CEO's addressDear Shareholder,We are entering into an exciting period for our new company Arana Therapeutics. As well as a new company name, a new strategic plan has been developed by the management team and board that will guide Arana Therapeutics to firmly establish itself as a globally significant player in the fast-growing, new generation antibody therapeutics sector. Based on our strong financial position, the new plan commits Arana Therapeutics to expanding and accelerating the development of its internal clinical pipeline. The company is also in the enviable position of having its own antibody “product engine”, ensuring a steady supply of new antibody drug candidates. During the year we completed two major transactions, and these have set the course for the company’s future. In December 2006 we sold our investment in Domantis Limited for over $176 million, realising a profit of $136 million. This was a truly outstanding return on the initial investment and is one of the reasons Arana Therapeutics is in such a strong financial position today. Then in August 2007, the merger between Peptech and EvoGenix was completed. This has created a global player focused on developing new generation, antibody/protein based products and technology for the treatment of inflammatory diseases and cancer, two areas of medicine with significant unmet patient needs. The combined company has an enhanced product pipeline, an exceptionally strong balance sheet and recurring revenues from licensing and commercialisation agreements with international pharmaceutical companies including GSK, CSL, Centocor (J&J) and Abbott Laboratories. The two companies are now integrated and we are focused on the development of our product pipeline and the enhancement of our powerful technology engine. New management teamThe new company combines the very best of the two management teams. Together we have a strong record of achievement in the sector and we are focused on executing revenue generating deals and identifying new growth opportunities.The combined team has a proven track record in executing major commercial deals, defending and capitalising on its IP, managing product development from the bench top to market, and solid experience in the international new drug approval process. I would like to take this opportunity to thank Merilyn Sleigh for her exceptional leadership as CEO of EvoGenix and her contribution to the success of the merger. Recent developmentsIn October, we announced the completion of the Phase I trial of our lead compound for rheumatoid arthritis ART621 (formerly PN0621) which was a great result for the company.The results of the trial, which involved the first administration to humans of a domain antibody derived product, will be key to the successful development of ART621 and will be used in the design of Phase II trials in patients that are expected to start in the first half of 2008. Also in October, we entered into a research and commercialisation agreement with AVEO Pharmaceuticals Inc. This allows AVEO to access our Superhumanisation™ technology to humanise internally-derived drug candidates. We will receive annual license fees and payments upon successful achievement of pre-clinical and clinical milestones as well as royalties on sales of any products resulting from the collaboration. In August, we entered into a second project with GlaxoSmithKline (GSK) under the terms of a Research and Collaboration Agreement executed between the two companies in October 2005. In this second project we will apply our proprietary EvoGene™ technology to the optimisation of a further protein selected from the GSK product pipeline. FinancialsThe results for the financial year were excellent, with a net results of $133.4 million and a cash balance of $169.0 million. While the net profit was dominated by the profit on the sale of Domantis, underlying revenues increased by 46% compared to the prior year.We also continued to increase our expenditure on R & D to $11.6 million (an increase of 56%) in line with our focus on accelerating product development. Research and development costs will increase substantially over the next several years as the company progresses its products to clinical development. OutlookWhile we continue to report a strong financial position, the board and management share your concerns that the company’s share price does not appropriately reflect our true value.We remain focused on highlighting the company’s value to the market, especially important recent developments such as the AVEO licensing transaction and the successful completion of the Phase I trial for ART621, and remain confident that as the market becomes fully aware of our developments, our true value will be reflected. Within three years, Arana Therapeutics expects to have a significant product portfolio with 2-3 assets in late stage clinical development (Phase II/III), 2-3 assets at early stage clinical development (Phase I or investigational new drug stage), 3-4 pre-clinical programs, an expanded IP portfolio and a number of new technology deals generating recurring revenues. Our goal is to strike a balance between developing a product portfolio with the optimum chances of success while simultaneously conducting the clinical development process with economic prudence. The company has never been so well positioned for future growth. A focus on the antibody sector positions our new company in what is currently one of the most dynamic areas of the pharmaceutical industry. New generation antibody companies are achieving substantial valuations, judged by the recent and ongoing M & A activity in this field, and we expect Arana to benefit from this. Finally, I would like to thank all our employees for their help in creating Arana Therapeutics. Looking forward, I am excited by what 2007/08 is shaping up to be – great employees, a diversified product portfolio, supported by recurring revenues and a strong financial position. 
John Chiplin Chief Executive Officer |
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