Press Release

Osmetech plc

Interim Results for the six months ending 31 st October 2004

Highlights

•  Acquisition of Molecular Sensing plc ('MS') successfully completed

•  License signed for LGC HyBeacons DNA probe technology

•  Sales of £2,442,000 (2003 - £3,457,000) in line with expectations

•  Strong growth to commence in the second half with IDEXX veterinary sales and new product launches

James White, Chief Executive, Osmetech plc said:

'Osmetech's strategic objective to develop an international diagnostics business in the high growth point of care and near patient testing market has continued to show good progress.

'The highly successful acquisition of the OPTI product line of blood gas analyzers in 2003 provided us a high quality infrastructure to support the organic growth of the Group's business as well as providing us with a solid revenue base.

'The current financial year will see the start of a significant growth period for OPTI, through both new product introductions and the commencement of the IDEXX trading relationship. IDEXX is a worldwide leader in the development and commercialisation of animal health diagnostic products, delivering sales of $475 million in 2003 and with a market capitalisation of approximately $1.9 billion.

'We also expect to be able to grow the business through suitable acquisitions and are delighted to report the important recent acquisition of MS. This further strengthens the Group's product pipeline by providing an instrument in late stage development for DNA and RNA analysis, 'Opti GENE' (previously known as 'Genedrive'). We initially intend to sell the Opti GENE into the rapidly growing genetic testing and infectious disease testing market segments.

'MS has been integrated into the Group and we have already secured a key license agreement with LGC giving us access to their HyBeacons DNA probe technology. Using this technology we will finalise existing tests and to develop new tests specifically designed for use with the Opti GENE instrument which will be exhibited for the first time later this year.'

For further information:

Osmetech plc
James White/David Sandilands       020 7378 7033 (Thursday 27 th January)
                                                                Thereafter 020 7849 6027

madano partners hip
Matthew Moth / Adam Wurf                020 7378 7033

OPTI

As expected, during the first half of the year, OPTI sales of $4,445,000 (£ 2,442,000) were lower than the corresponding period last year: $5,582,000 ( £3,457,000 ), which benefited from approximately $1m of SARS-related sales to China and initial 'pipeline filling' sales to distributors. Repeat consumable sales increased during the period and accounted for 70% of total sales.

The second half of the current financial year will be boosted by new product introductions and sales to IDEXX Laboratories, Inc. for veterinary markets. Overall sales in the period should increase significantly both from the level achieved in the first half and that achieved in the second half last year.

The new products launched this year will provide the basis for the continued growth of OPTI for a number of years both through the sales of new instruments and repeat consumable sales for the expanded installed base.

Earlier this month, IDEXX launched the VetStat electrolyte and blood gas analyser at the largest US veterinary conference, NAVC. VetStat is a customized OPTI CCA instrument supplied by Osmetech under an OEM manufacturing and supply contract. This agreement was signed in August 2004, when we also entered into a development and supply contract with IDEXX to create a new platform for measuring critical care parameters based on Osmetech's proprietary optical fluorescence technology. Both contracts are for a period of at least 10 years and should have a significant impact upon Osmetech's sales revenues, opening the veterinarian market for Osmetech's technology and products.

Integrated Vaginal Infection Product

Since FDA approval was obtained for Osmetech's bacterial vaginosis (BV) test based upon our proprietary electronic nose technology we have been looking to develop a device capable of diagnosing and differentiating between the most prevalent and clinically important vaginal infections by incorporating and automating third party tests. This simple to use integrated device must provide objective results within the timeframe of a normal patient consultation.

We have evaluated a variety of alternatives and potential complimentary tests to achieve our objective of developing a vaginal infection product ("VIP") that best meets the market requirements. We reviewed and assessed the collaborative work that LGC and Molecular Sensing had been performing during which time scientific proof of principle was established demonstrating the compatibility of HyBeacon tests with the Opti GENE.

A study of clinical samples at the Royal Free Hospital in London evaluated the HyBeacon Chlamydia detection assay run on the Opti GENE instrument. Although this study was not optimised or performed under FDA clinical trial guidelines, the results were excellent, exhibiting a high degree of accuracy in comparison with other widely practised nucleic acid amplification tests.

We believe that the opportunities for the Opti GENE instrument are highly attractive and we intend to develop and market this device as a priority to address the most critical requirements of the vaginal infection and sexually transmitted diseases market.

Acquisition of Molecular Sensing plc

The all share offer for OFEX listed MS was completed on 12 October 2004 . The offer of 47 Osmetech shares for every 2 MS shares resulted in a total of 83,992,581 new Osmetech shares being issued. With an average mid-market price of 3.245 pence per share this valued MS at approximately £2.7m. At the date of acquisition, MS had net assets of £1.8m, including cash of £1.9m. The development programme for the completion of the Opti GENE instrument has already been fully integrated into Osmetech's operations.

Molecular Diagnostics and Opti GENE

Molecular diagnostics is the fastest growing segment of the international healthcare diagnostics market, exhibiting annual growth rates of at least 20%. The human genome project has created a major opportunity to improve both cost efficiency and treatment. Furthermore, the landscape for testing is changing with a higher proportion of tests likely to be performed outside of the traditional large laboratory settings as tests become cheaper and simpler and the demand for faster results increases. The highest rates of growth are expected among the small to medium sized hospitals, where most OPTI customers are located.

We believe that the Opti GENE instrument has the key performance characteristics necessary for success in the principal segments of genetic testing and infectious diseases. Opportunities should also exist to secure partners capable of exploiting the Opti GENE in other markets including veterinary, food, forensic, environmental and research.

We have recently strengthened the management team with the experience necessary to commercialise this molecular diagnostics technology and have also established an assay development facility in Boston , US . We are leveraging our existing infrastructure and the skills of the OPTI team in Atlanta to complete the development process. Our proven manufacturing and distribution capabilities will provide further efficiencies and we expect to benefit from having similar customer bases.

We plan to show the Opti GENE instrument for the first time at the Medica trade exhibition in November this year.

Financial Review

Total sales of £2,442,000 (2003 - £3,457,000) included a 9% negative impact on currency translation by comparison with the same period last year as a result of the weakening dollar. As explained earlier the expected decrease in local currency terms was due to the one-off positive impact last year of SARS-related sales to China and initial 'pipeline filling' sales to distributors.

Gross profit margins at 44% returned to more normal levels after the abnormally high levels achieved last year from the successful utilisation of slow moving inventory acquired as part of the purchase of the OPTI business.

Operating expenses were 24% lower at £2,070,000 (2003 - £2,717,000) reflecting a combination of a reduced cost base, lower non-OPTI development costs and currency translation effects.

We expect the favourable impact of increased OPTI sales in the second half to be offset by increased development costs for Opti GENE and associated assays as these projects are accelerated.

Total cash and term deposit balances increased during the period by £460,000 to £3,632,000 at 31 October 2004 . This included cash within MS of £1,764,000 (cash at the acquisition date was £1,896,000). Outflows in the period include £279,000 costs associated with the acquisition.

Outlook

Over the past two years Osmetech has been transformed into an international medical devices company in the fast growing near patient testing market. OPTI gives us a robust and high quality revenue stream providing a solid base for the business as well as providing a proven infrastructure to support the Group's other activities.

The launch of new OPTI products and the start of the significant trading relationship with IDEXX, the world's leading veterinary diagnostics Company, will lead to a strong performance in the second half

We are very excited about the prospects for the Opti GENE molecular diagnostics instrument, which should provide very strong growth for the Group over the medium term. The OPTI team's considerable experience in successfully developing and launching new products will be extremely valuable in this regard.

We intend to generate licensing revenues for the Group by exploiting our intellectual property portfolio in non-core areas. We will also continue to search for other opportunities to grow the business and leverage our operations further through acquisition.

Gordon Hall                James White
Chairman Chief         Executive Officer

27 January 2005