Significant recent events in 2009

During Q1 09, Inion continued to evaluate a range of options aimed at ensuring it has sufficient funding to enable it to continue with its current strategy. However, whilst it has been able to obtain indicative commitments from a number of investors, in light of prevailing equity market conditions the company has not been able to secure a sufficient level of funding. Discussions are continuing with a number of parties in relation to other strategic transactions or divestment of certain assets to raise additional funding.

The directors have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group’s and the company’s ability to continue as a going concern and as the company has recently announced, the directors will continue (i) to approach potential investors and/or buyers of the company’s assets or (ii), failing such additional investments/disposals, to facilitate an orderly liquidation of the company. Nevertheless following the discussions referred to above, and after considering the uncertainties described, the directors believe that they have a reasonable expectation that the Group and the company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts. However, until the outcomes of discussions with potential investors/buyers are known, there is considerable uncertainty over this basis of presentation.

Inion announced on 29 April 2009 that it intends to apply to cancel the listing of its Ordinary Shares on the Official List and to trading on the London Stock Exchange’s market for listed securities.

2008 Financial summary

Sales of Spine and Speciality Orthopaedics products in the US have grown from zero and accelerated rapidly in the second half of the year since Inion’s spinal graft containment systems gained US marketing clearance in July 2008.

Global sales in 2008 from Inion’s core Spine and Speciality Orthopaedics businesses are EUR3.3 million, an increase of 20% compared to EUR2.8 million in 2007. Sales of EUR2.4 million (2007: EUR2.3 million) from our Craniomaxillofacial (CMF) business account for almost all of the remainder

Underlying operating expenditure for the year of EUR12.2 million (before one-off costs) is down by EUR2.7 million or 18% on prior year (2007: EUR14.9 million) as the company has continued to maintain a tight control over costs. Lower expenditure also resulted from the strategic review in 2007 which led to the scaling back of R&D activities in non-core areas including the closure of its Cambridge R&D facility.

Underlying loss before tax was EUR7.3 million (2007: EUR10.9 million) before one-off costs. Including one-off costs loss before tax was EUR13.6 million (2007: EUR12.3 million).

Cash, cash equivalents and short-term investments at December 31, 2008 totalled EUR3.6 million

The company has also implemented measures to reduce its overhead expenditure and headcount levels have been reduced to 20 from 83 at the end of 2008 to conserve its current cash resource. This has meant the suspension of certain activities within the business including manufacturing.

2008 Operational Summary

Inion’s commercial operation developed well during 2008 particularly in its priority US market. Sales in this region grew rapidly in the second half of the year as a result of a more effective sales management team and improved distribution networks, dedicated training programme for sales teams and end-users, and the approval of important new products.

Inion received FDA 510(k) marketing clearance in July 2008 for its S-1™ and S-2™ spinal graft containment systems for spinal fusion procedures, completing its product offering for these applications. This major approval allowed the company to accelerate commercial activities in the US spine market with a limited launch of these new products to high-volume and influential users at selected trial sites, with a full US launch of these products planned for 2009

The encouraging progress made in the US has seen Inion begin to replicate its commercial model in its key markets within Europe and the Far East (Korea, Taiwan and Australia).

Inion initiated a programme to register its full core product portfolio in China with a view to extending its commercial operations into this huge potential market

First out-licensing agreement signed in August with US firm Curative Biosciences Inc. covering novel bioactive technology for promoting bone regrowth and repair when treating patients with broken bones. Inion received an undisclosed upfront payment on signing and could receive development and sales milestones of up to $2.025 million and royalties on future product sales.

Ian Paling, the former chief executive officer of Corin Group PLC, was elected as Inion’s new chairman in August 2008, replacing Dr Göran Ando, who stepped down from the Board.

Ian Paling, Inion’s chairman, said: The past several months have been a very difficult period for Inion as we have tried unsuccessfully to raise the funds needed to support our business strategy. This is a very frustrating situation given the operational progress the company has made in the last 12 months, particularly in the US. We are now exploring a range of options that will allow us to generate as much value as possible for our shareholders.