The Company's lead product, Mycograb(R), is a genetically recombinant antibody
('grab') which binds to the immunodominant antigen, heat shock protein 90 ('
hsp90').  The drug is based on a naturally-occurring human antibody response
against hsp90, which facilitates the body in defending itself against life
threatening infections.  Hsp90 was recently highlighted in a leading journal as
enabling pathogenic fungi to rapidly develop drug resistance whereas exposure to
an hsp90 inhibitor, such as Mycograb(R), can enhance the effect of other
anti-fungal agents and preclude or delay the onset of drug resistance or even
reverse drug resistance.  Also, earlier this month, Mycograb(R) was described as
the only antifungal under development with a novel mechanism of action by a Task
Force of the Infectious Diseases Society of America.

The evidence supporting the potential clinical and commercial value of Mycograb
(R) in different clinical indications has continued to mount during the period
under review.  Mycograb(R) has made notable advances in each of the three
clinical areas where its worth as an adjunct in combination with current best
therapy is being assessed:

a)       Invasive candidiasis

Following the impressive data from the confirmatory study for the treatment of
invasive candidiasis reported upon in 2004, the Company prepared a Common
Technical Document and filed an application for market authorization in March
2005.  A number of GCP and GMP inspections were carried out by the Regulator in
2005 and at Day 120 in the process, the EMEA posed a number of questions to
NeuTec.  Detailed answers, often in the form of additional analyses, have been
prepared and returned to the EMEA in respect of all questions received.  The
Company is currently awaiting the response to these answers.

In responding to the Regulator's questions, the drug's safety dataset has been
significantly expanded: additional toxicological and pharmacokinetic data has
been prepared and an additional voluntary phase I study was successfully carried
out.  Escalating doses of Mycograb(R) were given to allow for the definition of
its safety profile, dose-proportionality, volumes of distribution, time
dependent kinetics and method of elimination. This newly expanded dataset has
facilitated a clearer label and a more defined set of application guidelines for
the drug.

Progress with the Company's application for market approval remains within the
EMEA's prescribed timelines and is consistent with a timetable that includes a
regulatory decision before the year end.

Mycograb(R) has Orphan Drug Status in both Europe and the US in the treatment of
invasive candidiasis.  An editorial comment in Clinical Infectious Diseases
(November 2005) concluded that earlier analyses have likely underestimated the
true incidence of candidemia because of deficient diagnostic testing.  The
commentary went on to suggest that the attributable mortality rate associated
with candidemia in a case control study in the US was estimated to be 49% and
that hospital charges attributable to invasive candidiasis were $33,604 -
$45,602 for adults and $65,058 - $119,474 for paediatrics per episode.

b)       Carcinoma of the breast

The Company completed patient recruitment in its phase Ib, pharmacokinetic,
multi-centre, open label study to evaluate the safety and efficacy of Mycograb
(R) administered in combination with Docetaxel in metastatic or recurrent breast
cancer patients in late 2005.

The primary objective of the study is to observe the safety and tolerability of
Mycograb(R) in combination with Docetaxel when administered at twice the dosage
used in the treatment of invasive candidiasis (ie at 2 mg per kg of body
weight).  The secondary objective is to monitor the response rate of the target
tumours and overall survival and progression-free survival through seven months
post treatment.

A total of 21 patients were recruited into the study and of these 7 patients
have been withdrawn for the following reasons: withdrawal of patient consent
(one patient), principal investigator decision (one patient), Docetaxel toxicity
(three patients) and cancer progression (two patients).  All 14 on-going
patients have now received the full course of six cycles of treatment, three
weeks apart, and all 20 surviving patients continue to be monitored on a regular
basis.

Hsp90 has continued to attract significant industry and scientific attention as
a prime target for combinatorial therapy against certain cancers.  A
presentation by the Company at the International Symposium on Targeted
Anticancer Therapies (TAT) in March 2006 was well received and underlined the
activity of the drug against a range of cancer cells in the laboratory.

c)       Cryptococcal meningitis

Cryptococcus neoformans ('C. neoformans') is the most common form of fungal
meningitis and is prevalent in patients with AIDS.  It carries a mortality rate
of up to 20%.  NeuTec is about to commence a phase III study using Mycograb(R)
in combination with current best therapy (generic amphotericin B and
5-flucytosine) against C. neoformans.

The trial will involve approximately 150 patients in a double-blind,
placebo-controlled, multi-centre study.  Regulatory and ethical approval has
recently been obtained in South Africa and this follows a successful
Investigational New Drug ('IND') application to the US Food and Drugs Agency ('
FDA').  Hospitals in the United States, South Africa and South America have
agreed to participate in the study and contracts with investigators are close to
finalization.

The results from this trial will be used to assess the efficacy of Mycograb(R)
against a further life threatening indication, will widen the safety database,
particularly in a non-intensive care unit-based patient environment, and will
explore the drug in combination with conventional amphotericin B (as used in the
Japanese market in the treatment of systemic candidiasis) rather than liposomal
amphotericin B (as used in the US and European markets for the treatment of
invasive candidiasis).

Developmental programme

A total of eight patients have been included in the Company's compassionate use
programme in England, Scotland, Belgium and the Netherlands, the majority having
failed on mono-therapy with other drugs.  As a result, Mycograb(R) has now been
given in combination with conventional amphotericin B and Caspofungin as well as
with liposomal amphotericin B.  It has also been given successfully in the
treatment of two children with invasive candidiasis.  Significantly, this data
has extended the patient safety database.  The Company expects to commit further
resource to this programme in the coming months.

Advisory group meetings have taken place which include a number of investigators
who participated in the confirmatory study into invasive candidiasis and other
experts in this area.  A detailed programme for attending and presenting at
major industry conferences and congresses is being followed, and this includes
participation at the 2006 Meetings of the International Symposium on Intensive
Care and Emergency Medicine (ISICEM) in Brussels, the European Congress of
Clinical Microbiology and Infectious Diseases (ECCMID) in Nice and the
International Society for Human and Animal Mycology (ISHAM) Congress in Paris.

These meetings form part of a wide-ranging programme for the identification and
targeting of leading specialists and renowned clinicians in the treatment of
severe fungal infection.  They will extend the awareness of Mycograb(R) and its
novel mechanism of action.  This programme has been supplemented by the first
technical publication of the mechanism of action entitled 'Fungal heat-shock
proteins in human disease', published in FEMS (the Federation of European
Microbiological Societies) in January 2006.

In order to comply with regulatory requirements regarding marketed drugs, the
Company has been working with its principal Contract Manufacturing Organisation
to implement a full Process Validation Programme during the summer.  Three
batches of Mycograb(R) were delivered during the period under review and
contracts have been signed to secure a further 11 batches of drug in four
campaigns over the next 18 months.