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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 20-F



(Mark
One):



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



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended September 30, 2004; or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period
from to



Commission file number 000-31116



CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC

(Exact name of registrant as specified in its charter)



England and Wales

(Jurisdiction of Incorporation or Organization)



Milstein Building

Granta Park

Cambridge CB1 6GH UK

(Address of Principal Executive Offices)



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



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: 2,821,278 as of September 30, 2004

Ordinary Shares: 41,109,938 as of September 30, 2004



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 ̈



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, 2004 filed as Exhibit 15.1 to this Form 20-F (the Annual Report).



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 26, 2004, November 29, 2004 and December 14, 2004, 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 and 15.4 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;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | future performance in clinical trials of the product candidates that were developed using CATs technology;
| | - | -----------------------------------------------------------------------------------------------------------



| |  | the ability of CAT and its collaborators to commercialize products;
| | - | -------------------------------------------------------------------



| |  | business and management strategies and the expansion and growth of CATs operations;
| | - | ------------------------------------------------------------------------------------



| |  | 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
| | - | --------------------------------------------------------------------------------------------------



| |  | acquisitions, including the timing, nature, availability, location and significance of those acquisitions.
| | - | ----------------------------------------------------------------------------------------------------------



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



| | A. | Selected Financial Data
| | -- | -----------------------



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



| | B. | Capitalization and Indebtedness
| | -- | -------------------------------



Not applicable.



| | C. | Reason for the Offer and Use of Proceeds
| | -- | ----------------------------------------



Not applicable.



| | D. | 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, 2004, CATs consolidated losses were approximately £38.1 million and its consolidated accumulated deficit on
profit and loss account at that time was approximately £159.3 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 expects that it 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.



CATs early stage of development makes it difficult to evaluate its 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 limited operating history makes it difficult for an investor to evaluate CATs business and prospects. CATs technology may not result in any meaningful benefits to CATs current
or potential collaborative partners. Further, due to CATs limited operating history, CAT has difficulty accurately



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forecasting its revenue. In addition, because the number of product candidates to which CAT and CATs collaborative partners can devote development
effort is 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 the CATs shares and ADRs is likely to decrease.



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;
| | - | ------------------------------------------------------------------------------------------



| |  | the amount, and timing, of milestone payments CAT receives from its collaborators;
| | - | ----------------------------------------------------------------------------------



| |  | 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;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| |  | the emergence of competing products, technology and other adverse market developments; and
| | - | ------------------------------------------------------------------------------------------



| |  | 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 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.



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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.



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. Outstanding litigation is described in Item 8 in Financial Information  Legal Proceedings. 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 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
| | - | ---------------------------------------------------------------



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| |  | 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.



CAT is currently involved in litigation with Abbott Laboratories in relation
to the interpretation of contracts dating back to the 1990s and the level of royalties receivable in respect of HUMIRA, further details of which is set forth in Item 8 in Financial Information  Legal Proceedings.



If this or any other legal proceedings in which CAT is or 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.



CAT depends
on collaborators for product development, manufacturing and marketing. 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;
| | - | ---------------------------------------------------------------------------------------



| |  | access skills and information that it does not possess;
| | - | -------------------------------------------------------



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| |  | fund its research and development activities;
| | - | ---------------------------------------------



| |  | fund pre-clinical testing, clinical trials and manufacturing of product candidates;
| | - | -----------------------------------------------------------------------------------



| |  | seek and obtain regulatory approvals for product candidates; and
| | - | ----------------------------------------------------------------



| |  | successfully market and sell existing and future product candidates.
| | - | --------------------------------------------------------------------



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.



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;
| | - | ---------------------------------------------------------------------------------------------------



| |  | the likelihood of successful product introduction may be reduced;
| | - | -----------------------------------------------------------------



| |  | 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.



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.



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In addition to HUMIRA, ten product candidates based on CATs technology have entered clinical
trials. Data obtained from these clinical trials have been insufficient to conclusively demonstrate safety and efficacy under applicable regulatory guidelines. As a result, these data will not support an application for regulatory approval without
further clinical trials. 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;
| | - | ---------------------------------------------------------------------------------------



| |  | slower than expected rate of patient recruitment;
| | - | -------------------------------------------------



| |  | inability to adequately follow patients after treatment;
| | - | --------------------------------------------------------



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



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



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



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 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 over 50 countries.
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



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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 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.



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 currently relies on
third party manufacturers for the production of Trabio®, CAT-192 (metelimumab) and 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 TNFainhibitor 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, Medarex and other companies each have antibody



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products in clinical trials. Consumers and physicians may choose to use these or other products of CATs competitors rather than CATs products.



Also, CAT 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.



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;
| | - | -----------------------------------------------------------------------------------------------------



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| |  | 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.



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 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



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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.



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.



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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 will 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.



ITEM 4 -INFORMATION ON THE COMPANY



| | A. | 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



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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 2004 financial year or since the beginning of the 2005 financial year.



| | B. | 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, 2004, CAT employed 281 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 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 two protein chains, designated as heavy chain and light chain because of their
relative size. 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.



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As with all proteins, antibody structure is defined largely by genes. 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.$6 billion in 2005.



There are 17 approved and marketed in one or more commercial territories by
industry participants today. They include Rituaxan®/MabThera®,
Zevalin® and Bexxar® for non-Hodgkins lymphoma, Orthoclone®, Simulect® and Zenapzx® 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 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 100 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
flawed, 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 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 immunizing those mice with antigens causes those mice to produce genetically human antibodies.



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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. They are large Y shaped protein molecules, comprising two chains, a heavy chain and a light
chain. 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 antibody 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 used to characterize the antibodies as leads for drug development and to develop antibody drug candidates. CAT believes than 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. Ribosome Display
is now routinely used in the lead optimization of therapeutic antibody drugs, such as CAT-354.



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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 four CAT human therapeutic antibody products at various stages of clinical development and one CAT product candidate in pre-clinical development. Six further licensed CAT-derived human therapeutic antibodies are in clinical development,
with six further licensed product candidates in pre-clinical development. There are also on-going research programs in relation to 18 distinct molecular targets at CAT. Eleven of these are funded or co-funded by CAT and seven are co-funded by
CATs licensees.



HUMIRA®



HUMIRA (adalimumab) is a fully human anti-TNFamonoclonal antibody, isolated and optimized by CAT in collaboration with Abbott and approved for marketing as a treatment for rheumatoid arthritis in over 50 countries. Abbott reported sales of U.S.$280 million in
2003, HUMIRAs first year on the market, and sales of U.S.$578 million for the first nine months of 2004. Abbott forecasts total 2004 sales of over U.S.$800 million, and 2005 sales of over U.S.$1.2 billion.



Abbott continues to develop HUMIRA as a potential treatment for a number of
additional indications. Phase III trials continue in psoriatic arthritis and Abbott has announced plans to submit applications to the FDA and the European Medicines Agency in 2004 to request approval for use of HUMIRA as a treatment for psoriatic
arthritis. Further Phase III clinical trials in Crohns disease,



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juvenile rheumatoid arthritis and ankylosing spondylitis also continue. A Phase II clinical trial continues in chronic plaque psoriasis.



In August 2004, Abbott announced that the FDA had approved an expanded
indication for HUMIRA to include improvement in physical function for adult patients with moderately to severely active rheumatoid arthritis.



In November 2003, CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in London concerning the level of
royalties due to CAT. The trial commenced on November 22, 2004. Further details of this litigation are set forth in Item 8 in Financial Information  Legal Proceedings.



CAT Product Candidates



Trabio®



Trabio (lerdelimumab) is a fully human anti-TGFb2monoclonal antibody developed by CAT as a potential treatment for improving the outcome of surgery for glaucoma.



In November 2004, CAT announced preliminary results from its first pivotal (European Phase II/III) clinical
trial of Trabio. The trial, which started in February 2002, was carried out in 344 patients in six European countries. Trabio failed to meet the primary endpoint of improving the outcome of surgery for glaucoma compared to placebo. Overall, the
percentage of patients achieving intraocular pressure in the range 616 mm Hg at six and 12 months was 60% for Trabio compared to 68% for placebo. This compares to, and contrasts with, the earlier smaller clinical trials which showed that
5661% of patients treated with Trabio and 3538% of patients treated with placebo achieved such intraocular pressure.



This result will delay the filing of a Biologics License Application and, if repeated in the second pivotal study, will terminate development of the
product in this indication.



Following the preliminary
results of the first pivotal trial, CAT is minimizing future costs of Trabio development, consistent with its obligations in the two continuing trials. In the second pivotal (International Phase III) clinical trial of 393 patients in six
European countries and South Africa, enrollment is complete and preliminary results are expected in the first quarter of 2005. In the United States clinical trial, comparing Trabio with 5-Flurouracil in 236 patients, enrollment is complete and
preliminary results are expected at the end of 2005.



CAT-192



In February 2004, preliminary
results of a double-blind, placebo-controlled Phase I/II clinical trial of CAT-192 (metelimumab) in 45 patients suffering from diffuse systemic sclerosis at 12 medical centers in the United States and Europe were announced. The primary objective of
the trial was to assess the safety, tolerability and pharmacokinetics of CAT-192 in patients. The primary objective of the trial was met in that CAT-192 was generally safe and well-tolerated at each dose level. Elimination half-life was consistently
around three weeks. There were no treatment-related serious adverse events observed. The secondary objective was to evaluate the potential clinical outcomes for any future trial in systemic sclerosis. However, it has not proved possible to reach
definitive conclusions regarding the efficacy of CAT-192 from the results of the trial. The results were presented at the American College of Rheumatology in October 2004. Work continues to identify a route forward for clinical trials in diffuse
systemic sclerosis.



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GC-1008



GC-1008, a human anti-TGFbmonoclonal antibody, is being developed by CAT and Genzyme. Pre-clinical safety studies of GC-1008 have been undertaken and the results presented to the FDA with regard to the commencement of a Phase 1 clinical trial in Idiopathic Pulmonary
Fibrosis. During 2005, CAT and Genzyme also intend to commence a clinical trial of GC-1008 in various cancers.



CAT-213



CAT-213 is a fully human anti-eotaxin1monoclonal antibody directed at severe allergic disorders. Discussions with potential partners continue regarding the further development of CAT-213.



CAT-354



CAT-354 is a fully human anti-IL13 monoclonal antibody being developed by CAT, initially as a potential treatment for severe asthma. In September 2004,
CAT commenced a Phase I clinical trial in the United Kingdom. The clinical trial is a placebo-controlled, rising single intravenous dose study in up to 36 patients, with objectives to study the safety, tolerability and pharmacokinetics of CAT-354.
Enrollment is progressing and dosing has started. Preliminary results are expected to be available at the end of the second quarter of 2005. If this initial trial meets its primary objectives, CAT intends to commence further clinical trials later in
2005.



Licensed Product Candidates



ABT-874



ABT-874 is a fully human anti-IL12 monoclonal antibody, isolated and
optimized by CAT in collaboration with Abbott, and is licensed to Abbott. Abbott continues to develop ABT-874 as a potential treatment for a number of autoimmune diseases and announced the start of a Phase II clinical trial in multiple sclerosis in
June 2004.



LymphoStat-BTM



LymphoStat-BTM(belimumab) is a fully human anti-BLyS monoclonal antibody and the first of four antibody drug candidates to be 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.



A Phase II
clinical trial in each indication is underway and in July 2004 HGSI completed the enrollment, randomization and initiation of dosing in both studies. 283 patients were enrolled in the double-blind, placebo-controlled multi-center Phase II trial to
evaluate safety, optimal dosing and efficacy of LymphoStat-B in patients with active rheumatoid arthritis who have failed prior therapy. HGSI expects that results of this clinical trial will be available in the Spring of 2005. 449 patients have been
enrolled in the double-blind, placebo-controlled, multi-center Phase II clinical trial of LymphoStat-B in patients with active systemic lupus erythematosus. HGSI expects that the results of this clinical trial will be available in the Autumn of
2005.



HGS-ETR1



HGS-ETR1 (previously known as TRAIL-R1 mAb) is a fully human monoclonal
antibody licensed by CAT to HGSI and being developed by HGSI as a potential treatment for a number of cancers.



Phase I clinical trials to evaluate its safety and pharmacology in patients with advanced solid tumors or non-Hodgkins lymphoma continue. Interim results
of two Phase I trials were presented at the



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40thAnnual Meeting of
the American Society of Clinical Oncology in New Orleans in June 2004. Interim results from these trials were also presented at the 16thEORTC-NCI-AACR Symposium on Molecular Targets and Cancer Therapeutics in Geneva in September 2004. These interim results demonstrate the safety and tolerability of HGS-ETR1 and support its further evaluation in Phase II
trials. Based on these results and strong pre-clinical evidence, HGSI announced in September 2004 that it had commenced dosing patients in a Phase II clinical trial of HGS-ETR1. This United States Phase II clinical trial is a multi-center,
open-label, single-arm study in a maximum of 30 patients with relapsed or refractory non-small cell lung cancer. Each patient will receive four 10 mg/kg doses of HGS-ETR1 administered as an infusion 21 days apart. The primary objective of the study
is to evaluate tumor response. The secondary objectives are to evaluate the safety and tolerability of HGS-ETR1 and to determine plasma concentrations of HGS-ETR1 for use in a population pharmacokinetic analysis.



Also, in September 2004, HGSI announced that it had begun to dose patients in
an open-label, dose-escalation Phase 1b clinical trial of HGS-ETR1 to evaluate its safety and tolerability in combination with chemotherapy (paclitaxel and carboplatin) in patients with advanced solid malignancies.



In October 2004, HGSI announced the initiation of two further Phase II
clinical trials of HGS-ETR1. One of the trials will take place in Germany and is a multi-center, open-label study to evaluate the efficacy, safety and tolerability of HGS-ETR1 in a maximum of 30 patients with advanced colorectal cancer. The other is
a multi-center, open-label study to evaluate efficacy, safety and tolerability of HGS-ETR1 in a maximum of 30 patients with relapsed or refractory non-Hodgkins lymphoma.



HGS-ETR2



HGS-ETR2 (previously known as TRAIL-R2 mAb) is a fully human monoclonal antibody licensed by CAT to HGSI, and being developed by HGSI as a potential
treatment for cancer. In September 2004, HGSI announced that initial results of an ongoing Phase I clinical trial demonstrate the safety and tolerability of HGS-ETR2 in cancer patients with advanced solid tumors, and that these results support the
continued dose escalation and evaluation of HGS-ETR2 in these patients. Safety, pharmacokinetic and biological activity data were presented at the 16thEORTC-NCI-AACR Symposium on Molecular Targets and Cancer Therapeutics in Geneva.



ABthraxTM



ABthraxTMis a fully human anti-protective antigen monoclonal antibody isolated and developed by HGSI from antibody libraries licensed by CAT to HGSI. It has
been developed by HGSI as a potential treatment for anthrax.



In March 2004, HGSI presented results from its Phase I placebo-controlled, dose-escalation clinical trial to evaluate the safety, tolerability and pharmacokinetics of ABthrax. The results demonstrate that ABthrax is safe and well tolerated
in healthy adult volunteers, and achieved the blood levels predicted in relevant animal models as necessary to afford significant protection from the lethal effects of anthrax toxin. HGSI has stated that further development of ABthrax will depend on
the U.S. governments willingness to commit to the purchase of ABthrax.



MYO-029



MYO-029
is a fully human monoclonal antibody which 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, including muscular dystrophy and age-related sarcopenia. Wyeth announced in June



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2004 that it had filed an Investigational New Drug application for MYO-029 and is now moving forward with a Phase I clinical trial.



Research and Pre-Clinical Stage Programs



There are on-going research programs to 18 distinct molecular targets at CAT
consisting of 11 CAT proprietary programs and seven on behalf of partners. In addition, there is one CAT proprietary candidate, GC-1008 (partnered with Genzyme) and six antibody drug candidates licensed to partners which are at the pre-clinical
stage of development.



Markets



Information regarding markets can be found in the second table under Note 2
to the financial statements included in this Form 20-F.



Collaborative
Arrangements



A key element of CATs strategy is to
exploit its technology platforms in partnership with other companies. CAT has been successful in attracting partners and continues to seek further collaborations.



CATs own product development activities focus on the value-adding stages from identification of potential antibody
targets through to clinical demonstration of effectiveness for an antibody-based drug. In general, CAT will seek partners for further clinical trials of product candidates, in gaining marketing approval of product candidates and for subsequent
marketing of products. 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; and (3) at least ten years after 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 collaboration agreements are described below.



AstraZeneca



In November 2004, CAT 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. Based on CAT shares in issue as of November 21, 2004, this represents a 19.9% interest in the enlarged issued share capital of CAT. 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.



The subscription was conditional upon, among other things, CAT obtaining the approval of its shareholders for the disapplication of their statutory
preemption rights in relation to the subscription shares. This approval was given at the Companys EGM on December 16, 2004.



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In connection with the subscription, CAT also entered into a collaboration agreement with AstraZeneca in
November 2004. The collaboration agreement is conditional on the completion of the subscription agreement.



Under the terms of the collaboration agreement, CAT and AstraZeneca will 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 to, and jointly fund, certain of CATs existing and future discovery programs.



The alliance will include 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. 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 will be principally responsible for antibody discovery,
manufacturing process development and the supply of material for exploratory clinical trials. AstraZeneca will be principally responsible for translational biology, clinical development programs, regulatory filings and commercialization. Joint teams
will be established to oversee the full discovery and development process.



CAT anticipates that its investment in the alliance will be the principal focus of its research investment during the next five years.



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



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CATs human antibodies targeted against TGFß for 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-TGFß treatment 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 one antibody product candidate at clinical development stage (CAT-192) and one at pre-clinical development
stage (GC-1008).



The parties will 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 will be 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 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. Following these purchases, Genzyme now holds approximately 11.21% of the share capital of CAT. Under the
terms of the subscription agreement, Genzyme has agreed, subject to certain exceptions, not to increase its percentage holding of CAT shares for a period of three years from the date of the subscription agreement.



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 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 TGFß in 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 £0.2 million in revenues under U.K. GAAP during
the three years ended September 30, 2004.



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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.$1.5 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
royalties on product sales governed by the agreement.



CAT has
recognized £7.7 million in revenues under U.K. GAAP pursuant to this arrangement during the three years ended September 30, 2004.



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.



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.



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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 £5.3 million in revenues under U.K. GAAP under both the 1999 and 2000 agreements with HGSI during
the three years ended September 30, 2004.



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 June 2000, CAT granted Wyeth-Ayerst an exclusive
product license and in June 2002, CAT granted Wyeth Research (the pharmaceutical division of Wyeth-Ayerst) an exclusive product license. Both were to human monoclonal antibodies identified by CAT against targets supplied by Wyeth Research. CAT
received a license fee and clinical milestone under the agreement and will potentially receive further clinical milestones and royalties associated with product sales. 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 and marketed by Wyeth-Ayerst under the library license agreement.



Under both the collaboration and library license agreement, CAT has recognized £2.1 million in revenues under U.K. GAAP during the three years ended
September 30, 2004.



Abbott



CATs collaborative program with Knoll AG commenced in 1993. This was
later amended in 1995. Knoll was acquired by Abbott Laboratories in 2001. Under the program 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 Knoll, has isolated and optimized human monoclonal



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antibodies against the first two targets selected by Knoll, which are now in clinical trials (HUMIRA and ABT-874). CAT receives a license fee at the time
Abbott obtains an exclusive license, milestones based on product development events, clinical trial progression and regulatory approvals 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. CAT has commenced legal proceedings against Abbott regarding HUMIRA royalties as discussed in Item 8 in Financial
Information  Legal Proceedings.



During the 2002
financial year, CAT amended its agreement with Abbott to allow Abbott to internally develop antibodies in the case of the remaining four available antibody targets; two of these four targets have been selected.



CAT has recognized £8.4 million in revenues under U.K. GAAP under the
1995 agreement during the three years ended September 30, 2004. This figure does include royalty payments.



Elan



In January
2001 CAT entered into an alliance with Elan Pharma International Limited (Elan) under which the companies will jointly discover and develop antibody-based therapeutics targeted at a variety of neurological diseases and disorders. Under
the terms of the four year agreement, the two companies will fund all research and development jointly and share commercialization profits equally. CAT will have primary responsibility for the discovery and optimization of human antibodies against
multiple targets identified by Elan. Elan will evaluate clinical antibody candidates in pre-clinical models, manage clinical and regulatory development and will be responsible for global commercialization. Either party may terminate the agreement
for convenience on 60 days notice. If the agreement is terminated for convenience, then the non-terminating party will have the right to continue to develop and commercialize products developed in the collaboration and would be required to pay
the terminating party (a) a royalty on sales of those products and (b) a milestone payment of between U.S.$5 million and U.S.$15 million when those products receive regulatory approval. The amount of the royalty and milestone would depend on the
stage of development of those products achieved at the date of termination.



In February 2004, CAT exercised its rights to terminate its agreement with Elan. The collaboration involved research on a number of targets. Terminating this exclusive agreement allows CAT to collaborate with other
third parties in the fields of neurology and pain, and does not preclude future collaboration with Elan.



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.



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CAT has recognized £2.2 million in revenues under U.K. GAAP pursuant to this arrangement from
inception to the end of the 2004 financial year.



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, 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 (subsequently acquired by Amgen). In return, CAT received from Amgen an initial fee and potential milestone payments and royalties on future sales.



CAT has recognized £3.1 million in revenues under U.K. GAAP under these
arrangements in the three financial years ended September 30, 2004.



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 £1.5 million under U.K. GAAP in the three financial years ended September 30, 2004.



Technology License Agreements



Medical Research Council



CAT initially developed its technology in cooperation with Medical Research
Council (MRC). CATs rights in respect of this technology are governed by a license agreement of January 7, 1997 with 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 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.
| | - | ------------------------------------------------------------------------------------------------------------------------



CAT pays 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 MRC between 1% and 2.3% of the net invoice price, calculated in accordance with a
specified formula. CAT pays a royalty to MRC in connection with Abbotts sales of HUMIRA. The royalty obligations of CAT may be reduced under certain circumstances. CATs license with MRC includes the Winter II, McCafferty and Griffiths
patent families (discussed below in  Intellectual Property).



Dyax



Under
agreements entered into in 1997, 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 limited rights to Dyax under antibody Phage
Display patents controlled by CAT. In addition, CAT



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and Dyax entered into a revised agreement dated January 3, 2003 under which the parties agreed to increase access and freedom to each others Phage
Display patents. 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.



Dyax has also been granted options under the revised agreement to take up
licenses (together with a right to sub-license those licenses) to develop therapeutic and diagnostic antibody products using patent rights controlled by CAT. In return, CAT will 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 addition, under the
revised agreement, CATs obligations to pay royalties under the previous arrangements with Dyax for rights with respect to Dyaxs Ladner patents used in relation to the development of antibody products by CAT were terminated, save in
relation to HUMIRA. Under the revised agreement, CAT was granted an option to buy out, under a predetermined schedule, any obligation to pay royalties by CAT to Dyax with respect to HUMIRA. On September 19, 2003, Dyax and CAT agreed to amend the
revised agreement by granting Dyax further options to take up licenses. In addition, CAT reached agreement with Dyax that no royalties are due to Dyax in respect of HUMIRA.



Xoma



Under agreements dated December 23, 2002 between CAT and Xoma, CAT, and its collaborators, received the rights to use the Xoma antibody expression
technology for developing products using CATs phage-based antibody technology, in return for license payments to Xoma. Under the same agreements, Xoma received the 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



On September 3, 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.



This cross-license agreement expanded existing alliances: that of Micromet and Enzon, where both parties combined their significant patent estates and complementary expertise in the field of SCAs; and the license
agreement first entered into among CAT, Enzon and Creative BioMolecules in 1996. In addition to the cross-licensing of intellectual property under this agreement, Enzon and CAT have both



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agreed to withdraw (and have subsequently withdrawn) their pending oppositions to each others European patents in the area of diabodies.



Under the terms of the agreement, Micromet and Enzon obtained the right
within the framework of their collaboration to use CATs intellectual property in Phage Display to create and commercialize novel antibody products against a defined number of targets. In addition, Enzon and Micromet each received options to
develop and commercialize antibody products outside of their alliance. 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.



Intellectual Property



Key Patents



CAT has a patent portfolio of approximately 30 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 and Australia. A patent application is pending in 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 and target screening 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.



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.



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.



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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 may 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 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 and Trabio 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 2000, with Remicade (infliximab), marketed by Johnson & Johnson and Schering-Plough, which was approved in the
United States in 1999 and Europe in 2000, and with Kineret (anakinra), marketed 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. Amgen, Celltech/UCB, Genmab, Medarex, Roche and other companies have antibody product candidates in clinical trials in rheumatoid arthritis. Many other non-antibody products are also potentially competitive with HUMIRA.



Trabio. Trabio (lerdelimumab)  CAT is not aware
of any other products in development being specifically developed for the prevention of excessive scarring after glaucoma surgery although two approved anticancer drugs are widely used outside their labeling in this situation by surgeons. Trabio, as
an adjunct to surgery, would potentially compete with new or existing therapies to lower intraocular pressure, including topical medications such as beta blockers, carbonic anhydrase inhibitors and prostaglandin analogues, and laser surgery and
drainage devices. CAT is aware that there are several new topical glaucoma drugs and devices under development, and that improved drugs may reduce the need for surgical procedures.



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



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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.



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, Dr. David Glover, 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. Where an
assessment is required under other statutory provisions (for example, the Control of Substances Hazardous to Health Regulations 2002, as amended, or the Genetically Modified Organisms (Contained Use) Regulations 2000, as amended), it will often be
required to comply with the standard set by the Management of Health and Safety at Work Regulations 1999, as amended, and so one assessment may be carried out so as to satisfy the requirements of both pieces of legislation.



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 an annual basis, whichever occurs sooner.



CAT believes that the overall processes involved in its scientific operations
do not require 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



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separate from, those setting out the data requirements for the purposes of applying for approval to market a product.



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) 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 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) 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 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



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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 (including France and Germany) 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 European Medicines Agency (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.



34



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The legislation also introduced a system of Mutual Recognition under which an authorization
for a product gained in one member state (the Reference Member State) can be used as the basis for gaining authorization in others without, in theory, the repetition of the lengthy product assessment already carried out by the first
member state in authorizing the product. Objections to such recognition may be made by member states within time limits set by the legislation. The process of delaying with objections (Arbitration) may significantly lengthen the time
elapsing between the initial application and approval in the nominated member states. Arbitrations are handled by the 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. The Mutual Recognition procedure is
an option for all products for which the centralized procedure is not compulsory under Regulation 726/2004.



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, 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 a 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 to products are central to the legislation and have been extended and tightened by Directive 2004/27. 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.



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.



35



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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 (including France, Germany, Italy and the United Kingdom) have not yet 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) 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 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
for a product derived from the patent, with an upper limit of five years.



Abridged Applications  Market Exclusivity



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 market exclusivity, but which in fact
govern the making of so-called abridged applications for marketing authorizations. An abridged



36



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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 (Article 10  as replaced by Directive 2004/27) 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 between six and ten years (from authorization) from
relying upon pre-existing data submitted in support of a prior full application by another company, except in certain defined and limited circumstances.



The period is fixed at ten years for products derived from certain biotechnological processes (for which the centralized procedure is compulsory), and
high-technology products viewed by the competent regulatory authorities as representing significant innovation (for which the centralized procedure is an option). Member states may elect to extend the period of protection
from six to ten years in respect of other products. This discretion has been exercised by the United Kingdom, for example.



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 are unfortunately
unclear in some respects and their interpretation is subject to variation and dispute. Divergent views are taken by regulatory authorities on the availability of protection, for example, where new data is generated in respect of a variation to an
existing product involving substantial investment by the originator. There has been significant litigation as a result.



New legislation (Regulation 726/2004) will come into force in November 2005 replacing the current system. A uniform extended period of regulatory data
protection will apply to all EU countries. All medicinal products will then enjoy a period of data protection of eight years and an additional two years of marketing protection. In certain circumstances, protection may be extended by a further
period of one year.



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 market 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 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.



37



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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 investigational new drug (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 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



38



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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.



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



39



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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.



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



40



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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.



| | C. | 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.



| | D. | Property, Plants and Equipment
| | -- | ------------------------------



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



|                                                                      |  |                                            |  |                   |  |                |  |                      
|--------------------------------------------------------------------- |  | ------------------------------------------ |  | ----------------- |  | -------------- |  | ---------------------
|Property                                                              |  | Principalactivity                          |  | Size(square feet) |  | Nature oftitle |  | Unexpired term       
|The Franklin Building Granta Park Cambridge Cambridgeshire CB2 6HR UK |  | Laboratoriesand offices                    |  | 20,000            |  | Leasehold      |  | Approximately14 years
|                                                                      |  |                                            |  |                  
|Milstein Building Granta Park Cambridge Cambridgeshire CB1 6GH UK     |  | Laboratoriesand officesandregisteredoffice |  | 66,000            |  | Leasehold      |  | Approximately20 years



41



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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 29 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, 2004, 2003 and 2002, and the consolidated balance sheet data at September 30, 2004 and 2003 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, 2001 and 2000, and the consolidated balance sheet data at September 30, 2002, 2001 and 2000 were derived from our historical
consolidated financial statements which are not included in or incorporated by reference in this Form 20-F.



|                                                     |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|---------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | -
|Income statement                                     |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000 |   |  | 2001 £000 |   |  | 2000 £000 |  
|UK GAAP                                              |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|Turnover                                             |  | 15,925     |   |  | 8,743      |   |  | 9,471      |   |  | 7,121      |   |  | 7,018      |  
|Gross profit                                         |  | 12,902     |   |  | 8,053      |   |  | 9,391      |   |  | 6,770      |   |  | 6,637      |  
|Research and development expenses                    |  | 44,125     |   |  | 44,981     |   |  | 31,307     |   |  | 21,393     |   |  | 15,728     |  
|General and administration expenses(1)               |  | 10,969     |   |  | 9,196      |   |  | 16,234     |   |  | 6,443      |   |  | 4,842      |  
|Operating Loss                                       |  | (42,192    | ) |  | (46,124    | ) |  | (38,150    | ) |  | (21,066    | ) |  | (13,933    | )
|Net loss on ordinary activities before taxation      |  | (38,062    | ) |  | (41,764    | ) |  | (31,764    | ) |  | (11,771    | ) |  | (8,289     | )
|Taxation on loss on ordinary activities              |  | (64        | ) |  | 2,573      |   |  | 3,557      |   |  |           |   |  |           |  
|Net loss                                             |  | (38,126    | ) |  | (39,191    | ) |  | (28,207    | ) |  | (11,771    | ) |  | (8,289     | )
|Net loss per share (basic and diluted) (in pence)(2) |  | (93.3p     | ) |  | (107.5p    | ) |  | (78.7p     | ) |  | (33.3p     | ) |  | (27.5p     | )
|                                                     | 
|US GAAP                                              |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|Turnover                                             |  | 16,347     |   |  | 9,165      |   |  | 9,893      |   |  | 7,543      |   |  | 7,129      |  
|Operating loss                                       |  | (40,751    | ) |  | (46,552    | ) |  | (41,234    | ) |  | (28,860    | ) |  | (22,775    | )
|Net loss                                             |  | (36,685    | ) |  | (39,619    | ) |  | (31,291    | ) |  | (19,565    | ) |  | (17,131    | )
|Basic and diluted net loss per share (in pence)(2)   |  | (89.8p     | ) |  | (108.7p    | ) |  | (87.3p     | ) |  | (55.4p     | ) |  | (56.8p     | )
|                                                     | 
|Balance sheet                                        |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|UK GAAP                                              |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|Cash and investments in liquid resources             |  | 95,237     |   |  | 108,972    |   |  | 129,775    |   |  | 156,813    |   |  | 156,528    |  
|Total assets                                         |  | 121,335    |   |  | 138,551    |   |  | 156,908    |   |  | 172,470    |   |  | 169,436    |  
|Current liabilities                                  |  | (15,603    | ) |  | (12,657    | ) |  | (12,563    | ) |  | (8,335     | ) |  | (9,627     | )
|Long term liabilities                                |  | (20,650    | ) |  | (18,152    | ) |  | (8,580     | ) |  | (8,085     | ) |  | (7,369     | )
|Net assets                                           |  | 85,082     |   |  | 107,742    |   |  | 135,765    |   |  | 156,050    |   |  | 152,440    |  
|Shareholders funds  all equity                     |  | 85,082     |   |  | 107,742    |   |  | 135,765    |   |  | 156,050    |   |  | 152,440    |  
|Number of ordinary shares outstanding                |  | 41,109,938 |   |  | 38,338,320 |   |  | 36,214,349 |   |  | 35,455,865 |   |  | 34,770,438 |  
|                                                     | 
|US GAAP                                              |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|Cash and investments in liquid resources             |  | 95,237     |   |  | 108,972    |   |  | 129,775    |   |  | 156,813    |   |  | 156,528    |  
|Total assets                                         |  | 126,923    |   |  | 138,768    |   |  | 157,035    |   |  | 172,613    |   |  | 169,595    |  
|Current liabilities                                  |  | (15,020    | ) |  | (12,985    | ) |  | (12,904    | ) |  | (8,428     | ) |  | (9,294     | )
|Long term liabilities                                |  | (21,759    | ) |  | (19,683    | ) |  | (10,533    | ) |  | (10,460    | ) |  | (8,947     | )
|Net assets                                           |  | 90,144     |   |  | 106,100    |   |  | 133,598    |   |  | 153,725    |   |  | 151,354    |  
|Shareholders funds  all equity                     |  | 90,144     |   |  | 106,100    |   |  | 133,598    |   |  | 153,725    |   |  | 151,354    |  



|(1) | General and administration expenses for the year ended September 30, 2002 included
£7,913,000 of costs incurred in the year relating to two transactions entered into with Drug Royalty Corporation during the year (comparative periods none).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42



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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
|2000                      |  | 1.6765 |  | 1.4005 |  | 1.5528  |  | 1.4787    
|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    



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 December 15, 2004, the exchange rate was $1.945 to £1.00.



|               |  |        |  |       
|-------------- |  | ------ |  | ------
|               |  | High   |  | Low   
|June 2004      |  | 1.8387 |  | 1.8090
|July 2004      |  | 1.8734 |  | 1.8160
|August 2004    |  | 1.8459 |  | 1.7921
|September 2004 |  | 1.8105 |  | 1.7733
|October 2004   |  | 1.8404 |  | 1.7790
|November 2004  |  | 1.9073 |  | 1.8323



Operating and Financial Review



Overview



CAT is a biopharmaceutical company with two business strands. CATs
long term value is expected to come from the products CAT is developing and those in which CAT retains a long term economic interest. By investing further in product development and by taking products further down the pipeline before initiating
out-licensing, CAT can retain a more significant stake in these products. CAT has also licensed its technologies and capabilities to enable others to develop products, thereby balancing risk and reward.



At present, the majority of CATs revenue is generated from royalties
received from Abbott, regarding sales of HUMIRA, and from license fees. Going forward, it is expected that the primary source of revenue will be royalties from sales of products by collaborators. In the past, a significant part of CATs revenue
has been generated from contract research fees whereby CAT has provided research and



43



---

development services to certain corporate collaborators. As CAT transforms from a technology company to a product company this business stream has become
less material over time.



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



As of September 30, 2004, CAT had cash and liquid resources of £93.7 million. In the past 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 will continue to consider these sources of cash funding, though there can be no assurance that the Company can generate significant revenues nor that equity finance will be
available on acceptable terms or at all.



CAT is still a
relatively young company in an industry where the real returns on investment are generated in 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 the 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 29 to the financial statements included within this Form 20-F.



Results of operations



Years ended September 30, 2004, 2003 and 2002



The following information is extracted from the U.K. GAAP financial statements.



The following table details the components of CATs profit and loss account for the years ended September 30, 2004, 2003 and 2002.



|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | - |  | ----- | - |  | ------ | -
|                                            |  |       |   |  |       |   |  |       |   |  | Variance  |  
|                                            |  | 2004  |   |  | 2003  |   |  | 2002  |   |  | 2004/2003 |   |  | 2003/2002 |  
|                                            |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | %         |   |  | £m    |   |  | %      |  
|Turnover                                    |  | 15.9  |   |  | 8.7   |   |  | 9.5   |   |  | 7.2       |   |  | 82.8      |   |  | (0.8  | ) |  | (8.4   | )
|Direct costs                                |  | (3.0  | ) |  | (0.7  | ) |  | (0.1  | ) |  | (2.3      | ) |  | (328.6    | ) |  | (0.6  | ) |  | (600.0 | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|Gross profit                                |  | 12.9  |   |  | 8.0   |   |  | 9.4   |   |  | 4.9       |   |  | 61.3      |   |  | (1.4  | ) |  | (14.9  | )
|Operating expenses                          |  | (55.1 | ) |  | (54.2 | ) |  | (47.6 | ) |  | (0.9      | ) |  | (1.7      | ) |  | (6.6  | ) |  | (13.9  | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|Operating loss                              |  | (42.2 | ) |  | (46.2 | ) |  | (38.2 | ) |  | 4.0       |   |  | 8.7       |   |  | (8.0  | ) |  | (20.9  | )
|Finance income (net)                        |  | 4.1   |   |  | 4.4   |   |  | 6.4   |   |  | (0.3      | ) |  | (6.8      | ) |  | (2.0  | ) |  | (31.3  | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|Loss on ordinary activities before taxation |  | (38.1 | ) |  | (41.8 | ) |  | (31.8 | ) |  | 3.7       |   |  | 8.9       |   |  | (10.0 | ) |  | (31.4  | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|Taxation on loss on ordinary activities     |  |      |   |  | 2.6   |   |  | 3.6   |   |  | (2.6      | ) |  | (100.0    | ) |  | (1.0  | ) |  | (27.8  | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  
|Loss for the financial year                 |  | (38.1 | ) |  | (39.2 | ) |  | (28.2 | ) |  | 1.1       |   |  | 2.8       |   |  | (11.0 | ) |  | (39.0  | )
|                                            |  |       |   |  |       |   |  |       |   |  |           |   |  |           |   |  |       |   |  |        |  



44



---

Revenues



Revenues consist of the following for the three years ended September 30, 2004, 2003 and 2002:



|                       |  |      |  |      |  |      |  |           |   |  |           |  
|---------------------- |  | ---- |  | ---- |  | ---- |  | --------- | - |  | --------- | -
|                       |  |      |  |      |  |      |  | Variance  |  
|                       |  | 2004 |  | 2003 |  | 2002 |  | 2004/2003 |   |  | 2003/2002 |  
|                       |  | £m   |  | £m   |  | £m   |  | £m        |   |  | £m        |  
|Royalties              |  | 6.3  |  |     |  |     |  | 6.3       |   |  |          |  
|License fees           |  | 4.6  |  | 2.6  |  | 1.7  |  | 2.0       |   |  | 0.9       |  
|Technical milestones   |  | 1.6  |  | 0.2  |  |     |  | 1.4       |   |  | 0.2       |  
|Clinical milestones    |  | 1.1  |  | 1.8  |  | 1.4  |  | (0.7      | ) |  | 0.4       |  
|Contract research fees |  | 1.8  |  | 3.9  |  | 5.6  |  | (2.1      | ) |  | (1.7      | )
|Other                  |  | 0.5  |  | 0.2  |  | 0.8  |  | 0.3       |   |  | (0.6      | )
|                       |  |      |  |      |  |      |  |           |   |  |           |  
|Total                  |  | 15.9 |  | 8.7  |  | 9.5  |  | 7.2       |   |  | (0.8      | )
|                       |  |      |  |      |  |      |  |           |   |  |           |  



Royalties
Royalty income is generated by sales of products incorporating 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 fulfill 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.



Royalties recognized during the 2004 financial year predominantly 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 royalties due on HUMIRA sales in the period from January 2003 to June 30, 2004. Details of the litigation commenced against Abbott with regard to royalties related to HUMIRA are set forth in Item 8
in Financial Information - Legal Proceedings.



License fees License fees are typically one off upfront payments. Under CATs revenue recognition policy license fees are deferred and are typically recognized over the period of the license term. The following significant
agreements were entered into between 2002 and 2004:



| |  | Library license granted to Chugai in September 2002
| | - | ---------------------------------------------------



| |  | 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)
| | - | ---------------------------------------------------------------------------------------------------



| |  | 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)
| | - | -------------------------------------------------------------------------



License fees increased between 2002 and 2003 primarily as a result of the Chugai and Merck library licenses coming into effect during 2003 on completion
of the successful transfer of CATs technology. A full years revenue was recognized under the Chugai library license for the first time



45



---

during 2004 which, with the new licenses granted to Wyeth and Genzyme, accounts for the majority of the increase between 2003 and 2004.



Milestones On certain research and development programs CAT receives
milestone payments when it achieves certain defined technical criteria. 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, 2002:



| |  | Clinical milestone payments from HGSI on initiation of Phase I trials for LymphoStat-B and HGS-ETR1
| | - | ---------------------------------------------------------------------------------------------------



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 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 and therefore, only half the value has been recognized as revenue in the year
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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; the remainder is expected to be released as revenue during the 2005 financial
year on receipt of two further royalty payments from Abbott.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



Contract research feesCAT provides research and development services
to certain corporate collaborators, usually in the form of a defined number of CATs employees 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.



46



---

|                              |  |                               |  |                              
|----------------------------- |  | ----------------------------- |  | -----------------------------
|Year ended September 30, 2004 |  | Year ended September 30, 2003 |  | Year ended September 30, 2002
|Amgen                         |  |                              |  |                             
|Pfizer                        |  | Pfizer                        |  | Pfizer                       
|Wyeth Research                |  | Wyeth Research                |  | Wyeth Research               
|Merck                         |  | Merck                         |  | Merck                        
|                             |  | HGSI (completed March 2003)   |  | HGSI                         



The decrease in
revenues between years reflects CATs declining level of activity in this area.



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 2004 financial year comprised royalties payable to Medical Research Council and other licensors, primarily arising from the
payments received from Abbott regarding sales of HUMIRA. In addition, in the 2004 financial year, direct costs included an amount payable to Medical Research Council 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 all three financial years included agency fees incurred in obtaining new contracts. Direct costs will generally increase
as royalty income increases and therefore, these costs are expected to rise in future years.



Operating expenses



Operating expenses consist of the following for the three years ended September 30, 2004, 2003 and 2002:



|                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|-------------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | -
|                           |  |       |   |  |       |   |  |       |   |  | Variance  |  
|                           |  | 2004  |   |  | 2003  |   |  | 2002  |   |  | 2004/2003 |   |  | 2003/2002 |  
|                           |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | £m        |  
|Research and development   |  | (44.1 | ) |  | (45.0 | ) |  | (31.3 | ) |  | 0.9       |   |  | (13.7     | )
|General and administrative |  | (11.0 | ) |  | (9.2  | ) |  | (16.2 | ) |  | (1.8      | ) |  | 7.0       |  
|                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Total                      |  | (55.1 | ) |  | (54.2 | ) |  | (47.5 | ) |  | (0.9      | ) |  | (6.7      | )
|                           |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  



Research and development expenses



|                                          |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|----------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | - |  | --------- | - |  | --------- | -
|                                          |  |       |   |  |       |   |  |       |   |  | Variance  |  
|                                          |  | 2004  |   |  | 2003  |   |  | 2002  |   |  | 2004/2003 |   |  | 2003/2002 |  
|                                          |  | £m    |   |  | £m    |   |  | £m    |   |  | £m        |   |  | £m        |  
|External development expenses             |  | (18.5 | ) |  | (15.2 | ) |  | (8.3  | ) |  | (3.3      | ) |  | (6.9      | )
|Staff costs and laboratory consumables(i) |  | (15.1 | ) |  | (16.5 | ) |  | (14.4 | ) |  | 1.4       |   |  | (2.1      | )
|Infrastructure and depreciation           |  | (6.5  | ) |  | (6.9  | ) |  | (4.8  | ) |  | 0.4       |   |  | (2.1      | )
|Other                                     |  | (4.0  | ) |  | (6.4  | ) |  | (3.8  | ) |  | 2.4       |   |  | (2.6      | )
|                                          |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Total                                     |  | (44.1 | ) |  | (45.0 | ) |  | (31.3 | ) |  | 0.9       |   |  | (13.7     | )
|                                          |  |       |   |  |       |   |  |       |   |  |           |   |  |           |  
|Average staff numbers                     |  | 231   |   |  | 249   |   |  | 235   |   |  | (18       | ) |  | 14        |  

---



47



---

|(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 external development costs reflects a significant rise in spend on clinical trials over the last two years on CAT-funded programs, particularly Trabio and CAT-354.



Staff costs increased between 2002 and 2003 in line with increases in
scientific staff numbers. 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.



Infrastructure and depreciation expenses increased between
2002 and 2003 with the move to and fit out of the Milstein Building, completed in early 2003.



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.



General and administration expenses



|                      |  |       |   |  |      |   |  |       |   |  |           |   |  |           |  
|--------------------- |  | ----- | - |  | ---- | - |  | ----- | - |  | --------- | - |  | --------- | -
|                      |  |       |   |  |      |   |  |       |   |  | Variance  |  
|                      |  | 2004  |   |  | 2003 |   |  | 2002  |   |  | 2004/2003 |   |  | 2003/2002 |  
|                      |  | £m    |   |  | £m   |   |  | £m    |   |  | £m        |   |  | £m        |  
|Staff costs(i)        |  | (3.8  | ) |  | (3.1 | ) |  | (2.5  | ) |  | (0.7      | ) |  | (0.6      | )
|Litigation            |  | (2.5  | ) |  | (0.9 | ) |  | (1.9  | ) |  | (1.6      | ) |  | 1.0       |  
|Exceptional costs     |  |      |   |  | (0.6 | ) |  | (7.9  | ) |  | 0.6       |   |  | 7.3       |  
|Foreign exchange      |  | (1.1  | ) |  | (0.8 | ) |  |      |   |  | (0.3      | ) |  | (0.8      | )
|Other                 |  | (3.6  | ) |  | (3.8 | ) |  | (3.9  | ) |  | 0.2       |   |  | 0.1       |  
|                      |  |       |   |  |      |   |  |       |   |  |           |   |  |           |  
|Total                 |  | (11.0 | ) |  | (9.2 | ) |  | (16.2 | ) |  | (1.8      | ) |  | 7.0       |  
|                      |  |       |   |  |      |   |  |       |   |  |           |   |  |           |  
|Average staff numbers |  | 52    |   |  | 47   |   |  | 39    |   |  | 5         |   |  | 8         |  

---

|(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 between 2003 and 2004 reflects the reallocations of staff from research, and some increase in staff numbers.



Litigation expenses decreased between 2002 and 2003 with the successful resolution of all principal outstanding patent
litigation in the first quarter of the 2003 financial year. Litigation expenses have increased in 2004 due to the legal proceedings commenced by CAT against Abbott in the High Court in London.



Exceptional costs for 2002 relate to the costs incurred with regard to the
two DRC transactions entered into during that year. CAT made a bid for DRC in January 2002; however a competing offer was subsequently accepted. Following acceptance of the competing offer, CAT exercised an option to buy out its obligation to DRC
for £6.1 million with the issue of 463,818 CAT shares to DRC. The professional fees incurred in CATs bid and buy-back were £1.8 million. Exceptional costs for 2003 relate to the offer



48



---

made for 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 2004 and 2003 relate primarily to the non-cash
charge arising from the conversion from U.S. Dollars to Pound Sterling of CATs trading balances with its U.S. subsidiary, Aptein Inc., due to the significant depreciation of the U.S. Dollar compared to Pound Sterling.



Finance income



Interest income fell over the three years with average balances of cash and liquid resources decreasing during the period
(2004: £93.7 million; 2003: £107.8 million; 2002: £129.8 million) as cash was consumed by operating activities.



Taxation



CAT submitted one claim in the 2003 financial year and two claims in the 2002 financial year under the research and development tax credit scheme for
Small and Medium sized Enterprises in the U.K. CAT chose to surrender tax losses created through qualifying research and development expenditure in exchange for a cash refund. A claim of £0.9 million was made for the 2000 financial year,
£2.6 million for the 2001 financial year and £3.1 million 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:



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



| |  | 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;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  | 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, 2004, CAT had cash and liquid resources of approximately £93.7 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



49



---

operates. As the majority of CATs investments are short-term investments, exposure to interest rate changes has been minimal. Realization of losses
from interest rate movements is unlikely as investments are generally held to maturity. 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    |  
|                                                |  | 2004 £m |   |  | 2003 £m |   |  | 2002 £m |   |  | 2004/2003£m |   |  | 2003/2002 £m |  
|Net cash outflow from operating activities      |  | (31.1   | ) |  | (35.8   | ) |  | (26.8   | ) |  | 4.7         |   |  | (9.0         | )
|Returns on investments and servicing of finance |  | 4.2     |   |  | 5.1     |   |  | 7.6     |   |  | (0.9        | ) |  | (2.5         | )
|Taxation                                        |  | (0.1    | ) |  | 5.2     |   |  | 0.9     |   |  | (5.3        | ) |  | 4.3          |  
|Capital expenditure and financial investment    |  | (1.0    | ) |  | (8.1    | ) |  | (9.9    | ) |  | 7.1         |   |  | 1.8          |  
|Management of liquid resources                  |  | 15.4    |   |  | 18.8    |   |  | 29.5    |   |  | (3.4        | ) |  | (10.7        | )
|Financing                                       |  | 13.9    |   |  | 11.7    |   |  | 1.4     |   |  | 2.2         |   |  | 10.3         |  
|                                                |  |         |   |  |         |   |  |         |   |  |             |   |  |              |  
|(Increase)/decrease in cash                     |  | 1.3     |   |  | (3.1    | ) |  | 2.7     |   |  | 4.4         |   |  | (5.8         | )
|                                                |  |         |   |  |         |   |  |         |   |  |             |   |  |              |  



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 2002, the increase in creditors arose as a result of higher trade creditor balances.



Investments and servicing of finance Interest income fell over the
three years with average balances of cash and liquid resources decreasing during the period as cash was consumed by operating



50



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activities. CAT established a finance leasing facility under which equipment with a cost of £1.4 million has been financed. This is repayable over four
years.



Taxation CAT received £5.7 million
research and development tax credit during the 2003 financial year and £0.9 million during the 2002 financial year. The credit received in the 2003 financial year was based on the claim for the 2002 and 2001 financial years; the credit
received in the 2002 financial year was based on the claim for the 2000 financial year. CAT no longer qualifies for cash refunds under this scheme and hence no further tax credits were received during the 2004 financial year.



Capital expenditure CATs capital expenditures are 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 2002 to 2004 was due to lower spend on fixtures and
fittings and laboratory equipment with the completion of the fit out of the Milstein Building early in 2003.



Financing CATs net cash inflows from financing activities primarily resulted from the issue 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. The subscription for shares was the first of two tranches, the second tranche being a further 2.5 million shares with a value of
£13.3 million issued during the 2004 financial year following shareholder approval at the EGM held in October 2003. No significant financing transactions were completed during the 2002 financial year.



International Accounting Standards



CAT will be required to adopt International Financial Reporting Standards
and International Accounting Standards for the financial year ending September 30, 2006 onwards. The most notable change for CAT is likely to be the adoption of IFRS 2, Share Based Payment, which requires the fair value of equity based
compensation to be recognized in CATs profit and loss account.



Financial outlook for 2005



Further royalty
income from Abbott in respect of HUMIRA is expected in the 2005 financial year. Abbott has stated that it expects HUMIRA sales to be in excess of U.S.$800 million for the 2004 calendar year and in excess of U.S.$1.2 billion for the 2005 calendar
year. Recurring revenues, representing release of deferred income from licensing arrangements entered into prior to September 30, 2004 and contract research revenues, are expected to be of the order of £5 million for the 2005 financial year.
Additional revenues may arise from technical and clinical milestone receipts and any further licensing or contract research arrangements.



External development expenditure is expected to decrease in the 2005 financial year given cost savings identified on the Trabio program following the
announcement of the European Phase II/III trial result. Other operating expenses are not expected to increase significantly during 2005.



It is expected that CATs net cash outflow before financing for the current year will be of the order of £32 million.



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



51



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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 29 to 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. 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 fulfill 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. In accordance with this, no such royalties have been accrued in respect of any sales of HUMIRA after June 30, 2004.



Contingent liabilities



CAT is involved in three cases of litigation. Management has estimated there to be no requirement to provide for liabilities in respect of these cases. In
making these estimates, management has considered the nature of the litigations (and in particular that the current litigations do not involve a material claim against CAT for damages) as well as the probability of various outcomes. Should facts and
circumstances surrounding these litigation cases 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. Further information on litigation is
given in Note 27 and Note 28 to the financial statements included within this Form 20-F.



Contractual obligations and commitments



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



52



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The following table summarizes CATs annual future obligations (as of September 30, 2004) under
these contracts due by financial year:



|                        |  |                        |  |                  |  |                  |  |                       |  |            
|----------------------- |  | ---------------------- |  | ---------------- |  | ---------------- |  | --------------------- |  | -----------
|                        |  | Payments due by period
|Contractual obligations |  | Less than1 year £000  |  | 1 3 years £000 |  | 3 5 years £000 |  | Morethan 5years £000 |  | Total £000
|Debt (finance leases)   |  | 425                    |  | 466              |  |                 |  |                      |  | 891        
|Operating leases        |  | 2,020                  |  | 4,026            |  | 3,915            |  | 20,656                |  | 30,617     
|Purchase obligations    |  | 2,243                  |  | 673              |  |                 |  |                      |  | 2,916      
|                        |  |                        |  |                  |  |                  |  |                       |  |            
|Total                   |  | 4,688                  |  | 5,165            |  | 3,915            |  | 20,656                |  | 34,424     
|                        |  |                        |  |                  |  |                  |  |                       |  |            



In addition to the
commitments above CAT has agreed to bear 50% of program costs through to early 2006 under an amended collaboration agreement with Genzyme. Due to the nature of this collaborative arrangement it does not give rise to specified cash outflows.



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, third party royalties and stock compensation. More details as to the differences between U.K. and U.S. GAAP are set out in Note 29 to the
financial statements included in this Form 20-F.



Recently issued accounting
pronouncements



In December 2003, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104). SAB 104 updates portions of the interpretive guidance included in Topic 13 of the codification of Staff Accounting Bulletins
in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. In the updated Staff Accounting Bulletin Topic 13, the SEC staff indicated their belief that revenue is
generally realized or realizable and earned when all of the following criteria are met:



| |  | Persuasive evidence of an arrangement exists,
| | - | ---------------------------------------------



| |  | Delivery has occurred or services have been rendered,
| | - | -----------------------------------------------------



| |  | The sellers price to the buyer is fixed or determinable, and
| | - | -------------------------------------------------------------



| |  | Collectibility is reasonably assured.
| | - | -------------------------------------



CAT believes it is following the guidance of SAB 104.



In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities - an interpretation of ARB No. 51
(FIN 46). The interpretation addresses consolidation by business enterprises of Variable Interest Entities (VIEs) that either, do not have sufficient equity investment at risk to permit the entity to finance its activities
without additional subordinated financial support, or the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires disclosure of VIEs in financial statements issued after January 31, 2003, if it is
reasonably possible that as of the transition date, the enterprise will be the primary beneficiary of an existing VIE that will require consolidation or, the enterprise will hold a significant



53



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variable interest in, or have significant involvement with, an existing VIE. In December 2003, the FASB further revised FIN 46 through FASB Interpretation
No. 46R, Consolidation of Variable Interest Entities (FIN 46R). FIN 46R changes the effective date of FIN 46 for certain entities and makes other significant changes to FIN 46 based on implementation issues that arose during
2003. The adoption of FIN 46R did not have any impact on the consolidated financial statements.



In March 2004, the Emerging Issues Task Force reached a consensus on a three-step impairment model in Issue No. 03-1 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1). The three-step model must be applied on a security-by-security basis as follows: Step 1: Determine whether an investment is impaired; Step 2:
Evaluate whether an impairment is other than- temporary. For equity securities an impairment is presumed to be other-than temporary unless the investor has the ability and intent to hold the investment for a reasonable period of time sufficient for
a forecasted market price recovery of the investment, and evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary; Step 3: If the impairment is other-than-temporary,
recognize an impairment loss equal to the difference between the investments cost and its fair value. The effective date for implementation of portions of EITF 03-1 has been delayed as of September 30, 2004. The adoption of EITF 03-1 is not
expected to have any impact on the CATs financial statements.



ITEM 6
-DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



| | A. | Directors and Senior Management
| | -- | -------------------------------



The information set forth in the Annual Report under the headings Board of Directors, Senior Executives and Scientific
Advisory Board is incorporated herein by reference.



| | B. | 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 is incorporated herein
by reference. In addition, please see Note 18 to the financial statements included in this Form 20-F.



| | C. | Board Practices
| | -- | ---------------



The information set forth in the Annual Report under the headings 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 is
incorporated herein by reference.



| | D. | 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.



| | E. | 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 is incorporated herein by reference. Further information regarding share ownership can be found in



54



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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 November 25, 2004, 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
|Genzyme Corporation                    |  | 4,607,982            |  | 11.21                             
|Wellington Management Company LLP      |  | 3,777,462            |  | 9.19                              
|OrbiMed Advisors (US)                  |  | 3,010,300            |  | 7.32                              
|Invesco Perpetual (UK)                 |  | 2,655,047            |  | 6.46                              
|Deutsche Asset Management Limited (UK) |  | 2,301,191            |  | 5.60                              
|Legal & General Investment Management  |  | 1,568,446            |  | 3.82                              
|The Goldman Sachs Group Inc.           |  | 1,632,709            |  | 3.97                              



On June 30, 2004,
Human Genome Sciences, Inc. disclosed that it no longer was required to report to CAT, pursuant to sections 198-212 of the Companies Act 1985, the amount of its holdings in CATs shares.



On November 26, 2004, November 29, 2004 and December 14, 2004, 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 and 15.4, 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.



Changes in Holdings



As of November 25, 2004, Genzyme Corporation had holdings of 4,607,982 shares. Genzyme Corporation had holdings of 307,982
as of October 2000.



55



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As of November 25, 2004, Wellington Management Company LLP had holdings of 3,777,462 shares. Wellington
Management Company LLC had holdings of 1,150,053 shares as of February 6, 2003.



As of November 25, 2004, OrbiMed Advisors (US) had holdings of 3,010,300 shares. OrbiMed Advisors (US) had holdings of 2,752,700 shares as of September 11, 2003.



As of November 25, 2004, Deutsche Asset Management Limited (UK) had holdings
of 2,301,191 shares. Deutsche Asset Management Limited (UK) had holdings of 2,917,406 shares as of November 15, 2003.



Related Party Transactions



Please see Item 4.B under the headings Collaborative Arrangements  AstraZeneca and Collaborative Arrangements 
Genzyme.



ITEM 8 -FINANCIAL INFORMATION



Please see Item 18.



Legal Proceedings



CATs entitlement to royalties in relation to sales of HUMIRA is governed by an agreement dated April 1, 1995 between
Cambridge Antibody Technology Limited and Knoll Aktiengesellschaft. The agreement allows for offset, in certain circumstances, of royalties due to third parties against royalties of 5%-6% (depending on levels of sales) due to CAT, subject to a
minimum royalty level of 2%. Abbott indicated to CAT in March 2003 its wish to initiate discussions regarding the applicability of these royalty offset provisions for HUMIRA. CAT strongly believes that the offset provisions do not apply and is
seeking an outcome consistent with that position. Following unsuccessful efforts to resolve the matter with Abbott, in November 2003 CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in London.
The trial concluded on December 10, 2004 and it is expected that a judgement will be handed down by the end of the first quarter of the 2005 calendar year. It is impossible to predict with any certainty the eventual outcome of legal proceedings and
there can be no assurance that the Company will be successful in its claim. An adverse result may impact on the value of the Company (and its future revenues).



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 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.



CAT was named, together with numerous other defendants who practice or rely on antibody Phage Display to discover
antibodies, as a defendant in a complaint dated August 14, 2003 filed by Dr. George Pieczenik in the U.S. Federal District Court for the Southern District of New York. The complaint, among other allegations, purported to assert claims of patent
infringement with respect to a patent issued on August 12, 2003 to Dr. Pieczenik. Dr. Pieczenik sought a permanent injunction against the commercial use and licensing of unspecified patents and for damages for past infringements. The complaint was
subsequently amended to include claims against the U.S. Patent and Trademark Office and the FDA seeking re-examination and other remedies regarding certain patents held by the defendants, including CAT and MRC. All of Dr. Pieczeniks claims
against CAT were dismissed by the District Court on March 16, 2004 for lack of personal jurisdiction over CAT. The claims against the other defendants were dismissed in a series of separate orders. Dr. Pieczenik has filed an appeal in the U.S. Court
of Appeals for the Federal Circuit relating to certain orders entered concerning other defendants, including the U.S. Patent and Trademark Office, but has not appealed against the order dismissing his claims against CAT. The appeal is currently
pending.



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.



|                    |  |           |  |          |  |       |  |      
|------------------- |  | --------- |  | -------- |  | ----- |  | -----
|                    |  | HighU.S.$ |  | LowU.S.$ |  | High£ |  | Low £
|Financial year 2000 |  |           |  |          |  |       |  |      
|                    |  |           |  |         
|First quarter       |  |           |  |          |  | 49.00 |  | 5.85 
|Second quarter      |  |           |  |          |  | 29.25 |  | 18.25
|Third quarter       |  |           |  |          |  | 30.25 |  | 18.25
|Fourth quarter      |  |           |  |          |  | 41.50 |  | 29.00
|                    |  |           |  |         
|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 
|June 2004           |  | 9.59  |  | 8.55  |  | 5.30  |  | 4.80 
|July 2004           |  | 9.30  |  | 9.13  |  | 5.13  |  | 4.85 
|August 2004         |  | 9.10  |  | 8.33  |  | 4.99  |  | 4.53 
|September 2004      |  | 10.88 |  | 8.50  |  | 6.24  |  | 4.70 
|October 2004        |  | 12.33 |  | 10.82 |  | 6.74  |  | 6.15 
|November 2004       |  | 12.75 |  | 10.46 |  | 6.90  |  | 5.64 



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ITEM 10 -ADDITIONAL INFORMATION



| | A. | Share Capital
| | -- | -------------



Not applicable.



| | B. | 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.



| | C. | Material Contracts
| | -- | ------------------



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



| | D. | Exchange Controls
| | -- | -----------------



None.



57



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| | E. | 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. You should consult your own tax advisors as to the particular tax consequences to you under United Kingdom, United States federal, state and local and other foreign laws, of the
acquisition, ownership and disposition of shares or ADRs.



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. A new 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.



You should
consult your 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.



58



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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 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 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 an enterprise, or
| | - | ---------------------------------------------------------------------------------------



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



The estate 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.



59



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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.



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



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 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 U.S. Internal Revenue 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 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.



60



---

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 U.S. Internal Revenue 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.



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, for the 2004 financial
year CAT believes that it no longer is a PFIC.



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



61



---

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



In any year that CAT is a PFIC (including those shareholders who held their shares or ADRs in 2003), 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



| | F. | Dividends and Paying Agents
| | -- | ---------------------------



Not applicable.



62



---

| | G. | Statement by Experts
| | -- | --------------------



Not applicable.



| | H. | Documents on Display
| | -- | --------------------



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



| | I. | 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.



PART II



ITEM 13 -DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



(a) 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.



(b) 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 the 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, 2004, the Companys disclosure controls and procedures are effective. There were some refinements in the Companys internal control over financial reporting that occurred during the
2004 financial year. It is believed that these will result in enhancements to the Companys internal control over financial reporting.



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.



63



---

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:



|              |  |            |  |           
|------------- |  | ---------- |  | ----------
|              |  | 2004 £000 |  | 2003 £000
|Audit         |  | 39         |  | 35        
|Audit related |  | 45         |  | 384       
|Tax           |  |           |  |          
|Other         |  |           |  |          
|              |  |            |  |           
|              |  | 84         |  | 419       
|              |  |            |  |           



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



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, reporting accountant work and, in 2003, in connection with the filing of a shelf registration.



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.



PART III



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.



64



---

Report of Independent Registered Public Accountants



We have audited the accompanying consolidated balance sheets of Cambridge Antibody Technology Group plc as at September 30, 2004 and 2003,
and the related consolidated profit and loss accounts, the consolidated cash flow statements and the consolidated statements of total recognised gains and losses for each of the three years in the period ended September 30, 2004, 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 auditing standards generally accepted by the
Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cambridge Antibody Technology Group plc as at
September 30, 2004 and 2003 and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2004 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 29 to the consolidated financial statements.



Deloitte & Touche LLP

Cambridge, England.

21 November 2004



F-1



---

Accounts & Notes| Consolidated profit and loss account



|                                                            |  |       |  |            |   |  |            |   |  |            |  
|----------------------------------------------------------- |  | ----- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|For the year ended 30 September 2004                        |  | Notes |  | 2004£000  |   |  | 2003£000  |   |  | 2002£000  |  
|Turnover                                                    |  | 2     |  | 15,925     |   |  | 8,743      |   |  | 9,471      |  
|Direct costs                                                |  |       |  | (3,023     | ) |  | (690       | ) |  | (80        | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Gross profit                                                |  |       |  | 12,902     |   |  | 8,053      |   |  | 9,391      |  
|Research and development expenses                           |  |       |  | (44,125    | ) |  | (44,981    | ) |  | (31,307    | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Drug Royalty Corporation transaction costs                  |  | 3     |  |           |   |  |           |   |  | (7,913     | )
|Other general and administration expenses                   |  | 4     |  | (10,969    | ) |  | (9,196     | ) |  | (8,321     | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|General and administration expenses                         |  |       |  | (10,969    | ) |  | (9,196     | ) |  | (16,234    | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Operating loss                                              |  |       |  | (42,192    | ) |  | (46,124    | ) |  | (38,150    | )
|Finance income (net)                                        |  | 6     |  | 4,130      |   |  | 4,360      |   |  | 6,386      |  
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Loss on ordinary activities before taxation                 |  | 5     |  | (38,062    | ) |  | (41,764    | ) |  | (31,764    | )
|Taxation on loss on ordinary activities                     |  | 8     |  | (64        | ) |  | 2,573      |   |  | 3,557      |  
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Loss for the financial year                                 |  | 19    |  | (38,126    | ) |  | (39,191    | ) |  | (28,207    | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Loss per share  basic and diluted (pence)                  |  | 9     |  | 93.3       | p |  | 107.5      | p |  | 78.7       | p
|Shares used in calculating net loss per share (number)      |  | 9     |  | 40,866,684 |   |  | 36,440,993 |   |  | 35,828,446 |  
|The losses for all years arise from continuing operations.  |  |       |  |            |   |  |            |   |  |            |  
|                                                            |  |       |  |           
|Consolidated statement of total recognised gains and losses |  |       |  |            |   |  |            |   |  |            |  
|For the year ended 30 September 2004                        |  |       |  | 2004£000  |   |  | 2003£000  |   |  | 2002£000  |  
|Loss for the financial year                                 |  |       |  | (38,126    | ) |  | (39,191    | ) |  | (28,207    | )
|Gain on foreign exchange translation                        |  |       |  | 1,099      |   |  | 606        |   |  | 96         |  
|                                                            |  |       |  |            |   |  |            |   |  |            |  
|Total recognised losses relating to the year                |  |       |  | (37,027    | ) |  | (38,585    | ) |  | (28,111    | )
|                                                            |  |       |  |            |   |  |            |   |  |            |  



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 2004                         |  | Notes |  | 2004£000 |   |  | 2003£000 |  
|                                             |  |       | 
|Fixed assets                                 |  |       |  |           |   |  |           |  
|Intangible assets                            |  | 10    |  | 5,832     |   |  | 6,883     |  
|Tangible assets                              |  | 11    |  | 12,362    |   |  | 14,366    |  
|Investments                                  |  | 12    |  | 2,942     |   |  | 3,373     |  
|                                             |  |       |  |           |   |  |           |  
|                                             |  |       |  | 21,136    |   |  | 24,622    |  
|                                             |  |       | 
|Current assets                               |  |       |  |           |   |  |           |  
|Debtors                                      |  | 13    |  | 4,460     |   |  | 4,526     |  
|Short term investments                       |  | 14    |  | 93,061    |   |  | 108,347   |  
|Cash at bank and in hand                     |  |       |  | 2,678     |   |  | 1,056     |  
|                                             |  |       |  |           |   |  |           |  
|                                             |  |       |  | 100,199   |   |  | 113,929   |  
|                                             |  |       | 
|Creditors                                    |  |       |  |           |   |  |           |  
|Amounts falling due within one year          |  | 15    |  | (15,603   | ) |  | (12,657   | )
|                                             |  |       |  |           |   |  |           |  
|Net current assets                           |  |       |  | 84,596    |   |  | 101,272   |  
|                                             |  |       |  |           |   |  |           |  
|Total assets less current liabilities        |  |       |  | 105,732   |   |  | 125,894   |  
|                                             |  |       | 
|Creditors                                    |  |       |  |           |   |  |           |  
|Amounts falling due after more than one year |  | 16    |  | (20,650   | ) |  | (18,152   | )
|                                             |  |       |  |           |   |  |           |  
|Net assets                                   |  |       |  | 85,082    |   |  | 107,742   |  
|                                             |  |       |  |           |   |  |           |  
|                                             |  |       | 
|Capital and reserves                         |  |       |  |           |   |  |           |  
|Called-up share capital                      |  | 18    |  | 4,111     |   |  | 3,834     |  
|Share premium account                        |  | 18    |  | 226,829   |   |  | 212,883   |  
|Other reserve                                |  | 19    |  | 13,456    |   |  | 13,456    |  
|Profit and loss account                      |  | 19    |  | (159,314  | ) |  | (122,431  | )
|                                             |  |       |  |           |   |  |           |  
|Shareholders funds  all equity             |  | 20    |  | 85,082    |   |  | 107,742   |  
|                                             |  |       |  |           |   |  |           |  



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



F-3



---

Accounts & Notes| Company balance sheet



|                                      |  |       |  |           |   |  |           |  
|------------------------------------- |  | ----- |  | --------- | - |  | --------- | -
|At 30 September 2004                  |  | Notes |  | 2004£000 |   |  | 2003£000 |  
|                                      |  |       | 
|Fixed assets                          |  |       |  |           |   |  |           |  
|Investments                           |  | 12    |  | 177,057   |   |  | 101,456   |  
|                                      |  |       |  |           |   |  |           |  
|                                      |  |       | 
|Current assets                        |  |       |  |           |   |  |           |  
|Debtors                               |  | 13    |  | 8,357     |   |  | 32,181    |  
|Short term investments                |  | 14    |  | 92,559    |   |  | 106,501   |  
|Cash at bank and in hand              |  |       |  | 11        |   |  | 4         |  
|                                      |  |       |  |           |   |  |           |  
|                                      |  |       |  | 100,927   |   |  | 138,686   |  
|                                      |  |       | 
|Creditors                             |  |       |  |           |   |  |           |  
|Amounts falling due within one year   |  | 15    |  | (21,205   | ) |  | (247      | )
|                                      |  |       |  |           |   |  |           |  
|Net current assets                    |  |       |  | 79,722    |   |  | 138,439   |  
|                                      |  |       |  |           |   |  |           |  
|Total assets less current liabilities |  |       |  | 256,779   |   |  | 239,895   |  
|                                      |  |       |  |           |   |  |           |  
|Net assets                            |  |       |  | 256,779   |   |  | 239,895   |  
|                                      |  |       |  |           |   |  |           |  
|                                      |  |       | 
|Capital and reserves                  |  |       |  |           |   |  |           |  
|Called-up share capital               |  | 18    |  | 4,111     |   |  | 3,834     |  
|Share premium account                 |  | 18    |  | 226,829   |   |  | 212,883   |  
|Profit and loss account               |  | 19    |  | 25,839    |   |  | 23,178    |  
|                                      |  |       |  |           |   |  |           |  
|Shareholders funds  all equity      |  |       |  | 256,779   |   |  | 239,895   |  
|                                      |  |       |  |           |   |  |           |  



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



|                             
|-----------------------------
|Signed on behalf of the Board
|                             
|John Aston                   
|Director                     
|21 November 2004             



F-4



---

Consolidated cash flow statement



|                                                                     |  |       |  |            |   |  |           |   |  |           |  
|-------------------------------------------------------------------- |  | ----- |  | ---------- | - |  | --------- | - |  | --------- | -
|For the year ended 30 September 2004                                 |  | Notes |  | 2004 £000 |   |  | 2003£000 |   |  | 2002£000 |  
|Net cash outflow from operating activities                           |  | 21    |  | (31,067    | ) |  | (35,819   | ) |  | (26,808   | )
|Returns on investments and servicing of finance                      |  | 22    |  | 4,217      |   |  | 5,049     |   |  | 7,558     |  
|Taxation                                                             |  | 22    |  | (64        | ) |  | 5,210     |   |  | 920       |  
|Capital expenditure and financial investment                         |  | 22    |  | (1,026     | ) |  | (8,082    | ) |  | (9,961    | )
|                                                                     |  |       |  |            |   |  |           |   |  |           |  
|Net cash outflow before management of liquid resources and financing |  |       |  | (27,940    | ) |  | (33,642   | ) |  | (28,291   | )
|Management of liquid resources                                       |  | 22    |  | 15,357     |   |  | 18,778    |   |  | 29,534    |  
|Financing                                                            |  | 22    |  | 13,875     |   |  | 11,730    |   |  | 1,448     |  
|                                                                     |  |       |  |            |   |  |           |   |  |           |  
|Increase/(decrease) in cash                                          |  | 23    |  | 1,292      |   |  | (3,134    | ) |  | 2,691     |  
|                                                                     |  |       |  |            |   |  |           |   |  |           |  



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





---

Accounts & Notes|Notes to the financial statements



1 Description of business and accounting policies



Cambridge Antibody Technology Group plc (the Company) is the holding company of a group of
biotechnology companies based in the United Kingdom. The Company and its subsidiaries (the Group) use an advanced platform technology 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, exploiting the characteristics of antibodies both to discover and validate new disease targets and to engineer human monoclonal antibodies as treatments for human
diseases.



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 Abbott, Wyeth Research, Pfizer, HGSI, Genzyme, Amgen, Amrad, Elan, Chugai and Merck. The Groups collaborative agreements may cover research activities or product development or both.



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 £2,661,000 (2003: £2,363,000). 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.



Purchased rightsUnder an agreement with Drug Royalty Corporation
(DRC) the Group received a payment of £1.5 million in 1994 in return for rights to a percentage of revenues (and certain other payments) received by the Group over a period terminating in 2009. The Groups accounting policy is that the
payment be deferred and recognised ratably over the period for which rights were purchased. On 2 May 2002 the Group bought out this royalty obligation with the issue of CAT shares to DRC. The remaining balance of deferred income was released in the
year ended 30 September 2002.



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 five 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 & Notes | Notes to the financial statements cont.



1 Accounting policiescont.



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 Turnover and loss on
ordinary activities before taxation



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.



|                                                                                        |  |            |   |  |            |   |  |            |  
|--------------------------------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                                                        |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000 |  
|Total turnover                                                                          |  | 18,194     |   |  | 11,417     |   |  | 16,891     |  
|Less: intra-Group eliminations                                                          |  | (2,269     | ) |  | (2,674     | ) |  | (7,420     | )
|                                                                                        |  |            |   |  |            |   |  |            |  
|Consolidated turnover                                                                   |  | 15,925     |   |  | 8,743      |   |  | 9,471      |  
|                                                                                        |  |            |   |  |            |   |  |            |  
|Consolidated turnover was generated from customers in the following geographical areas: |  |            |   |  |            |   |  |            |  
|                                                                                        |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000 |  
|Europe                                                                                  |  | 718        |   |  | 251        |   |  | 135        |  
|United States of America                                                                |  | 6,474      |   |  | 6,665      |   |  | 8,674      |  
|Rest of the World                                                                       |  | 8,733      |   |  | 1,827      |   |  | 662        |  
|                                                                                        |  |            |   |  |            |   |  |            |  
|                                                                                        |  | 15,925     |   |  | 8,743      |   |  | 9,471      |  
|                                                                                        |  |            |   |  |            |   |  |            |  



Net assets of £509,000
(excluding creditors eliminated on consolidation of £20,176,000) (2003: net assets of £388,000, excluding creditors eliminated on consolidation of £15,385,000) and total assets of £509,000 (2003: £517,000) are held in
the United States of America. A net loss of £5,770,000 (2003: £6,044,000) arose in the United States of America.



F-8



---

2 Turnover and loss on ordinary activities before taxationcont.



Consolidated turnover by type:



|                       |  |            |  |            |  |           
|---------------------- |  | ---------- |  | ---------- |  | ----------
|                       |  | 2004 £000 |  | 2003 £000 |  | 2002 £000
|Licence fees           |  | 4,601      |  | 2,590      |  | 1,676     
|Technical milestones   |  | 1,610      |  | 225        |  | 35        
|Clinical milestones    |  | 1,091      |  | 1,850      |  | 1,396     
|Contract research fees |  | 1,829      |  | 3,904      |  | 5,611     
|Royalties              |  | 6,328      |  |           |  |          
|Other                  |  | 466        |  | 174        |  | 753       
|                       |  |            |  |            |  |           
|Total                  |  | 15,925     |  | 8,743      |  | 9,471     
|                       |  |            |  |            |  |           



During the financial years ended 30
September 2004, 2003 and 2002 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 
|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 
|                                                         |  |    |  |       
|2002 Customer contributing greatest  % to revenue        |  | 36 |  | 3,424 
|2002 Customer contributing second greatest  % to revenue |  | 31 |  | 2,954 
|                                                         |  |    |  |       
|Total                                                    |  | 67 |  | 6,378 
|                                                         |  |    |  |       



As at 30 September 2004 the three
customers shown above constituted 36% of the Groups trade receivables. As at 30 September 2003, the three customers shown above constituted 100% 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.



3 Drug Royalty Corporation transaction costs



General and administration expenses include £7.9 million of costs incurred in the year
ended 30 September 2002 relating to the two transactions entered into with Drug Royalty Corporation Inc. (DRC) during the year (other periods: none).



In January 2002, the Group announced a recommended offer for the whole of DRC. A competing offer was made by Inwest Investments Ltd of Canada which was accepted in April
2002.



Under an agreement with DRC, the Group received a payment of £1.5
million in 1994 in return for rights to a percentage of revenues (and certain other payments) received by the Group over a period terminating in 2009. On 2 May 2002, the Group bought out this royalty obligation to DRC for consideration of £6.1
million (CAD$14 million) with the issue of 463,818 CAT shares to DRC. The remaining balance of £0.6 million of deferred income was all released to turnover in 2002.



The professional fees incurred in the Groups bid and royalty buy-back were £1.8 million.



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.



F-9



---

Accounts & Notes | Notes to the financial statements cont.



5 Loss on ordinary activities before taxation



|                                                                                      |  |            |   |  |            |  |            |   |  | 
|------------------------------------------------------------------------------------- |  | ---------- | - |  | ---------- |  | ---------- | - |  | 
|                                                                                      |  | 2004 £000 |   |  | 2003 £000 |  | 2002 £000 |  
|The loss on ordinary activities before taxation is stated after charging (crediting): |  |            |   |  |            |  |            |  
|Depreciation and amounts written off tangible fixed assets:                           |  |            |   |  |            |  |            |  
|   owned assets                                                                      |  | 2,488      |   |  | 2,714      |  | 2,617      |  
|   leased assets                                                                     |  | 338        |   |  | 275        |  |           |  
|Amortisation of intangible fixed assets                                               |  | 1,051      |   |  | 1,050      |  | 882        |  
|Auditors remuneration    audit Deloitte & Touche LLP                                |  | 39         |   |  | 35         |  | 35         |  
|   audit related fees Deloitte & Touche
LLP                                          |  | 45         |   |  | 384        |  | 19         |  
|   other Deloitte & Touche LLP                                                       |  |           |   |  |           |  | 9          |  
|   other Arthur Andersen                                                             |  |           |   |  |           |  | 287        |  
|Foreign exchange loss                                                                 |  | 1,089      |   |  | 835        |  | 192        |  
|(Profit)/loss on disposal of tangible fixed assets                                    |  | (3         | ) |  | 94         |  |           |  
|Profit on disposal of Denzyme ApS                                                     |  |           |   |  |           |  | (2         | )
|Operating lease rentals:                                                              |  |            |   |  |            |  |            |  
|   plant and machinery                                                               |  | 56         |   |  | 46         |  | 5          |  
|   other operating leases                                                            |  | 2,107      |   |  | 1,781      |  | 874        |  
|Allocations under equity participation schemes                                        |  | 454        |   |  | 521        |  | 607        |  
|                                                                                      |  |            |   |  |            |  |            |   |  | 



Arthur Andersen resigned as auditors
to the Group on 17 May 2002 and were replaced by Deloitte & Touche. 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.



The Group recharged audit fees of £10,000 to the Company (2003: £10,000).



6 Finance income (net)



|                                   |  |            |  |            |  |           
|---------------------------------- |  | ---------- |  | ---------- |  | ----------
|                                   |  | 2004 £000 |  | 2003 £000 |  | 2002 £000
|Interest receivable                |  | 4,205      |  | 4,416      |  | 6,386     
|Interest payable on finance leases |  | (75)       |  | (56)       |  |          
|                                   |  |            |  |            |  |           
|                                   |  | 4,130      |  | 4,360      |  | 6,386     
|                                   |  |            |  |            |  |           



7 Staff costs



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



|                                                                         |  |        |  |        |  |        |  
|------------------------------------------------------------------------ |  | ------ |  | ------ |  | ------ | -
|                                                                         |  | 2004   |  | 2003   |  | 2002   |  
|Management and administration                                            |  | 52     |  | 47     |  | 39     |  
|Research and development                                                 |  | 231    |  | 249    |  | 235    |  
|                                                                         |  |        |  |        |  |        |  
|                                                                         |  | 283    |  | 296    |  | 274    |  
|                                                                         |  |        |  |        |  |        |  
|                                                                         |  |        | 
|                                                                         |  | £000  |  | £000  |  | £000  |  
|Their aggregate remuneration comprised:                                  |  |        |  |        |  |        |  
|Wages and salaries(i)                                                    |  | 11,657 |  | 11,669 |  | 9,771  |  
|Social security costs    charge/(credit) provided on unapproved options |  | 1      |  | 13     |  | (248   | )
|   on wages and
salaries                                                |  | 1,253  |  | 1,190  |  | 970    |  
|Other pension costs                                                      |  | 1,009  |  | 988    |  | 875    |  
|                                                                         |  |        |  |        |  |        |  
|                                                                         |  | 13,920 |  | 13,860 |  | 11,368 |  
|                                                                         |  |        |  |        |  |        |  



|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-10



---

7 Staff costscont.



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 £6.24. 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 £19,000.



|                                    |  |            |   |  |            |   |  |           
|----------------------------------- |  | ---------- | - |  | ---------- | - |  | ----------
|8 Taxation                          |  |            |   |  |            |   |  |           
|                                    |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000
|Research and development tax credit |  |           |   |  | 3,148      |   |  | 3,557     
|Overseas taxation                   |  | (64        | ) |  | (575       | ) |  |          
|                                    |  |            |   |  |            |   |  |           
|                                    |  | (64        | ) |  | 2,573      |   |  | 3,557     
|                                    |  |            |   |  |            |   |  |           



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 (year ended 30 September 2002 claims of £920,000 and £2,637,000
for the years ended 30 September 2000 and 30 September 2001 respectively).



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% (2003: 30%; 2002: 30%). The differences are explained below:



|                                                                            |  |           |   |  |           |   |  |           |  
|--------------------------------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                                            |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Loss on ordinary activities before tax                                      |  | (38,062   | ) |  | (41,764   | ) |  | (31,764   | )
|                                                                            |  |           |   |  |           |   |  |           |  
|Tax at 30% thereon                                                          |  | (11,419   | ) |  | (12,530   | ) |  | (9,529    | )
|Effects of:                                                                 |  |           |   |  |           |   |  |           |  
|Increase in losses carried forward                                          |  | 10,290    |   |  | 14,212    |   |  | 11,400    |  
|Expenses not deductible for tax purposes                                    |  | 806       |   |  | (438      | ) |  | (1,041    | )
|Capital allowances in deficit/(excess) of depreciation                      |  | 317       |   |  | (1,186    | ) |  | (888      | )
|Utilisation of tax losses in respect of research and development tax credit |  |          |   |  | (3,148    | ) |  | (3,557    | )
|Movement in short term timing differences                                   |  | 6         |   |  | (58       | ) |  | 58        |  
|                                                                            |  |           |   |  |           |   |  |           |  
|                                                                            |  |          |   |  | (3,148    | ) |  | (3,557    | )
|                                                                            |  |           |   |  |           |   |  |           |  
|Overseas taxation                                                           |  | 64        |   |  | 575       |   |  |          |  
|                                                                            |  |           |   |  |           |   |  |           |  
|                                                                            |  | 64        |   |  | (2,573    | ) |  | (3,557    | )
|                                                                            |  |           |   |  |           |   |  |           |  



F-11



---

Accounts & Notes|Notes to the financial statements cont.



8 Taxation cont.



|                                    |  |           |   |  |           |  
|----------------------------------- |  | --------- | - |  | --------- | -
|Analysis of deferred tax balances:  |  |           |   |  |           |  
|                                    |  | 2004£000 |   |  | 2003£000 |  
|Short term timing differences       |  | (168      | ) |  |          |  
|Accelerated capital allowances      |  | 2,315     |   |  | 2,354     |  
|Tax losses available                |  | (39,272   | ) |  | (30,154   | )
|                                    |  |           |   |  |           |  
|Total unprovided deferred tax asset |  | (37,125   | ) |  | (27,800   | )
|                                    |  |           |   |  |           |  



At 30 September 2004 the Group had tax
losses of approximately £131 million (2003: £100 million, 2002: £79 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 £37 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.



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 2004, 2003 and 2002 there were respectively 352,176, 289,640 and 867,316 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 £38,126,000 (2003: £39,191,000, 2002: £28,207,000) and a
weighted average number of ordinary shares of 40,866,684 (2003: 36,440,993, 2002: 35,828,446).



10 Intangible fixed assets



|                                        |  |               |  |              |  |           
|--------------------------------------- |  | ------------- |  | ------------ |  | ----------
|Group                                   |  | Licences£000 |  | Patents£000 |  | Total£000
|Cost:                                   |  |               |  |              |  |           
|At 1 October 2003 and 30 September 2004 |  | 4,740         |  | 5,265        |  | 10,005    
|                                        |  |               |  |              |  |           
|Amortisation:                           |  |               |  |              |  |           
|At 1 October 2003                       |  | 1,186         |  | 1,936        |  | 3,122     
|Charge for the year                     |  | 678           |  | 373          |  | 1,051     
|                                        |  |               |  |              |  |           
|At 30 September 2004                    |  | 1,864         |  | 2,309        |  | 4,173     
|                                        |  |               |  |              |  |           
|Net book value:                         |  |               |  |              |  |           
|At 30 September 2004                    |  | 2,876         |  | 2,956        |  | 5,832     
|                                        |  |               |  |              |  |           
|At 30 September 2003                    |  | 3,554         |  | 3,329        |  | 6,883     
|                                        |  |               |  |              |  |           



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 2005 to 2009 inclusive is £1,051,000.



F-12



---

|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|----------------------------------------- |  | ------------------------------ |  | ------------------------ |  | ------------------------ | - |  | -------------------- | - |  | ------------------ |  | ---------- | -
|11 Tangible fixed assets                  |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|Group                                     |  | Freeholdland andbuildings£000 |  | Fixturesandfittings£000 |  | Laboratoryequipment£000 |   |  | Officeequipment£000 |   |  | Motorvehicles£000 |  | Total£000 |  
|Cost:                                     |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 1 October 2003                         |  | 785                            |  | 11,595                   |  | 12,440                   |   |  | 2,059                |   |  | 20                 |  | 26,899     |  
|Additions                                 |  |                               |  | 197                      |  | 460                      |   |  | 168                  |   |  |                   |  | 825        |  
|Disposals                                 |  |                               |  |                         |  | (38                      | ) |  | (11                  | ) |  |                   |  | (49        | )
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2004                      |  | 785                            |  | 11,792                   |  | 12,862                   |   |  | 2,216                |   |  | 20                 |  | 27,675     |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|Depreciation:                             |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 1 October 2003                         |  | 237                            |  | 3,183                    |  | 8,171                    |   |  | 925                  |   |  | 17                 |  | 12,533     |  
|Charge for the year                       |  | 49                             |  | 541                      |  | 1,820                    |   |  | 413                  |   |  | 3                  |  | 2,826      |  
|Eliminated in respect of disposals        |  |                               |  |                         |  | (38                      | ) |  | (8                   | ) |  |                   |  | (46        | )
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2004                      |  | 286                            |  | 3,724                    |  | 9,953                    |   |  | 1,330                |   |  | 20                 |  | 15,313     |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|Net book value:                           |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2004                      |  | 499                            |  | 8,068                    |  | 2,909                    |   |  | 886                  |   |  |                   |  | 12,362     |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2003                      |  | 548                            |  | 8,412                    |  | 4,269                    |   |  | 1,134                |   |  | 3                  |  | 14,366     |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|Leased assets included above:             |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|Net book value:                           |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2004                      |  |                               |  | 45                       |  | 400                      |   |  | 324                  |   |  |                   |  | 769        |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|At 30 September 2003                      |  |                               |  | 48                       |  | 583                      |   |  | 476                  |   |  |                   |  | 1,107      |  
|                                          |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  
|The Company has no tangible fixed assets. |  |                                |  |                          |  |                          |   |  |                      |   |  |                    |  |            |  



|                                             |  |                            |   |  |                                   
|-------------------------------------------- |  | -------------------------- | - |  | ----------------------------------
|12 Fixed asset investments                   |  |                            |   |  |                                   
|                                             |  |                           
|                                             |  | GroupOtherinvestments£000 |   |  | CompanySubsidiaryundertakings£000
|Cost:                                        |  |                            |   |  |                                   
|At 1 October 2003                            |  | 3,373                      |   |  | 101,456                           
|Additions(i)                                 |  |                           |   |  | 75,601                            
|Transferred to current asset investments(ii) |  | (216                       | ) |  |                                  
|                                             |  |                            |   |  |                                   
|At 30 September 2004                         |  | 3,157                      |   |  | 177,057                           
|                                             |  |                            |   |  |                                   
|Provisions for impairment:                   |  |                            |   |  |                                   
|Charge in year and at 30 September 2004      |  | 215                        |   |  |                                  
|                                             |  |                            |   |  |                                   
|Net book value:                              |  |                            |   |  |                                   
|At 30 September 2004                         |  | 2,942                      |   |  | 177,057                           
|                                             |  |                            |   |  |                                   
|At 30 September 2003                         |  | 3,373                      |   |  | 101,456                           
|                                             |  |                            |   |  |                                   



|(i) | During the year, the Company subscribed for additional new ordinary shares in Cambridge Antibody Technology Limited to provide that company with working capital.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | 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 and Stratagene. The amounts due
to The Scripps Research Institute and Stratagene have been included within current asset investments. Shares payable to Medical Research Council have been reclassified as current asset investments during the year.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 2004 was £8,436,000 (30 September 2003: £3,264,000).



F-13



---

Accounts & Notes | Notes to the financial statements cont.



12 Fixed asset investments cont.



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



|                                                                                                      |  |                                       |  |                          |  |                                   |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------------------- |  | ------------------------ |  | --------------------------------- | -
|                                                                                                      |  | Country of incorporationand operation |  | Principalactivity        |  | Percentage ofordinary 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                               | %
|CAT Group Employees Trustees Limited, share scheme trust company, was dissolved on 17 February 2004. | 



13 Debtors



|                                                           |  |                |  |                |  |                  |  |                 
|---------------------------------------------------------- |  | -------------- |  | -------------- |  | ---------------- |  | ----------------
|                                                           |  | Group2004£000 |  | Group2003£000 |  | Company2004£000 |  | Company2003£000
|Due within one year:                                       |  |                |  |                |  |                  |  |                 
|Trade debtors                                              |  | 405            |  | 971            |  |                 |  |                
|Due from subsidiary undertakings                           |  |               |  |               |  | 7,588            |  | 31,337          
|Other debtors                                              |  | 1,051          |  | 1,030          |  | 19               |  | 4               
|Prepayments and accrued income(i)                          |  | 3,004          |  | 2,525          |  | 750              |  | 840             
|                                                           |  |                |  |                |  |                  |  |                 
|                                                           |  | 4,460          |  | 4,526          |  | 8,357            |  | 32,181          
|                                                           |  |                |  |                |  |                  |  |                 
|                                                          
|(i)Includes accrued interest of £750,000 (2003: £840,000).
|                                                          
|14 Short term investments                                 
|                                                           |  | Group2004£000 |  | Group2003£000 |  | Company2004£000 |  | Company2003£000
|Liquid resources:                                          |  |                |  |                |  |                  |  |                 
|Floating rate notes                                        |  | 29,985         |  | 25,989         |  | 29,985           |  | 25,989          
|Certificates of deposit                                    |  | 49,000         |  | 80,000         |  | 49,000           |  | 80,000          
|Term deposits                                              |  | 13,574         |  | 1,927          |  | 13,574           |  | 512             
|                                                           |  |                |  |                |  |                  |  |                 
|                                                           |  | 92,559         |  | 107,916        |  | 92,559           |  | 106,501         
|Listed investments (see note 12)                           |  | 502            |  | 431            |  |                 |  |                
|                                                           |  |                |  |                |  |                  |  |                 
|                                                           |  | 93,061         |  | 108,347        |  | 92,559           |  | 106,501         
|                                                           |  |                |  |                |  |                  |  |                 
|Market value of listed investments                         |  | 1,440          |  | 445            |  |                 |  |                
|                                                           |  |                |  |                |  |                  |  |                 



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



F-14



---

15 Creditors



|                                        |  |                |  |                |  |                  |  |                 
|--------------------------------------- |  | -------------- |  | -------------- |  | ---------------- |  | ----------------
|                                        |  | Group2004£000 |  | Group2003£000 |  | Company2004£000 |  | Company2003£000
|Amounts falling due within one year:    |  |                |  |                |  |                  |  |                 
|Bank overdraft                          |  | 1,512          |  | 1,144          |  |                 |  |                
|Obligations under finance leases        |  | 376            |  | 347            |  |                 |  |                
|Trade creditors                         |  | 1,263          |  | 2,165          |  |                 |  |                
|Amounts owed to subsidiary undertakings |  |               |  |               |  | 21,175           |  |                
|Taxation and social security            |  |               |  | 342            |  |                 |  |                
|Other creditors                         |  | 504            |  | 426            |  |                 |  |                
|Accruals(i)                             |  | 6,344          |  | 3,553          |  | 30               |  | 247             
|Deferred income                         |  | 5,604          |  | 4,680          |  |                 |  |                
|                                        |  |                |  |                |  |                  |  |                 
|                                        |  | 15,603         |  | 12,657         |  | 21,205           |  | 247             
|                                        |  |                |  |                |  |                  |  |                 



|(i) | Includes accrued employee benefits of £1,159,000 and other accrued liabilities of £3,400,000 (2003: accrued employee benefits of £1,091,000 and
other accrued liabilities of £680,000).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



16 Creditors



|                                                              |  |                |  |               
|------------------------------------------------------------- |  | -------------- |  | --------------
|                                                              |  | Group2004£000 |  | Group2003£000
|Amounts falling due after more than one year:                 |  |                |  |               
|Obligations under finance leases                              |  | 444            |  | 821           
|Other creditors                                               |  |               |  | 287           
|Deferred income                                               |  | 20,206         |  | 17,044        
|                                                              |  |                |  |               
|                                                              |  | 20,650         |  | 18,152        
|                                                              |  |                |  |               
|Borrowings are repayable as follows                          |  |                |  |               
|Bank overdraft:                                               |  |                |  |               
|Due within one year or on demand (note 15)                    |  | 1,512          |  | 1,144         
|                                                              |  |                |  |               
|Finance leases:                                               |  |                |  |               
|Due within one year (note 15)                                 |  | 376            |  | 347           
|Due in more than one year but not more than two years         |  | 405            |  | 376           
|Due in more than two years but not more than five years       |  | 39             |  | 445           
|                                                              |  |                |  |               
|                                                              |  | 820            |  | 1,168         
|                                                              |  |                |  |               
|Total due within one year or on demand                        |  | 1,888          |  | 1,491         
|Total due in more than one year but not more than two years   |  | 405            |  | 376           
|Total due in more than two years but not more than five years |  | 39             |  | 445           
|                                                              |  |                |  |               
|                                                              |  | 2,332          |  | 2,312         
|                                                              |  |                |  |               



F-15



---

Accounts & 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 prudent and appropriate may enter into such transactions in future.



|                                 |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           
|-------------------------------- |  | --------------------------------- |  | ------------------------------------- |  | -------------------------------------- | - |  | --------------------------------------------------------- | - |  | ----------
|Financial assets and liabilities |  | Fixedratefinancialassets(i)£000  |  | Floatingratefinancialassets(ii)£000  |  | Fixed ratefinancialliabilities(i)£000 |   |  | Financialliabilitieson which nointerest ispaid(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    
|                                 |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           
|                                 |  |                                   |  |                                       | 
|Financial assets and liabilities |  | Fixed ratefinancialassets(i)£000 |  | Floating ratefinancialassets(ii)£000 |  | Fixed ratefinancialliabilities(i)£000 |   |  | Financialliabilities onwhich nointerest is paid(iii)£000 |   |  | Total£000
|At 30 September 2003             |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           
|Sterling assets/(liabilities)    |  | 23,000                            |  | 84,920                                |  | (1,168                                 | ) |  | (1,030                                                    | ) |  | 105,722   
|United States Dollar assets      |  |                                  |  | 936                                   |  |                                       |   |  |                                                          |   |  | 936       
|Other assets                     |  |                                  |  | 2                                     |  |                                       |   |  |                                                          |   |  | 2         
|                                 |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           
|Book value                       |  | 23,000                            |  | 85,858                                |  | (1,168                                 | ) |  | (1,030                                                    | ) |  | 106,660   
|                                 |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           
|Fair value                       |  | 22,958                            |  | 85,854                                |  | (1,168                                 | ) |  | (1,030                                                    | ) |  | 106,614   
|                                 |  |                                   |  |                                       |  |                                        |   |  |                                                           |   |  |           



|(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 £3,157,000 (2003:
£3,373,000) as fixed asset investments which are non-interest bearing. (See note 12.)



F-16



---

17 Financial instruments cont.



The weighted average return on the fixed rate financial assets was 4.5% (2003: 3.6%), which was fixed over a weighted average term of 1.5
years (2003: 1.2 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% (2003: 14.8%) which was fixed over a weighted average
term of 3.8 years (2003: 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 2004          |  |          |   |  |               |   |  |            |   |  |            |  
|Functional currency: Sterling |  | 820      |   |  |              |   |  | (395       | ) |  | 425        |  
|United States Dollar          |  |         |   |  | (7,587        | ) |  |           |   |  | (7,587     | )
|                              |  |          |   |  |               |   |  |            |   |  |            |  
|                              |  | 820      |   |  | (7,587        | ) |  | (395       | ) |  | (7,162     | )
|                              |  |          |   |  |               |   |  |            |   |  |            |  
|                              |  |          |   | 
|                              |  | USD£000 |   |  | Sterling£000 |   |  | Other£000 |   |  | Total£000 |  
|At 30 September 2003          |  |          |   |  |               |   |  |            |   |  |            |  
|Functional currency: Sterling |  | (467     | ) |  |              |   |  | 84         |   |  | (383       | )
|United States Dollar          |  |         |   |  | (4,253        | ) |  |           |   |  | (4,253     | )
|                              |  |          |   |  |               |   |  |            |   |  |            |  
|                              |  | (467     | ) |  | (4,253        | ) |  | 84         |   |  | (4,636     | )
|                              |  |          |   |  |               |   |  |            |   |  |            |  



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                                                |  | 2004£000 |  | 2003£000
|75,000,000 (2003: 50,000,000) ordinary shares of 10p each |  | 7,500     |  | 5,000    



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 2003                                                                     |  | 38,338,320               |  | 3,834                   |  | 212,883          
|Issued to the Share Incentive Plan                                                    |  | 132,019                  |  | 13                      |  | 562              
|Exercise of options                                                                   |  | 129,327                  |  | 13                      |  | 361              
|In lieu of fees(i)                                                                    |  | 10,272                   |  | 1                       |  | 43               
|To Genzyme Corporation (as part of a subscription agreement) in October 2003(ii)(iii) |  | 2,500,000                |  | 250                     |  | 12,980           
|                                                                                      |  |                          |  |                         |  |                  
|At 30 September 2004                                                                  |  | 41,109,938               |  | 4,111                   |  | 226,829          
|                                                                                      |  |                          |  |                         |  |                  



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



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



|(iii) | Shares were issued at a price of £5.32 per share, being the average closing mid-market
price on 18 September 2003.
|----- | ------------------------------------------------------------------------------------------------------------------



F-17



---

Accounts & Notes| Notes to the financial statements cont.



18 Called-up share capital and share premium cont.



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



Old Option Schemes Prior 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. All employees of the Group, including
Executive Directors, are eligible for the grant of options under both parts 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 between the third and fourth anniversaries of the date of grant. During the year, the Committee reviewed this condition for option grants of up to
1.5 times basic salary and determined that for options granted on or after 15 November 2004 this condition will only be tested on the third anniversary of grant and it has not vested on that occasion again on the fourth anniversary of grant and that
thereafter if the option has not vested that it will automatically 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, the figure which is used for CATs share price in determining
whether 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 20 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 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 1 April in the relevant financial year are eligible for the award of free shares. Partnership shares
may be purchased by employees out of their pretax 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 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. The Board has the discretion to amend this ratio if it so determines.



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, on the London Stock Exchange (or such other market or exchange on which shares may be freely bought or sold), 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. However, the Remuneration Committee has resolved that,
initially, the conditions summarised below will apply to awards.



Restricted
Awards The 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 Awards The performance condition will be based on the Companys Total Shareholder Return as compared with selected UK listed biotechnology/pharmaceutical companies (but with current market values of at least £50
million) over a three, four or five year period. The current peer group is Acambis, Antisoma, Ark Therapeutics, AstraZeneca, Axis Shield, Galen Holdings, GlaxoSmithKline, Goldshield Group, Oxford Biomedica, Phytopharm, Shire Pharmaceuticals, Skye
Pharma and Xenova. 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 Upper Quartile     |  | Pro rata between 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.



At 30 September 2004 options had been granted over ordinary shares of the Company as follows:



|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          
|----------------------------------------------------------- |  | -------------- | ----- | ------------------------- | ----------- | ----------------------- | ----------- | ----- | ---- | - | ------------- | ---------
|                                                            |  | Exercise price |       | Earliest date exercisable |             | Latest date exercisable |             | Notes |      |   | Maximumnumber
|Old schemes                                                 |  | £              | 1.28  |                           | 28 Apr 1998 |                         | 27 Apr 2005 |       |      |   |               | 25,000   
|                                                            |  | 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   | ) |               | 25,670   
|                                                            |  | £              | 5.00  |                           | 24 Mar 2000 |                         | 23 Mar 2007 |       | (i   | ) |               | 30,230   
|                                                            |  | £              | 5.58  |                           | 2 Jun 2000  |                         | 1 Jun 2007  |       | (i   | ) |               | 5,375    
|                                                            |  | £              | 5.00  |                           | 19 Dec 2000 |                         | 18 Dec 2004 |       | (i   | ) |               | 49,000   
|                                                            |  | £              | 5.00  |                           | 19 Dec 2000 |                         | 18 Dec 2007 |       | (i   | ) |               | 31,000   
|                                                            |  | £              | 5.00  |                           | 25 Jun 2001 |                         | 24 Jun 2008 |       | (i   | ) |               | 27,500   
|                                                            |  | £              | 5.00  |                           | 27 Nov 2001 |                         | 26 Nov 2008 |       | (i   | ) |               | 15,000   
|                                                            |  | £              | 2.42  |                           | 27 Nov 2001 |                         | 26 Nov 2005 |       | (i   | ) |               | 81,182   
|                                                            |  | £              | 2.42  |                           | 27 Nov 2001 |                         | 26 Nov 2008 |       | (i   | ) |               | 35,641   
|                                                            |  | £              | 2.10  |                           | 28 May 2002 |                         | 27 May 2009 |       | (i   | ) |               | 3,125    
|                                                            |  | £              | 2.87  |                           | 3 Dec 2002  |                         | 2 Dec 2006  |       | (ii  | ) |               | 223,279  
|                                                            |  | £              | 2.87  |                           | 3 Dec 2002  |                         | 2 Dec 2009  |       | (ii  | ) |               | 53,536   
|                                                            |  | £              | 30.54 |                           | 1 Dec 2003  |                         | 30 Nov 2007 |       | (ii  | ) |               | 50,109   
|                                                            |  | £              | 30.54 |                           | 1 Dec 2003  |                         | 30 Nov 2010 |       | (ii  | ) |               | 17,513   
|                                                            |  | £              | 25.66 |                           | 25 May 2004 |                         | 24 May 2008 |       | (ii  | ) |               | 1,458    
|                                                            |  | £              | 25.66 |                           | 25 May 2004 |                         | 24 May 2011 |       | (ii  | ) |               | 7,398    
|                                                            |  | £              | 21.62 |                           | 18 Jun 2004 |                         | 17 Jun 2008 |       | (ii  | ) |               | 3,471    
|                                                            |  | £              | 17.07 |                           | 30 Nov 2004 |                         | 29 Nov 2008 |       | (ii  | ) |               | 29,181   
|                                                            |  | £              | 17.07 |                           | 30 Nov 2004 |                         | 29 Nov 2011 |       | (ii  | ) |               | 34,895   
|                                                            |  | £              | 17.04 |                           | 4 Dec 2004  |                         | 3 Dec 2008  |       | (ii  | ) |               | 86,343   
|                                                            |  | £              | 17.04 |                           | 4 Dec 2004  |                         | 3 Dec 2011  |       | (ii  | ) |               | 1,341    
|                                                            |  | £              | 10.83 |                           | 24 May 2005 |                         | 23 May 2012 |       | (ii  | ) |               | 76,322   
|                                                            |  | £              | 10.83 |                           | 24 May 2005 |                         | 23 May 2012 |       | (iii | ) |               | 15,005   
|                                                            |  | £              | 5.13  |                           | 22 Nov 2005 |                         | 21 Nov 2012 |       | (ii  | ) |               | 201,006  
|                                                            |  | £              | 5.13  |                           | 22 Nov 2005 |                         | 21 Nov 2012 |       | (iii | ) |               | 35,796   
|                                                            |  | £              | 4.60  |                           | 23 May 2006 |                         | 22 May 2013 |       | (ii  | ) |               | 203,564  
|                                                            |  | £              | 4.60  |                           | 23 May 2006 |                         | 22 May 2013 |       | (iii | ) |               | 36,739   
|CSOP  granted in year and outstanding at 30 September 2004 |  | £              | 4.31  |                           | 21 Nov 2006 |                         | 20 Nov 2013 |       | (ii  | ) |               | 250,745  
|                                                            |  | £              | 4.38  |                           | 12 Dec 2006 |                         | 11 Dec 2013 |       | (ii  | ) |               | 5,000    
|                                                            |  | £              | 5.24  |                           | 21 May 2007 |                         | 20 May 2014 |       | (ii  | ) |               | 130,939  
|EIP  granted in year and outstanding at 30 September 2004  |  | £              | 0.10  |                           | 20 Feb 2007 |                         | 19 Feb 2010 |       | (iv  | ) |               | 131,673  
|                                                            |  | £              | 0.10  |                           | 20 Feb 2007 |                         | 19 Feb 2010 |       | (iv  | ) |               | 46,635   
|                                                            |  | £              | 0.10  |                           | 25 May 2007 |                         | 24 May 2010 |       | (iv  | ) |               | 19,742   
|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          
|Total                                                       |  |                |       |                           |             |                         |             |       |      |   |               | 2,066,913
|                                                            |  |                |       |                           |             |                         |             |       |      |   |               |          



|(i) | These options were subject to the condition as stated in note (ii) below.This condition had been satisfied as at 30 September 2002.
|--- | -----------------------------------------------------------------------------------------------------------------------------------



|(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) | The number of options which 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%.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | The applicable Performance Condition is described under the heading Executive Incentive Plan
in this note 18.
|---- | -------------------------------------------------------------------------------------------------------------



F-18



---

19 Profit and loss account and other reserve



|                                    |  |                          |   |  |                        |  |                           
|----------------------------------- |  | ------------------------ | - |  | ---------------------- |  | --------------------------
|                                    |  | GroupProfit andloss£000 |   |  | GroupOtherreserve£000 |  | CompanyProfitand loss£000
|At 1 October 2003                   |  | (122,431                 | ) |  | 13,456                 |  | 23,178                    
|Retained (loss)/profit for the year |  | (38,126                  | ) |  |                       |  | 2,661                     
|Employee share options(i)           |  | 144                      |   |  |                       |  |                          
|Foreign exchange translation        |  | 1,099                    |   |  |                       |  |                          
|                                    |  |                          |   |  |                        |  |                           
|At 30 September 2004                |  | (159,314                 | ) |  | 13,456                 |  | 25,839                    
|                                    |  |                          |   |  |                        |  |                           



|(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



|                                                       |  |           |   |  |           |  
|------------------------------------------------------ |  | --------- | - |  | --------- | -
|                                                       |  | 2004£000 |   |  | 2003£000 |  
|Loss for the financial year                            |  | (38,126   | ) |  | (39,191   | )
|Other recognised gains and losses relating to the year |  | 1,099     |   |  | 606       |  
|                                                       |  |           |   |  |           |  
|                                                       |  | (37,027   | ) |  | (38,585   | )
|New shares issued                                      |  | 14,223    |   |  | 10,562    |  
|Employee share options                                 |  | 144       |   |  |          |  
|                                                       |  |           |   |  |           |  
|Net decrease in shareholders funds                    |  | (22,660   | ) |  | (28,023   | )
|Opening shareholders funds                            |  | 107,742   |   |  | 135,765   |  
|                                                       |  |           |   |  |           |  
|Closing shareholders funds                            |  | 85,082    |   |  | 107,742   |  
|                                                       |  |           |   |  |           |  



21 Reconciliation of operating loss
to operating cash flows



|                                                  |  |           |   |  |           |   |  |           |  
|------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                  |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Operating loss                                    |  | (42,192   | ) |  | (46,124   | ) |  | (38,150   | )
|Depreciation charge                               |  | 2,826     |   |  | 2,989     |   |  | 2,617     |  
|Amortisation of intangible assets                 |  | 1,051     |   |  | 1,050     |   |  | 882       |  
|(Profit)/loss on disposal of fixed assets         |  | (3        | ) |  | 94        |   |  |          |  
|Shares received from MorphoSys                    |  |          |   |  | (3,589    | ) |  |          |  
|Write down of fixed asset investment              |  | 215       |   |  |          |   |  |          |  
|EIP charge                                        |  | 144       |   |  |          |   |  |          |  
|Shares issued to buy out DRC royalty agreement    |  |          |   |  |          |   |  | 6,149     |  
|Increase in debtors                               |  | (24       | ) |  | (1,285    | ) |  | (158      | )
|Increase in deferred income                       |  | 4,086     |   |  | 10,597    |   |  | 84        |  
|Increase in creditors (excluding deferred income) |  | 2,830     |   |  | 449       |   |  | 1,768     |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash outflow from operating activities        |  | (31,067   | ) |  | (35,819   | ) |  | (26,808   | )
|                                                  |  |           |   |  |           |   |  |           |  



F-19



---

Accounts & Notes| Notes to the financial statements cont.



22 Analysis of cash flows



|                                                  |  |           |   |  |           |   |  |           |  
|------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                  |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Returns on investments and servicing of finance:  |  |           |   |  |           |   |  |           |  
|Interest received                                 |  | 4,295     |   |  | 5,095     |   |  | 7,558     |  
|Interest element of finance lease rentals         |  | (78       | ) |  | (46       | ) |  |          |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow                                   |  | 4,217     |   |  | 5,049     |   |  | 7,558     |  
|                                                  |  |           |   |  |           |   |  |           |  
|Taxation:                                         |  |           |   |  |           |   |  |           |  
|Research and development tax credit received      |  |          |   |  | 5,785     |   |  | 920       |  
|Overseas tax paid                                 |  | (64       | ) |  | (575      | ) |  |          |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash (outflow)/inflow                         |  | (64       | ) |  | 5,210     |   |  | 920       |  
|                                                  |  |           |   |  |           |   |  |           |  
|Capital expenditure and financial investment:     |  |           |   |  |           |   |  |           |  
|Purchase of intangible fixed assets               |  |          |   |  | (2,673    | ) |  | (2,067    | )
|Purchase of tangible fixed assets                 |  | (1,032    | ) |  | (5,413    | ) |  | (7,894    | )
|Proceeds from the sale of tangible fixed assets   |  | 6         |   |  | 4         |   |  |          |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash outflow                                  |  | (1,026    | ) |  | (8,082    | ) |  | (9,961    | )
|                                                  |  |           |   |  |           |   |  |           |  
|Management of liquid resources:                   |  |           |   |  |           |   |  |           |  
|(Increase)/decrease in term deposits              |  | (11,647   | ) |  | 1,769     |   |  | 9,749     |  
|Net sale of securities                            |  | 27,004    |   |  | 17,009    |   |  | 19,785    |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow                                   |  | 15,357    |   |  | 18,778    |   |  | 29,534    |  
|                                                  |  |           |   |  |           |   |  |           |  
|Financing:                                        |  |           |   |  |           |   |  |           |  
|Issue of ordinary share capital                   |  | 14,223    |   |  | 10,562    |   |  | 1,448     |  
|Proceeds from new finance lease commitments       |  |          |   |  | 1,389     |   |  |          |  
|Capital elements of finance lease rental payments |  | (348      | ) |  | (221      | ) |  |          |  
|                                                  |  |           |   |  |           |   |  |           |  
|Net cash inflow                                   |  | 13,875    |   |  | 11,730    |   |  | 1,448     |  
|                                                  |  |           |   |  |           |   |  |           |  



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



23 Analysis
and reconciliation of net funds



|                              |  |                    |   |  |                |   |  |                       |   |  |                       |  
|----------------------------- |  | ------------------ | - |  | -------------- | - |  | --------------------- | - |  | --------------------- | -
|                              |  | 1 October2003£000 |   |  | Cash flow£000 |   |  | Exchangemovement£000 |   |  | 30 September2004£000 |  
|Cash at bank and in hand      |  | 1,056              |   |  | 1,660          |   |  | (38                   | ) |  | 2,678                 |  
|Overdrafts                    |  | (1,144             | ) |  | (368           | ) |  |                      |   |  | (1,512                | )
|                              |  |                    |   |  |                |   |  |                       |   |  |                       |  
|                              |  |                    |   |  | 1,292          |   |  | (38                   | ) |  |                       |  
|Liquid resources              |  | 107,916            |   |  | (15,357        | ) |  |                      |   |  | 92,559                |  
|                              |  |                    |   |  |                |   |  |                       |   |  |                       |  
|Net cash and liquid resources |  | 107,828            |   |  | (14,065        | ) |  | (38                   | ) |  | 93,725                |  
|Finance leases                |  | (1,168             | ) |  | 348            |   |  |                      |   |  | (820                  | )
|                              |  |                    |   |  |                |   |  |                       |   |  |                       |  
|Net funds                     |  | 106,660            |   |  | (13,717        | ) |  | (38                   | ) |  | 92,905                |  
|                              |  |                    |   |  |                |   |  |                       |   |  |                       |  



F-20



---

23 Analysis and reconciliation of net fundscont.



|                                                       |  |           |   |  |           |   |  |           |  
|------------------------------------------------------ |  | --------- | - |  | --------- | - |  | --------- | -
|                                                       |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Increase/(decrease) in cash in the year                |  | 1,292     |   |  | (3,134    | ) |  | 2,691     |  
|Decrease in liquid resources                           |  | (15,357   | ) |  | (18,778   | ) |  | (29,534   | )
|Cash outflow/(inflow) from increase in lease financing |  | 348       |   |  | (1,168    | ) |  |          |  
|                                                       |  |           |   |  |           |   |  |           |  
|Change in net funds resulting from cash flows          |  | (13,717   | ) |  | (23,080   | ) |  | (26,843   | )
|Exchange movement                                      |  | (38       | ) |  | (35       | ) |  | (32       | )
|                                                       |  |           |   |  |           |   |  |           |  
|Movement in net funds in year                          |  | (13,755   | ) |  | (23,115   | ) |  | (26,875   | )
|Net funds at 1 October 2003                            |  | 106,660   |   |  | 129,775   |   |  | 156,650   |  
|                                                       |  |           |   |  |           |   |  |           |  
|Net funds at 30 September 2003                         |  | 92,905    |   |  | 106,660   |   |  | 129,775   |  
|                                                       |  |           |   |  |           |   |  |           |  



24 Financial commitments



Capital commitments of the Group were as follows:



|                                |  |                |  |               
|------------------------------- |  | -------------- |  | --------------
|                                |  | Group2004£000 |  | Group2003£000
|Contracted but not provided for |  | 2              |  | 56            
|                                |  |                |  |               



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



|                             |  |                            |  |                |  |                            |  |               
|---------------------------- |  | -------------------------- |  | -------------- |  | -------------------------- |  | --------------
|                             |  | Land andbuildings2004£000 |  | Other2004£000 |  | Land andbuildings2003£000 |  | Other2003£000
|Expiry date:                 |  |                            |  |                |  |                            |  |               
| within one year            |  |                           |  |               |  |                           |  | 1             
| between two and five years |  |                           |  | 64             |  |                           |  | 44            
| after five years           |  | 2,001                      |  |               |  | 1,832                      |  |              
|                             |  |                            |  |                |  |                            |  |               



The Company had no capital or
operating lease commitments.



In addition to the commitments above CAT has
agreed to bear fifty percent of programme costs through to early 2006 under an amended collaboration agreement with Genzyme. Due to the nature of this collaborative arrangement it does not give rise to

specified cash outflows.



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 2004 were £1,009,000 (2003: £988,000; 2002: £875,000).



26 Post balance sheet event



On 21 November 2004, CAT and AstraZeneca signed a major strategic alliance to discover and
develop human antibody therapeutics. Under the terms of the collaboration agreement, the companies will jointly undertake the discovery and development of human monoclonal antibodies as drugs, principally in the field of inflammatory diseases. The
alliance will include a five year discovery initiation phase during which the partners will jointly initiate a minimum of 25 discovery programmes. The committed joint research investment will be a minimum of $175 million during this phase which the
parties will fund 50:50. In addition, under a separate subscription agreement AstraZeneca will subscribe 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 represents a 19.9% interest in the enlarged issued share capital of CAT. The collaboration agreement is conditional on the completion of the subscription agreement. The issue of shares to AstraZeneca under the
subscription agreement requires the approval by CAT shareholders of the disapplication of statutory pre-emption rights.



F-21



---

Accounts & Notes| Notes to the financial statements cont.



27 Litigation



CATs entitlement to royalties in relation to sales of HUMIRA is governed by an agreement dated 1 April 1995 between Cambridge Antibody
Technology Limited and Knoll Aktiengesellschaft. The agreement allows for offset, in certain circumstances, of royalties due to third parties against royalties due to CAT, subject to a minimum royalty level. Abbott indicated to CAT in March 2003 its
wish to initiate discussions regarding the applicability of these royalty offset provisions for HUMIRA. CAT strongly believes that the offset provisions do not apply and is seeking an outcome consistent with that position. Following unsuccessful
efforts to resolve the matter with Abbott, in November 2003 CAT commenced legal proceedings against Abbott Biotechnology Limited and Abbott GmbH in the High Court in London. The trial commenced on 22 November 2004, with an estimated length of three
weeks. It is impossible to predict with any certainty the eventual outcome of legal proceedings and there can be no assurance that the Company will be successful in its claim. An adverse result may impact on the value of the Company (and its future
revenues).



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.



CAT was named, together
with numerous other defendants who practise or rely on antibody phage display to discover antibodies, as a defendant in a complaint dated 14 August 2003 filed by Dr. George Pieczenik in the United States Federal District Court for the Southern
District of New York. The complaint, among other allegations, purported to assert claims of patent infringement with respect to a patent issued on 12 August 2003 to Dr. Pieczenik. Dr. Pieczenik sought a permanent injunction against the commercial
use and licensing of unspecified patents and for damages for past infringements. The complaint was subsequently amended to include claims against the United States Patent and Trademark Office and the FDA seeking re-examination and other remedies
regarding certain patents held by the defendants, including CAT and MRC. All of Dr. Pieczeniks claims against CAT were dismissed by the District Court on 16 March 2004 for lack of personal jurisdiction over CAT. The claims against the other
defendants were dismissed in a series of separate orders. Dr. Pieczenik has filed an appeal in the United States Court of Appeals for the Federal Circuit relating to certain orders entered concerning other defendants, including the United States
Patent and Trademark Office, but has not appealed against the order dismissing his claims against CAT. The appeal is currently pending.



28 Accounting treatment of litigation expenses



CAT has provided for all litigation expenses incurred in relation to the Abbott litigation during the twelve month period ending 30 September 2004. A provision has not
been included in the current year results for Abbotts costs which CAT would be liable for in the event that it loses the legal proceedings and the court orders that it pays some or all of Abbotts costs.



F-22



---

29 Reconciliation to US GAAP



Summary of significant differences between UK GAAP followed by the Group and US GAAP The 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 |   |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Net loss as reported under UK GAAP                                  |  |       |   |  | (38,126   | ) |  | (39,191   | ) |  | (28,207   | )
|Adjustments for:(i)                                                 |  |       |   |  |           |   |  |           |   |  |           |  
|Compensation costs under variable plan accounting for stock options |  | (a    | ) |  |          |   |  | (597      | ) |  | (3,703    | )
|Acquisition of Aptein Inc.                                          |  | (b    | ) |  | (16       | ) |  | (16       | ) |  | (16       | )
|Revenue recognition                                                 |  | (c    | ) |  | 422       |   |  | 422       |   |  | 422       |  
|Accounting for National Insurance on share options                  |  | (d    | ) |  | 2         |   |  | 13        |   |  | (248      | )
|Employee share options                                              |  | (e    | ) |  | 144       |   |  |          |   |  |          |  
|Profit on sale of Denzyme ApS                                       |  | (f    | ) |  |          |   |  |          |   |  | 229       |  
|Termination of DRC royalty agreement                                |  | (g    | ) |  |          |   |  |          |   |  | 723       |  
|Direct costs                                                        |  | (h    | ) |  | 909       |   |  |          |   |  |          |  
|Foreign exchange difference                                         |  | (i    | ) |  | (20       | ) |  | (250      | ) |  | (491      | )
|                                                                    |  |       |   |  |           |   |  |           |   |  |           |  
|Net loss as reported under US GAAP                                  |  |       |   |  | (36,685   | ) |  | (39,619   | ) |  | (31,291   | )
|                                                                    |  |       |   |  |           |   |  |           |   |  |           |  



|(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:



|                                                              |  |            |   |  |            |   |  |            |  
|------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                              |  | 2004       |   |  | 2003       |   |  | 2002       |  
|Basic and diluted net loss per ordinary share (pence)         |  | 89.8       | p |  | 108.7      | p |  | 87.3       | p
|Shares used in computing net loss per ordinary share (number) |  | 40,866,684 |   |  | 36,440,993 |   |  | 35,828,446 |  
|Antidilutive securities, not included above (number)          |  | 352,176    |   |  | 289,640    |   |  | 867,316    |  
|                                                              |  |            |   |  |            |   |  |            |  



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 |   |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Shareholders funds as reported under UK GAAP            |  |       |   |  | 85,082    |   |  | 107,742   |   |  | 135,765   |  
|Acquisition of Aptein Inc.                               |  | (b    | ) |  | 95        |   |  | 111       |   |  | 127       |  
|Revenue recognition                                      |  | (c    | ) |  | (1,531    | ) |  | (1,953    | ) |  | (2,375    | )
|Accounting for National Insurance on stock options       |  | (d    | ) |  | 96        |   |  | 94        |   |  | 81        |  
|Direct costs                                             |  | (h    | ) |  | 909       |   |  |          |   |  |          |  
|Unrealised holding gain on available for sale securities |  | (j    | ) |  | 5,493     |   |  | 106       |   |  |          |  
|                                                         |  |       |   |  |           |   |  |           |   |  |           |  
|Shareholders funds as reported under US GAAP            |  |       |   |  | 90,144    |   |  | 106,100   |   |  | 133,598   |  
|                                                         |  |       |   |  |           |   |  |           |   |  |           |  



F-23



---

Accounts & Notes| Notes to the financial statementscont.



29 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 2002                               |  | 36,214,349      |  | 3,621              |  | 219,637                   |  | 13,497             |  | (103,157              | ) |  | 133,598                        |  
|Shares issued                                            |  | 2,123,971       |  | 213                |  | 10,349                    |  |                   |  |                      |   |  | 10,562                         |  
|Compensation costs for stock options                     |  |                |  |                   |  | 597                       |  |                   |  |                      |   |  | 597                            |  
|Foreign exchange translation                             |  |                |  |                   |  |                          |  |                   |  | 856                   |   |  | 856                            |  
|Unrealised holding gain on available for sale securities |  |                |  |                   |  |                          |  |                   |  | 106                   |   |  | 106                            |  
|Net loss for the year under US GAAP                      |  |                |  |                   |  |                          |  |                   |  | (39,619               | ) |  | (39,619                        | )
|                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|Total comprehensive loss                                 |  |                 |  |                    |  |                           |  |                    |  | (38,657               | ) |  |                                |  
|                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  
|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                         |  
|                                                         |  |                 |  |                    |  |                           |  |                    |  |                       |   |  |                                |  



Total accumulated other comprehensive
loss at 30 September 2003 was £1,550,000 (£1,444,000  foreign currency translations; £106,000 unrealised holding gain on available for sale securities) and at 30 September 2004 was £8,056,000 (£2,563,000 
foreign currency translations; £5,493,000  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 years ended 30 September
2003 (£697,000) and 30 September 2002 (£3,703,000) 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.



(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.



F-24



---

29 Reconciliation to US GAAPcont.



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 2004, 2003 and 2002 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 2004 was £96,000 and the net charge for the year then
ended amounted to £2,000.



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) Profit on sale of Denzyme ApSGoodwill of £229,000 arose on the purchase of
Denzyme ApS in June 1996. In accordance with the UK accounting standard then in force (Statement of Standard Accounting Practice 22) this goodwill was written off to reserves. Under US GAAP the goodwill was expensed in the income statement.



The Company sold Denzyme ApS, a wholly owned subsidiary, in November 2001.
Under UK GAAP the calculated profit on disposal takes account of the goodwill previously written off to reserves resulting in a profit on disposal of £2,000. Under US GAAP there is no requirement to write back the goodwill as it has already
been charged to the profit and loss account. Therefore under US GAAP the profit on disposal of Denzyme ApS is £231,000.



(g) Termination of DRC royalty agreementUnder an agreement with DRC the Group received a payment of £1.5 million in 1994 in return for rights to a
percentage of revenues (and certain other payments) received by the Group over a period terminating in 2009. On 2 May 2002 the Group bought out this obligation to DRC for £6.1 million (C$14 million) with the issue of 463,818 CAT shares to DRC.



Under UK GAAP the share price applied to this transaction defined in the
contract, was the volume weighted average closing CAT share price over the ten days prior to 30 April 2002, being the date that the Group notified DRC that it intended to terminate the royalty agreement. This resulted in a credit to the share
premium account of £6,102,000.



Under US GAAP the share price applied was
the fair value of the closing CAT share price on the 30 April 2002, resulting in a credit to the share premium account of £5,379,000.



(h) Direct costsThe Company receives royalties on product sales, and under certain licences and collaboration agreements royalties are then payable to Medical
Research Council and other licensors. In respect of product sales of HUMIRA, the amounts payable to Medical Research Council and other licensors are 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 has accounted for the royalties potentially payable to Medical Research Council by applying the principles of FRS 12, and has
recognised a provision using the mid-point of the expected range of possible outcomes.



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 has not
recognised a provision as the obligation is not probable and hence, an additional liability has not been incurred in respect of the contingent element of royalties discussed above.



F-25



---

Accounts & Notes|Notes to the financial statementscont.



29 Reconciliation to US GAAPcont.



(i) 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.



(j) 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 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.



(k) 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 2004, 2003 and 2002, CAT had approximately £133 million, £100 million and £79 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:



|                                                              |  |            |   |  |            |   |  |            |  
|------------------------------------------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                              |  | 2004 £000 |   |  | 2003 £000 |   |  | 2002 £000 |  
|Net cash used in operating activities                         |  | (26,546    | ) |  | (24,416    | ) |  | (18,330    | )
|Net cash provided by/(used in) investing activities           |  | 3,901      |   |  | 19,576     |   |  | (5,106     | )
|Net cash provided by financing activities                     |  | 13,875     |   |  | 10,341     |   |  | 1,448      |  
|Effects of exchange rate changes on cash and cash equivalents |  | (38        | ) |  | (35        | ) |  | (32        | )
|                                                              |  |            |   |  |            |   |  |            |  
|(Decrease)/increase in cash and cash equivalents              |  | (8,808     | ) |  | 5,466      |   |  | (22,020    | )
|Beginning cash and cash equivalents                           |  | 74,045     |   |  | 68,579     |   |  | 90,599     |  
|                                                              |  |            |   |  |            |   |  |            |  
|Ending cash and cash equivalents                              |  | 65,237     |   |  | 74,045     |   |  | 68,579     |  
|                                                              |  |            |   |  |            |   |  |            |  



F-26



---

29 Reconciliation to US GAAPcont.



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:



|                                                              |  |           |   |  |           |   |  |           |  
|------------------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                              |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Operating activities:                                         |  |           |   |  |           |   |  |           |  
|Net cash used in operating activities under UK GAAP           |  | (31,067   | ) |  | (35,819   | ) |  | (26,808   | )
|Returns on investments and servicing of finance               |  | 4,217     |   |  | 5,049     |   |  | 7,558     |  
|Taxation                                                      |  | (64       | ) |  | 5,210     |   |  | 920       |  
|Increase in bank overdrafts                                   |  | 368       |   |  | 1,144     |   |  |          |  
|                                                              |  |           |   |  |           |   |  |           |  
|Net cash used in operating activities under US GAAP           |  | (26,546   | ) |  | (24,416   | ) |  | (18,330   | )
|                                                              |  |           |   |  |           |   |  |           |  
|Investing activities:                                         |  |           |   |  |           |   |  |           |  
|Capital expenditure and financial investment under UK GAAP    |  | (1,026    | ) |  | (8,082    | ) |  | (9,961    | )
|Sale of tangible fixed assets                                 |  |          |   |  | 1,389     |   |  |          |  
|Management of liquid resources under UK GAAP                  |  | 15,357    |   |  | 18,778    |   |  | 29,534    |  
|Cash equivalents with a maturity of less than three months    |  | (10,430   | ) |  | 7,491     |   |  | (24,679   | )
|                                                              |  |           |   |  |           |   |  |           |  
|Net cash used in investing activities                         |  | 3,901     |   |  | 19,576    |   |  | (5,106    | )
|                                                              |  |           |   |  |           |   |  |           |  
|Financing activities:                                         |  |           |   |  |           |   |  |           |  
|Financing activities under UK GAAP                            |  | 13,875    |   |  | 11,730    |   |  | 1,448     |  
|Proceeds from new finance lease commitments                   |  |          |   |  | (1,389    | ) |  |          |  
|                                                              |  |           |   |  |           |   |  |           |  
|Net cash provided by financing activities under US GAAP       |  | 13,875    |   |  | 10,341    |   |  | 1,448     |  
|                                                              |  |           |   |  |           |   |  |           |  
|Movement in cash:                                             |  |           |   |  |           |   |  |           |  
|Increase/(decrease) in cash under UK GAAP                     |  | 1,292     |   |  | (3,134    | ) |  | 2,691     |  
|Cash equivalents with a maturity of less than three months    |  | (10,430   | ) |  | 7,491     |   |  | (24,679   | )
|Effects of exchange rate changes on cash and cash equivalents |  | (38       | ) |  | (35       | ) |  | (32       | )
|Increase in bank overdrafts                                   |  | 368       |   |  | 1,144     |   |  |          |  
|                                                              |  |           |   |  |           |   |  |           |  
|                                                              |  | (8,808    | ) |  | 5,466     |   |  | (22,020   | )
|                                                              |  |           |   |  |           |   |  |           |  



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 2004, 2003 and 2002, compensation expenses of nil, £597,000 and £3,703,000
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 2004, 2003 and 2002 would have been £1,989,000, £2,326,000 and £1,523,000 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:



|                      |  |                                                                                                                                      |   |            |         |   |            |         |   |            |  
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ | - | ---------- | ------- | - | ---------- | ------- | - | ---------- | -
|                      |  |                                                                                                                                      |   | 2004 £000 |         |   | 2003 £000 |         |   | 2002 £000 |  
|Net loss, as reported |  | (36,685                                                                                                                              | ) |            | (39,619 | ) |            | (31,291 | )
|Add:                  |  | Stock-based employee compensation expense included in reported net loss                                                              |   |           |         |   | 597        |         |   | 3,703      |  
|Deduct:               |  | Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects |   | (1,989     | )       |   | (2,326     | )       |   | (1,523     | )
|                      |  |                                                                                                                                      |   |            |         |   |            |         |   |            |  
|Pro forma net loss    |  | (38,674                                                                                                                              | ) |            | (41,348 | ) |            | (29,111 | )
|                      |  |                                                                                                                                      |   |            |         |   |            |         |   |            |  
|Loss per share        |  |                                                                                                                                      |   |            |         |   |            |         |  
|Basic  as reported   |  | 89.8                                                                                                                                 | p |            | 108.7   | p |            | 87.3    | p
|Basic  pro forma     |  | 94.6                                                                                                                                 | p |            | 113.5   | p |            | 81.3    | p
|                      |  |                                                                                                                                      |   |            |         |   |            |         |   |            |  



F-27



---

Accounts & Notes| Notes to the financial statementscont.



29 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 2004 |  | 0              | % |  | 65                                    | % |  | 4.9                    | % |  | 5.4               
|30 September 2003 |  | 0              | % |  | 65                                    | % |  | 4.2                    | % |  | 5.5               
|30 September 2002 |  | 0              | % |  | 65                                    | % |  | 4.9                    | % |  | 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 2004, 2003 and
2002, is summarised in the following table:



|                            |  |           |     |  |           |  |           |   |  |           |  |           |   |  |          
|--------------------------- |  | --------- | --- |  | --------- |  | --------- | - |  | --------- |  | --------- | - |  | ---------
|                            |  | Number    |     |  | 2004WAEP£ |  | Number    |   |  | 2003WAEP£ |  | Number    |   |  | 2002WAEP£
|Outstanding at 1 October    |  | 1,726,607 |     |  | 6.94      |  | 1,501,807 |   |  | 6.97      |  | 1,517,978 |   |  | 4.92     
|Granted during the year     |  | 491,495   |     |  | 3.78      |  | 522,762   |   |  | 4.88      |  | 283,121   |   |  | 14.96    
|Exercised during the year   |  | (129,327  | )   |  | 2.89      |  | (188,447  | ) |  | 2.77      |  | (255,634  | ) |  | 3.07     
|Forfeited during the year   |  | (128,659  | )   |  | 8.72      |  | (35,360   | ) |  | 8.43      |  | (43,658   | ) |  | 10.57    
|Expired during the year     |  |          |     |  |          |  | (74,155   | ) |  | 2.87      |  |          |   |  |         
|                            |  |           |     |  |           |  |           |   |  |           |  |           |   |  |          
|Outstanding at 30 September |  | 1,960,116 | (i) |  | 6.30      |  | 1,726,607 |   |  | 6.94      |  | 1,501,807 |   |  | 6.97     
|                            |  |           |     |  |           |  |           |   |  |           |  |           |   |  |          
|Exercisable at 30 September |  | 761,987   |     |  | 6.10      |  | 862,977   |   |  | 3.42      |  | 663,657   |   |  | 3.51     
|                            |  |           |     |  |           |  |           |   |  |           |  |           |   |  |          



The following table summarises the
value of options granted during the years ending 30 September 2004, 2003 and 2002.



|                                        |  |       |  |           |  |       |  |           |  |       |  |          
|--------------------------------------- |  | ----- |  | --------- |  | ----- |  | --------- |  | ----- |  | ---------
|Exercise price relative to market price |  | WAFV£ |  | 2004WAEP£ |  | WAFV£ |  | 2003WAEP£ |  | WAFV£ |  | 2002WAEP£
|Equals                                  |  |      |  |          |  |      |  |          |  |      |  |         
|Exceeds                                 |  | 2.79  |  | 4.62      |  |      |  |          |  | 10.28 |  | 17.05    
|Is less than                            |  | 4.65  |  | 0.10      |  | 3.10  |  | 4.88      |  | 7.42  |  | 10.83    
|                                        |  |       |  |           |  |       |  |           |  |       |  |          
|Total                                   |  | 3.14  |  | 3.78      |  | 3.10  |  | 4.88      |  | 9.32  |  | 14.96    
|                                        |  |       |  |           |  |       |  |           |  |       |  |          



The following tables summarise
information about the stock options outstanding at 30 September 2004, 2003 and 2002.



|                          |  |                                     |     |                                     |       |  |            |  |         |  |      
|------------------------- |  | ----------------------------------- | --- | ----------------------------------- | ----- |  | ---------- |  | ------- |  | -----
|                          |  | 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 
|                          |  |                                     |     |                                     |       |  |            |  |         |  |      



|(i) | The stock options outstanding at 30 September 2004 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 in note 18. All other options
granted under the terms of the CSOP, detailed in note 18 have been included in the Black-Scholes calculation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-28



---

29 Reconciliation to US GAAP cont.



|                           |  |                                     |  |                                    |  |            |  |         |  |      
|-------------------------- |  | ----------------------------------- |  | ---------------------------------- |  | ---------- |  | ------- |  | -----
|                           |  | Outstanding as at 30 September 2003 |  | Exercisable as at 30September 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 
|                           |  |                                     |  |                                    |  |            |  |         |  |      
|                           |  |                                    
|                           |  | Outstanding as at 30 September 2002 |  | Exercisable as at 30September 2002
|Range of exercise prices £ |  | Number                              |  | WAEP£                              |  | WARCLYears |  | Number  |  | WAEP£
|0  0.99                   |  |                                    |  |                                   |  |           |  |        |  |     
|1  2.99                   |  | 699,450                             |  | 2.66                               |  | 4.32       |  | 224,718 |  | 2.20 
|3  4.99                   |  | 189,179                             |  | 3.06                               |  | 3.78       |  | 189,179 |  | 3.06 
|5  10                     |  | 249,760                             |  | 5.02                               |  | 3.79       |  | 249,760 |  | 5.02 
|10  19.99                 |  | 269,883                             |  | 14.88                              |  | 9.34       |  |        |  |     
|21  31                    |  | 93,535                              |  | 29.46                              |  | 6.33       |  |        |  |     
|                           |  |                                     |  |                                    |  |            |  |         |  |      
|Total                      |  | 1,501,807                           |  | 6.97                               |  | 5.19       |  | 663,657 |  | 3.51 
|                           |  |                                     |  |                                    |  |            |  |         |  |      



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:



|                                                         |  |           |   |  |           |   |  |           |  
|-------------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                         |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Income tax expense computed at statutory income tax rate |  | (11,418   | ) |  | (12,530   | ) |  | (9,529    | )
|Permanent differences                                    |  | 806       |   |  | (438      | ) |  | (1,041    | )
|Research and development tax credit claimed              |  |          |   |  | (3,148    | ) |  | (3,557    | )
|Prior year adjustment to UK losses brought forward       |  | 45        |   |  | 6,056     |   |  |          |  
|Prior year adjustment to US losses brought forward       |  | 1,242     |   |  | 1,556     |   |  |          |  
|Change in valuation allowance                            |  | 9,325     |   |  | 5,356     |   |  | 10,570    |  
|Foreign tax suffered                                     |  | 64        |   |  |          |   |  |          |  
|                                                         |  |           |   |  |           |   |  |           |  
|Charge/(credit) for income taxes                         |  | 64        |   |  | (3,148    | ) |  | (3,557    | )
|                                                         |  |           |   |  |           |   |  |           |  



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-29



---

Accounts & Notes| Notes to the financial statements cont.



29 Reconciliation to US GAAP cont.



Net deferred taxes are analysed as follows:



|                                                    |  |           |   |  |           |   |  |           |  
|--------------------------------------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                                                    |  | 2004£000 |   |  | 2003£000 |   |  | 2002£000 |  
|Deferred tax assets:                                |  |           |   |  |           |   |  |           |  
|Losses carried forward                              |  | 39,272    |   |  | 30,154    |   |  | 23,658    |  
|Other short term timing differences                 |  |          |   |  |          |   |  | 58        |  
|                                                    |  |           |   |  |           |   |  |           |  
|                                                    |  | 39,272    |   |  | 30,154    |   |  | 23,716    |  
|Valuation allowance                                 |  | (37,125   | ) |  | (27,800   | ) |  | (22,444   | )
|                                                    |  |           |   |  |           |   |  |           |  
|Net deferred tax asset                              |  | 2,147     |   |  | 2,354     |   |  | 1,272     |  
|Deferred tax liabilities:                           |  |           |   |  |           |   |  |           |  
|Excess of book value over tax value of fixed assets |  | (2,315    | ) |  | (2,354    | ) |  | (1,272    | )
|Other short term timing differences                 |  | 168       |   |  |          |   |  |          |  
|                                                    |  |           |   |  |           |   |  |           |  
|Net deferred taxes                                  |  |          |   |  |          |   |  |          |  
|                                                    |  |           |   |  |           |   |  |           |  



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 2004 the Group had approximately £131 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 2003, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. SAB 104 updates portions of the interpretive guidance included in Topic 13 of the codification of Staff Accounting Bulletins in order to make this interpretive
guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. In the updated SAB Topic 13, the SEC staff indicated their belief that revenue is generally realised or realisable and earned when all of
the following criteria are met:



| |  | Persuasive evidence of an arrangement exists;
| | - | ---------------------------------------------



| |  | Delivery has occurred or services have been rendered;
| | - | -----------------------------------------------------



| |  | The sellers price to the buyer is fixed or determinable; and
| | - | -------------------------------------------------------------



| |  | Collectibility is reasonably assured.
| | - | -------------------------------------



The Group believes it is following the guidance of SAB 104.



In January 2003, the FASB issued FASB Interpretation FIN No. 46, Consolidation of Variable Interest Entities  an interpretation of ARB No. 51 (FIN 46).
The interpretation addresses consolidation by business enterprises of Variable Interest Entities (VIEs) that either, do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated
financial support, or the equity investors lack an essential characteristic of a controlling financial interest. FIN 46 requires disclosure of VIEs in financial statements issued after 31 January 2003, if it is reasonably possible that as of the
transition date, the enterprise will be the primary beneficiary of an existing VIE that will require consolidation, or the enterprise will hold a significant variable interest in, or have significant involvement with, an existing VIE. In December
2003, the FASB further revised FIN 46 through FIN No. 46R, Consolidation of Variable Interest Entities (FIN 46R). FIN 46R changes the effective date of FIN 46 for certain entities and makes other significant changes to FIN 46 based on
implementation issues that arose during 2003. The adoption of FIN 46R did not have any impact on the consolidated financial statements.



In March 2004, the Emerging Issues Task Force reached a consensus on a three-step impairment model in Issue No. 03-1 The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments (EITF 03- 1). The three-step model must be applied on a security-by-security basis as follows: Step 1: Determine whether an investment is impaired; Step 2: Evaluate whether an impairment is
other-than-temporary. For equity securities an impairment is presumed to be other-than-temporary unless the investor has the ability and intent to hold the investment for a reasonable period of time sufficient for a forecasted market price recovery
of the investment, and evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Step 3: If the impairment is other-than-temporary, recognise an impairment loss equal to
the difference between the investments cost and its fair value. The effective date for implementation of portions of EITF 03-1 has been delayed as at 30 September 2004.



F-30



---

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:

December 16, 2004




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 License 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 7, 2003.****                                                                                                                                                                 
|      | 
|4.18  |  | Form of Service Agreement between Cambridge Antibody Technology Group PLC and (a) John Aston; and (b) David Glover.****                                                                                                                                           
|      | 
|4.19  |  | Service Agreement, dated February 22, 2002, between Cambridge Antibody Technology Group PLC and Peter Chambré.****                                                                                                                                                
|      | 
|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  |  | Annual Report for the year ended September 30, 2004                                                                                                                                                                                                               
|      | 
|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 26, 2004)
|      | 
|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 29, 2004)
|      | 
|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 14, 2004)
|      | 
|15.5  |  | 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------



|+ | Confidential treatment requested for portions of this exhibit.
|- | --------------------------------------------------------------