Planned acquisition of Innovata plc by Vectura

17 Nov 2006

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Vectura Group plc ("Vectura") and Innovata plc ("Innovata")

Recommended offer for Innovata by Vectura

Chippenham, UK, 17 November 2006 : The Boards of Vectura and Innovata today announce that they have reached agreement on the terms of a recommended all share offer by Vectura for the whole of the issued and to be issued share capital of Innovata.

The combination of the two companies will create an Enlarged Group with a portfolio of revenues from marketed products, a strong development pipeline and a range of formulation, device and delivery technologies for drugs inhaled as dry powders.With its combined expertise, facilities and cash resources, the Boards of Vectura and Innovata believe that the Enlarged Group will be a UK leader in pulmonary product development, a fast growing area of the pharmaceutical industry.

The Enlarged Group will:

have revenues generated from eight marketed products;
benefit from two complementary development pipelines;
be able to offer a range of device and formulation technologies addressing a large and fast growing market sector;
be financially strong (combined pro forma cash of £92m at 30 September 2006); and
be expected to benefit from an enhanced market presence and increased market capitalisation.

It is proposed that the Acquisition be implemented by way of a Court approved scheme of arrangement under Section 425 of the Companies Act

Under the terms of the Proposal, Innovata Shareholders will receive 0.2858 new Vectura Shares for every Innovata Share.

On the Scheme becoming effective, Innovata Shareholders will own 46 per cent., and Vectura Shareholders will own 54 per cent. respectively of the enlarged share capital of Vectura, assuming no further issue of Innovata Shares or Vectura Shares prior to the date on which the Scheme becomes effective.

On the basis of a share price of 91 pence for each Vectura Share, being the average Closing Price of a Vectura Share for the 15 Dealing Days up to and including 16 November 2006, the last Dealing Day prior to this announcement, the Proposal values the entire issued share capital of Innovata (assuming no exercise of existing Innovata Options) at approximately £130.9 million and each Innovata Share at 26 pence. On this basis, the Proposal represents a premium of 13.0 per cent. to the Closing Price of an Innovata Share of 23 pence on 16 November 2006

On the basis of share price of 89.5 pence for each Vectura Share, being the Closing Price of a Vectura Share on 16 November 2006, the last Dealing Day prior to this announcement, the Proposal values the entire issued share capital of Innovata (assuming no exercise of existing Innovata Options) at approximately £128.8 million and each Innovata Share at 25.6 pence. On this basis, the Proposal represents a premium of 11.2 per cent. to the Closing Price of an Innovata Share of 23 pence on 16 November 2006

Upon the Scheme becoming effective, it is proposed that Dr Susan Foden, an existing non-executive director of Innovata, will be appointed to the Vectura Board as a non-executive director.

The Acquisition will be conditional on, inter alia, the approval of Vectura Shareholders, the approval of Innovata Shareholders, the sanction of the Court and the London Stock Exchange agreeing to admit the existing and new Vectura Shares to AIM, subject only to the Scheme becoming effective.

Vectura has received irrevocable undertakings to vote in favour of the resolutions to be put to the Innovata Court Meeting and the Innovata Extraordinary General Meeting from the Innovata Directors in respect of their entire legal and beneficial holdings of Innovata Shares amounting, in aggregate, to 61,759,132 Innovata Shares, representing approximately 12.3 per cent. of Innovata's existing issued share capital. These undertakings will continue to be binding even in the event of a higher competing offer for Innovata being announced, and cannot be withdrawn other than in the event of the Scheme lapsing or being withdrawn.

In addition, Vectura has received letters of intent to vote in favour of the resolutions to be put to the Court Meeting and the Innovata Extraordinary General Meeting from Morley Fund Management in respect of 75,831,665 Innovata Shares and from Cazenove Capital Management in respect of 17,602,683 Innovata Shares (representing, in aggregate, approximately 18.6 per cent. of Innovata's existing issued share capital)

In aggregate, Vectura has received irrevocable undertaking and letters of intent to vote in favour of the Proposal at the Innovata Court Meeting and the Innovata Extraordinary General Meeting in respect of 155,193,480 Innovata Shares (representing approximately 30.9 per cent. of Innovata's existing issued share capital).

Irrevocable undertakings to vote in favour of the Acquisition at the Vectura Shareholder Meeting have been received from the Vectura Directors in respect of their entire holding of Vectura Shares amounting to, in aggregate 650,332 Vectura Shares, representing approximately 0.39 per cent. of the existing issued share capital of Vectura.Irrevocable undertakings to vote in favour of the Acquisition at the Vectura Shareholder Meeting have also been received from Baronsmead VCT plc, Baronsmead VCT2 plc, Baronsmead VCT3 plc, Baronsmead VCT4 plc, ISIS II 2001 L.P. and ISIS II 2001 GMBH & Co. KG in respect of, in aggregate, 5,802,090 Vectura Shares, representing approximately 3.4 per cent. of the existing issued share capital of Vectura.

In addition, Vectura has received letters of intent to vote in favour of the Acquisition at the Vectura Shareholder Meeting from Bluecrest Capital International Ltd, Bluecrest Equity Master Fund Ltd, Man Mac Rothorn 6A Ltd and Bluecrest Strategic Ltd in respect of, in aggregate, 16,820,589 Vectura Shares and from AXA Framlington Investment Management Limited in respect of 7,861,275 Vectura Shares (representing, in aggregate, approximately 14.6 per cent. of Innovata's existing issued share capital).

In aggregate, Vectura has received irrevocable undertaking and letters of intent to vote in favour of the Proposal at the Vectura Shareholder Meeting in respect of 31,134,286 Vectura Shares (representing approximately 18.4 per cent. of Vectura's existing issued share capital).

The Boards of both Vectura and Innovata intend unanimously to recommend the Acquisition to their respective shareholders.

The Acquisition is expected to be completed by 16 January 2007.

Jack Cashman, Chairman of Vectura, commented:

"We believe that Innovata and Vectura represent an excellent strategic fit.The combination of the two businesses will create an Enlarged Group with a portfolio of licensed and marketed products, a broader and well balanced pipeline of mid to late stage products in clinical development, and the cash resources to progress development of our lead candidates.We believe that the Enlarged Group will have all the constituents in place to become a UK leader in pulmonary product development.It is the intention of the Vectura Directors for the Enlarged Group to move from AIM to the Official List during 2007 and we believe this should provide further liquidity and a higher profile with investors."

Ian Kent, Chairman of Innovata, added:

"The Innovata Directors believe size is important for companies in the biotechnology sector and the combination of Vectura and Innovata will result in a leading pulmonary development company with the skills and resources to leverage a pipeline of considerable potential, as well as a broader range of formulation, device and drug delivery capabilities.We believe that shareholders in both companies will benefit from the enhanced strength and reputation of the Enlarged Group."

This summary should be read in conjunction with the full text of the announcement.

Enquiries

Vectura Group plc +44 (0) 1249 667 700
Chris Blackwell, Chief Executive
Anne Hyland, Chief Financial Officer

Innovata plc +44 (0) 1159 747 474
Kieran Murphy, Chief Executive
Peter Shennan, Chief Financial Officer

Nomura Code Securities Ltd (Financial Adviser and broker to Innovata) +44 (0) 020 7776 1200
Juliet Thompson
Richard Potts

Financial Dynamics +44 (0) 20 7269 7156
David Yates
Anna Keeble

Appendix I contains the conditions to the Acquisition and implementation of the Scheme.

Appendix II contains details of the bases and sources of the financial information set out in this announcement.

Appendix III contains the definitions of terms used in this announcement.

Piper Jaffray, which is authorised and regulated in the UK by the Financial Services Authority, is acting as Nominated Adviser and broker to Vectura in connection with the Proposal and no-one else and will not be responsible to anyone other than Vectura for providing the protections afforded to clients of Piper Jaffray nor for providing advice in relation to the Proposal nor any other matter referred to in this announcement.

Nomura Code, which is authorised and regulated in the UK by the Financial Services Authority, is acting as Financial Adviser and broker to Innovata in connection with the Proposal and no-one else and will not be responsible to anyone other than Innovata for providing the protections afforded to clients of Nomura Code nor for providing advice in relation to the Proposal nor any other matter referred to in this announcement.

This announcement does not constitute an offer or invitation to acquire or exchange securities in Vectura or Innovata. Innovata Shareholders are advised to read carefully the formal documentation in relation to the Proposal, once it is dispatched.

The implications of the Scheme for Overseas Innovata Shareholders may be affected by the laws of the relevant jurisdictions. Such Overseas Innovata Shareholders should inform themselves about and observe any applicable legal requirements. It is the responsibility of each Overseas Innovata Shareholder to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required to be observed and the payment of any issue, transfer or other taxes in such jurisdictions.

Dealing disclosure requirements

Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the "Code"), if any person is, or becomes, "interested" (directly or indirectly) in 1 per cent. or more of any class of "relevant securities" of Innovata or of Vectura, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the Scheme becomes effective or the Proposal lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Innovata or Vectura, they will be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of Innovata or of Vectura by Innovata or Vectura, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.

"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on the Panel's website.

If you are in any doubt as to the application of Rule 8 to you, please contact an independent financial adviser authorised under the Financial Services and Markets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0) 20 7638 0129; fax +44 (0) 20 7236 7013.

In accordance with Rule 2.10 of the City Code, Vectura confirms that it has 168,834,281 shares of 0.025 pence each in issue and admitted to trading on AIM under the UK ISIN Code GB00B01D1K48.

In accordance with Rule 2.10 of the City Code, Innovata confirms that it has 503,158,305 shares of 1 pence each in issue and admitted to trading on the London Stock Exchange's main market for listed securities under the UK ISIN Code GB0005554703.

Recommended offer for Innovata plc by Vectura Group plc

1. Introduction

The Boards of Vectura and Innovata announce today that they had reached agreement on the terms of a recommended all share offer by Vectura for the whole of the issued and to be issued share capital of Innovata.

The Board of Vectura believes that Vectura's acquisition of Innovata will create an Enlarged Group with a portfolio of revenues from marketed products, a strong development pipeline and a range of formulation, device and delivery technologies for drugs inhaled as dry powders.With its combined expertise, facilities and cash resources, the Boards of Vectura and Innovata believe that the Enlarged Group will be a UK leader in pulmonary product development, a fast growing area of the pharmaceutical industry.

The Innovata Directors, who have been so advised by Nomura Code, consider the terms of the Proposal to be fair and reasonable and in the best interests of Innovata Shareholders as a whole.In providing its advice, Nomura Code has taken into account the Innovata Directors' commercial assessment of the Proposal. Accordingly, the Innovata Directors unanimously intend to recommend Innovata Shareholders to vote in favour of the Scheme at the Court Meeting and in favour of the Special Resolution to be proposed at the Innovata Extraordinary General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial holdings of 61,759,132 Innovata Shares, representing, in aggregate, approximately 12.3 per cent of the Innovata Shares in issue on the last Dealing Day prior to the date of the Announcement.

The Proposal

The Proposal involves the acquisition by Vectura of the whole of the issued and to be issued share capital of Innovata and is to be effected by way of a scheme of arrangement of Innovata under Section 425 of the Companies Act.Implementation of the Scheme is subject to satisfaction or (where appropriate) waiver of the Conditions set out in Appendix I.Under the terms of the Scheme, all existing Innovata Shares will be cancelled and new Innovata Shares will be allotted to Vectura, such that Innovata will become a wholly-owned subsidiary of Vectura. Upon the Scheme becoming effective, Innovata Shareholders who are on the register of members at the Scheme Record Time will receive:

0.2858 new Vectura Shares for every 1 Innovata Share

Fractions of new Vectura Shares will not be allotted or issued to Innovata Shareholders pursuant to the Proposal and fractional entitlements will be rounded down to the nearest whole number of new Vectura Shares.

The Acquisition constitutes a reverse takeover by Vectura for the purposes of the AIM Rules.Accordingly, following approval by Vectura's Shareholders, Vectura's existing quotation on AIM will be cancelled.Application will be made for the new and existing Vectura Shares to be admitted to trading on AIM and it is expected that Admission will become effective on the Dealing Day following that on which the Scheme becomes effective.

On the Scheme becoming effective, it will be binding on all holders of Scheme Shares including any Innovata Shareholders who did not vote to approve the Scheme or who voted against the Scheme.
On the Scheme becoming effective, Innovata Shareholders will own 46 per cent., and Vectura Shareholders will own 54 per cent. respectively of the enlarged share capital of Vectura, assuming no further issue of Innovata Shares or Vectura Shares prior to the date on which the Scheme becomes effective.
On the basis of a share price of 91 pence for each Vectura Share, being the average Closing Price of a Vectura Share for the 15 Dealing Days up to and including 16 November 2006, the last Dealing Day prior to this announcement, the Proposal values the entire issued share capital of Innovata (assuming no exercise of existing Innovata Options) at approximately £130.9 million and each Innovata Share at 26 pence. On this basis, the Proposal represents a premium of approximately 13.0 per cent. to the Closing Price of an Innovata Share of 23 pence on 16 November 2006
On the basis of share price of 89.5 pence for each Vectura Share, being the Closing Price of a Vectura Share on 16 November 2006, the last Dealing Day prior to this announcement, the Proposal values the entire issued share capital of Innovata (assuming no exercise of existing Innovata Options) at approximately £128.8 million and each Innovata Share at 25.6 pence. On this basis, the Proposal represents a premium of approximately 11.2 per cent. to the Closing Price of an Innovata Share of 23 pence on 16 November 2006

The new Vectura Shares will be issued credited as fully paid, on identical terms to and will rank pari passu with the existing issued Vectura Shares, including the right to receive and retain all dividends and other distributions declared, paid or made on Vectura Shares after the Scheme becomes effective.

On the basis that none of the outstanding Innovata Options are exercised, the Proposal will result in the issue of approximately 143.8 million new Vectura Shares by Vectura to existing Innovata Shareholders, representing 46 per cent. of the Enlarged Share Capital of Vectura.

The Proposal and the Scheme are subject to satisfaction or (where appropriate) waiver of the Conditions set out in Appendix I, including the approval of both Innovata Shareholders and Vectura Shareholders as described in paragraph 9 below and the sanction of the Court.

The Proposal has the unanimous support of the Boards of both Vectura and Innovata, who intend unanimously to recommend the Proposal to their respective shareholders.

2. Reasons for the recommendation by the Innovata Directors of the Proposal

Since early 2005, the Board of Innovata has made significant progress in pursuing its stated strategy of building a specialty pharmaceutical business particularly focused on the pulmonary market. However, the Innovata Directors also believe that one of the keys to success in the industry in which Innovata operates is the establishment of a business of sufficient size, with a strong revenue base and a number of collaborations with large pharmaceutical companies. Over the last 12 months, Innovata has announced that it has entered into a collaborative arrangement with a European pharmaceutical company and has been exploring the possibility of further such collaborations for the US and Japanese markets.As is further described below, Vectura has a number of similar collaborations with different companies. The Board of Innovata believes that one of the principal benefits of combining the Innovata and Vectura businesses is the size and reputation to be gained from the Enlarged Group having a number of such collaborations and the ability to further expand the business through offering a broader product, device and formulation competence base.The Enlarged Group will also benefit from a broader intellectual property base, including device, spray-drying, stabilisation, formulation and controlled release technologies.

In addition, the Board of Innovata understands that Vectura has been pursuing a similar strategy of focusing on specialty pharmaceutical products to that of Innovata. The Board of Innovata believes that shareholders in both companies will benefit from the combination of both businesses.

The Vectura Directors have stated that it is the intention of the Board of Vectura, following implementation of the Scheme, to make full use of Innovata's site at Ruddington.Vectura also expects to benefit from the expertise of Innovata employees in developing pharmaceutical products.Whilst it is likely that after completion of the Scheme there will be certain savings, the Board of Innovata is pleased to note that there is likely to be continued employment for the majority of Innovata's Ruddington employees and that the employment rights of all employees will be fully safeguarded.

The Board of Innovata therefore believes, and has been so advised by Nomura Code, that for the reasons expressed above, the interests of Innovata Shareholders are best served by the adoption of the Proposal and the sanction of the Scheme.

3. Background to, and reasons for, Vectura's Proposal

Strategy and strategic fit

Vectura's strategy is to become a principal player in the development of pulmonary pharmaceutical products.Vectura's first step in achieving this aim is to strengthen the Company's pulmonary pipeline and to broaden its technology base.In this regard, the Directors of Vectura believe that Innovata represents an excellent strategic fit with Vectura's current business.Vectura's Directors believe that the combined pulmonary portfolio of the Enlarged Group will create a UK leader in pulmonary product development.

Financial strength and investment proposition

As at 30 September 2006, on a pro forma basis, the Enlarged Group had £92 million in cash and liquid investments (before taking into account any Acquisition costs).The Enlarged Group will expect to benefit from continuing revenues from royalty streams on the eight marketed products and milestones on the six main licensing deals currently in place.One of the Enlarged Group's goals will be to become financially self-sustaining.The combination of the two companies is expected to result in cost savings from eliminating duplication in the infrastructure which will assist in securing this goal.

Product pipeline

The combination of Innovata with Vectura will allow the Enlarged Group to focus on the development of a broad and well-balanced pipeline with products at pre-clinical, clinical and post launch stages.Supported by a significant revenue stream, this broader pipeline should increase the likelihood of bringing new products to value milestones and should help to reduce the portfolio risk profile.

The Acquisition will create an Enlarged Group that has:

Royalties from eight marketed products:
- Five products for the treatment of respiratory diseases
- Three non-pulmonary products
Twelve products in full development:
- Seven targeted at the respiratory market
- Two neurology products
- Two sexual dysfunction products
- One product for diabetes

Nine of these twelve products will be in clinical development.

Vectura has stated its aim of focusing its future portfolio on respiratory and neurology therapeutic areas and it intends to out-license its existing products for erectile dysfunction and premature ejaculation.

Enabling technologies

The Enlarged Group's pipeline will be underpinned by the breadth of its formulation and delivery technologies and its experience in product development.

The combination of the two businesses brings together a range of validated formulation and stabilisation technologies:

PowderHale®, a formulation technology that improves dry powder flow characteristics to improve lung penetration, has been employed in the development of NVA237, a product licensed to Novartis AG in 2005
Stabilisation technology that facilitated the development of ADVATE, a serum-free formulation of recombinant factor VIII, marketed by Baxter International Inc.
Particle engineering (spray drying) technology, currently being used in the development of inhaled insulin

The Directors of Vectura and Innovata believe that all of these technologies have utility in other products.

The Enlarged Group will have single and multiple dose devices suitable for pulmonary delivery of medicines for local lung diseases and which provide rapid, efficient access through the lungs to the bloodstream for systemic treatments:

Clickhaler®, a multiple-dose single reservoir dry powder inhaler (DPI) that has achieved regulatory validation, and is available in five marketed products
Duohaler®, a twin reservoir multi-dose DPI device in development for the delivery of generic products
GyroHaler®, a passive multi-unit dose DPI in development to deliver dry powder formulations to treat respiratory diseases.Vectura has licensed the European rights to a generic combination product delivered with GyroHaler®
Aspirair®, a highly-efficient active single-unit DPI device involved in Vectura's development of three products that require deep lung delivery for systemic effect
A device for the private German company, Boehringer Ingelheim, which has agreed to collaborate with Vectura to develop this device for delivery of its own respiratory products
S2 bead engine, a highly efficient passive dispersion engine, which could be incorporated into a single unit dose DPI for a wide range of conditions

Staff and facilities

Both Vectura and Innovata benefit individually from strong management teams and staff experienced in the drug development process, and Vectura intends to maintain the expertise that exists within Innovata through the retention of most of Innovata's staff within the Enlarged Group.Vectura's and Innovata's key facilities in Chippenham, Cambridge and Ruddington, which the Vectura Directors intend to maintain within the Enlarged Group, provide a means to expand the Enlarged Group's operational capabilities to meet the needs of the consolidated portfolio.

The Directors of Vectura and Innovata believe that consolidation within the UK biotechnology sector will provide stronger opportunities for potential investors and that the acquisition of Innovata by Vectura will create a company which will be a more attractive specific investment opportunity in the field of pulmonary product development.It is the intention of the Vectura Directors for the Enlarged Group to move from AIM to the Official List during 2007 and the Vectura Directors believe that this should provide further liquidity and a higher profile with investors.

4. Directors, management and employees

Each of the Innovata Directors have agreed to resign from the Board of Innovata on the date on which the Scheme becomes effective, although Dr Susan Foden will join the board of Vectura as a non-executive director. Dr Chadwick and Dr Dalton will continue as employees of the Enlarged Group, although Dr Chadwick will move to a three day week and both of their respective terms of engagement will be modified.The services of Ian Kent and Kieran Murphy, Chairman and CEO of Innovata respectively, will be made available to the Enlarged Group on a part time basis for a period of 12 months following the date on which the Scheme becomes effective.

Further details of the termination arrangements, modification of terms and consultancy arrangements will be set out in the document to be sent to Innovata Shareholders in due course.

Vectura has given assurances that, following the Scheme becoming effective, the existing employment rights, including accrued pension rights, of Innovata's employees will be fully safeguarded and, save as in the case of the Innovata Directors as referred to above, its plans for Innovata do not include any material changes in the conditions of employment of Innovata employees.

5. Principal terms and conditions of the Acquisition and implementation of the Scheme

The Proposal involves the acquisition by Vectura of the whole of the issued and to be issued share capital of Innovata and is to be effected by way of a scheme of arrangement of Innovata under Section 425 of the Companies Act.Under the terms of the Scheme, all existing Innovata Shares will be cancelled and new Innovata Shares will be allotted to Vectura, such that Innovata will become a wholly-owned subsidiary of Vectura. Upon the Scheme becoming effective, Innovata Shareholders who are on the register of members at the Scheme Record Time will receive:

0.2858 new Vectura Shares for every 1 Innovata Share

The Acquisition is conditional on, inter alia, the approval of Innovata Shareholders and of Vectura Shareholders, and as the Acquisition constitutes a reverse acquisition under the AIM Rules, the admission of the existing and new Vectura Shares to trading on AIM. Application will be made to the Court for leave to convene the Innovata Court Meeting which (subject to the approval of the Court) is expected to be held at 10.00 a.m. on 20 December 2006 for the purpose of seeking the necessary approval from Innovata Shareholders.It is expected that the Innovata Extraordinary General Meeting will also be convened for 20 December 2006, immediately following the Court Meeting for the purpose of obtaining all other requisite approvals from Innovata Shareholders.It is expected that the Vectura Extraordinary General Meeting will be convened for 10.00 a.m. on 13 December 2006 for the purpose of seeking the necessary approvals from Vectura Shareholders.

The new Vectura Shares will, when issued, be credited as fully paid and free from all liens, charges and encumbrances and will rank pari passu in all respects with the existing Vectura Shares. Application will be made to the London Stock Exchange for the new Vectura Shares to be admitted to trading on AIM.It is expected that Admission will occur on the Dealing Day following the date on which the Scheme becomes effective.

Conditions to the Proposal and implementation of the Scheme

The Conditions to the Proposal and implementation of the Scheme are set out in full in Appendix I and include the following:

the Scheme becoming effective by no later than close of business on 31 March 2007 or such later date as Innovata and Vectura shall agree and the Court may approve, failing which the Scheme will lapse;
the approval of the Scheme by a majority in number representing not less than three-fourths in value of the holders of Innovata Shares, present and voting, either in person or by proxy, at the Court Meeting (or any adjournment of that meeting);
the resolutions required to approve and implement the Proposal being duly passed by the requisite majority at the Innovata Extraordinary General Meeting (or at any adjournment of that meeting);
the resolutions required to approve and implement the Acquisition being duly passed by the requisite majority at the Vectura Shareholder Meeting (or at any adjournment of that meeting);
the sanction of the Scheme and confirmation of the Reduction of Capital involved therein by the Court with such modifications (if any) as may be reasonably acceptable to Vectura and Innovata) and an office copy of the Order of the Court sanctioning the Scheme and confirming the Reduction of Capital which forms part of it being delivered by Innovata for registration to the Registrar of Companies in England and Wales and being registered by him;
the condition in the Paul Capital Agreement with respect to the payment of sums by Innovata to RST having been satisfied in accordance with its terms;
the London Stock Exchange agreeing or confirming its decision to admit the existing and new Vectura Shares to trading on AIM, subject only to (i) the allotment of the new Vectura Shares and/or (ii) the Scheme becoming effective (other than with respect to the condition described in this paragraph (vii)); and
the Conditions, which are not otherwise identified above, being satisfied or (where applicable) waived.

6. Information on Vectura

Vectura is an emerging pharmaceutical development company with a range of inhaled drugs for the treatment of medical conditions where optimised delivery via the lungs can provide significant benefits, such as fast onset of action, improved efficacy and improved tolerability compared with other therapies. Vectura's strategy is to combine the Vectura Group's proprietary pulmonary delivery technologies with known drugs either for use in new indications or for a new route of administration.

Vectura generates positive cash flows from licensing its technologies in certain fields to other pharmaceutical companies. The Boehringer Ingelheim agreement signed in April 2006 for a dry powder inhaler device is an example of such a deal. Vectura also operates a Pharmaceutical Development Services business that undertakes contract development work for licensing partners and other pharmaceutical companies. The cash generated from these activities is available for investment in Vectura's own development projects or for other purposes. The Vectura Directors believe that these activities demonstrate Vectura's expertise in applying pulmonary technologies to the creation of valuable pharmaceutical products.

7. Information on Innovata

Innovata is a cash generative company specialising in the development of pulmonary products for the treatment of respiratory disorders and other inhaled therapies. Innovata generates revenue from its pulmonary and non-pulmonary assets. Innovata has a track record of successful device development, formulation development, clinical development, regulatory approval and licensing of pharmaceutical products to major pharmaceutical companies and is involved in the development of new products for specialist pharmaceutical markets.

Innovata has undertaken a number of transactions as part of a strategy focused on the development of inhaled therapeutics using its proprietary technologies from its Ruddington base.Through these transactions, Innovata has brought together competencies in candidate product identification, product development (including device and formulation design and development), project management, clinical development, regulatory affairs, quality, manufacturing and supply-chain management.

Using its proprietary dry powder inhaler and drug formulation technologies, Innovata has developed a pipeline of revenue-generating pre-clinical, clinical-stage and marketed pulmonary products.

Innovata has established development and licensing partnerships with a number of pharmaceutical companies including Baxter, UCB and Otsuka.

Paul Capital Agreement

In 2001 and 2002, Innovata entered into royalty sharing arrangements with Paul Capital Royalty Acquisition Fund L.P. ("Paul Capital") under which Paul Capital provided funding totalling £22.5 million in return for which Paul Capital would receive a share of the revenues earned by Innovata from the commercialisation of Extraneal and Adept® in the period from commencement of these arrangements up to 30 September 2010. Under these royalty sharing arrangements ("the PRF Agreements"), Paul Capital was granted a right (the "Put Option") in certain circumstances (including on change of control), to require that Innovata re-purchases Paul Capital's interests in the royalty streams from Extraneal and Adept® for a consideration calculated to give Paul Capital an agreed minimum rate of return under the royalty sharing arrangements. Since these arrangements were entered into, the interests of Paul Capital have been assigned to Royalty Securitization Trust I ("RST").

As the Proposal would, if implemented, result in the trigger of RST's right to exercise its Put Option, Innovata and Vectura have jointly negotiated amendments to the terms of the PRF Agreements, these amendments being conditional on the Scheme becoming effective.

On 16 November 2006, Innovata entered into a conditional Deed of Waiver and Amendment ("the Deed") reflecting the amendments to the PRF Agreements that have been agreed with RST. The principal terms of the Deed, which is conditional, inter alia, on the Scheme becoming effective, are that RST will agree to waive its right to exercise the Put Option as a consequence of the acquisition of Innovata by Vectura. In return, RST is to receive a payment of US$2m from Vectura upon the Scheme becoming effective. Further amendments to the PRF Agreements have been agreed, such that future receipts by RST under the PRF agreements will be subject to agreed minimum and maximum annual payments. In addition, in the event that the Put Option becomes exercisable (for example on a change of control of Vectura) at any time between the date on which the Scheme becomes effective and the date on which the royalty sharing under the PRF Agreements terminates in September 2010, the basis of calculation of the amount payable in such circumstances will alter according to a schedule of fixed payments. Innovata will also have a right to buy out the interests of RST on the same basis of fixed payments. On the Scheme becoming effective, Vectura will guarantee the performance by Innovata of its obligations under the PRF Agreement, as amended by the Deed.

Further details of the Deed will be set out in the documents to be sent to Innovata and Vectura shareholders in due course.

8. Current trading and prospects of the Enlarged Group

Vectura

The unaudited interim results of Vectura for the six months to 30 September 2006 were announced today.For the six months ended 30 September 2006, Vectura achieved turnover of £6.1 million (2005: £3.6 million) and gross profits of £4.5 million (2005: £2.7 million).

Since March of this year, Vectura has made significant progress across all areas of the business, in both drugs and devices, and completed a £45 million fundraising.In clinical development Vectura's lead product NVA237 successfully completed a Phase IIb trial for COPD, VR004 (its drug for erectile dysfunction) successfully completed a Phase IIb trial, and VR040 for "off" episodes in Parkinson's Disease demonstrated safety and efficacy in a Phase IIa trial.The device expertise within Vectura was also further validated by a worldwide collaboration development and licence agreement, signed with Boehringer Ingelheim in April 2006.

Since 30 September 2006, Vectura has continued to operate in line with the Vectura Directors' expectations, and the Vectura Directors are confident of the financial and trading prospects of Vectura for the current financial year.

Innovata

The audited results of Innovata for the year ended 30 September 2006 were also announced earlier today. For the twelve months ended 30 September 2006, Innovata achieved turnover of £33.6 million (2005: £19.5 million) and gross profits of £29.3 million (2005: £15.8 million).

During the year ended 30 September 2006, Innovata has made significant progress in developing its business and increasing its revenues. Adept was licensed to Baxter and subsequently received regulatory approval in the US, a second Duohaler® licensing agreement was signed with a European partner, the inhaled insulin collaboration agreement with Bristol-Myers Squibb was restructured and the project progressed under the control of our Qdose joint venture. Royalties from ADVATE were included for the full year following acquisition of Quadrant Technologies Limited last year and benefited from strong growth in underlying sales. Royalties from Extraneal also grew, although as from September 2006, royalties will cease to be received from the European sales of Extraneal. Development fees increased, reflecting increased activities on the Duohaler® programmes and sales of Clickhaler devices grew following regulatory approvals.

Since 30 September 2006, Innovata has continued to operate in line with the Innovata Directors' expectations and the Innovata Directors are confident of the Group's prospects for the financial year that has just begun.

Enlarged Group

The Vectura Directors and the Proposed Director believe that the combination of Vectura and Innovata should result in a leading pulmonary development company of significant size and with the resources to develop and/or partner a broad and promising pipeline.

Accordingly, the Vectura Directors and the Proposed Director view the Enlarged Group's prospects for the current financial year with confidence.

It is the intention of the Vectura Directors and the Proposed Director for the Enlarged Group to move from AIM to the Official List during 2007.The Vectura Directors and the Proposed Director believe that moving the Enlarged Group to the Official List should provide further liquidity and a higher profile with investors.

9. Shareholder meetings

In view of its size, the Acquisition is conditional upon, inter alia, the approval of Vectura Shareholders at the Vectura Shareholder Meeting, which is expected to be held at 10.00 a.m. on 13 December 2006.

Implementation of the Scheme is subject, inter alia, to the approval of Innovata Shareholders at the Innovata Court Meeting and at the Innovata Extraordinary General Meeting.Application will shortly be made to the Court for leave to convene the Court Meeting which (subject to the approval of the Court) is expected to be held at 10.00 a.m. on 20 December 2006.It is expected that the Innovata Extraordinary General Meeting will also be convened for 20 December 2006, immediately following the Court Meeting.

The implementation of the Scheme can only take place if all the Conditions have been satisfied or, where appropriate, waived. Assuming the satisfaction or, where appropriate, waiver of the Conditions, the Scheme will become effective on the delivery by Innovata to the Registrar of Companies in England and Wales of the Court Order sanctioning the Scheme (and the related Reduction of Capital) and the registration of such Court Order. Once the Scheme becomes effective, it will be binding on all Innovata Shareholders whether or not they voted in favour.

The Scheme Document setting out full details of the Acquisition and the Scheme, together with notices of the Court Meeting and the Innovata Extraordinary General Meeting and the expected timetable, together with the Vectura Admission Document, will be posted as soon as practicable to Innovata Shareholders. At the same time, Vectura will post the Vectura Shareholder Circular, containing a notice convening the Vectura Shareholder Meeting, together with a copy of the Vectura Admission Document, to Vectura Shareholders.

10. Conduct Agreement

On 17 November 2006, Innovata and Vectura entered into a Conduct Agreement in connection with Proposal, pursuant to which each of the parties has undertaken (subject to and taking into account the fiduciary duties of their respective directors), inter alia, to use all reasonable endeavours to achieve satisfaction of the Conditions to the Scheme as soon as reasonably practicable and to co-operate together in the publication of all documents and the taking of all necessary steps in order to give effect to the Scheme.

Innovata has undertaken that prior to the Scheme becoming effective or the Conduct Agreement being terminated in accordance with its terms (whichever is earlier) and subject to and taking into account the fiduciary duties of its directors, it will make the necessary applications to Court and take the other necessary procedural steps to give effect to the Scheme.

Each of the parties has agreed that prior to the Scheme becoming effective or the Conduct Agreement being terminated in accordance with its terms (whichever is earlier) and subject to and taking into account the fiduciary duties of their respective directors, each of Innovata and Vectura will conduct their respective businesses in accordance with an agreed set of principles.

As an inducement to Vectura proceeding with the Proposal, Innovata has agreed to pay Vectura an inducement fee of £1,250,000 (inclusive of any applicable VAT) if:

(i)

Innovata fails to publish the Scheme Document and dispatch it, together with the Vectura Admission Document, to Innovata Shareholders (other than for reasons attributable directly or indirectly and in whole or in part to Vectura or the Vectura Directors);
(ii)

Innovata fails to hold the Court Meeting and Extraordinary General Meeting to be convened for the purposes of giving the necessary approvals for the Acquisition;
(iii)

in the event that the Scheme is approved by Innovata Shareholders, Innovata subsequently fails to undertake the various subsequent procedural steps necessary to give effect to the Scheme (other than for reasons attributable directly or indirectly and in whole or in part to Vectura or the Vectura Directors);
(iv)

an independent competing offer for Innovata is announced;
(v)

Innovata's directors either withdraw or adversely modify or fail to reconfirm their unqualified and unconditional recommendation of the Scheme or approve the announcement of or recommend any independent competing offer for Innovata or resolve to undertake any of the above actions,

and in any such case, the Scheme subsequently lapses or is withdrawn.However, nothing in the Conduct Agreement shall oblige Innovata to pay any amount which the Panel determines would not be permitted by rule 21.2 of the City Code.

As an inducement to Innovata proceeding with the Proposal, Vectura has agreed to pay Innovata an inducement fee of £1,250,000 (inclusive of any applicable VAT) if:

(i)

Vectura fails to publish the Vectura Admission Document (other than for reasons attributable directly or indirectly and in whole or in part to Innovata or the Innovata Directors);
(ii)

Vectura fails to hold a duly convened Vectura Shareholder Meeting for the purposes of passing the requisite resolutions to give effect to the Scheme; or
(iii)

prior to the holding of the Vectura Shareholders Meeting, the Vectura Directors withdraw their unqualified and unconditional recommendation to Vectura Shareholders to vote in favour of the resolutions to be considered at the Vectura Shareholders Meeting,

11. Irrevocable undertakings and letters of intent

Vectura has received irrevocable undertakings to vote in favour of the resolutions to be put to the Innovata Court Meeting and the Innovata Extraordinary General Meeting from the Innovata Directors in respect of their entire legal and beneficial holdings of Innovata Shares amounting, in aggregate, to 61,759,132 Innovata Shares, representing approximately 12.3 per cent. of Innovata's existing issued share capital. These undertakings will continue to be binding even in the event of a higher competing offer for Innovata being announced, and cannot be withdrawn other than in the event of the Scheme lapsing or being withdrawn.

In addition, Vectura has received letters of intent to vote in favour of the resolutions to be put to the Court Meeting and the Innovata Extraordinary General Meeting from Morley Fund Management in respect of 75,831,665 Innovata Shares and from Cazenove Capital Management in respect of 17,602,683 Innovata Shares (representing, in aggregate, approximately 18.6 per cent. of Innovata's existing issued share capital)

In aggregate, Vectura has received irrevocable undertaking and letters of intent to vote in favour of the Proposal at the Innovata Court Meeting and the Innovata Extraordinary General Meeting in respect of 155,193,480 Innovata Shares (representing approximately 30.9 per cent. of Innovata's existing issued share capital).

Irrevocable undertakings to vote in favour of the Acquisition at the Vectura Shareholder Meeting have been received from the Vectura Directors in respect of their entire holding of Vectura Shares amounting to, in aggregate 650,332 Vectura Shares, representing approximately 0.39 per cent. of the existing issued share capital of Vectura.Irrevocable undertakings to vote in favour of the Acquisition at the Vectura Shareholder Meeting have also been received from Baronsmead VCT plc, Baronsmead VCT2 plc, Baronsmead VCT3 plc, Baronsmead VCT4 plc, ISIS II 2001 L.P. and ISIS II 2001 GMBH & Co. KG in respect of, in aggregate, 5,802,090 Vectura Shares, representing approximately 3.4 per cent. of the existing issued share capital of Vectura.

In addition, Vectura has received letters of intent to vote in favour of the Acquisition at the Vectura Shareholder Meeting from Bluecrest Capital International Ltd, Bluecrest Equity Master Fund Ltd, Man Mac Rothorn 6A Ltd and Bluecrest Strategic Ltd in respect of, in aggregate, 16,820,589 Vectura Shares and from AXA Framlington Investment Management Limited in respect of 7,861,275 Vectura Shares (representing, in aggregate, approximately 14.6 per cent. of Innovata's existing issued share capital).

In aggregate, Vectura has received irrevocable undertaking and letters of intent to vote in favour of the Proposal at the Vectura Shareholder Meeting in respect of 31,134,286 Vectura Shares (representing approximately 18.4 per cent. of Vectura's existing issued share capital).

12. Share options

Innovata Options granted under the Innovata Share Schemes will, to the extent not already exercisable, become exercisable following the Effective Date, although such exercise will remain subject to the satisfaction of any relevant performance condition. Any Innovata Option which is subject to a performance condition which has not been satisfied will not therefore become exercisable solely as a result of the Scheme becoming effective.

To the extent that any Innovata Options become exercisable and are exercised once the Scheme becomes effective, any Innovata Shares allotted will automatically be exchanged for new Vectura Shares in accordance with Innovata's Articles (as amended by the resolution to be proposed at the Innovata Extraordinary General Meeting to approve the Scheme).

In addition to any right to exercise their Innovata Options in accordance with the rules of the relevant Innovata Share Scheme, Vectura intends to make a proposal to holders of Innovata Options pursuant to which the participants in the relevant Innovata Share Schemes will be offered the opportunity to exchange their options over Innovata Shares for options over Vectura Shares either in accordance with the rules of the relevant Innovata Share Scheme, in the case of HM Revenue and Customs approved options (where applicable) or, in the case of unapproved options, on the basis that they will receive new options on broadly equivalent terms over Vectura Shares with an aggregate market value similar to that of the Innovata Shares released and at a similar aggregate exercise price, save that, to the extent such Innovata Options would not have vested but for the Scheme becoming effective, the new options will be subject to the vesting periods that would otherwise have applied.However, no performance conditions (to the extent that any currently apply) will apply to such new options over Vectura Shares.

Each of the Innovata Directors who holds Innovata Options has agreed to accept Vectura's option exchange proposal, when made, in respect of all of their Innovata Options.

Options granted to Kieran Murphy and Ian Kent pursuant to the Individual Option Arrangements will become exercisable on the Effective Date.However, Mr Murphy and Mr Kent have also agreed to exchange these options over Innovata Shares for options over Vectura Shares.

All participants in the Innovata Share Schemes will be sent separately details of the proposals to be made by Vectura and the actions they may take in respect of their outstanding Innovata Options.

13. Accounting policies of the Enlarged Group

The Enlarged Group will adopt Vectura's accounting policies. The Board of Vectura believes that the impact of the differences between the accounting policies of Vectura and Innovata will not be significant.

14. Settlement, listing and dealings

Assuming the Scheme becomes effective on 16 January 2007, the last Dealing Day in, and for registration of transfers of, Innovata Shares is expected to be 15 January 2007, following which the Innovata Shares will be suspended from listing on the Official List and trading on the London Stock Exchange's main market for listed securities.No transfers of Innovata Shares will be registered after this date.

Prior to the Scheme becoming effective, application will be made to the UKLA and to the London Stock Exchange for the cancellation of the Innovata Shares from listing on the Official List and trading on the London Stock Exchange's main market for listed securities.Accordingly, if the Court sanctions the Scheme on 15 January 2007, it is expected that the Innovata Shares will cease to be listed on the Official List and traded on the London Stock Exchange's main market for listed securities at 8.00 a.m. on 16 January 2007.

On the Effective Date, share certificates in respect of Innovata Shares will cease to be valid and should, if so requested by Innovata, be sent to Innovata for cancellation.In addition, on the Effective Date entitlements to Innovata Shares held within the CREST system will be cancelled

The new Vectura Shares are to be issued in registered form.Settlement of the new Vectura Shares to which Innovata Shareholders are entitled is expected to occur as soon as possible after the Effective Date and in any event within 14 days of the Effective Date.

15. Overseas Innovata Shareholders

It is the responsibility of each Overseas Innovata Shareholder to satisfy himself/herself as to the full observance of the laws of the relevant jurisdiction in connection with the Proposal, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.

16. Expected timetable of principal events:

Posting of Scheme Document and Vectura Admission Document to Innovata Shareholders	24 November 2006
Posting of Vectura Shareholder Circular and Vectura Admission Document to Vectura Shareholders	24 November 2006
Vectura Shareholder Meeting	13 December 2006
Innovata Court Meeting	20 December 2006
Innovata Extraordinary General Meeting	20 December 2006
Date of Court Hearing	15 January 2007
Effective Date of the Scheme (if sanction and confirmation of the Court is received)	16 January 2007
Crediting of new Vectura Shares to CREST accounts	16 January 2007
Latest date for despatch of certificates for new Vectura Shares	30 January 2007

Each of these dates represent the expectation of the Vectura Directors and the Innovata Directors, and are subject to the discretion of the Court.

17. Disclosure of interests in Innovata Shares

Save for the irrevocable undertakings referred to above, neither Vectura nor, so far as Vectura is aware, any person acting in concert with Vectura has any interest in, or right to subscribe for, any Innovata Shares, nor does any such person have any short position or any arrangement in relation to Innovata Shares.For these purposes "arrangement" includes any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery and borrowing and lending of Innovata Shares.An "arrangement" also includes any indemnity or option arrangement, any agreement or any understanding, formal or informal, of whatever nature, relating to Innovata Shares which may be an inducement to deal or refrain from dealing in such securities.

It has not been possible, by the date of this announcement, to ascertain the interests in Innovata Shares (if any) of all of Vectura's concert parties.Further enquiries will be completed prior to publication of the Scheme Document.If such enquiries reveal any such interest, they will be included in the Scheme Document or announced earlier if so requested by the Panel.

"Interests in securities" is further explained in paragraph 18 below.

18. Dealing disclosure requirements

Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of Innovata or of Vectura by Innovata or Vectura, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website.If you are in any doubt as to the application of Rule 8 to you, please contact an independent financial adviser authorised under the Financial Services and Markets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0) 20 7638 0129; fax +44 (0) 20 7236 7013.

19. General

Vectura reserves the right, with the consent of the Panel, to elect to implement the Proposal by making a takeover offer for the entire issued and to be issued share capital of Innovata.If Vectura elects to implement the Proposal by a takeover offer, that offer will be implemented on the same terms, so far as applicable, as those which would apply to the Scheme.Further, if sufficient acceptances of any such offer are received and/or sufficient Innovata Shares are otherwise acquired, it is the intention of Vectura to apply the provisions of sections 428 to 430F (inclusive) of the Companies Act to acquire compulsorily any outstanding Innovata Shares to which such offer relates.

The availability of the Proposal to Overseas Innovata Shareholders may be affected by the laws of the relevant jurisdiction.Any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about and observe any applicable requirements.Further details in relation to Overseas Innovata Shareholders will be contained in the documents to be sent to Innovata Shareholders in due course.

The bases and sources of certain financial information contained in this announcement are set out in Appendix II to this announcement.Certain terms used in this announcement are defined in Appendix III to this announcement.

APPENDIX I

CONDITIONS OF THE ACQUISITION

CONDITIONS FOR IMPLEMENTATION OF THE PROPOSAL AND THE SCHEME

The Proposal is conditional upon the Scheme becoming unconditional and becoming effective by not later than 31 March 2007 or such later date as, subject to the City Code, Vectura and Innovata may agree and (if required) the Court may allow.

1. The Scheme is conditional upon:

(a)        the approval of the Scheme by a majority in number representing not less than three-fourths in value of the holders of Innovata Shares, present and voting, either in person or by proxy, at the Court Meeting (or any adjournment of that meeting);
(b)        the resolutions required to approve and implement the Scheme being duly passed by the requisite majority at the Innovata Extraordinary General Meeting (or any adjournment of that meeting);
(c)        the resolutions required to approve and implement the Acquisition being duly passed by the requisite majority at the Vectura Shareholder Meeting (or any adjournment of that meeting);
(d)        the sanction (with or without modification, such modification being acceptable to both Innovata and Vectura) of the Scheme and confirmation of the Reduction of Capital by the Court being obtained, an office copy of the Court Order being delivered to the Registrar of Companies and, in relation to the Reduction of Capital, being registered by the Registrar of Companies;
(e)        the condition in the Paul Capital Agreement with respect to the payment of sums by Innovata to RST having been satisfied in accordance with its terms; and
(f)        Admission of the new and existing Vectura Shares occurring in accordance with the AIM Rules or (if Vectura so determines and subject to the consent of the Panel) the London Stock Exchange agreeing to admit the new Vectura Shares to trading on AIM subject only to the allotment of such shares.

2. Vectura and Innovata have agreed that, subject as stated in paragraph 5 below, the Scheme is also conditional upon, and accordingly the necessary actions to make the Scheme become effective will only be taken, on the satisfaction or waiver of the following Conditions:

(a) no government or governmental, quasi-governmental, supranational, statutory or regulatory body, institution, association or agency (including any trade agency) or any court or other body (including any professional or environmental body) or person in any relevant jurisdiction (a "Relevant Authority") having decided to take, instituted, implemented or threatened or having announced its intention to institute or implement any action, proceedings, suit, investigation, enquiry or reference or enacted, made or proposed any statute, regulation, order or decision that would or might be reasonably expected to:

(i)         make the acquisition or the proposed acquisition of any shares in, or control of Innovata, by any member of the Wider Vectura Group void, unenforceable or illegal under the laws of any jurisdiction or directly or indirectly restrain, restrict, prohibit, frustrate or otherwise materially delay or interfere with the implementation of, or impose additional material conditions or obligations with respect to, or otherwise in a material way challenge, the acquisition of any shares in, or control of, Innovata by Vectura;
(ii)        require, prevent or delay the divestiture (or alter the terms of any proposed divestiture) by the Wider Vectura Group or the Wider Innovata Group of all or any material part of their respective businesses, assets or properties or of any Innovata Shares or other securities in Innovata or (except in relation to limitations which apply generally to entities conducting similar businesses) impose any material limitation on their ability to conduct all or any part of their respective businesses and to own any of their respective assets or properties in each case to an extent which is material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole;
(iii)       impose any material limitation on or result in any delay in the ability of any member of the Wider Vectura Group or any member of the Wider Innovata Group to acquire or hold or to exercise effectively, directly or indirectly, all or any rights of ownership of shares or other securities in, or to exercise management control over, any member of the Wider Innovata Group or on the ability of any member of the Wider Innovata Group to hold or exercise effectively, directly or indirectly, all or any rights of ownership of shares or other securities in, or to exercise management control over, any other member of the Wider Innovata Group in each case to an extent which is material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole;
(iv)       except as required pursuant to the Proposal, require any member of the Wider Vectura Group or the Wider Innovata Group to offer to acquire any shares or other securities in any member of the Wider Innovata Group or any other asset owned by any third party where such acquisition would be material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole;
(v)        impose any material limitation on the ability of any member of the Wider Vectura Group or the Wider Innovata Group to integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Vectura Group and/or the Wider Innovata Group in each case in a manner which would be adverse and material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole;
(vi)       result in any member of the Wider Vectura Group or of the Wider Innovata Group ceasing to be able to carry on business under any name under which it presently does so, where such a result would be material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole; or
(vii)      (except in relation to matters which generally affect entities conducting similar businesses) otherwise materially and adversely affect any or all of the businesses, assets, financial or trading position or profits or prospects of any member of the Wider Vectura Group or of the Wider Innovata Group to an extent which is adverse to and material in the context of the Wider Vectura Group taken as a whole or, as the case may be, the Wider Innovata Group taken as a whole,

and all applicable waiting and other time periods during which any such Relevant Authority could institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or otherwise intervene having expired, lapsed or been terminated;

(b) all necessary filings or applications in connection with the Proposal or its implementation having been made and all appropriate waiting and other time periods (including extensions of such periods) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated in each case in respect of the acquisition of any shares in, or control of, Innovata by Vectura;

(c) all material authorisations, orders, grants, recognitions, confirmations, licences, consents, clearances, permissions and approvals ("authorisations") which Vectura or Innovata reasonably deem necessary or appropriate in any jurisdiction for or in respect of the Scheme and the proposed acquisition of any shares or securities in, or control of, Innovata or any member of the Wider Innovata Group by Vectura or any member of the Wider Vectura Group or the issue of the new Vectura Shares or any matters arising from such issue being obtained in terms and in a form reasonably satisfactory to Vectura and Innovata from appropriate Relevant Authorities (in each case where the absence of such authorisation could reasonably be expected by Vectura and Innovata to have a material adverse effect on the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole) and such authorisations together with all authorisations necessary or appropriate for any member of the Wider Innovata Group to carry on its business (where such business is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole and where the absence of such authorisations would have a material and adverse effect on the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole) remaining in full force and effect and no intimation of any intention to revoke, withdraw, suspend, restrict, withhold or modify or not to renew any of them having been made under the laws or regulations of any jurisdiction (in each case to an extent which would have a material and adverse effect on the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole) and all necessary statutory or regulatory obligations in any jurisdiction in respect of the Scheme and the proposed acquisition of any shares or securities in, or control of Innovata or any matters arising from such acquisition having been complied with in all material respects;

(d) save as Disclosed, there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Innovata Group or Wider Vectura Group is a party or by or to which any such member or any of its material assets may be bound or be subject which, as a result of the making or implementation of the Scheme or the proposed acquisition by any member of the Wider Vectura Group of any shares or securities in Innovata or because of a change in the control or management of Innovata or any member of the Wider Innovata Group or otherwise, could or might reasonably be expected to result in (in each case to an extent which is material and adverse in the context of the Wider Innovata Group taken as a whole or, as the case may be, Wider Vectura Group taken as a whole):

(i)         any moneys borrowed by or any indebtedness (actual or contingent) of, or grant available to, any member of the Wider Innovata Group or Wider Vectura Group becoming repayable or capable of being declared repayable immediately or earlier than the stated repayment date or the ability of such member to borrow monies or incur any indebtedness being withdrawn or inhibited or adversely affected;
(ii)        the creation of any mortgage, charge or other security interest over the whole or any substantial part of the business, property or assets of any member of the Wider Innovata Group or Wider Vectura Group or any such security interest (whether existing or having arisen) becoming enforceable;
(iii)       any such arrangement, agreement, licence, permit, franchise or other instrument, or any right, interest, liability or obligation of any member of the Wider Innovata Group or Wider Vectura Group under any such arrangement, agreement, licence, permit, franchise or other instrument being terminated or adversely modified or affected or any onerous obligation or liability arising adverse action being taken or arising under any such arrangement, agreement, licence, permit, franchise or other instrument;
(iv)       the interests or business of any member of the Wider Innovata Group or Wider Vectura Group in or with any other person, firm or company (or any arrangements relating to such interest or business) being terminated or materially and adversely affected;
(v)        any member of the Wider Innovata Group or Wider Vectura Group ceasing to be able to carry on business under any name under which it presently does so;
(vi)       any assets or interest of any member of the Wider Innovata Group or Wider Vectura Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged otherwise than in the ordinary course of business; or
(vii)      the value of any member of the Wider Innovata Group or Wider Vectura Group or its financial or trading position or prospects being prejudiced or adversely affected,

and no event having occurred which, under any provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Innovata Group or Wider Vectura Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, could reasonably be expected to result in any events or circumstances as are referred to in sub-paragraphs (i) to (vii) of this paragraph (d);

(e) in any case where such result would be material and adverse in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;

(f) save as Disclosed, no member of the Wider Innovata Group having since 30 September 2005 (being the date to which the latest audited consolidated reports and accounts of the Innovata Group were made up) and no member of the Wider Vectura Group having since 31 March 2006 (being the date to which the latest audited consolidated reports and accounts of the Vectura Group were made up), to an extent which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole:

(i)         issued or agreed to issue or authorised or proposed the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save for the grant of Innovata Options or Vectura Options, or the issue of Innovata Shares or Vectura Shares on the exercise of Innovata Options or Vectura Options (as the case may be), pursuant to the terms of the Innovata Option Schemes or Vectura Option Schemes (as the case may be));
(ii)        recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution, whether payable in cash or otherwise, other than a distribution by any wholly-owned subsidiary of Innovata or, as the case may be, Vectura;
(iii)       (save as between wholly-owned subsidiaries of Innovata or, as the case may be) Vectura merged or demerged with any body corporate or, otherwise than in the ordinary course of business, acquired or disposed of, or transferred, mortgaged or charged or created any security interest over, any assets or any right, title or interest in any asset (including shares), or authorised, proposed or announced any intention to propose any merger, demerger, acquisition, disposal, transfer, mortgage, charge or security interest;
(iv)       redeemed, purchased or reduced or announced any proposal to redeem, purchase or reduce any of its own shares or other securities or made, authorised or proposed or announced its intention to propose any change in its share or loan capital;
(v)        issued, authorised or proposed the issue of any debentures or (other than in the ordinary course of business) incurred or increased any indebtedness or contingent liability;
(vi)       entered into, varied or terminated, or authorised, proposed or announced its intention to enter into, vary or terminate any arrangement, contract or commitment (whether in respect of capital expenditure or otherwise), other than in the ordinary course of business, which is of a long term, onerous or unusual nature or magnitude or which involves or could involve an obligation of a nature or magnitude which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;
(vii)      entered into or varied the terms of, or made any offer (which remains open for acceptance) to enter into or vary the terms of, any service contract or other agreement with any director or senior executive of Innovata or, as the case may be, Vectura;
(viii)      implemented, authorised or proposed the entry into of, or announced its intention to implement or enter into, any contract, transaction, reconstruction, amalgamation, commitment, scheme or other arrangement otherwise than in the ordinary course of business;
(ix)       taken any corporate action or (to an extent which is material in the context of the Innovata Group taken as a whole or, as the case may be, the Vectura Group taken as a whole) had any legal proceedings started or threatened against it for its winding-up, dissolution or reorganisation or for the appointment of a receiver, manager, administrator, administrative receiver, trustee, provisional liquidator, liquidator or similar officer in respect of all or any of its assets and revenues or any analogous proceedings or steps in any jurisdiction having been taken or for the appointment of any analogous person in any jurisdiction to have occurred;
(x)        waived or compromised any claim, other than in the ordinary course of business, which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;
(xi)       made or agreed or consented to any change to the terms of the trust deeds constituting the pension schemes established for its directors and/or employees and/or their dependants or to the benefits which accrue, or to the pensions which are payable under such schemes, or to the basis on which qualification for or accrual or entitlement to such benefits or pensions are calculated or determined or to the basis upon which the liabilities (including pensions) of such pension schemes are funded, or made or agreed or consented to any change to the trustees, in each case which is material in the context or the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;
(xii)      made any amendment to its memorandum or articles of association;
(xiii)      entered into any contract, transaction or arrangement which is or may be materially restrictive on the business of any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group other than of a nature and to an extent which is not unusual in the context of the business concerned;
(xiv)     been unable or admitted in writing that it is unable to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business; or
(xv)      entered into any contract, commitment or arrangement or passed any resolution in general meeting with respect to, or proposed or announced any intention to effect or propose, any of the transactions, matters or events referred to in this paragraph (f);

(g) save as Disclosed, since 30 September 2005 (being the date to which the latest audited consolidated reports and accounts of the Innovata Group were made up):

(i)         no adverse change, and no other circumstance which would or might be likely to result in any adverse change, in the business, assets, financial or trading position or profits or prospects of any member of the Wider Innovata Group having occurred which is material in the context of the Wider Innovata Group taken as a whole;
(ii)        no litigation, arbitration, prosecution or other legal proceedings having been threatened, announced, instituted or become pending and remaining outstanding by, against or in respect of any member of the Wider Innovata Group or to which any member of the Wider Innovata Group is or may be a party (whether as plaintiff or defendant or otherwise) and no investigation by any Relevant Authority or other investigative body against or in respect of any member of the Wider Innovata Group having been threatened, announced, implemented, instituted or become pending and remaining outstanding by, against or in respect of any member of the Wider Innovata Group in any such case which would or might reasonably be expected materially and adversely to affect the Wider Innovata Group taken as a whole; and
(iii)       no contingent or other liability having arisen or having been incurred which might be reasonably expected materially and adversely to affect any member of the Wider Innovata Group taken as a whole;

(h) save as Disclosed, since 31 March 2006 (being the last date to which the latest audited consolidated reports and accounts of the Vectura Group were made up):

(i)         no adverse change, and no other circumstance which would or might be likely to result in any adverse change, in the business, assets, financial or trading position or profits or prospects of any member of the Wider Vectura Group having occurred which is material in the context of the Wider Vectura Group taken as a whole;
(ii)        no litigation, arbitration, prosecution or other legal proceedings having being threatened, announced, instituted or become pending and remaining outstanding by, against or in respect of any member of the Wider Vectura Group or to which any member of the Wider Vectura Group is or may be a party (whether as plaintiff or defendant or otherwise) and no investigation by any Relevant Authority or other investigative body against or in respect of any member of the Wider Vectura Group having being threatened, announced, implemented, instituted or become pending and remaining outstanding by, against or in respect of any member of the Wider Vectura Group in any such case which would or might reasonably be expected materially and adversely to affect the Wider Vectura Group taken as a whole; and
(iii)       no contingent or other liability having arisen or having been incurred which might be reasonably expected materially and adversely to affect any member of the Wider Vectura Group taken as a whole;

(i) Vectura not having discovered regarding the Wider Innovata Group and Innovata not having discovered regarding the Wider Vectura Group:

(i)         any financial, business or other information in relation to circumstances existing prior to the Announcement Date which is material in the context of the Proposal and which has not been Disclosed by Innovata or Vectura to the other prior to such date;
(ii)        any financial, business or other information concerning any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group publicly disclosed at any time by any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make such information not misleading which in any case is material and adverse to the financial or trading position of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole and such information has not been corrected by a subsequent announcement to a Regulatory Information Service by or on behalf of any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group;
(iii)       any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group is subject to any liability, contingent or otherwise, which is not disclosed in the annual report and accounts of Innovata for the year ended 30 September 2005 or the preliminary statement of results of Innovata for the year ended 30 September 2006 or the annual report and accounts of Vectura for the year ended 31 March 2006 or the interim financial statements of Vectura for the six months ended 30 September 2006 and which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;
(iv)       any past or present member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group has failed to comply with any applicable legislation or regulations of any jurisdiction with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous or harmful substance or any substance likely to impair the environment or harm human or animal health or otherwise relating to environmental matters, or that there has otherwise been any such disposal, spillage, release, discharge, leak or emission (whether or not the same constituted non-compliance by any person with any such legislation or regulation, and wherever the same may have taken place), any of which would be reasonably likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group and which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole; or
(v)       there is or is reasonably likely to be any liability (whether actual or contingent) to make good, repair, re-instate or clean up any property now or previously owned, occupied, operated or made use of or controlled by any past or present member of the Wider Innovata Group or, as the case may be, the Wider Vectura Group or in which any such member may now or previously had an interest under any environmental legislation, regulation, notice, circular or order of any Relevant Authority or third party or otherwise and which is material in the context of the Wider Innovata Group taken as a whole or, as the case may be, the Wider Vectura Group taken as a whole;

3. Save with the consent of the Panel, the Proposal will lapse and the Scheme will not proceed if, before the date of the Court Meeting, following investigation by the Office of Fair Trading there is a reference of the Acquisition, or any part of it, to the Competition Commission.

4. Vectura reserves the right to elect to implement the Acquisition by way of a takeover offer. In such event, such offer will be implemented on the same terms (subject to appropriate amendments, including (without limitation) an acceptance condition set at ninety per cent. of the Innovata Shares to which such offer relates, so far as applicable, as those which would apply to the Scheme.

5. Vectura and Innovata, acting together, reserve the right to waive all or any of the conditions contained in paragraphs 2(a),(b) and (c), in whole or in part. Vectura reserves the right to waive all or any of the conditions in paragraphs 2(d), (e), (f) and (h) so far as they relate to the Innovata Group or the Wider Innovata Group, in whole or in part. Innovata reserves the right to waive all or any of the conditions in paragraphs 2(d),(e), (g) and (h) so far as they relate to the Vectura Group or the Wider Vectura Group, in whole or in part.

6. Vectura shall be under no obligation to waive or treat as satisfied, and Innovata shall be under no obligation to waive or treat as satisfied any of the Conditions in paragraph 2 by a date earlier than the latest date for satisfaction thereof, notwithstanding that the other Conditions of the Proposal may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of the Conditions may not be capable of fulfilment.

7. If Vectura is required by the Panel to make an offer for Innovata Shares under the provisions of Rule 9 of the City Code, Vectura may make such alterations to any of the above Conditions as are necessary to comply with the provisions of that Rule.

The Proposal and the Scheme are governed by English law and are subject to the jurisdiction of the English Courts.

APPENDIX II

BASES AND SOURCES OF THE FINANCIAL INFORMATION SET OUT IN THIS ANNOUNCEMENT

Unless otherwise stated:
1. Financial information relating to Innovata has been extracted without material adjustment from the Innovata preliminary audited results for the financial year ended 30 September 2006; and
2. Financial information relating to Vectura has been extracted without material adjustment from the unaudited interim results of Vectura for the 6 months ended 30 September 2006 and the published reports and accounts of Vectura for the two financial years ended 31 March 2006.
The value of the existing issued share capital of Innovata of approximately £130.9 million is based on 503,158,305 Innovata Shares in issue as at 16 November 2006 (source: Innovata).
Unless otherwise stated, all prices quoted for shares are closing mid-market prices as extracted from the London Stock Exchange website.
The percentage ownership of the Enlarged Group held by Innovata Shareholders and Vectura Shareholders is based on the enlarged issued share capital of Vectura following the Acquisition, being the aggregate of 168,834,281 Vectura Shares in issue on 15 November 2006 (source: Vectura registrar) and approximately 143,821,795 million new Vectura Shares to be issued pursuant to the Proposal. This assumes no exercise of options under the Vectura Share Schemes or the Innovata Share Schemes.
The combined cash and liquid investments of Vectura and Innovata are an aggregate of the cash and liquid investments of each company as extracted from the Innovata preliminary audited results for the financial year ended 30 September 2006 and the unaudited Vectura interim results for the 6 months ended 30 September 2006 (before taking into account any Acquisition costs).

APPENDIX III

DEFINITIONS

The following definitions apply throughout this announcement, unless the context otherwise requires:

"Act" or "Companies Act"	the Companies Act 1985 (as amended)
"Acquisition"	the acquisition of Innovata by Vectura pursuant to the Scheme
"Admission"	admission of the existing Vectura Shares and/or of the new Vectura Shares to trading on AIM in accordance with the AIM Rules
"AIM"	AIM, a market operated by the London Stock Exchange
"AIM Rules"	rules published by the London Stock Exchange governing, inter alia, admission to AIM and the continuing obligations of companies admitted to AIM, as amended from time to time
"Articles"	the articles of association of Innovata
"authorisations"	authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals
"Board"	the board of Vectura or the board of Innovata as the context requires
"Closing Price"	the closing middle market quotation of one Vectura Share and/or of one Innovata Share as derived from the Daily Official List
"Code" or "City Code"	the City Code on Takeovers and Mergers
"Conditions"	the conditions to the implementation of the Proposal (including the Scheme) set out in Appendix I to this announcement
"Conduct Agreement"	the agreement dated 17 November 2006 and entered into between Innovata and Vectura in connection with the Proposal
"Court"	the High Court of Justice in England and Wales
"Court Hearing"	the hearing by the Court of the petition to sanction the Scheme
"Court Meeting"	the meeting of Innovata Shareholders to be convened by order of the Court pursuant to section 425 of the Companies Act to consider and, if thought fit, approve the Scheme, including any adjournment thereof
"Court Order"	the order of the Court sanctioning the Scheme under section 425 of the Companies Act and confirming the associated Reduction of Capital of Innovata pursuant to the Scheme under section 137 of the Companies Act
"Court Sanction"	the sanction (with or without modification) of the Scheme and confirmation of the associated Reduction of Capital by the Court
"Daily Official List"	the Daily Official List of the London Stock Exchange
"Dealing Day"	a day on which the London Stock Exchange is open for business in the trading of securities admitted to AIM
"Disclosed"	(a) in respect of Innovata: (i) as disclosed in the audited consolidated reports and accounts of the Innovata Group for the year to 30 September 2005; (ii) as publicly announced by Innovata (through a Regulatory Information Service) prior to today; (iii) as disclosed in this announcement; or the simultaneous announcement made by Innovata of its preliminary results for the year ended 30 September 2006; or (iv) as otherwise fairly disclosed in writing to Vectura or its advisers by or on behalf of Innovata prior to today; and (b) in respect of Vectura: (i) as disclosed in the audited consolidated reports and accounts of the Vectura Group for the year to 31 March 2006 and the unaudited interim results for the 6 months ended 30 September 2006; (ii) as publicly announced by Vectura (through a Regulatory Information Service) today; (iii) as disclosed in this announcement; or (iv) as otherwise fairly disclosed in writing to Innovata or its advisers by or on behalf of Vectura prior to today
"Effective Date"	the date on which the Scheme becomes effective in accordance with its terms
"Enlarged Group"	the Vectura Group as enlarged by the Proposal
"Enlarged Share Capital"	the issued share capital of Vectura as enlarged by the issue of the new Vectura Shares
"Existing Vectura Shares"	the Vectura Shares in issue at the date of this announcement
"Explanatory Statement"	the explanatory statement relating to the Scheme to be set out in the Scheme Document, constituting the explanatory statement required by section 426 of the Act
"FSA"	the UK Financial Services Authority
"FSMA"	the Financial Services and Markets Act 2000 as amended from time to time
"Hearing Date"	the date on which the Court Hearing is held
"Innovata"	Innovata plc, a public company registered in England and Wales with company number 2148607
"Innovata Director"	a director of Innovata
"Innovata Extraordinary General Meeting"	the extraordinary general meeting of Innovata to be convened to consider the resolutions required to approve and implement the Scheme and the Proposal, including any adjournment thereof
"Innovata Group"	Innovata and its subsidiary undertakings
"Innovata Optionholder"	a holder of Innovata Options
"Innovata Options"	options to acquire shares granted pursuant to an Innovata Share Scheme
"Innovata Shareholder(s)"	holder(s) of Innovata Shares
"Innovata Share Schemes"	The ML Laboratories PLC Executive Share (1989) Option Scheme and the ML Laboratories PLC 1999 Executive Share Option Scheme
"Innovata Shares"	ordinary shares of £0.01 in the capital of Innovata
"Individual Option Arrangements"	the option over 1,000,000 Innovata Shares granted to Ian Kent and the option over 2,000,000 Innovata Shares granted to Kieran Murphy by resolution of shareholders at Innovata's 2005 extraordinary general meeting
"London Stock Exchange"	London Stock Exchange plc
"new Vectura Shares"	the new Vectura Shares proposed to be issued by Vectura (credited as fully paid) as consideration under the Proposal
"Nomura Code"	Nomura Code Securities Ltd
"Offer Period"	the period from 17 November 2006 until the Effective Date
"Overseas Innovata Shareholders"	Innovata Shareholders resident in, or nationals or citizens of, jurisdictions outside the UK
"Panel"	the Panel on Takeover and Mergers
"Paul Capital Agreement"	the Revenue Management Agreement dated 28 June 2001 between Paul Capital Royalty Acquisition Fund, L.P ("Paul Capital") and Innovata (as subsequently amended and restated), the benefit of which is now held by RST, the successor in interest to Paul Capital.
"Piper Jaffray"	Piper Jaffray Ltd
"Proposal"	the proposed acquisition of all the issued and to be issued ordinary share capital of Innovata by Vectura by means of the Scheme and pursuant to the Articles as proposed to be amended at the Innovata Extraordinary General Meeting
"Reduction of Capital"	the reduction of capital of Innovata proposed to be implemented as part of the Scheme
"Registrar of Companies"	the Registrar of Companies in England and Wales
"Registrars "	Capita Registrars of Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
"Regulatory Information Service"	any of the services on the list of Regulatory Information Services maintained by the Financial Services Authority
“RST”	Royalty Securitization Trust I
"Scheme"	the proposed scheme of arrangement under section 425 of the Companies Act between Innovata and the holders of Scheme Shares, with or subject to any modification or addition thereto or condition approved or imposed by the Court and agreed by Innovata and Vectura
“Scheme Document”	the document to be sent to Innovata Shareholders containing details of the Scheme
"Scheme Record Time"	6.00 p.m. on the Dealing Day immediately preceding the Hearing Date
"Scheme Shareholders"	holders of the Scheme Shares
"Scheme Shares"	all of the Innovata Shares: (i) in issue at the date of the Scheme; (ii) (if any) issued after the date on which the Scheme Document is posted of this Scheme and prior to the Voting Record Time; and (iii) (if any) issued on or after the Voting Record Time and before the close of business on the business day preceding the Hearing Date, in respect of which the original or any subsequent holder of it is or shall have agreed in writing to be bound by the Scheme
"Significant Interest"	a direct or indirect interest of 10% or more of the equity share capital (as defined in the Act)
"third party"	includes person, firm, company or body
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland
"United States" or "US"	the United States of America, its territories and possessions, any state of the United States and the District of Columbia
"US Securities Act"	the United States Securities Act of 1933, as amended from time to time
"Vectura"	Vectura Group plc, a public company registered in England and Wales with company number 3418970
"Vectura Admission Document"	the admission document to be published by Vectura in connection with the Proposal in accordance with the AIM Rules
"Vectura Director"	a director of Vectura
"Vectura Group"	Vectura and its subsidiary undertakings
"Vectura Option"	options to acquire Vectura Shares granted pursuant to a Vectura Share Scheme
"Vectura Shareholders"	holders of Vectura Shares
"Vectura Shareholder Meeting"	an extraordinary general meeting of Vectura to be convened for the purpose of considering and, if thought fit, approving resolutions to be proposed to approve and implement
"Vectura Shares"	ordinary shares of 0.025 pence each in the capital of Vectura
"Wider Innovata Group"	Innovata and its subsidiary undertakings, associated undertakings and any other undertaking in which Innovata and/or such undertakings (aggregating their interest) have a significant interest
"Wider Vectura Group"	Vectura and its subsidiary undertakings, associated undertakings and any other undertaking in which Vectura and/or such undertakings (aggregating their interest) have a significant interest