London, UK - 1 February 2010; Proximagen Neuroscience plc, the biotechnology company focused on diseases of the central nervous system ("CNS"), today issues a strategic update.

Since the £50m fundraising in June 2009, the Company has seen a period of unprecedented corporate activity and undergone a notable transition. During this time, the Company has evolved from specialising mainly in Parkinson's disease related programmes to the wider area of the CNS in general. The purpose of this announcement is to update shareholders on the progress made since June 2009.

Key points

·£50m raised in June 2009 to fund the acquisition of CNS companies and drug development programmes;

· As the Group continues to deliver on its acquisition and consolidation strategy, the Group's portfolio has grown from five programmes at the beginning of 2009 and now consists of a broad portfolio of 14 programmes, from discovery, through pre-clinical and clinical stages;

· The recently announced offer for Minster Pharmaceuticals plc would bring an additional two clinical stage assets, tonabersat and sabcomeline, into the Group, which have the potential to treat epilepsy and schizophrenia respectively;

· Dr Jackie Hunter, currently the Senior Vice President and Head of Science Environment Development at GlaxoSmithKline (GSK) and formerly the Senior Vice President and Head of the Neurology & GI Centre of Excellence for Drug Discovery (CEDD) at GSK, has joined the Board of directors;

· Dr Tim Sparey, formerly in Business Development at Merck Serono and Merck & Co, Inc., has been appointed as Proximagen's Head of Business Development;

· Consolidation and integration of acquisitions is expected to deliver cost savings of an estimated £1.7m in 2010; and

· Cash resources at 30 November 2009 of over £55.5m.

Objective and strategy

Proximagen's objective is to become one of the world's leading companies developing therapeutics for patients suffering from diseases of the CNS. To achieve this, the Company is establishing a pipeline of CNS programmes spanning all phases of development.

We are taking a flexible approach to how far we develop our programmes before partnering or monetising them. In taking these decisions, we are mindful of a number of factors, including development risk, the progress of competitor programmes, our financial position and our belief that the retention of rights to certain territories is an important long-term value driver.

In order to achieve our objectives, we have developed the following five strategic priorities:

· expand our pipeline within CNS through acquisition, in-licencing and partnering, thus building quality and critical mass in research and development;

· structure innovative deals and defer consideration where possible;

· with respect to our pipeline, either

· invest in programmes where the value inflection point is identifiable (such as establishing clinical proof of concept) and where such investment is justified by the potential returns, and then out-license the programme with the retention of rights in certain territories; or

· out-license programmes prior to significant investment where it is commercially viable to do so;

· reduce duplicated costs through sector consolidation and integration; and

· build closer relationships with 'Big Pharma' in our specialist areas.

Proximagen's pipeline

Proximagen's pipeline now comprises programmes derived from in-house discovery activities, outright purchase of assets, and purchases of assets through corporate acquisition on success-based terms. Below are details of six of the 14 programmes in our pipeline:

PRX00933 (5HT2c agonist for obesity) PRX00933 (formerly BVT933) belongs to a new class of drug candidates that effect weight loss through selective activation of 5HT2c receptors located in the brain. PRX00933 demonstrated significant weight loss in a Phase II clinical trial and is the next most advanced 5HT2c agonist in clinical development (Source: MedTrack). PRX00933 has been shown to be safe and well tolerated in over 400 patients. The compound is now entering further development, including non-clinical combination studies for obesity and diabetes.

PRX00023 (5HT1a agonist for epilepsy): 5HT1a receptor loss has been implicated in epilepsy and is associated with the brain atrophy that occurs in epileptic patients with depression. It is thought that by activating 5HT1a receptors, seizure incidence and depressive symptoms in epileptics may be reduced. PRX00023 was shown to be safe and well tolerated in over 400 patients and is now entering into further development to determine its utility in epilepsy. If successful, Proximagen will open discussions with funding agencies in the US to support a broader clinical development programme.

Compounds that activate the 5HT1a receptor are also thought to inhibit dyskinesia by regulating abnormal activity of certain neurologic pathways which co-ordinate movement. The reversal of dyskinesia has been shown using other 5HT1a agonists, both in functional models of the disorder and in clinical trials. We are undertaking studies in models of Parkinson's disease to determine PRX00023 utility in alleviating dyskinesia. If successful, PRX00023 would advance the PRX2 programme, designed to reduce the involuntary movements associated with Parkinson's disease, to a Phase II ready clinical programme.

5HT6 antagonist programme for cognition/pain:Proximagen acquired a set of 5HT6 antagonists from Biovitrum, the most advanced being a Phase II ready compound for cognition. Scientists at Proximagen determined that back-ups within this set showed superior pharmacokinetic characteristics, and in line with our strategy of investing in the best drug candidates, although not necessarily the most advanced, we are advancing a pre-clinical backup compound. 5HT6 receptors have also been implicated in the control of pain.

PRX1 programme for Parkinson's disease: Drug candidates from the PRX1 programme have the potential to become the first choice in the treatment of Parkinson's disease, having the efficacy benefits of L-DOPA, considered the best symptomatic treatment available, with advantages over L-DOPA's side-effect profile. This programme is subject to a $232 million licensing agreement with Upsher-Smith. As part of the agreement, Upsher-Smith is responsible for the worldwide development and commercialisation of PRX1. PRX1354, the lead candidate in the PRX1 programme, has shown an improvement over L-DOPA, with prolonged activity and a reduction in unwanted dyskinesia in models of the disease. Whilst PRX1354 demonstrates an improvement over L-DOPA in these models, back-up compounds from the same series are being identified with superior properties, thus potentially strengthening the programme considerably. Work on a back-up series is nearing completion and thereafter the best candidate will be taken into IND-enabling studies. Evaluating back-up compounds, in addition to the lead PRX1354, is expensive and time consuming, but demonstrates Upsher-Smith's commitment to develop drug candidates that represent the best chance of generating significant commercial value for both themselves and Proximagen.

Vascular Adhesion Protein-1 (VAP-1) programme for inflammation: The VAP-1 programme has the potential to deliver a blockbuster drug that regulates the movement of immune cells from the blood into sites of inflammation. This novel small molecule represents a new class of anti-inflammatory for the treatment of several CNS disorders including multiple sclerosis.

The drug candidate may also have utility in the treatment and prevention of the acute and chronic inflammation found in inflammatory bowel disease (Crohn's disease and ulcerative colitis), respiratory distress syndrome, psoriasis and chronic obstructive pulmonary disease.

TrkA programme: The TrkA programme is a novel, small molecule programme for pain therapy. TrkA is a target of great interest, particularly as antibodies to NGF have demonstrated clinical efficacy. There have been significant licensing deals for antibodies to NGF (e.g. Abbott-PanGenetics $190m deal of which $170m was upfront for P110, currently in Phase I for osteoarthritis), but given the challenges associated with developing antibodies there is an opportunity to develop small molecule modulators of this pain pathway.

Other programmes

Research and development at Proximagen has always been a streamlined process, with programmes showing the most visible commercialisation opportunities competing for resource and investment. In accordance with this strategy, a regular assessment is made of all Proximagen programmes. This evaluation led to the deprioritisation of our early stage PRX4 programme, wherein the neuroprotective effects of the full-length PRX4 gene product were not reproduced when undertaken in a large scale study. However, we are sufficiently encouraged by the developments of our other neuroprotection gene product, such that it will receive development resource in 2010. Whilst it is disappointing when we are unable to justify significant allocation of funds to certain programmes, the Company has long been an advocate of only investing shareholders' funds where there are justifiable reasons for doing so and then towards the most promising programmes. Programmes not meeting our stringent investment hurdles will be divested or closed down.

Compared with many other biotechnology companies, Proximagen now has a rich and growing pipeline, reflecting the Company's ability to pursue treatments for various therapeutic indications in later stages of development. We expect to continue to make significant investment in the development of our pipeline, whilst adhering to our merit-based approach to research and development.

Consolidation overview

Many biotechnology companies have seen their market valuations depreciate over the past two years and many companies appear attractively priced. However, identifying attractively priced companies in the sector is the easy part; finding companies with strong technologies and good science is more challenging. The Company reviewed over 40 opportunities worldwide in the second half of 2009 alone and undertook detailed due diligence on 20, completing one company acquisition and one asset acquisition during 2009. An offer on a third acquisition, Minster Pharmaceuticals plc, was made in early 2010.

Proximagen believes that significant value creation opportunities can arise by building critical mass, reducing the cost base, and focusing resources on a more promising pipeline where tough decisions will be taken to discontinue weak programmes.

Ongoing acquisition activities

On 4 January 2010, Proximagen announced a cash offer for Minster Pharmaceuticals plc ("Minster") which has two clinical stage assets, tonabersat and sabcomeline. Worldwide rights to both compounds were acquired by Minster from GlaxoSmithKline ("GSK") and these compounds benefit from comprehensive safety tolerance data as a result of investment by GSK.

Proximagen is interested in tonabersat for epilepsy and if utility is demonstrated, Proximagen would pursue the strategy stated above and look to partner tonabersat for this indication in 2010, whilst retaining some territorial rights.

Management team

The Company has made a number of key appointments in the last twelve months to help it deliver on its growth strategy.

· Peter Allen, who was appointed Chairman in February 2009, brings extensive sector and transaction experience to the Group.

· Dr Jackie Hunter has recently joined Proximagen as a Non-Executive Director. Jackie is currently the Senior Vice President and Head of Science Environment Development at GlaxoSmithKline (GSK) and until March 2008, she was the Senior Vice President and Head of the Neurology & GI Centre of Excellence for Drug Discovery (CEDD) at GSK.

· Our business development team has been strengthened with the appointment of Dr Tim Sparey as our Head of Business Development. Tim joined Proximagen after 15 years in the industry, first at Merck & Co. and latterly with Merck Serono.

· We are also pleased to have appointed Dr Maeve Duffy as Senior Clinical Project Leader. Maeve brings a wealth of clinical development experience to the Group.

Intellectual property

Over the past six months, Proximagen has significantly expanded its patent portfolio. As a result of the recent acquisitions, the Group now owns the rights to 26 patents and patents pending relating to our drug programmes in pre-clinical and clinical development.

Balance sheet

Balance sheet strength remains of paramount importance for executing our acquisition and drug development strategy. To date, our innovative deal structures, coupled with the ability to take advantage of the challenging funding environment in the biotechnology sector have resulted in only a relatively small amount of our capital having been used for consideration.

As at 30 November 2009, Proximagen had cash resources of £55.5m. We expect to invest these funds over the next two to three years in acquiring assets and developing our programmes.

The outlook

We have broadened our pipeline, both in terms of therapeutic indications addressed and the development profile, and we have a flexible, scalable operating infrastructure that can accommodate further programmes without replicating overhead costs.

We look forward to updating shareholders as we progress our acquisition and partnering strategy. The Company is expected to announce its preliminary results for the year ended 30 November 2009 in March 2010.

Commenting on the strategic update, Kenneth Mulvany, CEO, said:

"Proximagen made significant strategic progress in the second half of last year and is well positioned to capitalise on that progress during 2010. With a strong Board, senior management team and balance sheet, as well as a greatly enhanced asset portfolio, we look forward to building on this platform to deliver further significant improvements in the Company's long term prospects this year."