consult your own tax advisers to
determine whether and to what extent a credit would be available. In lieu of claiming a credit, you may claim a deduction of foreign taxes paid in the taxable year. Unlike a tax credit, a deduction generally does not reduce U.S. tax on a
dollar-for-dollar basis.



Taxation of Capital Gains



Upon the sale or exchange of a share or an ADR, you generally will
recognize a gain or a loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized and your adjusted tax basis in the share or the ADR. Such gain or loss will be a capital gain or loss. Such gain or loss
will generally be treated as U.S. source gain or loss. If you are an individual, any such capital gain will generally be subject to U.S. federal income tax at preferential rates if the shares of ADRs have a holding period of one year or more on the
date the shares or ADRs are sold.



The surrender of ADRs in
exchange for shares will not be a taxable event for U.S. federal income tax purposes. Accordingly, you will not recognize any gain or loss upon such surrender.



United States Anti-Deferral Provisions



The Code contains certain anti-deferral provisions which, if applicable, would change the U.S. federal income tax consequences of owning or
disposing of shares or ADRs discussed above. These provisions generally seek to reduce or eliminate the effect of the deferral of U.S. taxes on certain undistributed earnings of foreign corporations, with the result that in some cases income may be
required to be recognized before an actual cash distribution is made. As of the date of this prospectus, except as set forth below with respect to the rules regarding passive foreign investment companies, CAT believes that these anti-deferral
provisions will not apply to holders of shares or ADRs.



69



---

United States Information Reporting and Backup Withholding



Dividend payments with respect to shares and ADRs and proceeds from the
sale, exchange or redemption of shares or ADRs may be subject to information reporting to the IRS and possible U.S. backup withholding currently at a 28% rate. Backup withholding will not apply to you, however, if you furnish a correct taxpayer
identification number and make any other required certification or if you are otherwise exempt from backup withholding. If you are required to establish your exempt status, you generally must provide such certification on IRS Form W-9.



Amounts withheld as backup withholding may be credited against your U.S.
federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information.



PFIC Annual Information Statement



Although it was a PFIC (as defined below) in 2003, CAT believes that it was
not a PFIC for the 2004 and 2005 financial years.



Definition of Passive
Foreign Investment Company (PFIC)



In
general, shares or ADRs of U.S. holders will be treated as stock in a PFIC if, for any taxable year in which the shares or ADRs are held:



| |  | at least 75% of CATs gross income for the taxable year is passive income, or
|- |  | -----------------------------------------------------------------------------



| |  | at least 50% of the value, determined on the basis of a quarterly average, of CATs assets is attributable to assets that produce or are held for the production of passive
income.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Passive income generally includes
dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of
the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other
corporations income.



Consequences of PFIC Treatment



For those shareholders who held their shares or ADRs
in 2003, and for other shareholders in any year that CAT is a PFIC, if a U.S. holder of CAT shares does not make a mark-to-market election (as described below), the U.S. holder will be subject to special rules described below with respect to any
gain realized on the sale or other disposition of CATs ordinary shares or ADRs.



Under these rules:



| |  | the gain will be allocated ratably over your holding period for the shares or ADRs,
|- |  | -----------------------------------------------------------------------------------



| |  | the amount allocated to the taxable year in which the gain is realized and any tax year before CAT qualified as a PFIC will be taxed as ordinary income,
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the amount allocated to each prior year during which CAT qualified as a PFIC, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such prior year in which CAT qualified as a PFIC to which
such gain is allocated.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



70



---

CAT does not intend to pay dividends for the foreseeable future. If, however, CAT should make an
excess distribution to shareholders (generally, any distributions to shareholders during a single taxable year that are greater than 125% of the average annual distributions received by shareholders in respect of the shares or ADRs
during the three preceding taxable years or, if shorter, the holding period for the shares or ADRs) and CAT is treated as a PFIC, the excess distribution would be treated the same way a gain would be treated, as described in the preceding paragraph.



Because the shares of CAT are publicly traded, holders may
make a mark-to-market election. If this election is made, the PFIC rules described above will not apply. Instead, in general, ordinary income will include each year the excess, if any, of the fair market value of the shares or ADRs at the end of the
taxable year over the adjusted basis in the shares or ADRs. Holders will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of the shares or ADRs over their fair market value at the end of the taxable
year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The basis in the shares or ADRs will be adjusted to reflect any such income or loss amounts. If a particular Holder does not
make the mark-to-market election in the later of the first year that CAT is a PFIC or the first year when the Holder acquires shares of CAT, any unrealized gain at the time of the election is made will be taxed under the special rules set forth
above.



Holders who own or owned any shares of ADRs during any
year that CAT is or was a PFIC, must file Internal Revenue Service Form 8621.



Dividends and Paying Agents



Not applicable.



Statement by Experts



Not applicable.



Documents on Display



The exhibits to this Form 20-F are available for review at the
Companys registered office.



Subsidiary
Information



Not applicable.



ITEM 11 -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Information regarding quantitative and qualitative disclosures about
market risk can be found in Note 17 (under the heading Financial Instruments) to the financial statements included in this Form 20-F.



ITEM 12 -DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not applicable.



71



---

ITEM 13 -DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



There has been no material default in payment of principal, interest, a
sinking or purchase fund installment, or any other material default with respect to any indebtedness of the Company or any of its significant subsidiaries.



There have been no arrears in the payment of dividends on, and no material delinquency with respect to, any class of preferred stock of any significant
subsidiary of the Company.



ITEM 14 -MATERIAL MODIFICATIONS TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



Not
applicable.



ITEM 15 -CONTROLS AND PROCEDURES



The Company, through its Disclosure Committee, has carried out an evaluation
of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 15d-15. As a result of this work, the Chief Executive Officer and the Chief Financial Officer concluded that, as
of September 30, 2005, the Companys disclosure controls and procedures are effective. The Company continues to review and refine its internal controls over financial reporting in line with changes in the Companys reporting all GAAP.



ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT



CATs board of directors has determined that Åke Stavling, the
chairman of its audit committee, is an audit committee financial expert. Åke Stavling is independent, as that term is defined in Rule 10A-3 under the Securities Exchange Act of 1934 for purposes of the listing standards of the NASDAQ Stock
Market.



ITEM 16B CODE OF ETHICS



CAT has adopted a code of ethics that applies to all of its employees,
including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.



ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES



Fees for professional services provided by Deloitte & Touche LLP, CATs independent auditors, in each of the last two fiscal years, in each
of the following categories are:



|              |  |           |  |           
|------------- |  | --------- |  | ----------
|              |  | 2005£000 |  | 2004 £000
|Audit         |  | 44        |  | 39        
|Audit related |  | 308       |  | 45        
|Tax           |  |          |  |          
|Other         |  |          |  |          
|              |  |           |  |           
|              |  | 352       |  | 84        
|              |  |           |  |           



72



---

Audit fees include fees associated with the annual audit and local statutory audits. Audit related fees
paid to Deloitte & Touche LLP principally include fees in respect of quarterly and interim reviews and in 2005, reporting accountant work regarding the AstraZeneca agreement and reviews performed with respect to Sarbanes-Oxley §404
controls documentation and IFRS restatement of results.



Pre-Approval
Policies and Procedures



Consistent with the provisions of
the Securities Act of 1934, as amended by the Sarbanes Oxley Act of 2002, regarding auditor independence, the Audit Committee has policies and procedures relating to the pre-approval of audit and non-audit services. The Audit Committee approves all
audit and non-audit fees payable to the external auditor. Pre-approvals of non-audit services may be delegated to a single member of the Audit Committee.



All of the services set forth above in this Item 16C were approved by the Audit Committee in accordance with paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.



ITEM 17 -FINANCIAL STATEMENTS



The Company has responded to Item 18 in lieu of this item.



ITEM 18 -FINANCIAL STATEMENTS



The Companys financial statements are included beginning on page F-1.



ITEM 19 -EXHIBITS



Please see the attached Index of Exhibits.



73



---

Report of Independent Registered Public Accountants



We have audited the accompanying consolidated balance sheets of Cambridge Antibody Technology Group plc and subsidiaries (the
Company) at September 30, 2005 and 2004, and the related consolidated profit and loss accounts, cash flow statements and statements of total recognised gains and losses for each of the three years in the period ended September 30, 2005,
all expressed in pounds sterling. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.



In our opinion, such consolidated financial
statements present fairly, in all material respects, the financial position of Cambridge Antibody Technology Group plc and subsidiaries at September 30, 2005 and 2004 and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 2005 in conformity with accounting principles generally accepted in the United Kingdom.



Accounting principles generally accepted in the United Kingdom differ in certain significant respects from accounting principles generally accepted in the United States
of America. Information related to the nature and effect of such differences is presented in Note 28 to the consolidated financial statements.



As discussed in Note 2, the Company has restated its UK GAAP profit and loss account for the year ended September 2005 in respect of the accounting for a subsequent
event.



As discussed in Note 28, the Company has restated its US GAAP cash flow
information for the years ended September 30, 2004 and 2003 in respect of the presentation of cash and cash equivalents.







Deloitte
& Touche LLP

Cambridge, England.



3 March, 2006



F-1



---

ACCOUNTS AND NOTES | CONSOLIDATED PROFIT AND LOSS ACCOUNT



|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|------------------------------------------------------ |  | ----- |  | --------------------------------------- | - |  | -------------------------------------- | - |  | ---------------- | - |  | ------------------------------------- | - |  | ---------- | - |  | ---------- | -
|                                                       |  |       |  | As previously reported                  |   |  |                                        |   |  |                  |   |  |                                       |  
|For the year ended 30 September 2005                   |  | Notes |  | 2005Excludingsettlementwith Abbott£000 |   |  | 2005Settlementwith Abbott(Note 2)£000 |   |  | 2005 Total £000 |   |  | As restated (Note 2) 2005 Total £000 |   |  | 2004 £000 |   |  | 2003 £000 |  
|Turnover                                               |  | 3     |  | 24,458                                  |   |  | 169,506                                |   |  | 193,964          |   |  | 49,242                                |   |  | 15,925     |   |  | 8,743      |  
|Direct costs                                           |  |       |  | (6,254                                  | ) |  | (148,971                               | ) |  | (155,225         | ) |  | (10,503                               | ) |  | (3,023     | ) |  | (690       | )
|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|Gross profit                                           |  |       |  | 18,204                                  |   |  | 20,535                                 |   |  | 38,739           |   |  | 38,739                                |   |  | 12,902     |   |  | 8,053      |  
|Research and development expenses                      |  |       |  | (39,170                                 | ) |  |                                       |   |  | (39,170          | ) |  | (39,170                               | ) |  | (44,125    | ) |  | (44,981    | )
|General and administration expenses                    |  |       |  | (13,386                                 | ) |  | 4,552                                  |   |  | (8,834           | ) |  | (8,834                                | ) |  | (10,969    | ) |  | (9,196     | )
|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|Operating (loss)/profit                                |  |       |  | (34,352                                 | ) |  | 25,087                                 |   |  | (9,265           | ) |  | (9,265                                | ) |  | (42,192    | ) |  | (46,124    | )
|Profit on sale of fixed asset investments              |  | 12    |  | 1,461                                   |   |  |                                       |   |  | 1,461            |   |  | 1,461                                 |   |  |           |   |  |           |  
|Finance income (net)                                   |  | 6     |  | 6,430                                   |   |  | 844                                    |   |  | 7,274            |   |  | 7,274                                 |   |  | 4,130      |   |  | 4,360      |  
|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|(Loss)/profit on ordinary activities before taxation   |  | 5     |  | (26,461                                 | ) |  | 25,931                                 |   |  | (530             | ) |  | 530                                   |   |  | (38,062    | ) |  | (41,764    | )
|Taxation on loss on ordinary activities                |  | 8     |  |                                         |   |  |                                        |   |  | (1,047           | ) |  | (1,047                                | ) |  | (64        | ) |  | 2,573      |  
|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|Loss for the financial year                            |  | 19    |  |                                         |   |  |                                        |   |  | (1,577           | ) |  | (1,577                                | ) |  | (38,126    | ) |  | (39,191    | )
|                                                       |  |       |  |                                         |   |  |                                        |   |  |                  |   |  |                                       |   |  |            |   |  |            |  
|Loss per share  basic and diluted (pence)             |  | 9     |  |                                         |   |  |                                        |   |  | 3.2              | p |  | 3.2                                   | p |  | 93.3       | p |  | 107.5      | p
|Shares used in calculating net loss per share (number) |  | 9     |  |                                         |   |  |                                        |   |  | 49,381,476       |   |  | 49,381,476                            |   |  | 40,866,684 |   |  | 36,440,993 |  

The losses for all years arise from continuing operations.



CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES



|                                             |  |           |   |  |           |   |  |           |  
|-------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|For the year ended 30 September 2005         |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Loss for the financial year                  |  | (1,577    | ) |  | (38,126   | ) |  | (39,191   | )
|(Loss)/gain on foreign exchange translation  |  | (413      | ) |  | 1,099     |   |  | 606       |  
|                                             |  |           |   |  |           |   |  |           |  
|Total recognised losses relating to the year |  | (1,990    | ) |  | (37,027   | ) |  | (38,585   | )
|                                             |  |           |   |  |           |   |  |           |  



The accompanying notes are an integral
part of this consolidated profit and loss account and consolidated statement of total recognised gains and losses.



F-2



---

CONSOLIDATED BALANCE SHEET



|                                             |  |       |  |           |   |  |           |  
|-------------------------------------------- |  | ----- |  | --------- | - |  | --------- | -
|At 30 September 2005                         |  | Notes |  | 2005£000 |   |  | 2004£000 |  
|Fixed assets                                 |  |       |  |           |   |  |           |  
|Intangible assets                            |  | 10    |  | 2,581     |   |  | 5,832     |  
|Tangible assets                              |  | 11    |  | 11,706    |   |  | 12,362    |  
|Investments                                  |  | 12    |  | 2,299     |   |  | 2,942     |  
|                                             |  |       |  |           |   |  |           |  
|                                             |  |       |  | 16,586    |   |  | 21,136    |  
|                                             |  |       | 
|Current assets                               |  |       |  |           |   |  |           |  
|Debtors                                      |  |       |  |           |   |  |           |  
| due within one year                        |  | 13    |  | 13,406    |   |  | 4,460     |  
| due after one year                         |  | 13    |  | 1,160     |   |  |          |  
|Short term investments                       |  | 14    |  | 156,392   |   |  | 93,061    |  
|Cash at bank and in hand                     |  |       |  | 20,281    |   |  | 2,678     |  
|                                             |  |       |  |           |   |  |           |  
|                                             |  |       |  | 191,239   |   |  | 100,199   |  
|                                             |  |       | 
|Creditors                                    |  |       |  |           |   |  |           |  
|Amounts falling due within one year          |  | 15    |  | (29,804   | ) |  | (15,603   | )
|                                             |  |       |  |           |   |  |           |  
|Net current assets                           |  |       |  | 161,435   |   |  | 84,596    |  
|                                             |  |       |  |           |   |  |           |  
|Total assets less current liabilities        |  |       |  | 178,021   |   |  | 105,732   |  
|                                             |  |       | 
|Creditors                                    |  |       |  |           |   |  |           |  
|Amounts falling due after more than one year |  | 16    |  | (18,615   | ) |  | (20,650   | )
|                                             |  |       |  |           |   |  |           |  
|Net assets                                   |  |       |  | 159,406   |   |  | 85,082    |  
|                                             |  |       |  |           |   |  |           |  
|Capital and reserves                         |  |       |  |           |   |  |           |  
|Called-up share capital                      |  | 18    |  | 5,164     |   |  | 4,111     |  
|Share premium account                        |  | 18    |  | 301,804   |   |  | 226,829   |  
|Other reserve                                |  | 19    |  | 13,456    |   |  | 13,456    |  
|Profit and loss account                      |  | 19    |  | (161,018  | ) |  | (159,314  | )
|                                             |  |       |  |           |   |  |           |  
|Shareholders funds  all equity             |  | 20    |  | 159,406   |   |  | 85,082    |  
|                                             |  |       |  |           |   |  |           |  



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



F-3



---

ACCOUNTS AND NOTES | COMPANY BALANCE SHEET



|                                      |  |       |  |           |   |  |           |  
|------------------------------------- |  | ----- |  | --------- | - |  | --------- | -
|At 30 September 2005                  |  | Notes |  | 2005£000 |   |  | 2004£000 |  
|Fixed assets                          |  |       |  |           |   |  |           |  
|Investments                           |  | 12    |  | 177,057   |   |  | 177,057   |  
|                                      |  |       |  |           |   |  |           |  
|Current assets                        |  |       |  |           |   |  |           |  
|Debtors                               |  | 13    |  | 29,183    |   |  | 8,357     |  
|Short term investments                |  | 14    |  | 131,358   |   |  | 92,559    |  
|Cash at bank and in hand              |  |       |  | 9         |   |  | 11        |  
|                                      |  |       |  |           |   |  |           |  
|                                      |  |       |  | 160,550   |   |  | 100,927   |  
|                                      |  |       | 
|Creditors                             |  |       |  |           |   |  |           |  
|Amounts falling due within one year   |  | 15    |  | (1,092    | ) |  | (21,205   | )
|                                      |  |       |  |           |   |  |           |  
|Net current assets                    |  |       |  | 159,458   |   |  | 79,722    |  
|                                      |  |       |  |           |   |  |           |  
|Total assets less current liabilities |  |       |  | 336,515   |   |  | 256,779   |  
|                                      |  |       |  |           |   |  |           |  
|Net assets                            |  |       |  | 336,515   |   |  | 256,779   |  
|                                      |  |       |  |           |   |  |           |  
|Capital and reserves                  |  |       |  |           |   |  |           |  
|Called-up share capital               |  | 18    |  | 5,164     |   |  | 4,111     |  
|Share premium account                 |  | 18    |  | 301,804   |   |  | 226,829   |  
|Profit and loss account               |  | 19    |  | 29,547    |   |  | 25,839    |  
|                                      |  |       |  |           |   |  |           |  
|Shareholders funds  all equity      |  |       |  | 336,515   |   |  | 256,779   |  
|                                      |  |       |  |           |   |  |           |  



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



Signed on
behalf of the Board



John Aston

Director



F-4



---

CONSOLIDATED CASH FLOW STATEMENT



|                                                                              |  |       |  |           |   |  |           |   |  |           |  
|----------------------------------------------------------------------------- |  | ----- |  | --------- | - |  | --------- | - |  | --------- | -
|For the year ended 30 September 2005                                          |  | Notes |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Net cash outflow from operating activities                                    |  | 21    |  | (161      | ) |  | (31,067   | ) |  | (35,819   | )
|Returns on investments and servicing of finance                               |  | 22    |  | 6,223     |   |  | 4,217     |   |  | 5,049     |  
|Taxation                                                                      |  | 22    |  |          |   |  | (64       | ) |  | 5,210     |  
|Capital expenditure and financial investment                                  |  | 22    |  | 108       |   |  | (1,026    | ) |  | (8,082    | )
|                                                                              |  |       |  |           |   |  |           |   |  |           |  
|Net cash inflow/(outflow) before management of liquid resources and financing |  |       |  | 6,170     |   |  | (27,940   | ) |  | (33,642   | )
|Management of liquid resources                                                |  | 22    |  | (63,521   | ) |  | 15,357    |   |  | 18,778    |  
|Financing                                                                     |  | 22    |  | 75,653    |   |  | 13,875    |   |  | 11,730    |  
|                                                                              |  |       |  |           |   |  |           |   |  |           |  
|Increase/(decrease) in cash                                                   |  | 23    |  | 18,302    |   |  | 1,292     |   |  | (3,134    | )
|                                                                              |  |       |  |           |   |  |           |   |  |           |  



The accompanying notes are an integral
part of this consolidated cash flow statement.



F-5



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS



1 Description of business and accounting policies



Cambridge Antibody Technology Group plc is the holding company, based in the United Kingdom,
of a group of companies engaged in the business of biotechnology. The Company and its subsidiaries (the Group) use advanced platform technologies for the rapid isolation of human monoclonal antibodies, which have potential to identify and treat
human diseases. The Group uses proprietary technologies for drug discovery and drug development.



The Groups aim is to secure short term revenues through licences of its technology and long term revenues through product development, working in partnership with other companies at all stages of the drug
product discovery and development process. The Groups past and present collaborative partners include AstraZeneca, Abbott, Wyeth Research, Pfizer, HGSI, Genzyme, Amgen, Zenyth, Elan, Chugai and Merck. The Groups collaborative agreements
may cover research activities or product development or both.



On 21 November
2004, CAT and AstraZeneca signed a major strategic alliance to discover and develop human antibody therapeutics. Under the terms of the agreement, the companies will jointly undertake the discovery and development of human monoclonal antibodies as
drugs, principally in the field of inflammatory diseases. In addition, under a separate subscription agreement AstraZeneca subscribed in cash for 10,217,983 CAT Shares at a price of £7.34 per share for a total investment of £75 million.
Based on CAT shares in issue as at 21 November 2004 this represented a 19.9% interest in the enlarged issued share capital of CAT.



A summary of the principal accounting policies is set out below. These have all been applied consistently throughout the periods covered by this report.



Basis of accountingThe financial statements have been prepared under the historical
cost convention and in accordance with generally accepted accounting standards in the United Kingdom (UK GAAP).



Basis of consolidationThe Group financial statements consolidate the financial statements of Cambridge Antibody Technology Group plc (the Company) and its
subsidiary undertakings (collectively the Group), drawn up to 30 September each year. All intercompany balances and transactions have been eliminated on consolidation.



The acquisition of Cambridge Antibody Technology Limited (CAT Limited), by way of share for share exchange on 20 December 1996 was
accounted for as a group reconstruction in accordance with Financial Reporting Standard (FRS) 6. Consequently, consolidated financial information is presented as if the Company has always owned CAT Limited. Otherwise, the results of subsidiaries
acquired are consolidated for the periods from the date on which control passed. Such acquisitions are accounted for under the acquisition method. The results of subsidiaries disposed of are consolidated up to the date on which control passed.



The profit for the financial year dealt with in the financial statements of
the Company was £3,708,000 (2004: £2,661,000). As provided by S.230 of the Companies Act 1985, no company only profit and loss account is presented in respect of the Company.



GoodwillGoodwill, representing the excess of 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. On disposal of a previously acquired business, the attributable amount of goodwill previously written off to reserves under the then applicable accounting policy is included
in determining the profit or loss on disposal.



TurnoverTurnover
principally consists of income received in the normal course of business from licence fees, technical milestones, clinical milestones, fees for research and development services, payments for purchased rights, and royalties. These are stated net of
trade discounts, VAT and other sales related taxes.



A description of the various elements of turnover and their accounting policies is given below.



Licence feesLicence fees are deferred and recognised over the period of the licence term or the period of the associated research and development
agreement (where relevant). In circumstances where no such defined period exists, the licence fee is deferred and recognised over the period to expiration of the relevant patents licensed. For licence fees where a proportion of the fee is creditable
against research and development services to be provided in the future that proportion of the amount received is deferred and recognised over the period during which the services are rendered.



Technical milestonesDuring certain research and development
programmes the Group receives non-refundable milestone payments when it achieves certain defined technical criteria. Such milestone payments are recognised based on the percentage of completion of the relevant research and development programme
subject to the total revenue recognised being limited to the aggregate amount of non-refundable milestone payments received. The percentage completion is determined by reference to effort in hours incurred compared to total estimated effort for the
programme.



Clinical milestonesThe Group receives
non-refundable clinical development milestone payments when a licensee or corporate partner achieves key stages in clinical trials which they are conducting with a view to the ultimate commercialisation of a product derived using the Groups
proprietary technology. Such milestone payments are recognised when received except that if such milestone payments are creditable against future royalty payments a relevant amount will be deferred and released as the related royalty payments are
received.



Research and development servicesThe Group
provides research and development services to certain corporate collaborators, usually in the form of a defined number of the Groups employees working under the direction of the collaborator to further the collaborators research and
development effort. Such contracts are made on the basis of Full Time Equivalent (FTE) employees and are charged at a specified rate per FTE. Revenues from FTE services are recognised as the services are rendered.



RoyaltiesRoyalty income is generated by sales of products
incorporating the Groups proprietary technology. Royalty revenues are recognised once the amounts due can be reliably estimated based on the sale of underlying products and collectibility is assured. Where there is insufficient historical data
on sales and returns to fulfil these requirements, for example in the case of a new product, the royalty revenue will not be recognised until the Group can reliably estimate the underlying sales. This may be considerably later than when payment is
received if subsequent adjustments for product returns are possible under the terms of the relevant contract. In situations where there is adequate historical information on sales figures, royalties are recorded based on the reports received from
the licensee or based on estimated sales if the information has not been received.



F-6



---

1 Accounting policiescont.



Government grantsGrants of a revenue nature are credited to the profit and loss account as the related
expenditure is incurred.



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



Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are
included in financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no commitment to sell the asset, or on unremitted earnings of subsidiaries and associates where there is
no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.



Research and developmentResearch and development expenditure is written off as
incurred.



Collaboration arrangementsThe Group has entered into certain
collaboration arrangements whereby the parties agree to work jointly on research and development of potential therapeutic products. Under such arrangements the parties agree which elements of research and development each will perform. These
arrangements do not include the creation of any separate entity to conduct the activities nor any separate and distinct assets or liabilities. The parties agree that the combined cost of all relevant activities will be borne by the parties in a
particular proportion and that net revenues derived from sales of any resulting product will be shared similarly. The sharing of costs will result in balancing payments between the parties and such payments receivable or payable will be respectively
added to or deducted from research and development costs in the profit and loss account. Any amounts receivable or payable at a period end are included in the balance sheet under debtors or creditors.



Employee share optionsWhere options are granted at less than market value, the Group
recognises a charge that reflects the intrinsic value of awards made. The charge is recognised in the profit and loss account over the performance period.



Litigation expensesLitigation expenses are provided for as incurred (on an accruals basis). The Group does not provide for anticipated future litigation costs.



Pension costsThe Group operates a group personal pension plan which is
a defined contribution scheme. The amount charged to the profit and loss account in respect of pension costs is the Groups contributions payable in the year. Differences between contributions payable in the year and contributions actually paid
are shown as either accruals or prepayments in the balance sheet.



Intangible fixed assetsPurchased intangible assets (excluding goodwill) are capitalised as assets on the balance sheet at fair value on acquisition and amortised over their useful economic lives, subject to reviews for impairment
when events or change of circumstances indicate that the carrying value may not be recoverable using cash flow projections. To the extent carrying values exceed fair values, an impairment is recognised and charged to the profit and loss account in
that period. This applies to intangibles purchased separately from a business and also to intangibles acquired as part of the acquisition of a business, if their value can be measured reliably on initial recognition. The Groups purchased
intangible assets include access to intellectual property and options for product development rights which are being amortised over seven years and also include certain patents which are being written off over their term to expiry which is between
12 and 16 years from the date of acquisition. When reviewing all these assets for impairment the Directors have considered future cash flows arising.



Acquired intellectual property with no defined revenue stream is written off to research and development expenses on acquisition.



Tangible fixed assetsTangible fixed assets are stated at cost, net of depreciation
and any provision for impairment. Depreciation is provided on all tangible fixed assets other than freehold land on a straight-line basis at rates calculated to write off the cost, less estimated residual value, of each asset over its expected
useful life as follows:



Freehold buildings:
over 10 years.

Motor vehicles: over three years.

Office and laboratory equipment: over four years.

Fixtures and fittings: over either four or 20 years (or the remaining lease term if less).



InvestmentsFixed asset investments are shown at cost less provision for any
impairment. Current asset investments are stated at the lower of cost and net realisable value.



Liquid resourcesLiquid resources comprise negotiable securities and term deposits and are shown at cost with accrued interest included in debtors. Where relevant, a provision is made such that cost plus
accrued interest does not exceed market value.



Foreign currencyTransactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing
at that date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the profit and loss account.



The results of overseas operations and their balance sheets are translated at the rates ruling at the balance sheet date. Exchange
differences arising on translation of the opening net assets and results of overseas operations are dealt with through reserves.



F-7



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



1 Accounting policies cont.



LeasesAssets held under finance leases, which confer rights and obligations similar to those attached to
owned assets, are capitalised as tangible fixed assets and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are
charged to the profit and loss account over the period of the leases to produce a constant rate of charge on the balance of capital repayments outstanding. Hire purchase transactions are dealt with similarly, except that assets are depreciated over
their useful lives.



Rentals under operating leases are charged on a
straight-line basis over the lease term even if payments are made on another basis.



Sale and leasebackNo gain or loss on sale is recorded for sale and leaseback arrangements where the leaseback has been identified as a finance lease.



Non-monetary transactionsThe Group enters into certain non-monetary transactions that involve the granting of a licence over the
Groups proprietary technology in exchange for a licence over a third partys proprietary technology. The Group accounts for these transactions at fair value where the Group is able to determine the fair value within reasonable limits. To
the extent that the Group concludes that it is unable to determine the fair value of a cross licensing transaction, that transaction is accounted for at the recorded amounts of the assets. Management is required to exercise its judgement in
determining whether or not the fair value of the asset received or that given up can be determined. In doing so management considers, amongst other things, previous licence agreements over similar intellectual property rights where there is monetary
consideration. The Group has a limited number of comparable historical licence agreements. Management has determined that for all non-monetary transactions recorded to date the fair value of the exchanged licences is not determinable; consequently,
such transactions have been recognised at recorded value. In the future, as CAT has further transactions, there may be a fair value assigned to similar transactions resulting in a different accounting treatment.



Estimates and assumptionsThe preparation of financial statements in conformity with
generally accepted accounting standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the financial statements
and the reported amounts of revenues and expenses during the year. In the preparation of these consolidated financial statements, estimates and assumptions have been made by management concerning the ability to reliably estimate royalty revenues,
the selection of useful lives of fixed assets, accruals and provisions necessary for certain liabilities, the carrying value of investments, the recoverability of deferred tax assets and other similar evaluations. Actual results could differ from
those estimates.



2 Settlement agreement between CAT and Abbott (as
restated)



As described in note 27, in November 2003, CAT announced that
it had commenced legal proceedings against Abbott in the High Court in London. The court hearing was held in November 2004, and in December 2004, the judge issued his judgement in CATs favour. In March 2005, Abbott was granted permission to
appeal.



On 26 October 2005, CAT announced that it had reached an
agreement regarding royalties payable to CAT. With regard to sales of HUMIRA, under the terms of the settlement agreement:



| |  |  | Abbott paid CAT the sum of US$255 million, which CAT has paid to its licensors, Medical Research Council, Scripps Institute and Stratagene, in lieu of their entitlement to royalties
arising on sales of HUMIRA from 1 January 2005 onwards.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Abbott will pay CAT five annual payments of US$9.375 million commencing January 2006, contingent on the continued sale of HUMIRA. From each of these payments, CAT will pay US$2
million to its licensors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Abbott will pay CAT royalties at 2.688% on sales of HUMIRA from 1 January 2005.
| | - |  | -------------------------------------------------------------------------------



| |  |  | CAT will retain all royalties received from Abbott in respect of sales of HUMIRA up to 31 December 2004, net of approximately £7.6 million which has been paid to its
licensors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | CAT has refunded to Abbott approximately £9.2 million for royalties paid in respect of sales of HUMIRA from 1 January 2005 through to 30 June 2005.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



The settlement agreement was an extension of the long running
litigation process. In the audited UK GAAP financial statements issued by CAT on 28 November 2005, all aspects of the settlement agreement were treated as an adjusting post balance sheet event, and as such were treated as occurring during the year
ended 30 September 2005. For the purposes of this 20-F filing, one element of the settlement agreement, namely the US$255 million payment from Abbott to CAT and the subsequent payment of this amount by CAT to its licensors referred to above, in lieu
of their entitlement to royalties arising on sales of Humira from 1 January 2005 onwards, has been treated as a non-adjusting post balance sheet event. As a result, turnover (royalties) and direct costs have been restated from the amounts previously
reported in the audited UK GAAP financial statements issued on 28 November 2005, to exclude this element of the settlement. This restated UK GAAP treatment is in line with the treatment subsequently adopted under IFRS whereby these amounts will be
included as revenue and direct costs in CATs financial statements for the year ended 30 September 2006.



Turnover  royaltiesPrior to settlement being reached, the royalty arrears received from Abbott in January 2005, pursuant to the High Court Judgement, and the royalties received in March 2005 in excess of
2% argued by Abbott, were not recognised as revenue. These receipts were held in other creditors on the balance sheet pending resolution of the appeal. These amounts have been released to revenue in CATs results for the full year as a result
of the resolution of the litigation process. Of the royalty payment received from Abbott in September 2005, (in respect of sales of HUMIRA for the six months to 30 June 2005), the £9.2 million due back to Abbott has been recognised in
other creditors, the remainder, equating to 2.688% of sales, has been recognised as revenue.



F-8



---

2 Settlement agreement between CAT and Abbottcont.



The following adjustments were made to royalties, due from Abbott regarding sales of HUMIRA,
as a result of the Settlement reached with Abbott.



|                                                                                          |  |                                         |  |                                |  |                |  |                         
|----------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------------------------ |  | -------------- |  | ------------------------
|                                                                                          |  | As previously reported                  |  |                               
|                                                                                          |  | 2005Excludingsettlementwith Abbott£000 |  | 2005Settlementwith Abbott£000 |  | 2005Total£000 |  | Asrestated2005Total£000
|Royalties                                                                                 |  |                                         |  |                                |  |                |  |                         
|HUMIRA sales: six months to 31 December 2004  at 2%, adjusted to 5-6%                    |  | 5,167                                   |  | 8,114                          |  | 13,281         |  | 13,281                  
|HUMIRA sales: six months to 30 June 2005  at 2%, adjusted to 2.688%                      |  | 6,529                                   |  | 2,346                          |  | 8,875          |  | 8,875                   
|Accrued royalty on sales three months to 30 September 2005  at 2%, adjusted to 2.688%(i) |  | 4,041                                   |  | 1,390                          |  | 5,431          |  | 5,431                   
|Release of back dated royalties for sales to 30 June 2004  excess of 5-6% over 2%        |  |                                        |  | 12,934                         |  | 12,934         |  | 12,934                  
|Royalty buy out (due to CATs licensors)                                                  |  |                                        |  | 144,722                        |  | 144,722        |  |                        
|                                                                                          |  |                                         |  |                                |  |                |  |                         
|Total                                                                                     |  | 15,737                                  |  | 169,506                        |  | 185,243        |  | 40,521                  
|                                                                                          |  |                                         |  |                                |  |                |  |                         



|(i) | As reflected above, during the final quarter of the 2005 financial year, royalties due on
sales of HUMIRA have been accounted for on an accruals basis for the first time. Consistent with the Groups accounting policy, management has evaluated whether it can reliably estimate the underlying sales of HUMIRA. Management consider the
criteria for recognition have been met.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Direct costsCATs direct costs are typically payments made to third parties as a proportion of certain CAT revenues. Direct costs for the 2005 financial year comprised royalties payable to Medical Research Council, Scripps Institute and Stratagene
arising from the payments received from Abbott regarding sales of HUMIRA.



The
amounts due to CATs licensors on royalties received from Abbott regarding sales of HUMIRA was dependent on the outcome of the legal proceedings between CAT and Abbott. Prior to the resolution of the litigation proceedings with Abbott,
royalties due to CATs licensors were provided for at the mid-point of the expected possible outcomes. Subsequent to the Settlement Agreement reached with Abbott, final amounts due to CATs licensors have been agreed between the parties
and provided for in CATs full year results for 2005, resulting in the following.



|                                                                                                                          |  |                                     |  |                                |   |  |                |   |  |                          |  
|------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- |  | ------------------------------ | - |  | -------------- | - |  | ------------------------ | -
|                                                                                                                          |  | As previously reported              |  |                                |   | 
|                                                                                                                          |  | Excludingsettlementwith Abbott£000 |  | 2005Settlementwith Abbott£000 |   |  | 2005Total£000 |   |  | Asrestated2005Total£000 |  
|Direct costs                                                                                                              |  |                                     |  |                                |   |  |                |   |  |                          |  
|On royalty in respect of sales six months to 31 December 2004  at 0.75%                                                  |  | 2,035                               |  |                               |   |  | 2,035          |   |  | 2,035                    |  
|On royalty in respect of sales six months to 30 June 2005  0.75% adjusted to 0%                                          |  | 2,560                               |  | (2,560                         | ) |  |               |   |  |                         |  
|On accrued royalty in respect of sales three months to 30 September 2005  at 0.75% adjusted to 0%                        |  | 1,515                               |  | (1,515                         | ) |  |               |   |  |                         |  
|Payments on account made to Medical Research Council on sales of HUMIRA to 31 December 2004                               |  |                                    |  | 2,302                          |   |  | 2,302          |   |  | 2,302                    |  
|Payments made to licensors pursuant to Settlement (October 2005)                                                          |  |                                    |  | 7,606                          |   |  | 7,606          |   |  | 7,606                    |  
|Excess of amounts accrued (0.75%) over amounts paid to licensors (0.50%) (prior to payments on account referred to above) |  |                                    |  | (1,584                         | ) |  | (1,584         | ) |  | (1,584                   | )
|Royalty buy out                                                                                                           |  |                                     |  | 144,722                        |   |  | 144,722        |   |  |                         |  
|Other (non HUMIRA)                                                                                                        |  | 144                                 |  |                               |   |  | 144            |   |  | 144                      |  
|                                                                                                                          |  |                                     |  |                                |   |  |                |   |  |                          |  
|Total                                                                                                                     |  | 6,254                               |  | 148,971                        |   |  | 155,225        |   |  | 10,503                   |  
|                                                                                                                          |  |                                     |  |                                |   |  |                |   |  |                          |  



General and administration expensesLitigation expenses of £3.9 million were incurred during 2005 and £2.5 million in 2004, on the legal proceedings with Abbott. CAT received £2.85 million towards its legal costs from Abbott in January 2005, pursuant to the High
Court Judgement. These costs were not credited to the P&L account, but were held on the balance sheet in creditors pending resolution of the appeal. In October 2005, CAT received an additional £1.73 million towards its High Court legal
costs. Following resolution of the litigation process, the total received from Abbott, of £4.6 million, has been credited against general and administration expenses in CATs full year results for 2005. Under the terms of its accounting
policy, CAT has not accrued for any legal costs incurred in relation to the litigation process with Abbott that arose subsequent to 30 September 2005.



Finance incomeThe back dated royalty payment received from Abbott in January 2005, and the receipt of all subsequent payments of royalties in excess of 2% argued
by Abbott, were held in a separate account pending resolution of the litigation process. All interest earned on these monies was held in creditors on the balance sheet, given it was also potentially repayable should Abbott have won its appeal.
Subsequent to the Settlement Agreement, interest earned on these monies has been released to the profit and loss account.



F-9



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



3 Turnover and loss on ordinary activities before taxation (as restated)



Turnover and loss on ordinary activities before taxation relate solely to the principal
activity and are attributable to the continuing operations of the Group, substantially all of which take place in the United Kingdom. The Group is managed as one overall segment with results of operations and cash flows reviewed by the chief
operating decision maker on a Group wide basis.



Turnover principally consists
of licence fees, milestone payments, fees for research and development services provided under corporate agreements and royalties.



|                               |  |                               |   |  |                                  |   |  |           |   |  |           |  
|------------------------------ |  | ----------------------------- | - |  | -------------------------------- | - |  | --------- | - |  | --------- | -
|                               |  | Aspreviouslyreported2005£000 |   |  | Asrestated(Note 2)2005Total£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Total turnover                 |  | 195,315                       |   |  | 50,593                           |   |  | 18,194    |   |  | 11,417    |  
|Less: intra-Group eliminations |  | (1,351                        | ) |  | (1,351                           | ) |  | (2,269    | ) |  | (2,674    | )
|                               |  |                               |   |  |                                  |   |  |           |   |  |           |  
|Consolidated turnover          |  | 193,964                       |   |  | 49,242                           |   |  | 15,925    |   |  | 8,743     |  
|                               |  |                               |   |  |                                  |   |  |           |   |  |           |  



Consolidated turnover was generated from customers in the following geographical areas:



|                         |  |                               |  |                                  |  |           |  |          
|------------------------ |  | ----------------------------- |  | -------------------------------- |  | --------- |  | ---------
|                         |  | Aspreviouslyreported2005£000 |  | Asrestated(Note 2)2005Total£000 |  | 2004£000 |  | 2003£000
|Europe                   |  | 1,306                         |  | 1,306                            |  | 718       |  | 251      
|United States of America |  | 5,282                         |  | 5,282                            |  | 6,474     |  | 6,665    
|Bermuda(i)               |  | 185,243                       |  | 40,521                           |  | 6,328     |  |         
|Rest of the World        |  | 2,133                         |  | 2,133                            |  | 2,405     |  | 1,827    
|                         |  |                               |  |                                  |  |           |  |          
|                         |  | 193,964                       |  | 49,242                           |  | 15,925    |  | 8,743    
|                         |  |                               |  |                                  |  |           |  |          



|(i) | Consists of royalties received from Abbott.
|--- | -------------------------------------------



Net assets of £859,000 (excluding creditors eliminated on consolidation of
£26,053,000) (2004: net assets of £509,000, excluding creditors eliminated on consolidation of £20,176,000) and total assets of £859,000 (2004: £509,000) are held in the United States of America. A net loss of
£5,114,000 (2004: £5,770,000) arose in the United States of America.



Consolidated turnover by type:



|                       |  |                               |  |                                  |  |           |  |          
|---------------------- |  | ----------------------------- |  | -------------------------------- |  | --------- |  | ---------
|                       |  | Aspreviouslyreported2005£000 |  | Asrestated(Note 2)2005Total£000 |  | 2004£000 |  | 2003£000
|Royalties (see note 2) |  | 185,243                       |  | 40,521                           |  | 6,328     |  |         
|Licence fees           |  | 5,168                         |  | 5,168                            |  | 4,601     |  | 2,590    
|Technical milestones   |  | 1,099                         |  | 1,099                            |  | 1,610     |  | 225      
|Clinical milestones    |  | 1,118                         |  | 1,118                            |  | 1,091     |  | 1,850    
|Contract research fees |  | 356                           |  | 356                              |  | 1,829     |  | 3,904    
|Other                  |  | 980                           |  | 980                              |  | 466       |  | 174      
|                       |  |                               |  |                                  |  |           |  |          
|Total                  |  | 193,964                       |  | 49,242                           |  | 15,925    |  | 8,743    
|                       |  |                               |  |                                  |  |           |  |          



F-10



---

3 Turnover and loss on ordinary activities before taxationcont.



During the financial years ended 30 September 2005, 2004 and 2003 certain customers individually contributed
more than 10% of the Groups revenue in each year. The amounts of those individual contributions in order of size by year were as follows:



|                                                                                   |  |    |  |        
|---------------------------------------------------------------------------------- |  | -- |  | -------
|                                                                                   |  | %  |  | £000  
|2005 Customer contributing greatest % to revenue (as restated  Note 2)            |  | 83 |  | 41,089 
|                                                                                   |  |    |  |        
|Total                                                                              |  | 83 |  | 41,089 
|                                                                                   |  |    |  |        
|2005 Customer contributing greatest % to revenue (as previously reported  Note 2) |  | 96 |  | 185,811
|                                                                                   |  |    |  |        
|Total                                                                              |  | 96 |  | 185,811
|                                                                                   |  |    |  |        
|2004 Customer contributing greatest   % to revenue                                 |  | 45 |  | 7,159  
|2004 Customer contributing second greatest   % to revenue                          |  | 14 |  | 2,173  
|2004 Customer contributing third greatest   % to revenue                           |  | 13 |  | 2,080  
|                                                                                   |  |    |  |        
|Total                                                                              |  | 72 |  | 11,412 
|                                                                                   |  |    |  |        
|2003 Customer contributing greatest   % to revenue                                 |  | 28 |  | 2,476  
|2003 Customer contributing second greatest   % to revenue                          |  | 21 |  | 1,885  
|2003 Customer contributing third greatest   % to revenue                           |  | 14 |  | 1,250  
|                                                                                   |  |    |  |        
|Total                                                                              |  | 63 |  | 5,611  
|                                                                                   |  |    |  |        



As at 30 September 2005 the
customer shown above constituted 82% of the Groups trade receivables. As at 30 September 2004, the three customers shown above constituted 36% of the Groups trade receivables.



A significant proportion of revenue in each financial year is derived from a relatively
concentrated customer base. As a result, there is a risk that factors affecting that customer base may have an adverse effect on the Groups financial condition and results of operation.



4 Oxford GlycoSciences



In January 2003, the Company and Oxford GlycoSciences Plc (OGS) announced that they had agreed the terms of a merger of the two groups by
way of a share for share exchange. CATs shareholders subsequently approved the merger at an Extraordinary General Meeting held in February. However, a decline in CATs share price depressed the value of CATs offer. A competing offer
made to OGS shareholders by Celltech Group plc subsequently became unconditional. Professional fees incurred of £1.7 million relating to the offer made for OGS were offset against a break fee of £1.1 million received from OGS. The net
cost of £0.6 million was recorded in general and administrative costs during the year ended 30 September 2003.



5 Loss on ordinary activities before taxation



|                                                                                      |  |           |   |  |           |   |  |          
|------------------------------------------------------------------------------------- |  | --------- | - |  | --------- | - |  | ---------
|                                                                                      |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000
|The loss on ordinary activities before taxation is stated after charging (crediting): |  |           |   |  |           |   |  |          
|Depreciation and amounts written off tangible fixed assets:                           |  |           |   |  |           |   |  |          
| owned assets                                                                        |  | 2,355     |   |  | 2,488     |   |  | 2,714    
| leased assets                                                                       |  | 338       |   |  | 338       |   |  | 275      
|Amortisation of intangible fixed assets                                               |  | 375       |   |  | 1,051     |   |  | 1,050    
|Impairment provision in respect of intangible fixed assets                            |  | 2,876     |   |  |          |   |  |         
|Auditors remuneration  audit Deloitte & Touche LLP                                  |  | 44        |   |  | 39        |   |  | 35       
| audit related fees Deloitte & Touche LLP                                            |  | 308       |   |  | 45        |   |  | 384      
| other Deloitte & Touche LLP                                                         |  |          |   |  |          |   |  |         
|Foreign exchange (gain)/loss                                                          |  | (449      | ) |  | 1,089     |   |  | 835      
|(Profit)/loss on disposal of tangible fixed assets                                    |  | (2        | ) |  | (3        | ) |  | 94       
|Operating lease rentals:                                                              |  |           |   |  |           |   |  |          
| plant and machinery                                                                 |  | 76        |   |  | 56        |   |  | 46       
| other operating leases                                                              |  | 1,960     |   |  | 2,107     |   |  | 1,781    
|Allocations under equity participation schemes                                        |  | 588       |   |  | 454       |   |  | 521      
|                                                                                      |  |           |   |  |           |   |  |          



Deloitte & Touche converted
to LLP status on 1 August 2003. The above figures for Deloitte & Touche LLP cover both Deloitte & Touche and Deloitte & Touche LLP.



Audit related fees paid to Deloitte & Touche LLP include fees in respect of reporting accountant work and in connection with the
filing of a shelf registration in 2003. In 2005, they comprise fees in respect of reporting accountant work regarding the AstraZeneca agreement and reviews performed of Sarbanes Oxley S404 controls documentation and IFRS restatement of results.



The Group recharged audit fees of
£10,000 to the Company (2004: £10,000).



F-11



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



6 Finance income (net)



|                                   |  |           |   |  |           |   |  |           |  
|---------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                   |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Interest receivable                |  | 7,507     |   |  | 4,205     |   |  | 4,416     |  
|Interest payable on finance leases |  | (46       | ) |  | (75       | ) |  | (56       | )
|Other interest payable             |  | (187      | ) |  |          |   |  |          |  
|                                   |  |           |   |  |           |   |  |           |  
|                                   |  | 7,274     |   |  | 4,130     |   |  | 4,360     |  
|                                   |  |           |   |  |           |   |  |           |  



7 Staff costs



The average monthly number of persons (including Executive
Directors) employed by the Group during the year was:



|                                                              |  |        |  |        |  |       
|------------------------------------------------------------- |  | ------ |  | ------ |  | ------
|                                                              |  | 2005   |  | 2004   |  | 2003  
|Management and administration                                 |  | 74     |  | 52     |  | 47    
|Research and development                                      |  | 210    |  | 231    |  | 249   
|                                                              |  |        |  |        |  |       
|                                                              |  | 284    |  | 283    |  | 296   
|                                                              |  |        |  |        |  |       
|                                                              |  |        | 
|                                                              |  | £000  |  | £000  |  | £000 
|Their aggregate remuneration comprised:                       |  |        |  |        |  |       
|Wages and salaries(i)                                         |  | 13,289 |  | 11,657 |  | 11,669
|Social security costs  charge provided on unapproved options |  | 15     |  | 1      |  | 13    
| on wages and salaries                                       |  | 1,377  |  | 1,253  |  | 1,190 
|Other pension costs                                           |  | 1,061  |  | 1,009  |  | 988   
|                                                              |  |        |  |        |  |       
|                                                              |  | 15,742 |  | 13,920 |  | 13,860
|                                                              |  |        |  |        |  |       



|(i) | Where options are granted at less than market value, the Group recognises a charge that
reflects the intrinsic value of awards made. This charge is included in wages and salaries.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Group has made a provision for employers National Insurance payable on certain options granted under the CSOP part B scheme in December 1999. The liability will not crystallise until the options are
exercised (they are exercisable from December 2002) and the ultimate liability will be determined by the difference between the exercise price paid by the employee and the market price on exercise and on the then prevailing rate for employers
contributions.



The options are exercisable subject to the condition that the
proportionate increase in the closing price of shares in the Company over a specified period must exceed the proportionate increase in the total return on the FTSE All Share Index. The specified period began on the date of grant and ended between
the third and fourth anniversary of the date of grant. The performance condition was satisfied during this period.



The provision has been made systematically by reference to the market value of the shares at the balance sheet dates over the period from the date of grant to the end of
the performance period, and from that date to the date of actual exercise the provision is being adjusted by reference to changes in market value.



The provision and corresponding charges to the profit and loss account will be affected by: the elapse of performance periods; the remaining number and option price of
shares under option; and the market value of the shares.



The market price of
shares at the year end was £7.44. If that price and the relevant number of shares under option remained unchanged, the charge for a further year would be nil given that the full provision has now been accounted for. If the market value of the
shares were to increase by 10% over that at the year end, the charge would increase by £18,000.



F-12



---

8 Taxation



|                                    |  |           |   |  |           |   |  |           |  
|----------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                    |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|UK Corporation Tax                  |  | (1,047    | ) |  |          |   |  |          |  
|Research and development tax credit |  |          |   |  |          |   |  | 3,148     |  
|Overseas taxation                   |  |          |   |  | (64       | ) |  | (575      | )
|                                    |  |           |   |  |           |   |  |           |  
|                                    |  | (1,047    | ) |  | (64       | ) |  | 2,573     |  
|                                    |  |           |   |  |           |   |  |           |  



During the year ended
30 September 2003 the Group received a refund of £3,148,000 in respect of the surrender of tax losses created through research and development for the year ended 30 September 2002.



Overseas taxation is the tax withheld on the licence
payments received from Chugai.



The tax assessed for the year differs from
that resulting from applying the standard rate of corporation tax in the UK of 30% (2004: 30%; 2003: 30%). The differences are explained below:



|                                                                            |  |           |   |  |           |   |  |           |  
|--------------------------------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                                            |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Loss on ordinary activities before tax                                      |  | (530      | ) |  | (38,062   | ) |  | (41,764   | )
|                                                                            |  |           |   |  |           |   |  |           |  
|Tax at 30% thereon                                                          |  | (159      | ) |  | (11,419   | ) |  | (12,530   | )
|Effects of:                                                                 |  |           |   |  |           |   |  |           |  
|Increase in losses carried forward                                          |  | 553       |   |  | 10,290    |   |  | 14,212    |  
|Expenses not deductible for tax purposes                                    |  | 751       |   |  | 806       |   |  | (438      | )
|Capital allowances in deficit/(excess) of depreciation                      |  | (99       | ) |  | 317       |   |  | (1,186    | )
|Utilisation of tax losses in respect of research and development tax credit |  |          |   |  |          |   |  | (3,148    | )
|Movement in short term timing differences                                   |  | 8         |   |  | 6         |   |  | (58       | )
|Accounting profit on chargeable assets                                      |  | (7        | ) |  |          |   |  |          |  
|                                                                            |  |           |   |  |           |   |  |           |  
|                                                                            |  | 1,047     |   |  |          |   |  | (3,148    | )
|                                                                            |  |           |   |  |           |   |  |           |  
|Overseas taxation                                                           |  |          |   |  | 64        |   |  | 575       |  
|                                                                            |  |           |   |  |           |   |  |           |  
|                                                                            |  | 1,047     |   |  | 64        |   |  | (2,573    | )
|                                                                            |  |           |   |  |           |   |  |           |  



|Analysis | of deferred tax balances:
|-------- | -------------------------



|                                    |  |           |   |  |           |  
|----------------------------------- |  | --------- | - |  | --------- | -
|                                    |  | 2005£000 |   |  | 2004£000 |  
|Short term timing differences       |  | (176      | ) |  | (168      | )
|Accelerated capital allowances      |  | 1,976     |   |  | 2,315     |  
|Tax losses available                |  | (39,450   | ) |  | (39,272   | )
|                                    |  |           |   |  |           |  
|Total unprovided deferred tax asset |  | (37,650   | ) |  | (37,125   | )
|                                    |  |           |   |  |           |  



At 30 September 2005 the Group
had tax losses of approximately £133 million (2004: £131 million, 2003: £100 million) available for relief against future taxable profits. Due to the availability of tax losses there is no provision for deferred taxation. A
deferred tax asset amounting to £39 million representing such losses has not been recognised. The deferred tax asset would become recoverable should the Group generate relevant taxable profits against which the tax losses would be offset.



F-13



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



9 Loss per share



Basic net loss per share is calculated by dividing net loss for the financial year by the weighted average number of ordinary shares outstanding during the year. The
computation of diluted net loss per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue ordinary shares were exercised or converted into ordinary shares or resulted in the issue of ordinary
shares that then shared in the net loss of the Group.



Potentially dilutive
issuable shares are included in the calculation of diluted loss per share if their issue would increase net loss per share or decrease net profit per share. Since the Group has reported losses, and it is inappropriate to assume the exercise of
out-of-the-money options, its basic and diluted loss per share are therefore equal.



For the years ending 30 September 2005, 2004 and 2003 there were respectively 679,011, 352,176 and 289,640 potentially dilutive issuable shares attributable to the exercise of outstanding options that were excluded from the calculation
of diluted loss per share. No adjustments were made to reported net loss in the computation of net loss per share.



Loss per ordinary share (basic and diluted) is based on the loss for the financial year of £1,577,000 (2004: £38,126,000, 2003: £39,191,000) and a
weighted average number of ordinary shares of 49,381,476 (2004: 40,866,684, 2003: 36,440,993).



10 Intangible fixed assets



|                                        |  |               |  |              |  |           
|--------------------------------------- |  | ------------- |  | ------------ |  | ----------
|Group                                   |  | Licences£000 |  | Patents£000 |  | Total£000
|Cost:                                   |  |               |  |              |  |           
|At 1 October 2004 and 30 September 2005 |  | 4,740         |  | 5,265        |  | 10,005    
|Amortisation:                           |  |               |  |              |  |           
|At 1 October 2004                       |  | 1,864         |  | 2,309        |  | 4,173     
|Charge for the year                     |  |              |  | 375          |  | 375       
|Impairment provision                    |  | 2,876         |  |             |  | 2,876     
|                                        |  |               |  |              |  |           
|At 30 September 2005                    |  | 4,740         |  | 2,684        |  | 7,424     
|                                        |  |               |  |              |  |           
|Net book value:                         |  |               |  |              |  |           
|At 30 September 2005                    |  |              |  | 2,581        |  | 2,581     
|                                        |  |               |  |              |  |           
|At 30 September 2004                    |  | 2,876         |  | 2,956        |  | 5,832     
|                                        |  |               |  |              |  |           



As part of an impairment review of
intangible assets, it was deemed appropriate to write down the carrying value of the licences to nil.



The Company has no intangible fixed assets.



The weighted average useful life of the patents is 14 years. The weighted average useful life of the licences is seven years. The overall weighted average life of all
intangibles is 11 years.



Estimated amortisation expense relating to these
intangible assets for each of the years ending 30 September 2006 to 2009 inclusive is £373,000.



F-14



---

11 Tangible fixed assets



|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|----------------------------------------- |  | --------------------------------- |  | --------------------------- | - |  | -------------------------- | - |  | ---------------------- | - |  | -------------------- | - |  | ----------- | -
|Group                                     |  | Freehold land and buildings £000 |  | Fixtures and fittings £000 |   |  | Laboratory equipment £000 |   |  | Office equipment £000 |   |  | Motor vehicles £000 |   |  | Total £000 |  
|Cost:                                     |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 1 October 2004                         |  | 785                               |  | 11,792                      |   |  | 12,862                     |   |  | 2,216                  |   |  | 20                   |   |  | 27,675      |  
|Additions                                 |  |                                  |  | 181                         |   |  | 1,428                      |   |  | 428                    |   |  |                     |   |  | 2,037       |  
|Disposals                                 |  |                                  |  |                            |   |  | (46                        | ) |  |                       |   |  |                     |   |  | (46         | )
|Written down                              |  |                                  |  | (2,510                      | ) |  | (2,500                     | ) |  | (463                   | ) |  | (6                   | ) |  | (5,479      | )
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2005                      |  | 785                               |  | 9,463                       |   |  | 11,744                     |   |  | 2,181                  |   |  | 14                   |   |  | 24,187      |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|Depreciation:                             |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 1 October 2004                         |  | 286                               |  | 3,724                       |   |  | 9,953                      |   |  | 1,330                  |   |  | 20                   |   |  | 15,313      |  
|Charge for the year                       |  | 49                                |  | 511                         |   |  | 1,715                      |   |  | 418                    |   |  |                     |   |  | 2,693       |  
|Eliminated in respect of disposals        |  |                                  |  |                            |   |  | (46                        | ) |  |                       |   |  |                     |   |  | (46         | )
|Eliminated in respect of write downs      |  |                                  |  | (2,494                      | ) |  | (2,472                     | ) |  | (507                   | ) |  | (6                   | ) |  | (5,479      | )
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2005                      |  | 335                               |  | 1,741                       |   |  | 9,150                      |   |  | 1,241                  |   |  | 14                   |   |  | 12,481      |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|Net book value:                           |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2005                      |  | 450                               |  | 7,722                       |   |  | 2,594                      |   |  | 940                    |   |  |                     |   |  | 11,706      |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2004                      |  | 499                               |  | 8,068                       |   |  | 2,909                      |   |  | 886                    |   |  |                     |   |  | 12,362      |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|Leased assets included above:             |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|Net book value:                           |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2005                      |  |                                  |  | 43                          |   |  | 216                        |   |  | 172                    |   |  |                     |   |  | 431         |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|At 30 September 2004                      |  |                                  |  | 45                          |   |  | 400                        |   |  | 324                    |   |  |                     |   |  | 769         |  
|                                          |  |                                   |  |                             |   |  |                            |   |  |                        |   |  |                      |   |  |             |  
|The Company has no tangible fixed assets. | 



12 Fixed asset investments



|                                           |  |                               |   |  |                                      
|------------------------------------------ |  | ----------------------------- | - |  | -------------------------------------
|                                           |  | Group Other investments £000 |   |  | Company Subsidiary undertakings £000
|Cost:                                      |  |                               |   |  |                                      
|At 1 October 2004                          |  | 3,157                         |   |  | 177,057                              
|Disposals(i)                               |  | (643                          | ) |  |                                     
|                                           |  |                               |   |  |                                      
|At 30 September 2005                       |  | 2,514                         |   |  | 177,057                              
|                                           |  |                               |   |  |                                      
|Provisions for impairment:                 |  |                               |   |  |                                      
|At 1 October 2004 and at 30 September 2005 |  | 215                           |   |  |                                     
|                                           |  |                               |   |  |                                      
|Net book value:                            |  |                               |   |  |                                      
|At 30 September 2005                       |  | 2,299                         |   |  | 177,057                              
|                                           |  |                               |   |  |                                      
|At 30 September 2004                       |  | 2,942                         |   |  | 177,057                              
|                                           |  |                               |   |  |                                      



|(i) | During August 2003 CAT received 588,160 newly issued shares from MorphoSys, a company listed
in Germany, under the terms of an agreement dated 23 December 2002, in consideration for which MorphoSys received a patent licence from CAT. The opening cost of other investments includes the net value of these shares, that is, excluding the
amount due to The Scripps Research Institute, Stratagene and the Medical Research Council, these amounts have been included within current asset investments. During the year, CAT sold some of its MorphoSys shares, generating a profit on disposal of
£1,461,000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The investment was valued by applying the
share price of the MorphoSys shares on the date that CAT became the beneficial owner of the shares, on 26 August 2003. The market value of this investment at 30 September 2005 was £9,729,000 (30 September 2004: £8,436,000).



F-15



---

ACCOUNTS AND NOTES |NOTES TO THE FINANCIAL STATEMENTS CONT.



12 Fixed asset investmentscont.



The subsidiary undertakings of the Company, all of which are consolidated, are as follows:



|                                      |  |                                        |  |                          |  |                                    |  
|------------------------------------- |  | -------------------------------------- |  | ------------------------ |  | ---------------------------------- | -
|                                      |  | Country of incorporation and operation |  | Principal activity       |  | Percentage of ordinary shares held |  
|Cambridge Antibody Technology Limited |  | England                                |  | Research and development |  | 100                                | %
|Optein Inc. (trading as Aptein Inc.)  |  | USA                                    |  | Research and development |  | 100                                | %
|Tagred Limited                        |  | England                                |  | Dormant                  |  | 100                                | %



13 Debtors



|                                  |  |                  |  |                  |  |                    |  |                   
|--------------------------------- |  | ---------------- |  | ---------------- |  | ------------------ |  | ------------------
|                                  |  | Group 2005 £000 |  | Group 2004 £000 |  | Company 2005 £000 |  | Company 2004 £000
|Due within one year:              |  |                  |  |                  |  |                    |  |                   
|Trade debtors                     |  | 5,919            |  | 405              |  |                   |  |                  
|Due from subsidiary undertakings  |  |                 |  |                 |  | 27,378             |  | 7,588             
|Other debtors                     |  | 3,725            |  | 1,051            |  |                   |  | 19                
|Prepayments and accrued income(i) |  | 3,762            |  | 3,004            |  | 1,805              |  | 750               
|                                  |  |                  |  |                  |  |                    |  |                   
|                                  |  | 13,406           |  | 4,460            |  | 29,183             |  | 8,357             
|                                  |  |                  |  |                  |  |                    |  |                   
|Due after more than one year:     |  |                  |  |                  |  |                    |  |                   
|Trade debtors                     |  | 1,160            |  |                 |  |                   |  |                  
|                                  |  |                  |  |                  |  |                    |  |                   
|                                  |  | 1,160            |  |                 |  |                   |  |                  
|                                  |  |                  |  |                  |  |                    |  |                   



|(i) | Includes accrued interest of £1,986,000 (2004: £750,000).
|--- | ---------------------------------------------------------



14 Short term investments



|                                   |  |                |  |                |  |                  |  |                 
|---------------------------------- |  | -------------- |  | -------------- |  | ---------------- |  | ----------------
|                                   |  | Group2005£000 |  | Group2004£000 |  | Company2005£000 |  | Company2004£000
|Liquid resources:                  |  |                |  |                |  |                  |  |                 
|Floating rate notes                |  | 26,986         |  | 29,985         |  | 26,986           |  | 29,985          
|Certificates of deposit            |  | 126,270        |  | 49,000         |  | 102,270          |  | 49,000          
|Term deposits                      |  | 2,824          |  | 13,574         |  | 2,102            |  | 13,574          
|                                   |  |                |  |                |  |                  |  |                 
|                                   |  | 156,080        |  | 92,559         |  | 131,358          |  | 92,559          
|Listed investments (see note 12)   |  | 312            |  | 502            |  |                 |  |                
|                                   |  |                |  |                |  |                  |  |                 
|                                   |  | 156,392        |  | 93,061         |  | 131,358          |  | 92,559          
|                                   |  |                |  |                |  |                  |  |                 
|Market value of listed investments |  | 1,319          |  | 1,440          |  |                 |  |                
|                                   |  |                |  |                |  |                  |  |                 



The Group holds cash which is surplus
to current requirements, but which will be required to finance future operations, in Sterling primarily and US Dollars, in interest bearing marketable securities as described in note 17.



F-16



---

15 Creditors



|                                        |  |                  |  |                  |  |                    |  |                   
|--------------------------------------- |  | ---------------- |  | ---------------- |  | ------------------ |  | ------------------
|                                        |  | Group 2005 £000 |  | Group 2004 £000 |  | Company 2005 £000 |  | Company 2004 £000
|Amounts falling due within one year:    |  |                  |  |                  |  |                    |  |                   
|Bank overdraft                          |  | 803              |  | 1,512            |  |                   |  |                  
|Obligations under finance leases        |  | 405              |  | 376              |  |                   |  |                  
|Trade creditors                         |  | 1,429            |  | 1,263            |  |                   |  |                  
|Amounts owed to subsidiary undertakings |  |                 |  |                 |  |                   |  | 21,175            
|Corporation tax                         |  | 1,047            |  |                 |  | 1,047              |  |                  
|Taxation and social security            |  | 417              |  |                 |  |                   |  |                  
|Other creditors(i)                      |  | 9,648            |  | 504              |  |                   |  |                  
|Accruals(ii)                            |  | 11,078           |  | 6,344            |  | 45                 |  | 30                
|Deferred income                         |  | 4,977            |  | 5,604            |  |                   |  |                  
|                                        |  |                  |  |                  |  |                    |  |                   
|                                        |  | 29,804           |  | 15,603           |  | 1,092              |  | 21,205            
|                                        |  |                  |  |                  |  |                    |  |                   



|(i) | Includes an one-off payment due of £9.2 million.
|--- | ------------------------------------------------



|(ii) | Includes accrued employee benefits of £1,244,000 and other accrued liabilities of
£8,080,000 (2004: accrued employee benefits of £1,159,000 and other accrued liabilities of £3,400,000).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The bank overdraft comprised payments to suppliers and other third parties which were in the course of presentation at the year end.



16 Creditors



|                                                              |  |                  |  |                 
|------------------------------------------------------------- |  | ---------------- |  | ----------------
|                                                              |  | Group 2005 £000 |  | Group 2004 £000
|Amounts falling due after more than one year:                 |  |                  |  |                 
|Obligations under finance leases                              |  | 40               |  | 444             
|Deferred income                                               |  | 18,575           |  | 20,206          
|                                                              |  |                  |  |                 
|                                                              |  | 18,615           |  | 20,650          
|                                                              |  |                  |  |                 
|Borrowings are repayable as follows                          |  |                  |  |                 
|Bank overdraft:                                               |  |                  |  |                 
|Due within one year or on demand (note 15)                    |  | 803              |  | 1,512           
|                                                              |  |                  |  |                 
|Finance leases:                                               |  |                  |  |                 
|Due within one year (note 15)                                 |  | 405              |  | 376             
|Due in more than one year but not more than two years         |  | 40               |  | 405             
|Due in more than two years but not more than five years       |  |                 |  | 39              
|                                                              |  |                  |  |                 
|                                                              |  | 445              |  | 820             
|                                                              |  |                  |  |                 
|Total due within one year or on demand                        |  | 1,208            |  | 1,888           
|Total due in more than one year but not more than two years   |  | 40               |  | 405             
|Total due in more than two years but not more than five years |  |                 |  | 39              
|                                                              |  |                  |  |                 
|                                                              |  | 1,248            |  | 2,332           
|                                                              |  |                  |  |                 



F-17



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



17 Financial instruments



The financial instruments of the Group comprise cash, liquid resources and debtors and creditors arising in the
normal course of business. The Group does not trade in financial instruments or derivatives.



The Groups liquid resources are managed on a discretionary basis by a third party. The mandate under which the fund managers operate includes the following criteria:



| |  |  | Investments only in freely negotiable instruments or deposits with specified banks and building societies.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | For the whole fund, minimum credit ratings for any counterparty, with further restrictions for particular types of investment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | For the whole fund, a minimum credit rating profile and maximum exposures to individual counterparties dependent on their minimum credit ratings.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For the whole fund, a maturity profile which is tailored to the Groups expected cash requirements (as investments are generally held to maturity).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | No currency exposure or short positions.
| | - |  | ----------------------------------------



These criteria are set by the Audit Committee and are reviewed when deemed necessary. The principal purpose of the Groups liquid resources is for future funding and
hence their safeguarding is considered to be paramount and therefore priority is given to security and liquidity over the yield achieved. The criteria for fund management reflect this. The Audit Committee reviews the return made on the Groups
funds against benchmark market returns quarterly. The majority of the Groups investments are short term investments and hence exposure to interest rate changes has been minimal. Realisation of losses from interest rate movements is unlikely as
investments are generally held to maturity. Declines in interest rates over time will, however, reduce the Groups interest income.



The results of the Group have not, to date, been materially impacted by exchange rate fluctuations. However, a significant proportion of current and future income is
likely to be receivable in United States Dollars which may give rise to transactional currency exposures due to fluctuations in the exchange rate between United States Dollars and Sterling, which is the Groups functional currency.



Where possible, the Group seeks to match United States Dollar income with United States
Dollar expenditure. To date the Group has not hedged any transactional currency exposure but will keep such exposures under review and where appropriate may enter into such transactions in future.



|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|-------------------------------- |  | --------------------------------- |  | ------------------------------------- |  | ---------------------------------------- | - |  | ------------------------------------------------------------ | - |  | ----------
|Financial assets and liabilities |  | Fixedratefinancialassets(i)£000  |  | Floating ratefinancialassets(ii)£000 |  | Fixedratefinancialliabilities (i) £000  |   |  | Financialliabilitieson which nointerest is paid(iii) £000   |   |  | Total£000
|At 30 September 2005             |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Sterling assets/(liabilities)    |  | 2,000                             |  | 153,000                               |  | (445                                     | ) |  | (803                                                         | ) |  | 153,752   
|United States Dollar assets      |  |                                  |  | 21,357                                |  |                                         |   |  |                                                             |   |  | 21,357    
|Other assets                     |  |                                  |  | 4                                     |  |                                         |   |  |                                                             |   |  | 4         
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Book value                       |  | 2,000                             |  | 174,361                               |  | (445                                     | ) |  | (803                                                         | ) |  | 175,113   
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Fair value                       |  | 2,000                             |  | 174,415                               |  | (445                                     | ) |  | (803                                                         | ) |  | 175,167   
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|                                 |  |                                   |  |                                       | 
|Financial assets and liabilities |  | Fixed ratefinancialassets(i)£000 |  | Floating ratefinancialassets(ii)£000 |  | Fixed ratefinancialliabilities (i) £000 |   |  | Financialliabilities on which nointerest is paid (iii) £000 |   |  | Total£000
|At 30 September 2004             |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Sterling assets/(liabilities)    |  | 8,000                             |  | 84,758                                |  | (820                                     | ) |  | (608                                                         | ) |  | 91,330    
|United States Dollar assets      |  |                                  |  | 1,571                                 |  |                                         |   |  |                                                             |   |  | 1,571     
|Other assets                     |  |                                  |  | 3                                     |  |                                         |   |  |                                                             |   |  | 3         
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Book value                       |  | 8,000                             |  | 86,332                                |  | (820                                     | ) |  | (608                                                         | ) |  | 92,904    
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           
|Fair value                       |  | 7,969                             |  | 86,343                                |  | (820                                     | ) |  | (608                                                         | ) |  | 92,884    
|                                 |  |                                   |  |                                       |  |                                          |   |  |                                                              |   |  |           



|(i) | Interest rates determined for more than one year.
|--- | -------------------------------------------------



|(ii) | Interest rates determined at least once a year.
|---- | -----------------------------------------------



|(iii) | Net of offsets, where applicable.
|----- | ---------------------------------



In addition, CAT holds shares in MorphoSys at a cost of £2,299,000 (2004: £3,157,000) as fixed asset investments which are non-interest bearing. (See note
12.)



F-18



---

17 Financial instrumentscont.



The weighted average return on the fixed rate financial assets was 4.8% (2004: 4.5%), which was fixed over a weighted
average term of 1.0 years (2004: 1.5 years). The returns achieved on fixed and floating rate financial assets are determined by money market rates prevailing at the date a transaction is entered into.



The weighted average interest rate on the fixed rate financial liabilities was 14.8% (2004:
14.8%) which was fixed over a weighted average term of 3.8 years (2004: 3.8 years).



In this disclosure financial assets comprise liquid resources and cash at bank and in hand. Short term debtors and creditors have been excluded. The financial liabilities on which no interest is paid comprise payments to third parties in
the course of presentation. These are payable on demand. There are no undrawn committed borrowing facilities. The Directors do not consider the deferred income balances to be financial liabilities where monies received are non-refundable. Fair value
of marketable securities is determined by reference to market value.



Currency exposuresAt the year end the Groups individual operations had the following net monetary assets and liabilities in currencies other than their functional currency.



|                              |  |          |  |               |   |  |            |   |  |            |  
|----------------------------- |  | -------- |  | ------------- | - |  | ---------- | - |  | ---------- | -
|                              |  | USD£000 |  | Sterling£000 |   |  | Other£000 |   |  | Total£000 |  
|At 30 September 2005          |  |          |  |               |   |  |            |   |  |            |  
|Functional currency: Sterling |  | 22,858   |  |              |   |  | (39        | ) |  | 22,819     |  
|United States Dollar          |  |         |  | (11,777       | ) |  |           |   |  | (11,777    | )
|                              |  |          |  |               |   |  |            |   |  |            |  
|                              |  | 22,858   |  | (11,777       | ) |  | (39        | ) |  | 11,042     |  
|                              |  |          |  |               |   |  |            |   |  |            |  
|                              |  |          |  |              
|                              |  | USD£000 |  | Sterling£000 |   |  | Other£000 |   |  | Total£000 |  
|At 30 September 2004          |  |          |  |               |   |  |            |   |  |            |  
|Functional currency: Sterling |  | 820      |  |              |   |  | (395       | ) |  | 425        |  
|United States Dollar          |  |         |  | (7,587        | ) |  |           |   |  | (7,587     | )
|                              |  |          |  |               |   |  |            |   |  |            |  
|                              |  | 820      |  | (7,587        | ) |  | (395       | ) |  | (7,162     | )
|                              |  |          |  |               |   |  |            |   |  |            |  



Transactions in foreign currency
monetary assets and liabilities give rise to currency gains and losses in the profit and loss account.



18 Called-up share capital and share premium



|                                                          |  |           |  |          
|--------------------------------------------------------- |  | --------- |  | ---------
|Authorised                                                |  | 2005£000 |  | 2004£000
|75,000,000 (2004: 75,000,000) ordinary shares of 10p each |  | 7,500     |  | 7,500    



During the year the Directors
exercised their powers to allot ordinary shares as shown in the table below.



|                                                                               |  |                          |  |                         |  |                  
|------------------------------------------------------------------------------ |  | ------------------------ |  | ----------------------- |  | -----------------
|Allotted, called-up and fully paid                                             |  | 10p ordinarysharesNumber |  | Issuedsharecapital£000 |  | Sharepremium£000
|At 1 October 2004                                                              |  | 41,109,938               |  | 4,111                   |  | 226,829          
|Issued to the Share Incentive Plan                                             |  | 109,450                  |  | 11                      |  | 568              
|Exercise of options                                                            |  | 189,551                  |  | 19                      |  | 645              
|In lieu of fees(i)                                                             |  | 12,946                   |  | 1                       |  | 80               
|To AstraZeneca (as part of a subscription agreement) in December 2004(ii)(iii) |  | 10,217,983               |  | 1,022                   |  | 73,682           
|                                                                               |  |                          |  |                         |  |                  
|At 30 September 2005                                                           |  | 51,639,868               |  | 5,164                   |  | 301,804          
|                                                                               |  |                          |  |                         |  |                  



|(i) | All Non-Executive Directors elected to take 25% of their basic annual fees in shares.
|--- | -------------------------------------------------------------------------------------



|(ii) | Net of expenses.
|---- | ----------------



|(iii) | Shares were issued at a price of £7.34 per share, representing a premium of 27.3% over
the average closing price of a CAT share for the five days preceding the execution of the Subscription Agreement.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company operates and has operated a number of employee share schemes for employees of the Group as described below.



Old Option SchemesPrior to March 1997, CAT Limited operated the Old Option Schemes.
Two of these were unapproved share option schemes and one was an Inland Revenue approved share option scheme. Options granted under the unapproved schemes included options to consultants and Non-executive Directors. These schemes were closed prior
to flotation. Options under these schemes were either exchanged for equivalent options over shares of the Company or the option holders entered into share exchange option agreements whereby shares allotted in CAT Limited on exercise are immediately
exchanged for shares in the Company.



Company Share Option Plan (CSOP)The CSOP was approved and came into operation in 1997 and consists of two parts. The CSOP part A is Inland Revenue approved and CSOP part B is unapproved. Employees of Cambridge Antibody Technology Group plc and its wholly owned subsidiary
Cambridge Antibody Technology Limited, including Executive Directors, are eligible for the grant of options under both parts of the CSOP; employees of Cambridge Antibody Technology Inc. are eligible for the grant of options under part B of the CSOP.
Options granted under part A are subject to limits set by the Inland Revenue and any balance is granted under part B.



The total of shares under option to each participant is subject to limits and the exercise of options is subject to the attainment of objective performance criteria which
are determined by the Remuneration Committee, except in a limited number of cases such as redundancy where options will automatically vest.



Under the CSOP rules, individuals may be granted options over shares with a value of up to two times basic salary (excluding bonuses) in any financial year. One or more
objective performance conditions is applied to all options granted under the scheme to determine whether they will become exercisable. These performance conditions are determined by the Remuneration Committee.



For option grants of up to 1.5 times basic salary, the Remuneration Committee has determined
that options will become exercisable subject to the condition that the proportionate increase in the closing price of shares in the Company averaged over a specified period must exceed the total return for the FTSE All Share Index. The specified
period begins on the date of grant and ends on the third anniversary of the date of grant. In the event that this performance condition has not been met on the third anniversary of the date of grant the condition can be tested again on the fourth
anniversary of the date of grant. If after the fourth anniversary of the date of grant the option has still not vested, it will irrevocably lapse.



For option grants in excess of 1.5 times basic salary the number of options which will become exercisable is determined on a linear sliding scale based on the extent to
which the Total Shareholder Return (TSR) for the Company exceeds the percentage increase in the TSR for the FTSE All Share Index over a three year period, by an amount of between 0% and 33%. For example if CATs TSR in the relevant period
exceeded the TSR for the FTSE All Share Index by 33% all options in excess of 1.5 times salary would become exercisable. Conversely, if the TSR in the relevant period did not exceed the TSR for the FTSE All Share Index at all, then no options in
excess of 1.5 times basis salary would become exercisable.



For all option
grants from 15 November 2004, the figure which is used for CATs share price in determining whether or not options have become exercisable is the closing price of a share as derived from the London Stock Exchange Daily Official List averaged
over a period of 90 consecutive business days. This reduces the possibility of options becoming exercisable when there is a short term fluctuation in the share price.



Share Incentive Plan(SIP) The Company has established an Inland Revenue approved SIP which complies with Schedule 2 to the
Income Tax (Earnings and Pensions) Act 2003. The SIP has four elements: free shares, partnership shares, matching shares and dividend shares. The Company does not operate the dividend share element of the scheme. Free shares can be appropriated to
employees with a maximum market value of £3,000 per employee per tax year. The shares are offered on similar terms to all eligible employees and include a performance-related element. All of CATs employees and Executive Directors
employed on 31 March in the relevant financial year are eligible for the award of free shares. Partnership shares may be purchased by employees out of their pre-tax salary up to £1,500 (or 10% of salary if lower) per year. Where employees
purchase partnership shares they can be awarded additional free shares on a matching basis. Under the rules of the SIP the Directors are given discretion to determine the ratio of partnership shares to matching shares. The Board has the discretion
to amend this ratio if it so determines. The ratio is currently 1:1. Free shares and matching shares are forfeited if the participant leaves the Group within 12 months of the date of grant other than in certain specified circumstances.



Executive Incentive Plan(EIP) The operation of the EIP is supervised by the
Remuneration Committee. Under the rules of the EIP awards can be granted in broadly two different ways:



(i) To deliver shares (Restricted Shares) to a participant after three years, subject to meeting a pre-specified performance target; and



(ii) As a co-investment scheme whereby an investment made by a participant in the Companys shares. These may either be shares
purchased on the London Stock Exchange (or such other market or exchange on which shares may be freely bought or sold) or shares which are newly issued for a consideration which equates to a value per share of the average mid market quotation for
one share in the Company as derived on the London Stock Exchange Daly Official List for the three days preceding the issue and allotment of the shares from personal funds (Invested Shares), for example through a reinvestment of part of an annual
bonus, is matched with free shares (Matching Shares). These matching Shares would be subject to continued employment for not less than three years and the meeting of a pre-specified performance target.



An award consists of the right to acquire shares in the Company for payment equal to a
nominal sum. In respect of rights to subscribe for shares this sum is the par value of the Companys shares (10p per share). Awards are neither transferable nor pensionable.



No awards may be granted over shares in any financial year whose value is greater than one times an employees annual rate of salary
for Restricted Awards and 45% of salary for Matching Shares.



Where the EIP is
operated in the same financial year as the CSOP the aggregate value of shares over which options and Restricted Awards can be made in any one financial year to an individual is two times his annual salary.



An award will normally vest no earlier than the third anniversary of its grant to the extent
that the applicable performance condition (see below) has been satisfied, the participant is still employed by the Group and, if operated as a co-investment scheme, the Invested Shares have been retained. It will then remain capable of exercise for
a period of three years. The conditions are not contained within the Plan rules, but will be set by the Remuneration Committee at each grant of awards under the Plan.



Restricted AwardsThe applicable performance condition is one based on the Companys relative Total Shareholder Return (i.e.
growth in share price plus dividends re-invested). Performance will be measured over the three years starting 1 April or 1 October before each grant takes place. The Restricted Awards will vest in respect of 25% of the shares for performance equal
to the Total Shareholder Return on the FTSE All Share Index rising on a straight line basis to 100% vesting for 33% out performance over the three year period. If the performance condition is not satisfied after the first three years, the Restricted
Award will lapse; there will be no opportunity for retesting.



Alternative but
broadly no less demanding conditions may be set for below board level executives if the Remuneration Committee feels that these would be a more appropriate way of motivating selected executives (e.g. achieving regulatory approval for certain drugs
or achieving revenue targets). In respect of grants which have been made to date however, only the performance condition described above has been used.



Matching AwardsThe performance condition will be based on the Companys Total Shareholder Return as compared with The NASDAQ Biotechnology Index and the
London Stock Exchanges Techmark Mediscience Index. Matching Awards will be a multiple of the number of Invested Shares which are acquired (up to 15% of an executives salary each year) based on performance as follows:



|                                      |  |                                            
|------------------------------------- |  | -------------------------------------------
|Performance ranking after three
years |  | Rates of Matching Awards to Invested
Shares
|Upper Quartile                        |  | 2:1                                        
|Between Median and                    |  | Pro rata between                           
|Upper Quartile                        |  | 0.25:1 and 2:1                             
|Median                                |  | 0.25:1                                     
|Below Median                          |  | zero                                       



If an executive wishes to keep his
shares as Invested Shares for a further year then the ratio could rise (but could not fall) by 25% for upper quartile performance over the four years reducing on a pro rata basis to an extra 6.25% for median performance. If an executive then wishes
to keep his vested shares as Invested Shares for a final year then the ratio could rise (but could not fall) by a further 20% for upper quartile performance over the full five years reducing on a pro rata basis to an extra 5% for median performance.
The maximum level of match would therefore be 3:1 for upper quartile performance over three, four and five years on an investment of up to 15% of an executives salary.



F-19



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



18 Called-up share capital and share premiumcont.



At 30 September 2005 options had been granted over ordinary shares of the Company as follows:



|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          
|----------------------------------------------------------- |  | -------------- | ----- | ------------------------- | ----------- | ----------------------- | ----------- | ----- | ---- | - | ------------- | ---------
|                                                            |  | Exercise price |       | Earliest date exercisable |             | Latest date exercisable |             | Notes |      |   | Maximumnumber
|Old schemes                                                 |  | US$            | 4.80  |                           | 19 Apr 1999 |                         | 19 Apr 2006 |       |      |   |               | 75,000   
|                                                            |  | £              | 3.00  |                           | 4 Sept 1999 |                         | 3 Sept 2006 |       |      |   |               | 1,500    
|CSOP                                                        |  | £              | 5.00  |                           | 24 Mar 2000 |                         | 23 Mar 2007 |       | (i   | ) |               | 24,700   
|                                                            |  | £              | 5.00  |                           | 24 Mar 2000 |                         | 23 Mar 2007 |       | (i   | ) |               | 28,700   
|                                                            |  | £              | 5.00  |                           | 19 Dec 2000 |                         | 18 Dec 2007 |       | (i   | ) |               | 20,500   
|                                                            |  | £              | 5.00  |                           | 25 Jun 2001 |                         | 24 Jun 2008 |       | (i   | ) |               | 25,000   
|                                                            |  | £              | 5.00  |                           | 27 Nov 2001 |                         | 26 Nov 2008 |       | (i   | ) |               | 15,000   
|                                                            |  | £              | 2.42  |                           | 27 Nov 2001 |                         | 26 Nov 2005 |       | (i   | ) |               | 44,061   
|                                                            |  | £              | 2.42  |                           | 27 Nov 2001 |                         | 26 Nov 2008 |       | (i   | ) |               | 19,224   
|                                                            |  | £              | 2.87  |                           | 3 Dec 2002  |                         | 2 Dec 2006  |       | (i   | ) |               | 189,216  
|                                                            |  | £              | 2.87  |                           | 3 Dec 2002  |                         | 2 Dec 2009  |       | (i   | ) |               | 31,163   
|                                                            |  | £              | 30.54 |                           | 1 Dec 2003  |                         | 30 Nov 2007 |       | (iii | ) |               | 9,360    
|                                                            |  | £              | 30.54 |                           | 1 Dec 2003  |                         | 30 Nov 2010 |       | (iii | ) |               | 1,063    
|                                                            |  | £              | 25.66 |                           | 25 May 2004 |                         | 24 May 2011 |       | (iii | ) |               | 487      
|                                                            |  | £              | 17.07 |                           | 30 Nov 2004 |                         | 29 Nov 2008 |       | (ii  | ) |               | 27,322   
|                                                            |  | £              | 17.07 |                           | 30 Nov 2004 |                         | 29 Nov 2011 |       | (ii  | ) |               | 31,341   
|                                                            |  | £              | 17.04 |                           | 4 Dec 2004  |                         | 3 Dec 2008  |       | (ii  | ) |               | 63,252   
|                                                            |  | £              | 17.04 |                           | 4 Dec 2004  |                         | 3 Dec 2011  |       | (ii  | ) |               | 1,341    
|                                                            |  | £              | 10.83 |                           | 24 May 2005 |                         | 23 May 2012 |       | (ii  | ) |               | 76,034   
|                                                            |  | £              | 5.13  |                           | 22 Nov 2005 |                         | 21 Nov 2012 |       | (ii  | ) |               | 193,665  
|                                                            |  | £              | 5.13  |                           | 22 Nov 2005 |                         | 21 Nov 2012 |       | (iv  | ) |               | 35,796   
|                                                            |  | £              | 4.60  |                           | 23 May 2006 |                         | 22 May 2013 |       | (ii  | ) |               | 201,064  
|                                                            |  | £              | 4.60  |                           | 23 May 2006 |                         | 22 May 2013 |       | (iv  | ) |               | 36,739   
|                                                            |  | £              | 4.31  |                           | 21 Nov 2006 |                         | 20 Nov 2013 |       | (ii  | ) |               | 227,160  
|                                                            |  | £              | 4.38  |                           | 12 Dec 2006 |                         | 11 Dec 2013 |       | (ii  | ) |               | 5,000    
|                                                            |  | £              | 5.24  |                           | 21 May 2007 |                         | 20 May 2014 |       | (ii  | ) |               | 127,959  
|CSOP  granted in year and outstanding at 30 September 2005 |  | £              | 5.95  |                           | 29 Nov 2007 |                         | 28 Nov 2014 |       | (vi  | ) |               | 199,200  
|                                                            |  | £              | 7.22  |                           | 30 Dec 2007 |                         | 29 Dec 2014 |       | (vi  | ) |               | 6,000    
|                                                            |  | £              | 5.69  |                           | 19 May 2008 |                         | 18 May 2015 |       | (vi  | ) |               | 81,720   
|EIP                                                         |  | £              | 0.10  |                           | 20 Feb 2007 |                         | 19 Feb 2010 |       | (iv  | ) |               | 113,373  
|                                                            |  | £              | 0.10  |                           | 20 Feb 2007 |                         | 19 Feb 2010 |       | (v   | ) |               | 43,506   
|                                                            |  | £              | 0.10  |                           | 25 May 2007 |                         | 24 May 2010 |       | (iv  | ) |               | 19,742   
|EIP  granted in year and outstanding at 30 September 2005  |  | £              | 0.10  |                           | 30 Dec 2007 |                         | 30 Dec 2010 |       | (iv  | ) |               | 113,247  
|                                                            |  | £              | 0.10  |                           | 4 Mar 2008  |                         | 4 Mar 2011  |       | (v   | ) |               | 26,979   
|                                                            |  | £              | 0.10  |                           | 24 May 2008 |                         | 24 May 2011 |       | (iv  | ) |               | 18,442   
|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          
|Total                                                       |  |                |       |                           |             |                         |             |       |      |   |               | 2,133,856
|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          



|(i) | These options were subject to the condition as stated in note (ii) below. This condition had been satisfied as at 30 September 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



|(ii) | These options are exercisable subject to the condition that the proportionate increase in the
closing price of shares in the Company over a specified period must exceed the increase in the Total Shareholder Return (TSR) for the FTSE All Share Index. The specified period begins on the date of grant and ends between the third and fourth
anniversary of the date of grant. In certain circumstances, such as the death of an employee, the rules of the CSOP permit the Directors to allow options which have been granted but which have not vested to be exercised provided the exercise takes
place within the period prescribed in the CSOP rules in relation to these circumstances.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) | These options have failed to meet the performance condition as stated in (ii) above.
Under the rules of the CSOP there are however certain circumstances where the option will become exercisable eg, in the case of redundancy notwithstanding the fact that the performance condition has not been satisfied. Certain of the options granted
on these dates have not therefore lapsed notwithstanding the fact the performance condition has not been met.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | The extent to which the option or award will become exercisable will be determined on a
linear sliding scale on the third anniversary of the date of grant based on the extent to which the TSR for the Company exceeds the percentage increase in the TSR for the FTSE All Share Index by an amount of between 0% and 33%. In relation to the
CSOP there are certain circumstances where this condition may not apply. These are detailed in note (ii) above. In relation to the EIP, the Remuneration Committee has discretion to determine the extent to which the performance condition will
apply in certain circumstances eg, in relation to redundancy.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(v) | The applicable Performance Condition is described above under the heading Executive Incentive
Plan. In relation to the EIP, the Remuneration Committee has discretion to determine the extent to which the performance condition will apply in certain circumstances eg, in relation to redundancy.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(vi) | These options are exercisable subject to the condition that the proportionate increase in the
closing price of shares in the Company over a specified period must exceed the increase in the Total Shareholder Return (TSR) for the FTSE All Share Index. The specified period begins on the date of grant and ends on either the third or the fourth
anniversary of the grant date. There are certain circumstances where this performance condition may not apply. These are detailed in note (ii) above.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



---

19 Profit and loss account and other reserve



|                                    |  |                          |   |  |                        |  |                           
|----------------------------------- |  | ------------------------ | - |  | ---------------------- |  | --------------------------
|                                    |  | GroupProfit andloss£000 |   |  | GroupOtherreserve£000 |  | CompanyProfitand loss£000
|At 1 October 2004                   |  | (159,314                 | ) |  | 13,456                 |  | 25,839                    
|Retained (loss)/profit for the year |  | (1,577                   | ) |  |                       |  | 3,708                     
|Employee share options(i)           |  | 286                      |   |  |                       |  |                          
|Foreign exchange translation        |  | (413                     | ) |  |                       |  |                          
|                                    |  |                          |   |  |                        |  |                           
|At 30 September 2005                |  | (161,018                 | ) |  | 13,456                 |  | 29,547                    
|                                    |  |                          |   |  |                        |  |                           



|(i) | Where options are granted at less than market value, the Group recognises a charge that reflects the intrinsic value of awards made. This is offset by a credit to
the profit and loss account reserve.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The other reserve
represents the share premium account of CAT Limited and arises on consolidation from the application of merger accounting principles to the acquisition of that company.



20 Reconciliation of movements in Group shareholders funds



|                                                       |  |           |   |  |           |  
|------------------------------------------------------ |  | --------- | - |  | --------- | -
|                                                       |  | 2005£000 |   |  | 2004£000 |  
|Loss for the financial year                            |  | (1,577    | ) |  | (38,126   | )
|Other recognised gains and losses relating to the year |  | (413      | ) |  | 1,099     |  
|                                                       |  |           |   |  |           |  
|                                                       |  | (1,990    | ) |  | (37,027   | )
|New shares issued (net of expenses)                    |  | 76,028    |   |  | 14,223    |  
|Employee share options                                 |  | 286       |   |  | 144       |  
|                                                       |  |           |   |  |           |  
|Net increase/(decrease) in shareholders funds         |  | 74,324    |   |  | (22,660   | )
|Opening shareholders funds                            |  | 85,082    |   |  | 107,742   |  
|                                                       |  |           |   |  |           |  
|Closing shareholders funds                            |  | 159,406   |   |  | 85,082    |  
|                                                       |  |           |   |  |           |  



21 Reconciliation of operating loss
to operating cash flows



|                                                  |  |           |   |  |           |   |  |           |  
|------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                  |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Operating loss                                    |  | (9,265    | ) |  | (42,192   | ) |  | (46,124   | )
|Depreciation charge                               |  | 2,693     |   |  | 2,826     |   |  | 2,989     |  
|Amortisation and impairment of intangible assets  |  | 3,251     |   |  | 1,051     |   |  | 1,050     |  
|(Profit)/loss on disposal of fixed assets         |  | (2        | ) |  | (3        | ) |  | 94        |  
|Shares received from MorphoSys                    |  |          |   |  |          |   |  | (3,589    | )
|Write down of fixed asset investment              |  |          |   |  | 215       |   |  |          |  
|EIP charge                                        |  | 286       |   |  | 144       |   |  |          |  
|Increase in debtors                               |  | (8,871    | ) |  | (24       | ) |  | (1,285    | )
|(Decrease)/increase in deferred income            |  | (2,258    | ) |  | 4,086     |   |  | 10,597    |  
|Increase in creditors (excluding deferred income) |  | 14,005    |   |  | 2,830     |   |  | 449       |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash outflow from operating activities        |  | (161      | ) |  | (31,067   | ) |  | (35,819   | )
|                                                  |  |           |   |  |           |   |  |           |  



F-21



---

ACCOUNTS AND NOTES|NOTES TO THE FINANCIAL STATEMENTSCONT.



22 Analysis of cash flows



|                                                  |  |           |   |  |           |   |  |           |  
|------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                  |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Returns on investments and servicing of finance:  |  |           |   |  |           |   |  |           |  
|Interest received                                 |  | 6,272     |   |  | 4,295     |   |  | 5,095     |  
|Interest element of finance lease rentals         |  | (49       | ) |  | (78       | ) |  | (46       | )
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow                                   |  | 6,223     |   |  | 4,217     |   |  | 5,049     |  
|                                                  |  |           |   |  |           |   |  |           |  
|Taxation:                                         |  |           |   |  |           |   |  |           |  
|Research and development tax credit received      |  |          |   |  |          |   |  | 5,785     |  
|Overseas tax paid                                 |  |          |   |  | (64       | ) |  | (575      | )
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash (outflow)/inflow                         |  |          |   |  | (64       | ) |  | 5,210     |  
|                                                  |  |           |   |  |           |   |  |           |  
|Capital expenditure and financial investment:     |  |           |   |  |           |   |  |           |  
|Purchase of intangible fixed assets               |  |          |   |  |          |   |  | (2,673    | )
|Purchase of tangible fixed assets                 |  | (1,998    | ) |  | (1,032    | ) |  | (5,413    | )
|Proceeds from the sale of tangible fixed assets   |  | 2         |   |  | 6         |   |  | 4         |  
|Proceeds from the sale of fixed asset investments |  | 2,104     |   |  |          |   |  |          |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow/(outflow)                         |  | 108       |   |  | (1,026    | ) |  | (8,082    | )
|                                                  |  |           |   |  |           |   |  |           |  
|Management of liquid resources:                   |  |           |   |  |           |   |  |           |  
|Decrease/(increase) in term deposits              |  | 10,750    |   |  | (11,647   | ) |  | 1,769     |  
|Net (purchase)/sale of securities                 |  | (74,271   | ) |  | 27,004    |   |  | 17,009    |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash (outflow)/inflow                         |  | (63,521   | ) |  | 15,357    |   |  | 18,778    |  
|                                                  |  |           |   |  |           |   |  |           |  
|Financing:                                        |  |           |   |  |           |   |  |           |  
|Issue of ordinary share capital                   |  | 76,028    |   |  | 14,223    |   |  | 10,562    |  
|Proceeds from new finance lease commitments       |  |          |   |  |          |   |  | 1,389     |  
|Capital elements of finance lease rental payments |  | (375      | ) |  | (348      | ) |  | (221      | )
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow                                   |  | 75,653    |   |  | 13,875    |   |  | 11,730    |  
|                                                  |  |           |   |  |           |   |  |           |  



Liquid resources comprise current
asset investments in negotiable securities and cash deposits.



23 Analysis
and reconciliation of net funds



|                              |  |                    |   |  |                |  |                       |  |                       |  
|----------------------------- |  | ------------------ | - |  | -------------- |  | --------------------- |  | --------------------- | -
|                              |  | 1 October2004£000 |   |  | Cash flow£000 |  | Exchangemovement£000 |  | 30 September2005£000 |  
|Cash at bank and in hand      |  | 2,678              |   |  | 17,593         |  | 10                    |  | 20,281                |  
|Overdrafts                    |  | (1,512             | ) |  | 709            |  |                      |  | (803                  | )
|                              |  |                    |   |  |                |  |                       |  |                       |  
|                              |  |                    |   |  | 18,302         |  | 10                    |  |                       |  
|Liquid resources              |  | 92,559             |   |  | 63,521         |  |                      |  | 156,080               |  
|                              |  |                    |   |  |                |  |                       |  |                       |  
|Net cash and liquid resources |  | 93,725             |   |  | 81,823         |  | 10                    |  | 175,558               |  
|Finance leases                |  | (820               | ) |  | 375            |  |                      |  | (445                  | )
|                              |  |                    |   |  |                |  |                       |  |                       |  
|Net funds                     |  | 92,905             |   |  | 82,198         |  | 10                    |  | 175,113               |  
|                              |  |                    |   |  |                |  |                       |  |                       |  



F-22



---

23 Analysis and reconciliation of net fundscont.



|                                                       |  |           |  |           |   |  |           |  
|------------------------------------------------------ |  | --------- |  | --------- | - |  | --------- | -
|                                                       |  | 2005£000 |  | 2004£000 |   |  | 2003£000 |  
|Increase/(decrease) in cash in the year                |  | 18,302    |  | 1,292     |   |  | (3,134    | )
|Decrease/(increase) in liquid resources                |  | 63,521    |  | (15,357   | ) |  | (18,778   | )
|Cash outflow/(inflow) from increase in lease financing |  | 375       |  | 348       |   |  | (1,168    | )
|                                                       |  |           |  |           |   |  |           |  
|Change in net funds resulting from cash flows          |  | 82,198    |  | (13,717   | ) |  | (23,080   | )
|Exchange movement                                      |  | 10        |  | (38       | ) |  | (35       | )
|                                                       |  |           |  |           |   |  |           |  
|Movement in net funds in year                          |  | 82,208    |  | (13,755   | ) |  | (23,115   | )
|Net funds at 1 October 2004                            |  | 92,905    |  | 106,660   |   |  | 129,775   |  
|                                                       |  |           |  |           |   |  |           |  
|Net funds at 30 September 2005                         |  | 175,113   |  | 92,905    |   |  | 106,660   |  
|                                                       |  |           |  |           |   |  |           |  



24 Financial commitments



Capital commitments of the Group were as follows:



|                                |  |                |  |               
|------------------------------- |  | -------------- |  | --------------
|                                |  | Group2005£000 |  | Group2004£000
|Contracted but not provided for |  | 70             |  | 2             
|                                |  |                |  |               



In the next year the Group has
operating lease commitments as follows, categorised by period to expiry.



|                             |  |                            |  |                |  |                            |  |               
|---------------------------- |  | -------------------------- |  | -------------- |  | -------------------------- |  | --------------
|                             |  | Land andbuildings2005£000 |  | Other2005£000 |  | Land andbuildings2004£000 |  | Other2004£000
|Expiry date:                 |  |                            |  |                |  |                            |  |               
| within one year            |  |                           |  |               |  |                           |  |              
| between two and five years |  |                           |  | 128            |  |                           |  | 64            
| after five years           |  | 1,957                      |  |               |  | 2,001                      |  |              
|                             |  |                            |  |                |  |                            |  |               



The Company had no capital or
operating lease commitments.



In addition to the commitments above, as of 1
October 2005 CAT expects to fund the alliance it has with Genzyme a further US$25 million over the course of fiscal years 2006, 2007 and part of 2008, under an amended collaboration agreement with Genzyme. Due to the nature of this collaborative
arrangement it does not give rise to specified cash outflows, the timing of such funding may vary depending on the progress of product development under the collaboration. CAT and Genzyme have yet to determine the level of funding beyond that point.



As part of the Alliance CAT has with AstraZeneca, it was agreed that both
parties would jointly fund the cost of a minimum of 25 discovery programmes that will be initiated over the first five-year discovery phase. The research funding is expected to be a minimum of US$175 million that AstraZeneca and CAT would commit to
on a 50:50 basis. CAT has the option of co-investing in all programmes through to Clinical Proof of Concept, and of continuing to fund jointly the development of one in every five product candidates that reach Clinical Proof of Concept up to product
launch. As of 1 October 2005, based on the current programme budgets for the six Discovery projects currently being worked on in the Alliance, CAT has a financial commitment of US$19 million to the Alliance over the course of fiscal years 2006 to
2008. Again the timing of such funding may vary depending on the progress of product development under the collaboration. CAT and AstraZeneca intend to commence a further five programmes during 2006, CAT will be committed to fund fifty per cent of
these programme costs in addition to the six currently being worked on. CATs financial commitment is represented in part by an obligation to provide substantial human resource to the Alliance over the next five years. Based on current
programme plans, CAT is forecast to incur more than fifty per cent of the total programme costs within the Alliance over the next few years and therefore, expects to receive cash reimbursements from AstraZeneca to reapportion total alliance costs on
a 50:50 basis.



25 Pension arrangements



The Group operates a group personal pension plan which is a defined contribution plan. Group
contributions payable for the year to 30 September 2005 were £1,061,000 (2004: £1,009,000; 2003: £988,000).



F-23



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTSCONT.



26 Post balance sheet event



In addition to the Settlement Agreement reached with Abbott, which, other than in respect of the royalty buy-out from CATs licensors,
has been accounted for as an adjusting post balance sheet event, as described in note 2, the following post balance sheet event occurred. This has not been accounted for in the results for the year ended 30 September 2005.



On 1 November 2005, CAT announced the acquisition of product candidates GCR-3888 and
GCR-8015 from Genencor, a subsidiary of Danisco, based in Palo Alto, California. CAT has hired ten key former staff of Genencor who will continue to be responsible for the development of these programmes, and has thereby established a CAT operation
in the US for the first time. This will be based in Palo Alto, California.



The
consideration for the acquisition is up to US$16 million, of which US$14 million was paid by CAT on closing, on 4 November 2005. Simultaneously Genencor subscribed US$14 million for 1,170,277 new CAT ordinary shares. CAT may be required to pay
Genencor additional consideration of up to US$2 million, payable in either cash or shares at CATs option contingent on the availability for use in a clinical trial of bulk product material of GCR-8015 produced by Genencor.



27 Litigation



In November 2003 CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in London concerning
the levels of royalties due to CAT under a license agreement between the parties. In December 2004 the High Court ruled in CATS favour. In January 2005 the Judge denied Abbott leave to appeal and further ordered that Abbott contribute to
CATs legal costs. In February 2005 the Court of Appeal granted leave to appeal and a hearing was set for October 2005. Since year end the matter was settled and the hearing did not take place. Financial terms of the settlement are disclosed in
note 2. Under the terms of the Settlement Agreement, Abbott will pay CAT a reduced royalty of 2.688% together with five annual payments of US$9.375 million commencing January 2006 contingent on the continued sale of HUMIRA. $2 million from each of
these payments will be payable to CATs licensors. CAT will also retain royalties previously received from Abbott up to 31 December 2004 net of £7.6 million which will be paid to CATs licensors. In addition, Abbott paid CAT
US$255 million which CAT paid to its licensors the Medical Research Council, Scripps Institute and Stratagene in lieu of their entitlement to royalties on sales of HUMIRA. Abbott will also pay a reduced royalty of 4.75% on any future sales of
ABT-874 (a second drug candidate covered by the licence agreement) from which CAT will pay a portion to the MRC and other licensors pursuant to CATs prior arrangements with them.



CVC, a former shareholder of CAT Limited, has alleged in US Federal Court for the Southern District of New York that CAT Limited was
required, under the terms of a subscription agreement entered into in 1993, to issue anti-dilution shares to CVC, equivalent to 25,790 ordinary shares. The Group believes that CVCs claim is groundless. However, the Group cannot assure
investors as to the outcome of this litigation. If CVC was successful in such proceedings, the Group has been advised that it would also be required to issue ordinary shares to certain other shareholders who received shares in 1993 in similar
circumstances as CVC. The Group estimates that the total number of ordinary shares which would be required to be issued in these circumstances would be approximately 763,000. In connection with these proceedings, both parties filed cross motions for
summary judgement in 1999, which were denied in May 2000. Since then there has been no change in the status of proceedings. The Directors continue to believe that the proceedings have no merit, and accordingly, no provision has been made.



F-24



---

28 Reconciliation to US GAAP



Summary of significant differences between UK GAAP followed by the Group and US GAAPThe Groups consolidated
financial statements have been prepared in accordance with UK GAAP, which differs in certain significant respects from accounting principles generally accepted in the United States of America (US GAAP). The following is a summary of adjustments
to net loss and shareholders funds required when reconciling such amounts recorded in the financial statements to the corresponding amounts in accordance with US GAAP.



Reconciliation of net loss from UK GAAP to US GAAP



|                                                                    |  |       |   |  |           |   |  |           |   |  |           |  
|------------------------------------------------------------------- |  | ----- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                                                                    |  | Notes |   |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Net loss as reported under UK GAAP                                  |  |       |   |  | (1,577    | ) |  | (38,126   | ) |  | (39,191   | )
|Adjustments for:(i)                                                 |  |       |   |  |           |   |  |           |   |  |           |  
|Compensation costs under variable plan accounting for stock options |  | (a    | ) |  |          |   |  |          |   |  | (597      | )
|Acquisition of Aptein Inc.                                          |  | (b    | ) |  | (16       | ) |  | (16       | ) |  | (16       | )
|Revenue recognition                                                 |  | (c    | ) |  | 422       |   |  | 422       |   |  | 422       |  
|Accounting for National Insurance on share options                  |  | (d    | ) |  | 15        |   |  | 2         |   |  | 13        |  
|Employee share options                                              |  | (e    | ) |  | 286       |   |  | 144       |   |  |          |  
|Direct costs                                                        |  | (f    | ) |  | (909      | ) |  | 909       |   |  |          |  
|Foreign exchange difference                                         |  | (g    | ) |  | 241       |   |  | (20       | ) |  | (250      | )
|                                                                    |  |       |   |  |           |   |  |           |   |  |           |  
|Net loss as reported under US GAAP                                  |  |       |   |  | (1,538    | ) |  | (36,685   | ) |  | (39,619   | )
|                                                                    |  |       |   |  |           |   |  |           |   |  |           |  



|(i) | The deferred tax effect of reconciling items has not been reflected as, where a deferred tax asset arises, a valuation allowance would be recognised against that
asset, and where a deferred tax liability arises, the valuation allowance would be reduced accordingly.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Loss per share under US GAAPUnder US GAAP, the Group would compute loss per share under Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings per Share. Under SFAS No. 128, basic net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. The computation of diluted net loss per
share reflects the potential dilution that could occur if dilutive securities and other contracts to issue ordinary shares were exercised or converted into ordinary shares or resulted in the issue of ordinary shares that then shared in the net loss
of the Group. Diluted net loss per ordinary share for CAT is the same as basic net loss per ordinary share as the effects of the Companys potential dilutive securities (employee options) are antidilutive. Under UK GAAP, the basis of
calculation is the same. However, since different net losses are produced under US GAAP and UK GAAP the net loss per share under US GAAP is presented below:



|                                                              |  |            |   |  |            |   |  |            |  
|------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                              |  | 2005       |   |  | 2004       |   |  | 2003       |  
|Basic and diluted net loss per ordinary share (pence)         |  | 3.1        | p |  | 89.8       | p |  | 108.7      | p
|Shares used in computing net loss per ordinary share (number) |  | 49,381,476 |   |  | 40,866,684 |   |  | 36,440,993 |  
|Antidilutive securities, not included above (number)          |  | 679,011    |   |  | 352,176    |   |  | 289,640    |  
|                                                              |  |            |   |  |            |   |  |            |  



Antidilutive securities represent
stock options outstanding which have not been included in the calculation of loss per ordinary share as the impact of including such shares in the calculation of loss per share would be antidilutive.



Reconciliation of shareholders funds from UK GAAP to US GAAP



|                                                                                         |  |       |   |  |           |   |  |           |   |  |           |  
|---------------------------------------------------------------------------------------- |  | ----- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                                                                                         |  | Notes |   |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Shareholders funds as reported under UK GAAP                                            |  |       |   |  | 159,406   |   |  | 85,082    |   |  | 107,742   |  
|Acquisition of Aptein Inc.                                                               |  | (b    | ) |  | 79        |   |  | 95        |   |  | 111       |  
|Revenue recognition                                                                      |  | (c    | ) |  | (1,109    | ) |  | (1,531    | ) |  | (1,953    | )
|Accounting for National Insurance on stock options                                       |  | (d    | ) |  | 111       |   |  | 96        |   |  | 94        |  
|Direct costs                                                                             |  | (f    | ) |  |          |   |  | 909       |   |  |          |  
|Unrealised holding gain on available for sale securities (net of deferred tax provision) |  | (h    | ) |  | 4,616     |   |  | 5,493     |   |  | 106       |  
|                                                                                         |  |       |   |  |           |   |  |           |   |  |           |  
|Shareholders funds as reported under US GAAP                                            |  |       |   |  | 163,103   |   |  | 90,144    |   |  | 106,100   |  
|                                                                                         |  |       |   |  |           |   |  |           |   |  |           |  



F-25



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



28 Reconciliation to US GAAPcont.



Movement in shareholders equity under US GAAP



|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|---------------------------------------------------------------------------------------- |  | --------------- |  | ------------------ |  | ------------------------- |  | ------------------ |  | --------------------- | - |  | ------------------------------ | -
|                                                                                         |  | Number ofshares |  | Share capital£000 |  | Sharepremium account£000 |  | Other reserve£000 |  | Accumulatedloss £000 |   |  | Total shareholdersequity£000 |  
|Balance, 30 September 2003                                                               |  | 38,338,320      |  | 3,834              |  | 230,583                   |  | 13,497             |  | (141,814              | ) |  | 106,100                        |  
|Shares issued                                                                            |  | 2,771,618       |  | 277                |  | 13,946                    |  |                   |  |                      |   |  | 14,223                         |  
|Foreign exchange translation                                                             |  |                |  |                   |  |                          |  |                   |  | 1,119                 |   |  | 1,119                          |  
|Unrealised holding gain on available for sale securities                                 |  |                |  |                   |  |                          |  |                   |  | 5,387                 |   |  | 5,387                          |  
|Net loss for the year under US GAAP                                                      |  |                |  |                   |  |                          |  |                   |  | (36,685               | ) |  | (36,685                        | )
|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|Total comprehensive loss                                                                 |  |                 |  |                    |  |                           |  |                    |  | (30,179               | ) |  |                                |  
|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|Balance, 30 September 2004                                                               |  | 41,109,938      |  | 4,111              |  | 244,529                   |  | 13,497             |  | (171,993              | ) |  | 90,144                         |  
|Shares issued                                                                            |  | 10,529,930      |  | 1,053              |  | 74,975                    |  |                   |  |                      |   |  | 76,028                         |  
|Foreign exchange translation                                                             |  |                |  |                   |  |                          |  |                   |  | (654                  | ) |  | (654                           | )
|Unrealised holding gain on available for sale securities (net of deferred tax provision) |  |                |  |                   |  |                          |  |                   |  | (877                  | ) |  | (877                           | )
|Net loss for the year under US GAAP                                                      |  |                |  |                   |  |                          |  |                   |  | (1,538                | ) |  | (1,538                         | )
|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|Total comprehensive loss                                                                 |  |                 |  |                    |  |                           |  |                    |  | (3,069                | ) |  |                                |  
|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|Balance, 30 September 2005                                                               |  | 51,639,868      |  | 5,164              |  | 319,504                   |  | 13,497             |  | (175,062              | ) |  | 163,103                        |  
|                                                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  



Total accumulated other comprehensive
loss at 30 September 2004 was £8,056,000 (£2,563,000  foreign currency translations; £5,493,000  unrealised gain on available for sale securities) and at 30 September 2005 was £6,525,000
(£1,909,000  foreign currency translations; £4,616,000  unrealised gain on available for sale securities).



The deferred tax effect of reconciling items has not been reflected as, where a deferred tax asset arises, a valuation allowance would be recognised against that asset,
and where a deferred tax liability arises, the valuation allowance would be reduced accordingly.



(a) Compensation costs under variable plan accounting for stock optionsCAT has granted stock options to employees that will vest upon the attainment of certain targets. Under UK GAAP, there is no
accounting for the cost of these grants after the initial grant date. Under US GAAP, Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to Employees, the Company is required to follow variable plan accounting
for these grants. The nature of conditions attached to the stock options awards mean that management cannot make a reasonable estimate of the number of shares that will be eventually issued because the Company cannot control the achievements of the
conditions. As a consequence, the compensation expense for the stock awards is recorded when and only when the options vest when the target is achieved, based on the difference between the exercise price and market value at that date. Compensation
cost recorded for US GAAP purposes in the year ended 30 September 2003 of £597,000 represents the difference between the CAT share price and the exercise price on the US GAAP measurement date for options where the performance
period expired. For UK GAAP purposes, as indicated above, such options were accounted for at the time of the initial grant.



(b) Accounting for the acquisition of Aptein Inc.The Company acquired Aptein Inc. (Aptein) in July 1998 for consideration payable partly on completion, the
remainder being deferred, payable subject to the achievement of certain conditions. Aptein was acquired for its patent portfolio, which comprised its only material asset. The value of purchase consideration therefore had a corresponding impact on
the fair value ascribed to the patents, which are shown in the balance sheet as an intangible asset.



Under UK GAAP, in accordance with FRS 7 Fair Values in Acquisition Accounting, the fair value of the deferred consideration was recognised immediately and the fair value of the contingent
consideration which was payable by the issue of shares in the Company was reported as part of shareholders funds as shares to be issued. The difference between the initial investment of the contingent consideration and the actual
amount was recorded as an adjustment to the purchase price in June 1999, when paid. At this time a corresponding adjustment to the value of the intangible asset was also recognised.



Under US GAAP, in accordance with the accounting standard then in force, contingent consideration is not recorded until such time as
the contingency is resolved. Accordingly, prior to the actual payment of the contingent consideration the recorded value of the intangible asset under US GAAP was lower than under UK GAAP, resulting in a lower amortisation charge. On
payment of the contingent consideration, the amortisation charge under US GAAP increased above UK GAAP as a consequence of the higher unamortised cost.



F-26



---

28 Reconciliation to US GAAPcont.



(c) Revenue recognitionThe nature of the Groups principal revenue streams and
the Groups accounting policy for revenue recognition under UK GAAP are as detailed in note 1.



The treatment of revenues under US GAAP is equivalent to that under UK GAAP except as follows:



Under US GAAP, where licensing arrangements are accompanied by an equity subscription agreement, the series of transactions have been accounted for as a multiple
element arrangement. Accordingly the aggregate consideration has been allocated to the two elements of the arrangement as follows. The fair value of the equity subscription is calculated as being the aggregate number of shares issued at the average
of the opening and closing share prices on the date of issue. Any deficit or premium arising from the aggregate value of the share subscription over the fair value of the shares is recorded as an adjustment to licence revenues. No such reallocation
is made under UK GAAP.



During the years ended 30 September 2005, 2004 and
2003 licence revenues under US GAAP were therefore £422,000 higher due to the recognition of deferred income in the period.



(d) Accounting for National Insurance on share optionsUnder UK GAAP the Company has accounted for a potential liability to National Insurance on employee
share options. The provision has been made systematically by reference to the market value of shares at the balance sheet dates over the period from the date of grant to the end of the relevant performance period and from that date to the date of
actual exercise the provision is being adjusted by reference to changes in market value. The provision at 30 September 2005 was £111,000 and the net charge for the year then ended amounted to £15,000.



Under US GAAP, Emerging Issues Task Force (EITF) Issue 00-16 Recognition and
Measurement of Employer Payroll Taxes on Employee Stock-Based Compensation, no liability to National Insurance is recognised until such time as the share option is exercised since this is when the liability crystallises. This adjustment
removes the timing difference relating to the expense in the income statement.



(e) Employee share optionsCAT has granted stock options to employees that will vest upon the attainment of certain performance targets. Awards made through the Executive Incentive Plan have been granted at less than market value.



Under UK GAAP, in accordance with UITF 17 (revised 2000), Employee
Share Schemes, the Company recognises a charge that reflects the intrinsic value of these awards made. The charge is recognised in the profit and loss account over the performance period.



Under US GAAP, APB Opinion 25, Accounting for Stock Issued to Employees,
(see note (a) for further details), the Company does not recognise a charge in its profit and loss account until the awards have vested as the performance targets are outside the control of the Group.



(f) Direct costsThe Company receives royalties on product sales, and under certain
licences and collaboration agreements royalties are then payable to the Medical Research Council and other licensors. In respect of product sales of HUMIRA, the amounts payable to the Medical Research Council and other licensors were dependent on
the outcome of the legal proceedings between CAT and Abbott.



Under
UK GAAP, accounting for contingencies is governed by FRS 12, Provisions, Contingent Liabilities and Contingent Assets. FRS 12 requires the recognition of a provision when an entity has a present obligation as a result of a past
event; it is probable that a transfer of economic benefits will be required to settle the obligation; and a reliable estimate can be made of the obligation. The term probable is defined as more likely than not, which
generally denotes any statistical chance greater than 50%. FRS 12 requires that, where there is a continuous range of possible outcomes, and each point in that range is as likely as any other, the mid-point of that range is used in measuring the
provision.



The Company accounted for the royalties potentially payable to the
Medical Research Council by applying the principles of FRS 12, and recognised a provision using the mid-point of the expected range of possible outcomes in the 2004 financial year.



Under US GAAP, accounting for contingencies is governed by Financial Accounting Standards Board (FASB) Statement No. 5,
Accounting for Contingencies, and Interpretation No. 14 (FIN 14), Reasonable Estimation of the Amount of a Loss. Similar to UK GAAP, SFAS 5 requires the recognition of a provision when it is probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. However, the term probable as used in US GAAP generally denotes a higher probability than under UK GAAP. Furthermore, where there is a range of
possible outcomes, and no amount within the range appears at the time to be a better estimate than any other amount, the minimum amount in the range should be accrued.



Accordingly, under US GAAP, the Company did not recognise a provision in the 2004 financial year as the obligation was not probable and
hence, an additional liability was not incurred in respect of the contingent element of royalties discussed above.



Subsequent to the Settlement Agreement reached with Abbott (see note 2 for further details) final amounts due to CATs licensors have been agreed between the
parties. The reconciling item recorded in 2004 has therefore been reversed in 2005.



(g) Foreign currency translationUnder UK GAAP, the results of overseas subsidiaries are translated at the closing exchange rate. Under US GAAP, the average exchange rate for the year is used.



F-27



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



28 Reconciliation to US GAAP cont.



(h) Publicly traded investmentsIn August 2003, CAT received 588,160 newly issued shares from MorphoSys under
the terms of the agreement, dated 23 December 2002. Under UK GAAP the value of the majority of these shares (to which CAT is entitled) has been classified as a fixed asset investment, the remainder, being the amount due to The Scripps
Research Institute, Stratagene and the Medical Research Council, as a current asset investment, at the value of the shares on the date they were received, less any provision for impairment. CAT holds no other publicly traded investments.



Under US GAAP, SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities, investments are classified as trading, available for sale or held to maturity. Investments, such as the MorphoSys shares to which CAT is entitled, accounted for as trading and available for sale are marked to market if there is a
readily determinable market value. The unrealised gain or loss on the securities is recorded through income for trading securities and as a component of other comprehensive loss for available for sale securities. Held to maturity securities are
recorded at historical cost. Any other than temporary declines in market value are recorded in earnings.



A deferred tax liability has been recognised, and offset against, the unrealised holding gain on available for sale securities. Refer to note (i) below for further details on the basis of recognition of deferred
tax liabilities and assets.



(i) TaxationUnder UK GAAP, deferred
tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law.
Net deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.



Under US GAAP, deferred tax is recognised in full in respect of temporary differences between the reported carrying amount of an asset or liability and its
corresponding tax basis. Deferred tax assets are also recognised in full subject to a valuation allowance to reduce the amount of such assets to that which is more likely than not to be realised.



As at 30 September 2005, 2004 and 2003, CAT had approximately £133 million,
£133 million and £100 million respectively of cumulative tax losses. These losses represent a deferred tax asset for accounting purposes. In accordance with both UK GAAP and US GAAP, no asset has been recognised in respect of
these tax losses due to the uncertainty as to whether these losses can be offset against future profits.



Consolidated statements of cash flowsThe consolidated statements of cash flows prepared under UK GAAP presents substantially the same information as that required under US GAAP by SFAS 95
Statement of Cash Flows. These standards differ however with regard to classification of items within the statements and the definition of cash and cash equivalents.



Under UK GAAP, cash comprises cash in hand, deposits repayable on demand and bank overdrafts. Deposits are repayable on demand if they
can be withdrawn at any time without notice and without penalty or if a maturity or period of notice of not more than 24 hours or one working day has been agreed. Under US GAAP, cash equivalents are short term highly liquid investments,
generally with original maturities of three months or less, that are readily convertible to known amounts of cash and present insignificant risk of changes in value because of changes in interest rates.



Under UK GAAP, cash flows are presented separately for operating activities, returns on
investments and servicing of finance, taxation, capital expenditure and financial investment, management of liquid resources and financing activities. US GAAP requires only three categories of cash flow activity to be reported: operating,
investing and financing. Cash flows from taxation and returns on investments and servicing of finance under UK GAAP would, with the exception of dividends paid, be shown under operating activities under US GAAP. The payment of dividends and the
payment to acquire own shares (treasury stock) would be included as a financing activity under US GAAP. Management of liquid resources under UK GAAP would be included as cash and cash equivalents. Under US GAAP management of liquid
resources would be included as an investing activity to the extent that such amounts have an original maturity of more than three months and are convertible into known amounts of cash. Under UK GAAP, a finance lease entered into in connection
with a sales leaseback is reflected in financing activities. Under US GAAP, the sale is reflected in investing activities whereas the leaseback is not reflected as it is a non-cash activity. Summary statements of cash flow presented under
US GAAP using UK GAAP measurement principles are given below:



|                                                              |  |           |   |  |                     |   |  |                     |  
|------------------------------------------------------------- |  | --------- | - |  | ------------------- | - |  | ------------------- | -
|                                                              |  | 2005£000 |   |  | 2004 Restated £000 |   |  | 2003 Restated £000 |  
|Net cash provided by/(used) in operating activities           |  | 5,353     |   |  | (26,546             | ) |  | (24,416             | )
|Net cash provided (used in)/by investing activities           |  | (31,891   | ) |  | 18,977              |   |  | 21,376              |  
|Net cash provided by financing activities                     |  | 75,653    |   |  | 13,875              |   |  | 10,341              |  
|Effects of exchange rate changes on cash and cash equivalents |  | 10        |   |  | (38                 | ) |  | (35                 | )
|                                                              |  |           |   |  |                     |   |  |                     |  
|Increase/(decrease) in cash and cash equivalents              |  | 49,125    |   |  | 6,268               |   |  | 7,266               |  
|Beginning cash and cash equivalents(i)                        |  | 27,243    |   |  | 20,975              |   |  | 13,709              |  
|                                                              |  |           |   |  |                     |   |  |                     |  
|Ending cash and cash equivalents                              |  | 76,368    |   |  | 27,243              |   |  | 20,975              |  
|                                                              |  |           |   |  |                     |   |  |                     |  



|(i) | The US GAAP comparatives have been restated as a result of re-aligning the
classification between cash and cash equivalents and short term investments in 2005. This treatment is now in line with the treatment which will be adopted under IFRS. See below for further details.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-28



---

28 Reconciliation to US GAAP cont.



A reconciliation between the consolidated cash flow statement prepared in accordance with UK GAAP and
US GAAP using UK GAAP measurement principles is presented below for the years ended 30 September:



|                                                                  |  |           |   |  |                     |   |  |                     |  
|----------------------------------------------------------------- |  | --------- | - |  | ------------------- | - |  | ------------------- | -
|                                                                  |  | 2005£000 |   |  | 2004 Restated £000 |   |  | 2003 Restated £000 |  
|Operating activities:                                             |  |           |   |  |                     |   |  |                     |  
|Net cash used in operating activities under UK GAAP               |  | (161      | ) |  | (31,067             | ) |  | (35,819             | )
|Returns on investments and servicing of finance                   |  | 6,223     |   |  | 4,217               |   |  | 5,049               |  
|Taxation                                                          |  |          |   |  | (64                 | ) |  | 5,210               |  
|(Decrease)/increase in bank overdrafts                            |  | (709      | ) |  | 368                 |   |  | 1,144               |  
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Net cash provided by/(used in) operating activities under US GAAP |  | 5,353     |   |  | (26,546             | ) |  | (24,416             | )
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Investing activities:                                             |  |           |   |  |                     |   |  |                     |  
|Capital expenditure and financial investment under UK GAAP        |  | 108       |   |  | (1,026              | ) |  | (8,082              | )
|Sale of tangible fixed assets                                     |  |          |   |  |                    |   |  | 1,389               |  
|Management of liquid resources under UK GAAP                      |  | (63,521   | ) |  | 15,357              |   |  | 18,778              |  
|Cash equivalents with a maturity of less than three months        |  | 31,522    |   |  | 4,646               |   |  | 9,291               |  
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Net cash (used in)/provided by investing activities               |  | (31,891   | ) |  | 18,977              |   |  | 21,376              |  
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Financing activities:                                             |  |           |   |  |                     |   |  |                     |  
|Financing activities under UK GAAP                                |  | 75,653    |   |  | 13,875              |   |  | 11,730              |  
|Proceeds from new finance lease commitments                       |  |          |   |  |                    |   |  | (1,389              | )
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Net cash provided by financing activities under US GAAP           |  | 75,653    |   |  | 13,875              |   |  | 10,341              |  
|                                                                  |  |           |   |  |                     |   |  |                     |  
|Movement in cash:                                                 |  |           |   |  |                     |   |  |                     |  
|Increase/(decrease) in cash under UK GAAP                         |  | 18,302    |   |  | 1,292               |   |  | (3,134              | )
|Cash equivalents with a maturity of less than three months        |  | 31,522    |   |  | 4,646               |   |  | 9,291               |  
|Effects of exchange rate changes on cash and cash equivalents     |  | 10        |   |  | (38                 | ) |  | (35                 | )
|(Decrease)/increase in bank overdrafts                            |  | (709      | ) |  | 368                 |   |  | 1,144               |  
|                                                                  |  |           |   |  |                     |   |  |                     |  
|                                                                  |  | 49,125    |   |  | 6,268               |   |  | 7,266               |  
|                                                                  |  |           |   |  |                     |   |  |                     |  



Restatement



|                                                                                     |  |            |   |  |           
|------------------------------------------------------------------------------------ |  | ---------- | - |  | ----------
|                                                                                     |  | 2004 £000 |   |  | 2003 £000
|Investing activities:                                                                |  |            |   |  |           
|Cash equivalents with a maturity of less than three months                           |  | (10,430    | ) |  | 7,491     
|As stated previously                                                                 |  |            |   |  |           
|Restated                                                                             |  | 4,646      |   |  | 9,291     
|                                                                                     |  |            |   |  |           
|Increase in net cash provided by investing activities as a result of the restatement |  | 15,076     |   |  | 1,800     
|                                                                                     |  |            |   |  |           
|Movement in cash:                                                                    |  |            |   |  |           
|As stated previously                                                                 |  | (8,808     | ) |  | 5,466     
|Restated                                                                             |  | 6,268      |   |  | 7,266     
|                                                                                     |  |            |   |  |           
|Increase in cash as a result of the restatement                                      |  | 15,076     |   |  | 1,800     
|                                                                                     |  |            |   |  |           
|Ending cash and cash equivalents:                                                    |  |            |   |  |           
|As stated previously                                                                 |  | 65,237     |   |  | 74,045    
|Restated                                                                             |  | 27,243     |   |  | 20,975    
|                                                                                     |  |            |   |  |           
|Decrease in cash and cash equivalents as a result of the restatement                 |  | 37,994     |   |  | 53,070    
|                                                                                     |  |            |   |  |           



Accounting for share-based
compensationAs permitted under SFAS 123, Accounting for Stock-Based Compensation, in accounting for options granted under its share option schemes the Group has adopted the disclosure provisions of SFAS 123, but opted to remain
under the expense recognition provisions of APB Opinion 25, Accounting for Stock Issued to Employees. Accordingly, for the years ended 30 September 2005 and 2004 compensation expenses of nil, and for the year ended 30 September
2003 compensation expenses of £597,000 were recognised for options granted under these schemes. Had compensation expense for options granted under these schemes been determined based on fair value at the grant dates in accordance with SFAS
123, the Companys charge to income for the years ended 30 September 2005, 2004 and 2003 would have been £1,314,000, £1,989,000 and £2,326,000 respectively. In calculating these amounts, the fair value of the options has
been amortised over their respective vesting periods. Net loss and loss per share under US GAAP would therefore have been reduced to the pro forma amounts shown below:



|                      |  |                                                                                                                                      |   |           |         |   |           |         |   |           |  
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ | - | --------- | ------- | - | --------- | ------- | - | --------- | -
|                      |  |                                                                                                                                      |   | 2005£000 |         |   | 2004£000 |         |   | 2003£000 |  
|Net loss, as reported |  | (1,538                                                                                                                               | ) |           | (36,685 | ) |           | (39,619 | )
|Add:                  |  | Stock-based employee compensation expense included in reported net loss                                                              |   |          |         |   |          |         |   | 597       |  
|Deduct:               |  | Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects |   | (1,314    | )       |   | (1,989    | )       |   | (2,326    | )
|                      |  |                                                                                                                                      |   |           |         |   |           |         |   |           |  
|Pro forma net loss    |  | (2,852                                                                                                                               | ) |           | (38,674 | ) |           | (41,348 | )
|                      |  |                                                                                                                                      |   |           |         |   |           |         |   |           |  
|Loss per share        |  |                                                                                                                                      |   |           |         |   |           |         |  
|Basic  as reported   |  | 3.1                                                                                                                                  | p |           | 89.8    | p |           | 108.7   | p
|Basic  pro forma     |  | 5.8                                                                                                                                  | p |           | 94.6    | p |           | 113.5   | p



F-29



---

ACCOUNTS AND NOTES | NOTES TO THE FINANCIAL STATEMENTS CONT.



28 Reconciliation to US GAAPcont.



The weighted average fair value of options was estimated using the Black-Scholes stock option pricing model using the
following weighted average assumptions:



|                  |  |                |   |  |                                       |   |  |                        |   |  |                   
|----------------- |  | -------------- | - |  | ------------------------------------- | - |  | ---------------------- | - |  | ------------------
|Year ending       |  | Dividend yield |   |  | Annual standarddeviation (volatility) |   |  | Risk-freeinterest rate |   |  | Expected lifeYears
|30 September 2005 |  | 0              | % |  | 55                                    | % |  | 4.5                    | % |  | 5.4               
|30 September 2004 |  | 0              | % |  | 65                                    | % |  | 4.9                    | % |  | 5.4               
|30 September 2003 |  | 0              | % |  | 65                                    | % |  | 4.2                    | % |  | 5.5               



For the purposes of the following
tabulations, Weighted Average Exercise Price is abbreviated to WAEP, Weighted Average Fair Value to WAFV and Weighted Average Remaining Contractual Life to WARCL.



The movement in options outstanding during the three years ended 30 September 2005, 2004
and 2003, is summarised in the following table:



|                               |  |           |   |      |       |      |           |   |  |       |  |           |   |  |      
|------------------------------ |  | --------- | - | ---- | ----- | ---- | --------- | - |  | ----- |  | --------- | - |  | -----
|                               |  | 2005      |   | 2004 |       | 2003
|                               |  | Number    |   |      | WAEP£ |      | Number    |   |  | WAEP£ |  | Number    |   |  | WAEP£
|Outstanding at 1 October       |  | 1,960,116 |   |      | 6.30  |      | 1,726,607 |   |  | 6.94  |  | 1,501,807 |   |  | 6.97 
|Granted during the year        |  | 367,632   |   |      | 4.72  |      | 491,495   |   |  | 3.78  |  | 522,762   |   |  | 4.88 
|Exercised during the year      |  | (189,551  | ) |      | 3.50  |      | (129,327  | ) |  | 2.89  |  | (188,447  | ) |  | 2.77 
|Forfeited during the year      |  | (154,963  | ) |      | 17.53 |      | (128,659  | ) |  | 8.72  |  | (35,360   | ) |  | 8.43 
|Expired during the year        |  |          |   |      |      |      |          |   |  |      |  | (74,155   | ) |  | 2.87 
|                               |  |           |   |      |       |      |           |   |  |       |  |           |   |  |      
|Outstanding at 30 September(i) |  | 1,983,234 |   |      | 5.39  |      | 1,960,116 |   |  | 6.30  |  | 1,726,607 |   |  | 6.94 
|                               |  |           |   |      |       |      |           |   |  |       |  |           |   |  |      
|Exercisable at 30 September    |  | 724,269   |   |      | 6.97  |      | 761,987   |   |  | 6.10  |  | 862,977   |   |  | 3.42 
|                               |  |           |   |      |       |      |           |   |  |       |  |           |   |  |      



The following table summarises the
value of options granted during the years ending 30 September 2005, 2004 and 2003.



|                                        |  |       |  |       |  |       |  |       |  |       |  |      
|--------------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|                                        |  | 2005  |  | 2004  |  | 2003 
|Exercise price relative to market price |  | WAFV£ |  | WAEP£ |  | WAFV£ |  | WAEP£ |  | WAFV£ |  | WAEP£
|Equals                                  |  |      |  |      |  |      |  |      |  |      |  |     
|Exceeds                                 |  | 3.79  |  | 7.22  |  | 2.79  |  | 4.62  |  |      |  |     
|Is less than                            |  | 3.89  |  | 4.68  |  | 4.65  |  | 0.10  |  | 3.10  |  | 4.88 
|                                        |  |       |  |       |  |       |  |       |  |       |  |      
|Total                                   |  | 3.89  |  | 4.72  |  | 3.14  |  | 3.78  |  | 3.10  |  | 4.88 
|                                        |  |       |  |       |  |       |  |       |  |       |  |      



The following tables summarise
information about the stock options outstanding at 30 September 2005, 2004 and 2003.



|                           |  |                                     |  |                                     |  |            |  |         |  |      
|-------------------------- |  | ----------------------------------- |  | ----------------------------------- |  | ---------- |  | ------- |  | -----
|                           |  | Outstanding as at 30 September 2005 |  | Exercisable as at 30 September 2005
|Range of exercise prices £ |  | Number                              |  | WAEP£                               |  | WARCLYears |  | Number  |  | WAEP£
|0  0.99                   |  | 144,662                             |  | 0.10                                |  | 4.89       |  |        |  |     
|1  2.99                   |  | 308,664                             |  | 2.65                                |  | 1.33       |  | 308,664 |  | 2.65 
|3  4.99                   |  | 546,463                             |  | 4.28                                |  | 6.86       |  | 76,500  |  | 3.16 
|5  9.99                   |  | 758,240                             |  | 5.42                                |  | 7.36       |  | 113,900 |  | 5.00 
|10  19.99                 |  | 214,295                             |  | 14.41                               |  | 6.37       |  | 214,295 |  | 14.41
|20  31                    |  | 10,910                              |  | 30.32                               |  | 2.62       |  | 10,910  |  | 30.32
|                           |  |                                     |  |                                     |  |            |  |         |  |      
|Total                      |  | 1,983,234                           |  | 5.39                                |  | 5.97       |  | 724,269 |  | 6.97 
|                           |  |                                     |  |                                     |  |            |  |         |  |      



|(i) | The stock options outstanding at 30 September 2005, 2004 and 2003 shown above do not
include the total potential number of awards that could be granted under the matching element of the Executive Incentive Plan. The total number of awards that could be granted under this scheme are detailed in note 18. The applicable Performance
Condition is described under the heading Executive Incentive Plan on page 59 of the Remuneration Report. All other options granted under the terms of the CSOP, detailed in note 18, have been included in the Black-Scholes calculation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-30



---

28 Reconciliation to US GAAP cont.



|                           |  |                                     |     |                                     |       |  |            |  |         |  |      
|-------------------------- |  | ----------------------------------- | --- | ----------------------------------- | ----- |  | ---------- |  | ------- |  | -----
|                           |  | Outstanding as at 30 September 2004 |     | Exercisable as at 30 September 2004
|Range of exercise prices £ |  | Number                              |     |                                     | WAEP£ |  | WARCLYears |  | Number  |  | WAEP£
|0  0.99                   |  | 91,253                              |     |                                     | 0.10  |  | 5.42       |  |        |  |     
|1  2.99                   |  | 421,763                             |     |                                     | 2.65  |  | 2.45       |  | 421,763 |  | 2.65 
|3  4.99                   |  | 572,548                             |     |                                     | 4.28  |  | 7.92       |  | 76,500  |  | 3.16 
|5  9.99                   |  | 551,516                             |     |                                     | 5.12  |  | 6.42       |  | 183,775 |  | 5.02 
|10  19.99                 |  | 243,087                             |     |                                     | 14.71 |  | 7.35       |  |        |  |     
|20  31                    |  | 79,949                              |     |                                     | 29.61 |  | 4.31       |  | 79,949  |  | 29.61
|                           |  |                                     |     |                                     |       |  |            |  |         |  |      
|Total                      |  | 1,960,116                           | (i) |                                     | 6.30  |  | 5.99       |  | 761,987 |  | 6.10 
|                           |  |                                     |     |                                     |       |  |            |  |         |  |      



|                           |  |                                     |  |                                     |  |            |  |         |  |      
|-------------------------- |  | ----------------------------------- |  | ----------------------------------- |  | ---------- |  | ------- |  | -----
|                           |  | Outstanding as at 30 September 2003 |  | Exercisable as at 30 September 2003
|Range of exercise prices £ |  | Number                              |  | WAEP£                               |  | WARCLYears |  | Number  |  | WAEP£
|0  0.99                   |  |                                    |  |                                    |  |           |  |        |  |     
|1  2.99                   |  | 547,160                             |  | 2.66                                |  | 3.41       |  | 547,160 |  | 2.66 
|3  4.99                   |  | 322,063                             |  | 4.25                                |  | 7.93       |  | 77,929  |  | 3.16 
|5  9.99                   |  | 502,317                             |  | 5.08                                |  | 6.12       |  | 234,760 |  | 5.02 
|10  19.99                 |  | 264,326                             |  | 14.88                               |  | 8.34       |  |        |  |     
|20  31                    |  | 90,741                              |  | 29.45                               |  | 5.32       |  | 3,128   |  | 23.03
|                           |  |                                     |  |                                     |  |            |  |         |  |      
|Total                      |  | 1,726,607                           |  | 6.94                                |  | 5.90       |  | 862,977 |  | 3.42 
|                           |  |                                     |  |                                     |  |            |  |         |  |      



Deferred taxA reconciliation
of the provision for income taxes with the amount computed by applying the statutory income tax rate (30%) to loss before taxation, using UK GAAP measurement principles, is as follows:



|                                                         |  |            |   |  |            |   |  |            |  
|-------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                         |  | 2005 £000 |   |  | 2004 £000 |   |  | 2003 £000 |  
|Income tax expense computed at statutory income tax rate |  | (159       | ) |  | (11,418    | ) |  | (12,530    | )
|Permanent differences                                    |  | 751        |   |  | 806        |   |  | (438       | )
|Research and development tax credit claimed              |  |           |   |  |           |   |  | (3,148     | )
|Prior year adjustment to UK losses brought forward       |  | (69        | ) |  | 45         |   |  | 6,056      |  
|Prior year adjustment to US losses brought forward       |  |           |   |  | 1,242      |   |  | 1,556      |  
|Change in valuation allowance                            |  | 524        |   |  | 9,325      |   |  | 5,356      |  
|Foreign tax suffered                                     |  |           |   |  | 64         |   |  |           |  
|                                                         |  |            |   |  |            |   |  |            |  
|Charge/(credit) for income taxes                         |  | 1,047      |   |  | 64         |   |  | (3,148     | )
|                                                         |  |            |   |  |            |   |  |            |  



Under UK GAAP, withholding taxes
are included within the corporation tax charge for the year. Under US GAAP, the withholding tax is reclassified and presented as a component of general and administrative expenses.



F-31



---

ACCOUNTS AND NOTES |NOTES TO THE FINANCIAL STATEMENTS CONT.



28 Reconciliation to US GAAPcont.



Net deferred taxes are analysed as follows:



|                                                    |  |           |   |  |           |   |  |           |  
|--------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                    |  | 2005£000 |   |  | 2004£000 |   |  | 2003£000 |  
|Deferred tax assets:                                |  |           |   |  |           |   |  |           |  
|Losses carried forward                              |  | 39,450    |   |  | 39,272    |   |  | 30,154    |  
|Other short term timing differences                 |  |          |   |  |          |   |  |          |  
|                                                    |  |           |   |  |           |   |  |           |  
|                                                    |  | 39,450    |   |  | 39,272    |   |  | 30,154    |  
|Valuation allowance                                 |  | (37,650   | ) |  | (37,125   | ) |  | (27,800   | )
|                                                    |  |           |   |  |           |   |  |           |  
|Net deferred tax asset                              |  | 1,800     |   |  | 2,147     |   |  | 2,354     |  
|Deferred tax liabilities:                           |  |           |   |  |           |   |  |           |  
|Excess of book value over tax value of fixed assets |  | (1,976    | ) |  | (2,315    | ) |  | (2,354    | )
|Other short term timing differences                 |  | 176       |   |  | 168       |   |  |          |  
|Unrealised gain on available for sale securities    |  | 2,178     |   |  |          |   |  |          |  
|                                                    |  |           |   |  |           |   |  |           |  
|Net deferred taxes - Liability                      |  | 2,178     |   |  |          |   |  |          |  
|                                                    |  |           |   |  |           |   |  |           |  



As discussed in note 8, the Group
recorded a research and development tax credit in the 2003 financial year. This credit resulted in a surrender of certain losses for which a valuation allowance was recorded in the prior year. The change in valuation allowance above includes the
establishment of the valuation allowance for the current year and the decrease in the valuation allowance resulting from the surrender of prior year losses.



As at 30 September 2005 the Group had approximately £133 million of tax losses available to carry forward indefinitely against future trading profits.



Aptein, the Groups only overseas subsidiary, has no distributable
earnings and therefore no provision has been made for the deferred tax liability in respect of earnings to be distributed from Aptein to the United Kingdom.



There are no deferred taxes recorded in the current year as there are net operating losses that fully offset the deferred tax liability.



Accounting pronouncementsIn December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS 123 (revised 2004), Share-based payment, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of
the award. The revised statement eliminates the alternative of using APB Opinion 25 intrinsic value method of accounting that was provided for in SFAS 123 as originally issued. SFAS 123 (revised 2004) is effective no later than the beginning of the
first fiscal year beginning after 15 December 2005. CAT has not evaluated what the effect would be on the CATs financial position.



In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets  an amendment of APB Opinion No. 29. APB 29 requires that nonmonetary
exchanges of assets be recorded at fair value with an exception for exchanges of similar productive assets, which can be recorded on a carryover basis. SFAS 153 eliminates the current exception and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for
nonmonetary asset exchanges that take place in fiscal periods beginning after 15 June 2005, however earlier application is permitted. It is uncertain what effect, if any, this statement will have on CAT, adoption is on a prospective basis.



In May 2005, the FASB issued SFAS 154, Accounting changes and error
corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is impracticable
to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective in fiscal years beginning after 15 December 2005, however, earlier application is permitted. Management does not expect the impact of
this new statement to be material to CATs financial position, adoption is on a prospective basis.



F-32



---

FIVE YEAR SUMMARY



Our audited historical consolidated financial statements are presented in British pounds Sterling and are prepared in accordance with UK GAAP. UK GAAP differs in
certain respects from US GAAP. A reconciliation of certain amounts from UK GAAP to US GAAP, as well as a summary of principal differences between UK GAAP and US GAAP applicable to us, are presented in note 28 to our audited
historical consolidated financial statements included elsewhere in this Annual Report.



The following summary financial data should be read in conjunction with the Operational Review and Financial Review and our historical consolidated financial statements, including the notes thereto. The summary
statement of income data set forth below for the fiscal years ended 30 September 2005, 2004, 2003, 2002 and 2001, and the consolidated balance sheet data at 28 September 2005, 2004, 2003, 2002 and 2001 have been derived from our audited
historical consolidated financial statements, but do not, however, constitute our statutory accounts within the meaning of Section 240 of the Companies Act 1985 in the United Kingdom.



|                                                 |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|------------------------------------------------ |  | ---------- | ---- |  | ---------- | -- |  | ---------- | -- |  | ---------- | -- |  | ---------- | --
|Income statement                                 |  | 2005 £000 |      |  | 2004 £000 |    |  | 2003 £000 |    |  | 2002 £000 |    |  | 2001 £000 |   
|UK GAAP                                          |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|Turnover                                         |  | 49,242     | (ii) |  | 15,925     |    |  | 8,743      |    |  | 9,471      |    |  | 7,121      |   
|Gross profit                                     |  | 38,739     |      |  | 12,902     |    |  | 8,053      |    |  | 9,391      |    |  | 6,770      |   
|Research and development expenses                |  | 39,170     |      |  | 44,125     |    |  | 44,981     |    |  | 31,307     |    |  | 21,393     |   
|General and administration expenses              |  | 8,834      |      |  | 10,969     |    |  | 9,196      |    |  | 16,234     |    |  | 6,443      |   
|Operating loss                                   |  | (9,265     | )    |  | (42,192    | )  |  | (46,124    | )  |  | (38,150    | )  |  | (21,066    | ) 
|Net loss on ordinary activities before taxation  |  | (530       | )    |  | (38,062    | )  |  | (41,764    | )  |  | (31,764    | )  |  | (11,771    | ) 
|Taxation on loss on ordinary activities          |  | (1,047     | )    |  | (64        | )  |  | 2,573      |    |  | 3,557      |    |  |           |   
|Net loss                                         |  | (1,577     | )    |  | (38,126    | )  |  | (39,191    | )  |  | (28,207    | )  |  | (11,771    | ) 
|Net loss per share (basic and diluted)(i)(pence) |  | (3.2       | p)   |  | (93.3      | p) |  | (107.5     | p) |  | (78.7      | p) |  | (33.3      | p)
|                                                 |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|US GAAP                                          |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|Turnover                                         |  | 49,664     |      |  | 16,347     |    |  | 9,165      |    |  | 9,893      |    |  | 7,543      |   
|Operating loss                                   |  | (9,226     | )    |  | (40,751    | )  |  | (46,552    | )  |  | (41,234    | )  |  | (28,860    | ) 
|Net loss                                         |  | (1,538     | )    |  | (36,685    | )  |  | (39,619    | )  |  | (31,291    | )  |  | (19,565    | ) 
|Basic and diluted net loss per share(i)(pence)   |  | (3.1       | p)   |  | (89.8      | p) |  | (108.7     | p) |  | (87.3      | p) |  | (55.4      | p)
|                                                 |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|Balance sheet                                    |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|UK GAAP                                          |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|Cash and investments in liquid resources         |  | 176,361    |      |  | 95,237     |    |  | 108,972    |    |  | 129,775    |    |  | 156,813    |   
|Total assets                                     |  | 207,825    |      |  | 121,335    |    |  | 138,551    |    |  | 156,908    |    |  | 172,470    |   
|Current liabilities                              |  | (29,804    | )    |  | (15,603    | )  |  | (12,657    | )  |  | (12,563    | )  |  | (8,335     | ) 
|Long term liabilities                            |  | (18,615    | )    |  | (20,650    | )  |  | (18,152    | )  |  | (8,580     | )  |  | (8,085     | ) 
|Net assets                                       |  | 159,406    |      |  | 85,082     |    |  | 107,742    |    |  | 135,765    |    |  | 156,050    |   
|Shareholders funds  all equity                 |  | 159,406    |      |  | 85,082     |    |  | 107,742    |    |  | 135,765    |    |  | 156,050    |   
|Number of ordinary shares outstanding            |  | 51,639,868 |      |  | 41,109,938 |    |  | 38,338,320 |    |  | 36,214,349 |    |  | 35,455,865 |   
|                                                 |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|US GAAP                                          |  |            |      |  |            |    |  |            |    |  |            |    |  |            |   
|Cash and investments in liquid resources         |  | 176,361    |      |  | 95,237     |    |  | 108,972    |    |  | 129,775    |    |  | 156,813    |   
|Total assets                                     |  | 214,698    |      |  | 126,923    |    |  | 138,768    |    |  | 157,035    |    |  | 172,613    |   
|Current liabilities                              |  | (32,293    | )    |  | (15,020    | )  |  | (12,985    | )  |  | (12,904    | )  |  | (8,428     | ) 
|Long term liabilities                            |  | (19,302    | )    |  | (21,759    | )  |  | (19,683    | )  |  | (10,533    | )  |  | (10,460    | ) 
|Net assets                                       |  | 163,103    |      |  | 90,144     |    |  | 106,100    |    |  | 133,598    |    |  | 153,725    |   
|Shareholders funds  all equity                 |  | 163,103    |      |  | 90,144     |    |  | 106,100    |    |  | 133,598    |    |  | 153,725    |   



|(i) | Under UK and US GAAP, potentially dilutive issuable shares are only included in the calculation of fully diluted earnings per share if their issue would
decrease net profit per share or increase net loss per share. Since the Group has reported losses, its basic and fully diluted loss per share are therefore equal.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | Restated. See Note 2.
|---- | ---------------------



F-33



---

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it
has duly caused and authorized the undersigned to sign this registration statement on its behalf.



CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLCBy:

/s/ John AstonName:

John AstonTitle:

Chief Financial OfficerDate:

March 3, 2006




S-1



---

INDEX TO EXHIBITS



|        |  |                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                
|1.1     |  | Memorandum of Association*                                                                                                                                                                 
|        | 
|1.2     |  | New Articles of Association                                                                                                                                                                
|        | 
|2.1     |  | Specimen of ordinary share certificate**                                                                                                                                                   
|        | 
|2.2     |  | Form of Deposit Agreement**                                                                                                                                                                
|        | 
|2.3     |  | Form of ADR**                                                                                                                                                                              
|        | 
|+4.1    |  | License Agreement, dated as of January 7, 1997, between CAT and the Medical Research Council**                                                                                             
|        | 
|+4.2    |  | Collaboration and Licence Agreement, dated November 21, 2004, by and between AstraZeneca UK Limited, Cambridge Antibody Technology Limited and Cambridge Antibody Technology Group
PLC*****
|        | 
|4.3     |  | Lease Agreement, relating to the lease of a building in South Cambridgeshire, England**                                                                                                    
|        | 
|4.4     |  | Lease Agreement, relating to facilities to be constructed in the future**                                                                                                                  
|        | 
|+4.5    |  | Development and License agreement, dated April 1, 1995 by and between Cambridge Antibody Technology Limited and Knoll AG**                                                                 
|        | 
|+4.6    |  | Development and License Agreement, dated February 28, 1999, between Knoll AG and Cambridge Antibody Technology Limited**                                                                   
|        | 
|+4.7    |  | Amended and Restated License and Collaboration Agreement, dated as of September 19, 2003, between Cambridge Antibody Technology Limited and Genzyme Corporation****                        
|        | 
|+4.8    |  | Collaboration Agreement, dated August 9, 1999, between Human Genome Sciences, Inc. and Cambridge Antibody Technology Limited**                                                             
|        | 
|+4.9    |  | Antibody License Agreement, dated February 29, 2000, between Human Genome Sciences, Inc. and Cambridge Antibody Technology Limited**                                                       
|        | 
|+4.10   |  | Research Collaboration and Service Agreement, dated March 29, 1999, by and among Genetics Institute, Inc. and Cambridge Antibody Technology Limited**                                      
|        | 
|4.11    |  | Not used.                                                                                                                                                                                  
|        | 
|4.12    |  | Not used.                                                                                                                                                                                  
|        | 
|4.13    |  | Form of Non-executive Director Service Agreement**                                                                                                                                         



---

|      |  |                                                                                                                                                                                                                                                                   
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|+4.14 |  | Research, Development and Commercialization Agreement, dated January 24, 2001, between Elan Pharma International Limited and Cambridge Antibody Technology Limited***                                                                                             
|      | 
|+4.15 |  | Commercial Manufacturing Services Agreement, dated November 23, 2001, between Cambridge Antibody Technology Limited and Lonza Biologics PLC*                                                                                                                      
|      | 
|+4.16 |  | Antibody Library License Agreement, dated September 30, 2002, between Cambridge Antibody Technology Limited and Chugai Pharmaceutical Co., Ltd.****                                                                                                               
|      | 
|4.17  |  | The Cambridge Antibody Technology Group plc Executive Incentive Plan, dated February 4, 2005                                                                                                                                                                      
|      | 
|4.18  |  | Form of Service Agreement between Cambridge Antibody Technology Group PLC and (a) John Aston; and (b) Diane Mellett.****                                                                                                                                          
|      | 
|4.19  |  | Service Agreement, dated February 22, 2002, between Cambridge Antibody Technology Group PLC and Peter Chambré.****                                                                                                                                                
|      | 
|4.20  |  | Form of Indemnification Agreement between Cambridge Antibody Technology Group PLC and Directors                                                                                                                                                                   
|      | 
|4.21  |  | Settlement and Amendment Agreement, dated October 25, 2005, by and between Cambridge Antibody Technology Limited, Cambridge Antibody Technology Group plc, Abbott Biotechnology Ltd., Abbott GmbH
& Co. KG and Abbott Laboratories                                
|      | 
|8.1   |  | List of subsidiaries. The information required by this exhibit is contained in Note 12 (under the heading Fixed asset investments) to the financial statements included in this Form
20-F.                                                                      
|      | 
|11.1  |  | Code of Ethics of Cambridge Antibody Technology Group****                                                                                                                                                                                                         
|      | 
|12.1  |  | Certification of Peter Chambré pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                          
|      | 
|12.2  |  | Certification of John Aston pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                             
|      | 
|13.1  |  | Certification of Peter Chambré pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                          
|      | 
|13.2  |  | Certification of John Aston pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                             
|      | 
|15.1  |  | Portions of Annual Report for the year ended September 30, 2005 that are incorporated herein by reference                                                                                                                                                         
|      | 
|15.2  |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on November 25, 2005)



---

|     |  |                                                                                                                                                                                                                                                                   
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15.3 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on November 28, 2005)
|     | 
|15.4 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on December 1, 2005) 
|     | 
|15.5 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on December 5, 2005) 
|     | 
|15.6 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on December 20, 2005)
|     | 
|15.7 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on January 3, 2006)  
|     | 
|15.8 |  | Notification to London Stock Exchange of Interests in Directors and Connected Persons in the Registrants Shares (previously filed and previously furnished as Exhibit 99.1 to the
Registrants Report of Foreign Private Issuer on Form 6-K on February 9, 2006) 
|     | 
|15.9 |  | Consent of Deloitte & Touche                                                                                                                                                                                                                                      

---

|* | Filed with the Companys Annual Report on Form 20-F/A for the 2002 Financial Year on October 14, 2003 under the same exhibit number.
|- | ------------------------------------------------------------------------------------------------------------------------------------

|** | Filed with the Companys Registration Statement on Form 20-F/A, dated June 5, 2001 under the same exhibit number.
|-- | -----------------------------------------------------------------------------------------------------------------

|*** | Filed with the Companys Annual Report on Form 20-F/A for the 2001 Financial Year on October 14, 2003 under the same exhibit number.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|**** | Filed with the Companys Annual Report on Form 20-F for the 2003 Financial Year on December 4, 2003 under the same exhibit number.
|---- | ----------------------------------------------------------------------------------------------------------------------------------

|***** | Filed with the Companys Annual Report on Form 20-F/A for the 2004 Financial Year on September 19, 2005 under the same exhibit number.
|----- | --------------------------------------------------------------------------------------------------------------------------------------

|+ | Confidential treatment requested for portions of this exhibit.
|- | --------------------------------------------------------------