Prospectus

An Initial Public Offering of Ordinary Shares to raise A$10,000,000 at $0.25 per share with ability to take up to A$2,000,000 of oversubscriptions.

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Investment in Regeneus Ltd should be considered speculative. This is an important document which you should read in its entirety. You may wish to consult your professional advisor about its contents.

REGENEUS LTD ACN 127 035 358

JOINT LEAD MANAGERS

Important Notice

This Prospectus is an important document which should be read in its entirety before making any investment decision. You should obtain independent advice if you have questions about the matters contained in this Prospectus.

Offer

The Offer contained in this Prospectus is an invitation to acquire shares in the Company.

Lodgement and Listing

This Prospectus is dated 5 August 2013 and a copy of this Prospectus was lodged with ASIC on that date.

Regeneus will apply to ASX for admission of the Company to the official list of ASX and for quotation of the shares on ASX within seven days after the date of this Prospectus.

Neither ASIC nor ASX take any responsibility for the contents of this Prospectus nor for the merits of investing in the Company. A copy of this Prospectus has been provided to ASX. The fact that ASX may admit Regeneus to the official list of ASX is not to be taken in any way as an indication of the investment merits of the Company or the Offer.

Expiry Date

No shares will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

How to obtain a Prospectus and Application Form

This Prospectus is available in a paper version and in electronic form. The electronic version will be made available on the Company’s website http://www.regeneus.com.au. The information on www. regeneus.com.au does not form part of this Prospectus. The Offer constituted by this Prospectus in electronic form is available only to residents in Australia. Persons who access the electronic form of this Prospectus must ensure that they download and read the entire Prospectus. If you are unsure about the completeness of this prospectus received electronically or a printout of it, you should contact the Company. Any person may obtain a paper copy of this Prospectus free of charge by contacting the Company on +612 9499 8010.

Applications for Shares under this Prospectus may only be made on a printed copy of the Application Form attached to or accompanying this Prospectus. The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to a hard copy of the Prospectus or the complete and unaltered electronic version of the Prospectus. If this Prospectus is found to be deficient, any Applications may need to be dealt with in accordance with section 724 of the Corporations Act.

No Financial Advice

The information in this Prospectus is not financial product advice and does not take into account your investment objectives, financial situation or particular needs. This Prospectus should not be construed as financial, taxation, legal or other advice. Regeneus is not licenced to provide financial product advice in respect of its securities or any other financial product.

This Prospectus is important and should be read in its entirety prior to deciding whether to invest in the Company. There are risks associated with an investment in the shares of the Company and the shares offered under this Prospectus must be regarded as a speculative investment. Some of the risks that should be considered are set out in Section 5 of this Prospectus. You should carefully consider these risks in light of your personal circumstances (including financial and tax issues). There may also be risks in addition to these that should be considered in light of your personal circumstances.

If you do not understand this Prospectus or are in doubt as to how to deal with it, you should seek professional guidance from your stockbroker, lawyer, accountant or other professional adviser before deciding whether to invest in the shares.

No person named in this Prospectus guarantees the Company’s performance or any return on investment made pursuant to this Prospectus.

Exposure Period

The Exposure Period for this Prospectus commences on the day after this Prospectus is lodged with ASIC and will run for seven days. This period may be extended by ASIC for a further period of seven days (up to a total of 14 days). Regeneus is prohibited from processing Applications under the Offer during the Exposure Period.

The purpose of the Exposure Period is to enable this Prospectus to be examined by ASIC and market participants prior to the raising of funds under the Offer. This Prospectus will be made generally available to Australian residents during the Exposure Period, without the Application Form, by being posted on the following website: www.regeneus. com.au. Applications received during the Exposure Period will not be processed until after the expiry of this period. No preference will be conferred on any Applications received during the Exposure Period.

No Offer where Offer would be illegal

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register the Shares in any jurisdiction outside Australia. The distribution of this Prospectus outside Australia may be restricted by law and persons who come into possession of this Prospectus outside Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law.

Applications

Applications according to this Prospectus may only be made during the Offer Period, and on the Application Form attached to, or accompanying this Prospectus (including an electronic copy).

You should read this Prospectus in its entirety before deciding to apply for Shares. If, after reading this Prospectus, you are unclear or have any questions about the Offer, then you should seek professional guidance from your lawyer, stockbroker, accountant or other financial adviser before deciding whether to invest in the Shares.

Regeneus Ltd Prospectus

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Defined words and expressions

Some words and expressions used in this Prospectus have defined meanings, which are set out in the Glossary. A reference to time in this Prospectus is to Australian Eastern Standard Time, unless otherwise stated. A reference to $, A$, AUD and cents is to Australian currency, unless otherwise stated.

Financial Information and Amounts

The historical financial information included in this Prospectus for the financial years ended 2011 and 2012 and half year ended 31 December 2012 has been prepared and presented in accordance with Australian Accounting Standards and is expressed in Australian dollars unless otherwise stated. Copies of the historical financial reports are available upon request.

Forward-looking Statements

This Prospectus contains a number of forward-looking statements. These include statements containing words such as ‘anticipate’, ‘believe’, ‘expect’, ‘forecast’, ‘estimate’, ‘likely’, ‘intend’, ‘could’, ‘may’, ‘target’, ‘plan’, ‘considers’, ‘foresee’, ‘aim’, ‘will’ and similar words.

Forward-looking statements provided in this Prospectus are based on current expectations, estimates and projections about Regeneus’ business and the industry in which it operates. They may also be based on assumptions and contingencies which are subject to change without notice and/or involve known and unknown risks and uncertainties and other factors which are beyond the control of the Company. These forward looking statements should not be relied on as an indication or a guarantee of future performance. Actual results, performance or achievements may differ materially from those expressed or implied in such statements and any projections and assumptions on which those statements are based because events and actual circumstances frequently do not occur as forecast and these differences may be material.

Regeneus has no intention to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in the Prospectus, unless required by law.

Risks

An investment in Shares in the Company is subject to investment risks and other known and unknown risks and factors, many of which are outside the control of the Company. These include the various risk factors set out in Section 5 of this Prospectus.

Photographs and Diagrams

Photographs used in this Prospectus which do not have any descriptions are for illustration only and should not be interpreted to mean that any person shown endorses this Prospectus or its contents or that the assets shown in them are owned by the Company.

Diagrams used in the Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available as at the date of this Prospectus.

Privacy

By completing an Application Form, you are providing personal information to the Company, Joint Lead Managers and the Share Registry, which is contracted by the Company to manage Applications. That personal information will be collected, held and used both in and outside of Australia by the Company, the Joint Lead Managers and the Share Registry, to process your Application, service your needs as a Shareholder, provide facilities and services that you request and carry out appropriate administration of your investment. If you do not wish to provide this information, the Company may not be able to process your Application.

If you become a Shareholder, the Corporations Act requires information about you (including your name, address, and details of Shares you hold) to be included in the Company’s public share register. This information must continue to be included in the Company’s public share register even if you cease to be a Shareholder.

Regeneus, the Joint Lead Managers and the Share Registry, may disclose your personal information for purposes related to your investment to their agents and service providers (which may be located outside Australia) including those listed below or as otherwise authorised under the Privacy Act 1988 (Cth):

the Share Registry for ongoing administration of the Company’s public share register;
the Joint Lead Managers in order to assess your Application;
printers and other companies for the purposes of preparation and distribution of documents for handling mail;
market research companies for the purpose of analysing the Company’s Shareholder base and for product development and planning; and
legal and accounting firms, auditors, management consultants and other advisers for the purpose of administering and advising on the Shares and for associated actions.

Under the Privacy Act 1988 (Cth), you may request access to your personal information that is held by, or on behalf of, the Company and/or the Share Registry. You can request access to your personal information or obtain further information about the Company’s privacy practices by contacting the Company or the Share Registry, details of which are set out elsewhere in this Prospectus. Regeneus aims to ensure that the personal information it retains about you is accurate, complete and up-to-date. To assist with this, please contact the Company or the Share Registry if any of your details you have provided change.

Disclaimers

Your investment in the Company is subject to investment and other risks, including possible loss of income and principal invested. Some of the risk factors that you should consider are set out in Section 5 of this Prospectus

In making your decision of whether to invest, you should rely only on information in this Prospectus. No person is authorised to provide any information or to make any representations in connection with the Offer, which is not in this Prospectus. Any information or representations not in this Prospectus may not be relied upon as having been authorised by Regeneus in connection with the Offer. Except as required by law, and only to the extent so required, no person named in this Prospectus or any other person warrants the future performance of the Company or any return on any investment made under this Prospectus.

Any references to information on the Company’s website are provided for convenience only. No document or other information included on the Company’s website is incorporated by reference into this Prospectus unless specified.

Enquiries

If you have any questions in relation to the Offer please call +612 9499 8010 or visit the Company’s website at www.regeneus.com.au.

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Regeneus Ltd Prospectus

Important Notice

Key Offer Statistics

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Offer Price A$0.25
Number of Shares on issue before the Offer [ 1] 141,188,872
Minimum Subscription Maximum Subscription
Number of New Shares on Offer 40,000,000 48,000,000
Representing % of the Company 22.00% 25.28%
Gross proceeds of the Offer $10,000,000 $12,000,000
Total Shares on issue following the Offer [2] 181,788,872 189,908,872
Market capitalisation of the Company at the Offer Price [3] $45,447,218 $47,477,218
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1 Includes conversion of convertible notes and Options

2 Includes conversion of convertible notes and Options and issue of Shares to Peloton Capital. Total Shares on issue may vary depending on the actual date of Listing. See Section 10.4 for more detail

3 Market capitalisation is determined by multiplying the number of Shares on issue by the price at which Shares trade on the ASX from time to time. Shares may not trade at the Offer Price after Listing. If Shares trade below the Offer Price after Listing, the market capitalisation may be lower

Important Dates

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Date of Prospectus 5 August 2013
Offer opens 13 August 2013
Offer Closing Date 30 August 2013
Settlement under the Offer 2 September 2013
Basis of New Share allocation announced 4 September 2013
Expected issue and allotment of New Shares 4 September 2013
Expected date for despatch of holding statements 5 September 2013
Shares Commence Trading on ASX on a normal T+3 basis 11 September 2013
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The dates above are indicative only and may change without notice. All times are Australian Eastern Standard Time.

Regeneus, in conjunction with the Joint Lead Managers reserves the right to vary the dates and times of the Offer including to close the Offer early, extend the Offer or to accept late applications, either generally or in particular cases, without notification. Applications received under the Offer are irrevocable and may not be varied or withdrawn except as required by law.

Investors are encouraged to submit their Application Forms as early as possible after the Offer opens.

Regeneus Ltd Prospectus

Chairman’s Letter

Dear Investor,

On behalf of the Board of Directors, it is with great pleasure that I invite you to become a shareholder of Regeneus, an Australian cell-based regenerative medicine company.

Regenerative medicine is a rapidly evolving interdisciplinary field that is transforming healthcare by translating fundamental science into a variety of regenerative technologies including cell-based therapies that can be used to address significant unmet medical needs. The primary goal of these new therapeutic technologies is to enhance the body’s natural ability to repair or replace tissue damaged or destroyed by injury or disease.

Regeneus’ cell technologies enable the application of regenerative capacities of adipose-derived cells (cells derived from fat tissue) including mesenchymal stem cells ( MSCs ), in the treatment of musculoskeletal and other inflammatory conditions in humans and animals.

To date, the Company has successfully developed and commercialised through its network of medical specialists an autologous (patient’s own cells) “point-of-care” cell therapy to treat musculoskeletal conditions in humans ( HiQCell ). Regeneus has also developed and is trialing an allogeneic (donor cells) “off the shelf” product for canine and equine musculoskeletal conditions ( CryoShot ).

The business has grown significantly since start-up in 2007 and achieved sales revenues of $1.2m in FY2012. We have achieved over 50% growth in FY2013 sales revenues driven by increasing market adoption rates of our products.

As part of our continued R&D work, we plan to extend our existing product platforms to other indications and markets. One key initiative is to explore the use of our CryoShot platform for developing a human off the shelf product for musculoskeletal and other inflammatory conditions. We are also developing a cell secretions based product for the treatment of skin inflammatory conditions like acne.

To support our early commercialisation strategy and ongoing R&D work, we are seeking to raise A$10,000,000 under the Offer (with the ability to take up to A$2,000,000 of oversubscriptions) and to obtain listing on the Australian Securities Exchange ( ASX ).

Although an investment in Regeneus involves a number of risks and must be considered speculative, I believe the Offer represents an excellent opportunity to participate in the development of the next wave of medicine based on regenerative technologies. I encourage you to read the Prospectus carefully and in its entirety before making an investment decision.

On behalf of my fellow Directors, I look forward to welcoming you as a shareholder of Regeneus.

Yours faithfully

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John Martin Chairman Regeneus Ltd

Regeneus Ltd Prospectus

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1.	Investment Overview. . . . . . . . . . . . . . . . . . . . . . . 1
2.	Regenerative Medicine Overview . . . . . . . . . . . . . . . . 11
3.	Business Overview . . . . . . . . . . . . . . . . . . . . . . . 17
4.	Board, Management and Corporate Governance . . . . . . . . . 33
5.	Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.	Financial Information . . . . . . . . . . . . . . . . . . . . . . 46
7.	Details of the Offer . . . . . . . . . . . . . . . . . . . . . . . 61
8.	Investigating Accountant’s Report . . . . . . . . . . . . . . . . 65
9.	Intellectual Property Report . . . . . . . . . . . . . . . . . . . 72
10.	Additional Information . . . . . . . . . . . . . . . . . . . . . 92
11.	Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
12.	Application Form . . . . . . . . . . . . . . . . . . . . . . . 105
13.	Corporate Directory . . . . . . . . . . . . . . . . . . . . . . 109

Regeneus Ltd Prospectus

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Investment Overview

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1. Investment Overview

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Topic Summary Where to Find More
Information – Section(s)
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A. INTRODUCTION
Who is Regeneus?	Regeneus is a Sydney based regenerative medicine company. Founded in August	Please refer to Section 3 for
	2007, Regeneus develops and commercialises proprietary cell-based technologies	more information.
	for the creation and manufacture of innovative cell treatments for humans and
	animals.
	Regeneus’ cell technologies enable the application of regenerative capacities
	of adipose derived cells (cells derived from fat) including mesenchymal stem cells
	(MSCs), for the treatment of musculoskeletal and other infammatory conditions.
	To date, the Company has successfully developed and has commercialised
	an autologous (using a patient’s own cells) “point-of-care” cell therapy for the
	treatment of musculoskeletal conditions in humans (HiQCell). Regeneus has also
	developed and commercialised, an autologous product (AdiCell) as well as
	an allogeneic (using donor cells) “off the shelf” product for canine and equine
	musculoskeletal conditions (CryoShot).
	HiQCell is currently available through a network of medical specialists at three
	medical facilities in Sydney and is available at a new facility in the Gold Coast from
	July 2013. CryoShot is currently being trialled at 70 veterinary clinics across Australia.
	Regeneus is led by an experienced Board and management team which has been
	responsible for the rapid development of the business and has a successful track
	record of developing, protecting and commercialising novel scientifc products and
	processes.
What is regenerative	Regenerative medicine is a rapidly evolving interdisciplinary feld in healthcare	Please refer to Section 2 for
medicine?	focused on a variety of therapeutic strategies which augment, repair, replace or	more information.
	regenerate organs and tissues to restore or establish normal function. The primary
	goal is to enhance the body’s natural ability to repair or replace tissue damaged or
	destroyed by injury or disease.
	Regeneus is focused on cell based treatments, in particular, the use of adipose
	derived stem cells including MSCs. Recent studies indicate that the therapeutic
	value of MSCs is largely due to secretions (includes cytokines and growth factors)
	by regenerative cells. Regeneus is also focused on developing technology and
	protocols for the use of secretions from adipose tissue.
Why is the Company raising	The Offer will raise new capital for the Company which will be used to fund	Please refer to Section 6.9
funds pursuant to the Offer?	Regeneus’ commercialisation strategy associated with existing and in development	for more information.
	products, R&D initiatives, capital expenditure, working capital and costs of the Offer.

Regeneus Ltd Prospectus

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Topic	Summary	Where to Find More Information – Section(s)
B. KEY FEATURES OF REGENEUS’	BUSINESS MODEL
What is Regeneus’ strategy?	Regeneus is committed to developing its proprietary regenerative cell technologies in order to provide medical specialists and veterinarians with next generation tools for the treatment of and functional restoration of damaged or diseased tissues. The Company intends to implement this strategy by: i. Continuing the commercialisation of its existing products for the treatment of musculoskeletal conditions in particular osteoarthritis, through: - the roll-out of HiQCell processing laboratories in hospitals and day surgeries in Australia; - licensing and training of sports medicine and orthopaedic specialist who wish to perform the HiQCell treatment (which will result in the generation of further clinical data); - establishment of HiQCell processing laboratories in UK and Singapore; and - increasing penetration of canine and equine CryoShot into the Australian market and other like regulatory markets also resulting in further data collection; ii. Seeking to meet the registration requirements for canine CryoShot in the USA which will include undertaking clinical trials for the use of CryoShot for canine osteoarthritis; iii. Continuing R&D activities in other indications, applications and markets for regenerative medicine; and iv. Continuing the process for the development of a human off the shelf cell therapy product based on the CryoShot technology platform including human safety trials.	Please refer to Section 3 for more information.
What Intellectual Property underpins the business?	Regeneus has a dynamic intellectual property (IP) and patent application portfolio; not just a single technology. The proprietary IP portfolio comprises nine patent application families and three registered trademarks. The patent applications claim both point-of-care and off the shelf cell-based and cell-secretions based treatments using adipose-derived cells and secretions. The Company has also licenced from Northern Sydney Local Health District exclusive rights to commercialise IP rights relating to technology developed at the Kolling Institute of Medical Research for vaccines for the potential treatment or prevention of cancer in animals and humans.	Please refer to Sections 3.5 and 9 for more information.
How does Regeneus generate its revenue?	Regeneus generates revenue from the following sources: (i) Human Health – licence and service fees in relation to each HiQCell treatment performed from the medical specialist who performs the treatment; (ii) Animal Health - sales of products (CryoShot and AdiCell kits); and (iii) Licence fees - relating to technology access arrangements with R&D partners.	Please refer to Section 3.3 & 6.4 for more information.
C. REGENEUS’S PRODUCTS
What are Regeneus’ key	Regeneus has two main cell based products, HiQCell and CryoShot that	Please refer to Section 3 for
products?	are currently available to licenced medical specialists and veterinary clinics	more information.
	respectively. These products are targeted at the treatment of musculoskeletal
	conditions in humans and animals.
	Regeneus is also in the process of developing a secretions based product for topical
	treatment of skin infammatory conditions.
Why does Regeneus use	Adipose tissue is a good source of regenerative cells because:	Please refer to Section 2 for
adipose tissue as source material?	(i) adipose tissue contains a much higher concentration of MSCs than in bone marrow: (500 – 1000 times higher per gram of tissue).	more information.
	(ii) due to the higher concentration of MSCs, there is no need to culture additional
	cells – thereby reducing risk, cost and time in administering the treatment; and
	(iii) adipose tissue is easily harvested via mini-liposuction in a minimally invasive procedure.

Regeneus Ltd Prospectus

1. Investment Overview

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Topic Summary Where to Find More
Information – Section(s)
C1. HUMAN HEALTH
What is HiQCell? HiQCell is an advanced technology that enables the body’s own natural Please refer to Section 3.3.4
regenerative cells to heal the body. It is a unique and relatively simple same-day for more information.
treatment that involves injecting a mixture of regenerative cells (including MSCs)
into affected joints and/or tendons. It has both an anti-inflammatory and immune
regulatory function, which reduces pain and creates an environment in which
tissues can be repaired. It is targeted for use in the treatment of osteoarthritis and
tendinopathy.
Figure 1: Overview of HiQCell Treatment
1: Tissue Harvest
• Small amount of adipose tissue is harvested via liposuction by
medical specialist
2: Cell Processing
• Regeneus isolates regenerative cells from adipose tissue at the
point-of-care and creates the HiQCell cell suspension for injection
3: Cell Injection
• Medical specialist injects cell suspension into the joint
• Multiple joints can be treated at the same time
4: Cryo Re-injection
• Option of cryopreservation of regenerative cells for future re-
injection by medical specialist
Regeneus in conjunction with cryogenic storage specialists, Cryosite Limited also
currently enables Regeneus’ licenced medical specialists to provide patients with a
cryopreservation option of storing a patient’s regenerative cells for future treatment
of their musculoskeletal condition.
What are Secretions? Secretions are molecules (includes cytokines and growth factors) that are secreted Please refer to Section 2.4
by regenerative cells. Regeneus has developed technology and protocols for the and Section 3.3.6 for more
production of secretions from adipose tissue. information.
Recent studies indicate that the therapeutic value of MSCs is largely due to these
secretions. Company research indicates that when secretions are applied to skin, it
has a localised anti-inflammatory effect, accelerates wound healing and reduces
scarring. Regeneus is developing a cream that contains secretions for topical
treatment of a variety of skin conditions including acne.
C2. ANIMAL HEALTH
What is CryoShot? CryoShot canine and CryoShot equine are off the shelf allogeneic cell therapy Please refer to Section 3.4.1
products for the treatment of musculoskeletal conditions in dogs and horses. for more information.
Significant quantities of CryoShot can be produced from a small amount of adipose
tissue derived from a donor animal. Donor tissue is processed and cultured to isolate
and increase the regenerative cells before being cryogenically frozen and stored in
liquid nitrogen. It is delivered to veterinary clinics in cryogenically frozen form and is
stored at the clinic and thawed prior to injection.
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Regeneus Ltd Prospectus

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Topic	Summary	Where to Find More Information – Section(s)
C3. INDICATIONS
What indications do the products treat?	Regeneus’ existing products treat musculoskeletal conditions such as osteoarthritis, tendinopathy and ligament injuries in humans and animals. Regeneus identifed that there is a large unmet need for a biological treatment option for osteoarthritis sufferers as existing treatment options are often limited to long term pain relief or a total joint replacement.	Please refer to Section 2.6 for more information.
What other indications can the products apply to?	The proprietary products have the capacity to be applied to a wide range of indications. Regeneus intends to conduct trials to develop its products for the treatment of neuropathic pain, other immune-mediated conditions and cancer.	Please refer to Sections 3.3.6 and 3.4.3 and for more information.
C4. REGULATORY
What are the regulatory requirements for Regeneus’ cell treatments?	The HiQCell treatment does not require registration with the Therapeutics Goods Administration (TGA) because it is an autologous treatment (i.e. uses the patient’s own cells) carried out by a medical specialist. Similar regulatory frameworks for autologous treatments exist in other major developed markets. CryoShot is currently being distributed in Australia under a pre-registration permit as a veterinary product. Regeneus intends to register the product for broader market penetration. Registration will require clinical trials for safety and effcacy.	Please refer to Section 3.3.4 for more information.
D. KEY STRENGTHS
Attractive regenerative	Despite being in its infancy, the attractive regenerative medicine sector is	Please refer to Section 2 for
medicine sector	capitalised in excess of US$3.5bn globally. Regenerative medicine technologies	more information.
	have the potential to create less costly and more effective treatments for some of
	the most widespread and debilitating conditions.
	Strong proprietary IP coupled with a point-of-care business provides Regeneus with
	the potential to produce innovative products at a lower cost and at an accelerated
	rate compared to traditional drug pathways.
At the forefront of science and	Regeneus’ IP portfolio covers cell based treatments and importantly, cell secretions	Please refer to Section 2 for
innovation	based treatments. Cells when injected operate as ‘implantable drug factories’	more information.
	that continue to secrete cell secretions to promote regeneration. The cells and
	their secretions have an anti-infammatory effect, encourage cell growth and
	recruitment and modulate the patient’s immune response to allow new tissue to
	grow.
	Regeneus is also developing a cell secretions based product for the topical
	treatment of skin infammatory conditions.
Commenced	Regeneus’ products are already commercially available within the veterinary and	Please refer to Section 3 for
commercialisation of point-of-	human health market with demonstrated safety and effcacy. Over 700 joints across	more information.
care and off the shelf platform	335 patients have been treated with the HiQCell product in Australia.
with growing commercial demand	Under the pre-registration permit, CryoShot has been produced and distributed for a number of trials across Regeneus’ network of associated veterinary practices.
	Early commercialisation has given Regeneus the ability to generate product
	revenue early in the Company’s lifecycle.
Technology applies across a	Regeneus’ initial focus has been on musculoskeletal diseases where it identifed that	Please refer to Section 3 for
broad range of diseases	there was a clear market need for alternative treatment.	more information.
	The technology may be able to be applied to other indications such as in cancer
	and auto-immune diseases and infammatory conditions such as neuropathic pain.

Regeneus Ltd Prospectus

1. Investment Overview

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Topic Summary Where to Find More
Information – Section(s)
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Favourable early results from	Regeneus’ off the shelf allogeneic veterinary product, CryoShot was introduced in	Please refer to Section 3.4.2
the off the shelf veterinary	FY2012 on a pre-registration commercial basis and is currently being trialled through	for more information.
product	selected veterinary clinics in Australia. Early results in dogs on the usage of CryoShot
	have been positive with reduction in pain and improvement in mobility within 10
	days of treatment with no need for further surgery or ongoing medication.
	There is a potentially large global opportunity for a veterinary product for use in
	musculoskeletal and pain management. The potential uses of CryoShot extend
	to pain management, anti-infammatory and as an adjunct to existing surgicals
	treatments such as arthroscopy.
	In the Company’s experience, the veterinary market is a good market proxy for the
	human market and the experience of transitioning from a point-of-care to an off the
	shelf product has provided Regeneus with the opportunity to refne production and
	logistics of delivering an off the shelf product for human health.
Experienced and balanced	The management team and Board have strong expertise in both science and	Please refer to Section 4 for
management and Board	commerce. The team has a strong track record of commercial success in	more information.
	commercialising biotech opportunities.
	The team is responsible for driving the business from commencement to its current
	position in a relatively short period of time and is well placed to continue to expand
	and grow the business.
E. KEY RISKS
Market Adoption	The success of Regeneus’ commercialisation strategy relies on medical specialists,	Please refer to Section 5.2
	medical facilities and patients accepting Regeneus’ products for routine use.	for more information.
	Take up of the products will involve clinical studies to provide further evidence of
	the medical benefts of the products in order to overcome any market resistance.
	Regeneus’ ability to generate revenues in the future will depend on its ability to
	market and sell its products.
Product Liability	The testing, marketing and sale of Regeneus’ products whether directly or through	Please refer to Section 5.2
	its licencees involves a risk of product liability claims being brought against the	for more information.
	Company. Regeneus seeks to limit its liability for such claims in its agreements with
	medical specialists and veterinarians and is also entitled to be indemnifed by them
	in various circumstances. However, limitations of liability are not necessarily effective
	at law and indemnifcation may not always be available. Regeneus intends
	to maintain product liability insurance in respect of its products, however, if the
	Company is unable to obtain suffcient product liability insurance at an acceptable
	cost this could prevent or inhibit the commercialisation of products the Company
	develops.
Regulatory Environment	The regulatory framework in Australia and overseas territories in which Regeneus	Please refer to Section 5.2
	operates or intends to commercialise its point-of-care product may change and	for more information.
	may mean that the Company will require registration prior to commercialisation. This
	will impact the commercialisation strategy in particular the roll-out of the HiQCell
	treatment across Australia, UK and Singapore.
	Regeneus is in the process of establishing the registration pathway for CryoShot with
	various key regulatory bodies including APVMA (Australia), EMA (Europe) and FDA
	(USA). To our knowledge, there is currently no cell based product that has gone
	through registration in the veterinary market which may mean that registration may
	take longer than anticipated and may delay full commercialisation of CryoShot.
Future Product Development	There are many risks inherent in the development and use of new cell based	Please refer to Section 5.2
	products for the human and veterinary markets. Products may fail during clinical trial	for more information.
	or may fail to gain regulatory approval if required. Regeneus cannot guarantee
	that the development work being undertaken will result in the development of any
	products, or even if they do, that the products will be marketed or commercially
	successful.
	The time required to develop and obtain regulatory approval for marketable
	products can be uncertain and in some cases very long.

Regeneus Ltd Prospectus

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Topic Summary Where to Find More
Information – Section(s)
Clinical Validation A core component of the Company’s strategy is the commercialisation and Please refer to Section 5.2
registration of its products (where registration is required). For the registration for more information.
process, successful clinical trials will be necessary for the Company to obtain
regulatory approval for its products. Such trials can be expensive, time consuming,
may be delayed or may fail. This may delay the market adoption rate.
HiQCell does not currently require registration under the Therapeutic Goods
Administration (TGA). However, any negative clinical trial results could have a
negative commercial impact on the speed of commercialisation of the treatment.
Reputational Damage The reputation of Regeneus and its individual brands is important in attracting Please refer to Section 5.2
medical specialists, hospitals and patients and key employees. Reputational for more information.
damage could arise due to a number of circumstances, including:
• inadequate services or unsatisfactory clinical outcomes for patients;
• error, malpractice or negligence of Regeneus’ employees; or
• error, malpractice or negligence of the medical specialists performing the
treatments.
Negative publicity could adversely impact Regeneus’ reputation which may
potentially result in a fall in the number of patients seeking Regeneus’ products or
medical specialists willing to provide them.
Intellectual Property One of the Company’s assets is its IP rights that support the HiQCell and CryoShot Please refer to Sections
technology and other future products. The commercial value of the IP is dependent 3.5, 5.2 and 9 for more
on certain legal protections, including patent rights. The grant of patent rights does information.
not inevitably follow after making an application for such rights. Examination of
patents, for example may be expensive and time consuming with no guarantee
that patent rights will be secured. Further, the grant of patent rights does not
guarantee that such rights are valid or that they do not infringe another party’s
patent rights and no assurance can be given that others will not challenge the
Company’s IP rights in its technology.
F. SUMMARY OF THE OFFER DETAILS
What is the Offer? This Offer invites Applications for investors to purchase Shares in Regeneus Ltd, which Please refer to Section 7 for
is proposed to be listed on ASX. The Shares will trade on ASX under the ticker “RGS”. more information.
What are the terms of the The Offer Price is $0.25 per share Please refer to Section 7 for
Offer? more information.
The Offer is seeking to raise A$10,000,000 with oversubscriptions of up to A$2,000,000,
before the costs of the Offer.
Minimum application amount of A$2,000.
Offer opens on 13 August 2013.
Offer closes at 5.00 pm (Sydney, Australia time) on 30 August 2013.
Regeneus Shares are expected to commence trading on ASX on or about 11
September 2013.
What will the capital structure Table 1: Proposed Capital Structure Please refer to Section 10.2
of the Company look like for more information.
upon completion of the Offer? Offer Statistics Based on Based on
Minimum Over
Subscription Subscription
being Raised being Raised
Offer Price per Share $0.25 $0.25
Shares available pursuant to the IPO 40,000,000 48,000,000
Representing % of the Company 22.00% 25.28%
Total cash Proceeds of the Offer $10,000,000 $12,000,000
Shares on issue before the Offer 141,188,872 141,188,872
Total Shares on issue on Completion of the Offer 181,788,872 189,908,872
Market Capitalisation at the Offer Price $45,447,218 $47,477,218
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Regeneus Ltd Prospectus

1. Investment Overview

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Topic Summary Where to Find More
Information – Section(s)
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Who can invest?	The	Offer includes:	Please refer to Section 7 for
	•	A Broker frm offer, which is open only to Australian resident Retail Investors who	more information.
		received a frm allocation from their broker;
	•	An institutional offer, which consists of an institution to bid for shares made to
		Institutional investors in Australia and other selected juristictions; and
	•	A general public offer which is open to Australian resident retail investors.
What is the proposed use of	The	table below sets out the proposed use of proceeds from the Offer. This	Please refer to Section 6.9
funds raised pursuant to the	represents current intentions based on the current business plan and business		for more information.
Offer?	conditions. The amounts and timing of the actual expenditure may vary and will
	depend upon numerous factors, including the timing and success of the Company’s
	commercialisation activities and revenue from sales.

Table 2: Use of Funds

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Minimum Subscription Over Subscription
$’000 $’000
Clinical Development - Vet and
4,300 5,900
Human Products
Market Development and
2,200 2,500
Commercialisation
Capital Expenditure 700 700
Transaction Costs 1,100 1,200
Working Capital 1,700 1,700
TOTAL 10,000 12,000
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Human Health

roll-out of the commercialisation of HiQCell as a treatment option for musculoskeletal conditions across all capital cities in Australia and targeted launch in selected overseas markets such as UK and Singapore;
work with leading medical specialists to generate further clinical data to support the expansion of HiQCell for musculoskeletal conditions and other indications including neuropathic pain;
toxicology study on cell secretions based topical application product for acne; and
safety trial towards the development of a human off the shelf product based on CryoShot.

Animal Health

expand collection of clinical data in field trials from canine and equine CryoShot;
clinical trial for the registration of CryoShot for canine osteoarthritis; and
clinical trial towards the development and registration of canine cancer vaccine.

Corporate

costs of the Offer;
capital expenditure for expansion; and
working capital

Following completion of the Offer, the Company will have a total cash balance of approximately A$9.3 million if $10 million is raised. Regeneus believes that the funds raised under the Offer will be sufficient to fund the Company’s objectives for the next two years.

Regeneus Ltd Prospectus

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Topic Summary Where to Find More Information – Section(s) What is the financial position of The financial position of Regeneus before and after the Offer is set out below in Table 3. Please refer to Section 6 for the Company? more information. Table 3: Regeneus Financial Summary

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As at Minimum Over
31 December subscription subscription
2012 Reviewed Pro forma Pro forma
$’000 $’000 $’000
Current assets 2,994 14,216 16,095
Non-current assets 638 638 638
Total assets 3,632 14,854 16,733
Current liabilities 1,140 1,029 1,029
Non-current liabilities 3,935 - -
Total liabilities 5,075 1,029 1,029
Net assets (1,443) 13,825 15,704
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G. REGENEUS DIRECTORS

Who are the directors of Regeneus and what are their interests in Regeneus?

The Board has a broad range of experience in the biotechnology industry and early stage technology companies combined with Australian public company, capital markets, financial and commercial expertise. The Directors of Regeneus are:

Please refer to Section 4 for more information.

Table 4: List of Board of Directors

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Name Age Position Independence
Executive & not
John Martin 51 Executive Chairman
independent
Prof. Executive & not
48 Chief Executive Officer
Graham Vesey independent
Assoc. Prof.
45 Non-Executive Director Not independent
Ben Herbert
Dr. Roger Aston 57 Non-Executive Director Independent
Barry Sechos 52 Non-Executive Director Independent
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As at Listing, the Directors will have relevant interest (both direct and indirect) in Securities as outlined below.

Table 5: Relevant Interest (both direct and indirect)

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Directors Shares Options Exercise Price
Prof.
14,695,352 2,142,855 $0.25
Graham Vesey
Assoc. Prof.
8,689,412 - -
Ben Herbert
John Martin 6,869,292 2,692,855 $0.25
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Includes shares to be issued to John Martin and Prof. Graham Vesey as set out in Section 10.6 and Options to be granted to John Martin and Prof Graham Vesey prior to Listing as set out in Section 4.5 and 10.6 and Options to be granted to Wild Rose Pty Ltd as set out in Section 10.7

Each of John Martin, Prof Graham Vesey, Assoc. Prof. Ben Herbert, Dr. Roger Aston and Barry Sechos may apply for New Shares pursuant to the Offer. Final Directors Security holdings will be notified to ASX on Listing.

Directors are entitled to remuneration and fees as set out in this Prospectus.

Regeneus Ltd Prospectus

1. Investment Overview

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Topic Summary Where to Find More
Information – Section(s)
H: EXISTING SHAREHOLDERS AND RELATED PARTIES
Who are the Existing The Existing Shareholders of Regeneus are outlined below and assuming the Please refer to Section 10
Shareholders and what will be Maximum Subscription is raised, they will hold the following interests in the Company for more information.
there interest in Regeneus at at Completion of the Offer.
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Who are the Existing Shareholders and what will be there interest in Regeneus at at Completion of the Offer. completion of the Offer Table 6: Shareholder Analysis

there interest in Regeneus at completion of the Offer	at Completion of the Offer. Table 6: Shareholder Analysis
	Category Number of Shares on completion of the Offer Number of Options on completion of the Offer Board & related parties of Directors 30,254,056 4,335,710 Other Management and Employees 3,357,580 8,692,135 Other Existing Shareholders 107,577,236 1,300,021 New Shareholders under Offer 40,600,000 - Total 181,788,872 14,327,865 includes Shares to be issued on conversion of Convertible Notes, exercise of Options and to Peloton Capital, as described in Sections 10.4 and 10.6 Includes Options to be issued prior to Listing, as described in Sections 10.6 and 10.7
What are the signifcant benefts and interests payable to other key people in connection with the Offer?	Advisers and other service providers are entitled to fees for services as set out in this Prospectus. In particular, certain persons are entitled to the issue of Options in connection with the Offer and listing of Regeneus. Please refer to Section 10 for more information.
I. APPLICATIONS
How can I apply?	Contact your broker or fnacial advisor. Instructions on how to complete the Application Form accompanying this Prospectus are set out in Section 7. Please refer to Section 7.4 for more information.
What is the allocation policy?	The Board will allocate New Shares based on satisfying the Minimum Subscription of the Offer and to ensure an appropriate Shareholder base for the Company going forward. Please refer to Section 7.5 for more information.
Is there any brokerage commission or stamp duty payable?	No brokerage commission or stamp duty is payable by an Applicant for acquisition of Shares under the Offer. Please refer to Section 7 for more information.
When will I receive confrmation that my Application has been successful?	Confrmations of successful Application in the form of Holding Statements are expected to be despatched by post on or around 5 September 2013. Please refer to Section 7.7 for more information.
How can I obtain further information?	To obtain further information speak to your accountant, stockbroker, fnancial adviser or professional adviser. If you require assistance or additional copies of this Prospectus you should contact your adviser or the Company on +612 9499 8010. Please refer to Section 7 for more information.

Regeneus Ltd Prospectus

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02 Regenerative Medicine Overview

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2. Regenerative Medicine Overview

2.1 A New Era of Medicine

Regenerative medicine research translates fundamental knowledge in biology, chemistry and physics into materials, devices, systems and a variety of therapeutic strategies which augment, repair, replace or regenerate organs and tissues. This rapidly evolving, interdisciplinary field in healthcare is transforming the practice of medicine, medical innovation and the production of medical devices and therapies[1] .

It encompasses an array of technologies and therapeutic approaches including cell-based therapies, small molecules and biologics as well as synthetic and bio-based materials designed to augment, repair, replace and regenerate organs and tissues, thereby targeting the root cause of disease.

There are a number of key trends in healthcare today that will impact on the development of regenerative medicine, and provide an indication of the significant role the field could play in the future of healthcare. The Australian Institute for Health and Welfare figures indicate that life expectancy continues to increase, with current life expectancy almost 84 years for females and 79 years for males[2] . One consequence of extended lifespan is an increased incidence of chronic diseases and 32% of people over 45 have at least one chronic health problem that does not cause death. Conditions that limit mobility, such as arthritis, are common and 2.5% of all GP visits are for treatment associated with arthritis. Regeneus believes that the potential of regenerative medicine will continue to drive the development of technologies to address the key challenges:

Cost saving – regenerative medicine could delay or prevent the need for major surgeries and the need for long term care and hence potentially reducing pricing pressures within the public healthcare system
Reduce reliance on drugs e.g. painkillers that have long term side effects
Aging population – large and growing unmet medical needs e.g. osteoarthritis that currently have no significant therapeutic options
Improved patient clinical outcome e.g. as an adjunct to surgery

2.2 Stem Cells

Stem cells are incorporated into regenerative medicines and research studies with the objective of achieving a variety of positive effects:

To stimulate healing and regeneration in diseased tissue
To engineer tissue for replacement of damaged or diseased tissue
To deliver small molecule therapies to targeted areas

Stem cells are a specialised type of cell that selfreplicates and can differentiate into multiple tissuespecific cell types. There are two types of stem cells used in regenerative medicine and research, embryonic and adult stem cells. Embryonic stem cells ( ESCs ) are derived from early-stage embryos and have the greatest capacity to differentiate and can form any cell or tissue in the body. Many of the tissue engineering approaches to regenerative medicine involve the use of ESCs, however, the translation of this research into clinical use remains many years or decades away. A combination of ethical concerns regarding human embryos, technical challenges with production and serious safety issues have slowed the development of ESC technologies.

There are two major types of adult stem cells; haematopoietic stem cells ( HSCs ) and mesenchymal stem cells ( MSCs ). Most of the cell types in blood are produced from HSCs, which reside in bone marrow. One of the most well understood branches of stem cell therapy is the use of HSCs in cancer treatment. The average human’s bone marrow produces approximately one hundred billion blood cells each day. Since 1959, in cancer therapy, this has been exploited to repopulate the blood after high-dose chemotherapy and radiation. After transplant into a patient, the differentiation potential of HSCs is crucial to the therapeutic outcome. This has naturally enough led to the perception that differentiation potential is the key to all stem cell therapies.

Regeneus is focused on the use of MSCs and other regenerative cells, which are found in many adult tissues, where they associate with capillaries. In a practical sense, MSCs for therapeutic use can be harvested from bone marrow, umbilical cord blood and adipose tissue. Although MSCs can be induced to differentiate into various connective tissues, such as cartilage, tendon, bone, ligament and muscle this is not their primary role in regenerative treatments. Many years of research into MSC mechanisms of action have revealed that they are primarily signalling cells. MSCs are attracted to areas of injury and inflammation, where they secrete a wide range of proteins and other factors that reduce inflammation and stimulate tissue repair. Implanted MSCs are able to control the micro-environment at the injury site and interact with local cells to produce functional tissue repair often with minimal scarring.

1 Alliance for Regenerative Medicine (http://alliancerm.org/ promise-and-potential)
2 Australian Institute of Health and Welfare (AIHW) http://www.aihw.gov.au

Regeneus Ltd Prospectus

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2.3 Mesenchymal Stem Cells from Adipose Tissue

Adipose tissue (fat) is a highly vascularised tissue comprising a dense network of capillary beds surrounding mature adipocytes. Recent studies show that adipose tissue provides much more than simply insulation and energy. Adipose tissue has been identified as an important endocrine organ that secretes an array of bioactive factors, which are involved in a variety of processes including tissue repair and inflammation.

Associated with the capillary beds in adipose tissue are a number of different cell types including MSCs. Adipose tissue can be easily harvested by liposuction and the harvested tissue can be processed to isolate the regenerative cells. Using enzyme digestion, the connective tissue can be disrupted thereby releasing the cells. Subsequent centrifugation produces floating fat cells (adipocytes), and the stromal vascular fraction ( SVF ), which contains high numbers of MSCs and other white blood cells. Notably, adipose tissue contains approximately 500-1000 times more MSCs per gram than bone marrow.

In addition to the high MSC yield per gram of tissue there are other significant advantages of adipose tissue as a source of therapeutic cells. These include:

An easily accessible supply of adipose tissue in most patients with a minimally invasive procedure performed under local anesthesia
The ability to rapidly isolate and concentrate the cells for use in a same day procedure
Patient compatible (autologous) cells; no immune rejection issues

Figure 2: Adipose tissue stained with a fluorescent dye that binds to cell nuclei. Large adipocytes can be observed and the capillaries running through the tissue are easily identified by the strings of green dots.

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Harvesting MSCs

The relatively high numbers of MSCs and ease of tissue harvest makes adipose tissue a favoured tissue type in comparison to bone marrow and cord blood. A therapeutic dose of cells can be obtained approximately 60 to 90 minutes after harvest, enabling true ‘point-of-care’ autologous treatment. The SVF also contains high numbers of T regulatory cells and inhibitory macrophages, which directly suppress inflammation and immune system activation. As discussed earlier, the MSC component of SVF further enhances tissue repair through secretion of antiinflammatory cytokines and regenerative growth factors. The combination of cells arising from freshly isolated SVF, the diversity of secretions and ability to treat rapidly after harvest makes it an attractive therapeutic.

2.4 Therapeutic Benefits of MSCs

Currently, the predominant view in medical research is that the main therapeutic action of implanted MSCs is a result of secretions rather than the cells’ ability to differentiate. Immediately after implantation MSCs respond to the local environment and secrete various proteins, which suppress inflammation by modulating the immune response to injury or disease. The medium and long-term benefits of MSCs come from their secretion of growth factors, which stimulate tissue repair.

Regeneus Ltd Prospectus

2. Regenerative Medicine Overview

MSCs and their secretions have been shown to have 6 main effects on tissues:

Reduce inflammation via immune system modulation
Inhibit scar formation
Protect cells in damaged tissue
Stimulate the growth of new blood vessels
Promote wound healing via the secretion of growth factors
Stimulate the proliferation of local tissue cells

Anti-inflammatory proteins (cytokines)

The cell population of the Regeneus proprietary HiQCell treatment contains a mixed population of cells, including MSCs, immune cells and adipocytes. This unique combination produces high levels of anti-inflammatory proteins called cytokines. This combination of cells has been shown to produce the highest level of some key anti-inflammatory proteins, compared to other cell populations in adipose tissue.

Growth Factors

It is now clear from the scientific literature that numerous growth factors are needed to effectively stimulate tissue repair. The unique combination of regenerative cells in HiQCell produces high levels of a range of growth factors involved in cartilage repair. In addition, the MSCs in HiQCell are likely to stimulate the local cells to release specific cartilage repair growth factors such as the bone morphogenic proteins 2 and 7.

2.5 Regenerative Medicine: A Commercial Focus going forward

Regenerative medicine is already a commercial and medical reality. A significant number of regenerative medicine products are already commercially and clinically successful. In addition to over 60,000 haemopoietic stem cell transplants annually performed worldwide for the treatment of oncology and bloodbased disorders, it is estimated by the Alliance of Regenerative Medicine ( ARM ) that in 2012, cell therapy products distributed by biotherapeutic companies generated over $900 million with 160,000 patients receiving treatments[3] .

and over $300 million from grant sources totalling an approximate $1.2 billion in investment.

2.6 Focus on Treatment of Musculoskeletal Conditions

Regeneus’ regenerative medicine products are currently focused on the treatment of musculoskeletal conditions, in particular osteoarthritis and tendinopathy. Regeneus identified musculoskeletal conditions as an area of focus as there is a gap in the existing treatment options which are often limited to long term pain relief or a total joint replacement. Consequently, there is a large unmet need for an effective treatment option.

Human Market Opportunity

The musculoskeletal system provides form, support, stability and movement to the body. It is composed of bones, muscles, cartilage, tendons, ligaments, joints and tissues that support, bind and protect other tissues and organs of the body. Within this system many medical conditions under the umbrella term of arthritis can occur, with osteoarthritis being the most common, accounting for an estimated greater than 60% incidence of all arthritis conditions diagnosed[4] . Osteoarthritis is a degenerative disease whereby articular cartilage and subchondral bone located within skeletal joints degrade over time through impact injury or age related use. Symptoms may include joint pain, tenderness, stiffness, locking, and swelling. A variety of causes including hereditary, developmental, metabolic, and mechanical lead to loss of cartilage and the development of the disease.

It is estimated that approximately 3.1 million Australians (15% of the population) live with arthritis[5] , and that this number will grow to seven million sufferers by 2050[6] . The incidence of arthritis occurs at relatively low rates in under adult-age groups but increases dramatically from early middle age. It also has a higher rate of incidence in females.

In 2012, seven cell therapy products were approved by regulatory agencies around the world in contrast with five such approvals in the three years prior, and none from 2002 to 2008. Going forward the industry expects to see multiple approvals annually.

3 Alliance for Regenerative Medicine Annual Report 2013

In addition, the sector is attracting increased attention from investors and industry partners. In 2012, according to ARM, the sector garnered over $900 million in investment from private investors and public markets,

4 AIHW 2004
5 AIHW 2010: A Snapshot of Arthritis in Australia
6 Arthritis Australia: The Voice of Arthritis 2011 Survey

Regeneus Ltd Prospectus

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Chart 1: Chronic Disease by Population:

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Chronic Disease Population (m) - Aust - 2007/08
Cancer
Diabetes
Asthma
Arthritis
Cardiovascular
Disease
0 1 2 3 4
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Source: 2007-08 National Health Survey

Chart 2: Arthritis incidence:

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Arthritis Incidence % by Age - Aust - 2011/12
70%
60%
50%
40%
30%
20%
10%
0%
0-14 15-24 25-34 35-44 45-54 55-64 65-74 75+
Key Male Female
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It is estimated that more than 27,000 new cases of osteoarthritis are diagnosed each year in Australia. However, with no known cure the treatment focus is currently based on various symptomatic pain relief measures. End-stage treatment is typically joint replacement surgery which potentially carries patient selection and procedural risk considerations, as well as recovery and rehabilitation processes and a finite life expectancy of the joint device. In light of these alternate options, Regeneus considers its HiQCell treatment as a relevant and potentially effective treatment option for mid-stage osteoarthritis.

Figure 3: Existing Treatment Gap

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HIGH LOW
PAIN
RELIEF Long term symptom relief REPLACEMENT
Delay further intervention
Revision joint replacement
REGENERATION Total joint replacement
Platelet Rich Plasma (PRP)
Hyaluronic acid
Steroids Stimulate tissue repairInhibit inflammation
Inhibit tissue damage
Pharmaceuticals
Lifestyle changes
LOW HIGH
PATIENT LIFETIME
DISEASE SEVERITY QUALITY OF LIFE
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Source: Australian Health Survey first results 2011

6 Arthritis Australia: The Voice of Arthritis 2011 Survey

Regeneus Ltd Prospectus

2. Regenerative Medicine Overview

Veterinary Market Opportunity

The global companion animal veterinary health market (excluding manufacturers) is currently estimated to be valued at approximately US$9 billion with many of the existing products relating to provision of a quality life to animals with products like vaccines, antibiotics, parasiticides and medical feed additives.

Musculoskeletal conditions constitute a significant proportion of veterinary visits within the companion animal segment with osteoarthritis and tendonitis/ tendinopathy being common. Symptoms involve pain, inflammation, and loss of ability to varying degrees for most of the conditions. Current therapies offer some degree of the remediation of symptoms, but most often very little in the realm of reversing, or even halting the progression of the underlying pathologies.

It is estimated that approximately one in five dogs suffer from osteoarthritis. It is driven by a number of initial causes including trauma, mal-alignment and others that lead to cartilage damage. Clinical effects of osteoarthritis may include pain and inflammation, lameness, and loss of mobility. Current diagnosis is often made on a combination of clinical history, x-rays or other imaging techniques, and elimination of other causes (e.g. rheumatoid arthritis). It is a progressive disease, in that in most cases it will continue to get worse. In the veterinary world, osteoarthritis is also a significant cause of euthanasia.

The mainstay of current treatment of osteoarthritis includes the use of non-steroidal anti-inflammatory drugs ( NSAIDS ). Regeneus estimates the global companion animal pharmaceutical pain relief market at approximately US$0.5 billion with osteoarthritis accounting for up to 80% of the market. Regeneus estimates the Australian veterinary anti-inflammatory agents market at A$30 million with companion animal (primarily dogs) NSAID market at $17 million.

Similar to human health, there is an existing treatment gap for osteoarthritis sufferers and a large unmet demand for an effective treatment option.

Regeneus Ltd Prospectus

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03

Business Overview

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3. Business Overview

3.1 Introduction

Regeneus is a Sydney based regenerative medicine company. Founded in August 2007, Regeneus is focused on using the regenerative capacities of adipose (fat)-derived cells including MSCs to develop innovative cell treatments for humans and animals. Regeneus’ initial focus is on developing products for the treatment of musculoskeletal conditions, including osteoarthritis, tendinopathy and ligament injuries in humans and animals. There is significant potential to expand the Company’s treatments into other inflammatory and immune-mediated conditions.

Regeneus is committed to developing its proprietary regenerative cell products in order to provide medical specialists and veterinarians with next generation tools for the treatment and functional restoration of damaged and diseased tissues. The wide ranging potential use of regenerative cell therapies provides the basis for a cell therapy platform that may be able to address a wide range of diseases.

3.2 History

Regeneus was founded by experienced biotechnology innovators to take advantage of the rapid advances in cell based regenerative medicine, and the opportunity to develop and commercialise innovative adipose-derived cell products to treat a range of musculoskeletal and other inflammatory conditions in humans and animals.

Historically, Regeneus has introduced new technologies through the veterinary market initially as it represents a good market proxy for developing similar products for the human market. Figure 4 below outlines this evolution of Regeneus’ proprietary products.

Figure 4: Regeneus Product Evolution

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----- Start of picture text -----

Launch of 1st off the
AdiCell extended to equine shelf product - CryoShot,
conditions with similar replacing AdiCell
successful treatment (made available on Developing Secretions based
outcomes pre-registration trial basis) products & KollVax product
2008 2009 2010 2011 2012 2013
Introduction of AdiCell for HiQCell introduced for Introduction of
the treatment of canine treatment of Human MSK. Cryopreservation Option for
orthopaedic conditions. (335 patients treated since HiQCell treatment
(>400 animals treated 2011 with demonstrated
successfully) safety and efficacy in
reducing pain)
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Regeneus Ltd Prospectus

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3.3 Business Model & Commercialisation Strategy

Regeneus has an extensive proprietary IP portfolio, skills and experience in the area of the separation, preparation and uses of adipose-derived regenerative cells for therapeutic purposes in the human and animal health markets.

The Company’s existing products can be classified as either:

(i) Autologous - derived from a patient’s own cells which have the advantage of being immunologically matched to the patient. This is a one-to-one treatment and is unique to the individual patient; and
(ii) Allogeneic - derived from a donor’s cells.

Regeneus also has the capability and IP coverage in cells and cell secretions to make off the shelf allogeneic products for a range of indications in the human and animal health markets including inflammatory conditions, heart disease and wound healing. This gives Regeneus the potential to develop, trial and if successful, manufacture off the shelf cell based products for wider distribution. Figure 5 below provides an overview of Regeneus and its product platforms.

Regeneus generates revenue from the following sources:

Human Health – licence and service fees from medical specialists who perform HiQCell treatments. Regeneus receives a licence fee and cell processing fee per treatment.
Animal Health – sale of products (CryoShot and AdiCell kits); and
Licence fees relating to technology access arrangements with R&D development partners.

3.3.1 HiQCell Commercialisation Strategy

Regeneus is committed to developing its proprietary regenerative cell technologies in order to provide medical specialists with next generation tools for the treatment and functional restoration of damaged or diseased tissues.

Regeneus believes that there is significant opportunity for the Company to leverage its existing first mover advantage in Australia to capture market share in the regenerative medicine space.

The Company is well positioned to:

roll-out the commercialisation of HiQCell as a treatment option for musculoskeletal conditions

Figure 5: Overview of Regeneus’ Product Platform

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----- Start of picture text -----

Description Point-of-care treatment that involves Off the shelf product. Regenerative Off the shelf topical product
injecting a mixture of the patient’s cells derived from donor adipose containing secretions produced from
adipose-derived regenerative cells tissue that is cryogenically frozen and donor adipose tissue
into the affected joint to help repair thawed for injection
and regenerate the affected site
Current Applications Human musculoskeletal conditions Animal musculoskeletal conditions In development - Human topical skin
with a focus on osteoarthritis and with a focus on osteoarthritis and inflammatory condition such as acne
tendinopathy tendinopathy
Future Applications Pain and other inflammatory Pain, cancer and other inflammatory Other inflammatory conditions
conditions conditions
Development of human off the shelf
product
Revenue Source Licence Fee & Cell Processing Fee Product sales Future product sales
per treatment
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Regeneus’ patent applications describe a broad range of inflammatory disorders including autoimmune diseases, heart disease, renal disease, asthma and diabetes.

Regeneus Ltd Prospectus

3. Business Overview

across all capital cities in Australia through a national network of associated medical specialists and private hospital facilities;

work with leading medical specialists to generate further clinical data to support the expansion of HiQCell for the treatment of musculoskeletal conditions;
leverage the capacity at existing and upcoming hospital facilities to expand HiQCell to the treatment of other indications e.g. neuropathic pain once products are developed;
launch HiQCell in UK and Singapore for the treatment of musculoskeletal conditions; and
provide a high quality HiQCell experience for associated medical practitioners and their patients.

The Regeneus business model provides medical specialists with the training and point-of-care cell processing services so they can carry out the HiQCell treatment. The cell processing is undertaken at the point-of-care by a trained Regeneus technician under the supervision of the medical specialist. It is a scalable model that creates hubs of medical excellence through collaboration between high-quality hospital facilities, specialist medical practitioners and highly trained Regeneus staff who carry out the HiQCell processing.

3.3.2 CryoShot Commercialisation Strategy

CyroShot is distributed directly to veterinary clinics (as research facilities) and also nationally throughout Australia by Provet. Although Regeneus is able to trial CryoShot commercially on a pre-registration basis, full commercialisation will depend upon achieving registration (marketing authorisation) of CryoShot with key regulators.

Regeneus is in the process of establishing the registration pathway for CryoShot with key regulators and has commenced discussions with the following regulators:

Australia – Australian Pesticides and Veterinary Medicines Agency ( APVMA );
Europe – European Medicines Agency ( EMA ); and
US – Food and Drugs Administration ( FDA ).

In the meantime, the Company will continue to promote early commercial activities for CryoShot with existing associated veterinary practitioners and other selected veterinary clinics as this is critical in collection of the clinical data required for application for registrations. In collaboration with its veterinary practitioners and clinics, Regeneus will also look to expand the treatment applications for CryoShot as an adjunct treatment to existing surgical procedures.

3.3.3 Secretions Product Development

Regeneus has developed technology and protocols for the production of secretions from adipose tissue which will be used to develop a cream for topical treatment of skin inflammatory conditions such as acne, rosacea, psoriasis, atopic dermatitis and insect stings and bites.

The Company will conduct a toxicology study on a cell secretions based topical application product for acne.

Regeneus Ltd Prospectus

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HUMAN HEALTH

Figure 6: Overview of the HiQCell Treatment

3.3.4 The HiQCell Treatment

The current product within the human health platform is the HiQCell treatment. It is targeted for use in the treatment of musculoskeletal conditions, notably osteoarthritis and tendinopathy. It is an advanced technology that uses the body’s own natural regenerative cells to heal the body. It is a unique and relatively simple same-day treatment that involves injecting a mixture of regenerative cells (including MSCs) into affected joints and/or tendons. HiQCell has demonstrated positive results thus far, with increases in mobility and concurrent reduction in pain and importantly, slower than expected cartilage degradation.

1: Tissue Harvest

Small amount of adipose tissue is harvested via liposuction by medical specialist

2: Cell Processing

Regeneus isolates regenerative cells from adipose tissue at the point-of-care and creates the HiQCell cell suspension for injection

3: Cell Injection

Medical specialist injects cell suspension into the joint
Multiple joints can be treated at the same time

A. Overview of the HiQCell Treatment

The HiQCell treatment involves injecting a mixture of regenerative cells taken from a patient’s own adipose tissue. The treatment is carried out by and under the supervision of a trained medical specialist who specialises in the diagnosis and treatment of musculoskeletal conditions, in an appropriately accredited and equipped hospital or day surgery.

4: Cryo Re-injection

Option of cryopreservation of regenerative cells for future re-injection by medical specialist

The HiQCell treatment may be performed as a standalone procedure under local anaesthesia or as an adjunct procedure in conjunction with orthopaedic surgery such as arthroscopy under general anaesthesia.

The HiQCell treatment has both an anti-inflammatory and immune-regulatory function, which reduces the pain associated with osteoarthritis and creates an environment in which tissues can be repaired. After injection, the regenerative cells in HiQCell lead to the secretion of anti-inflammatory proteins called cytokines, chemokines and growth factors. These proteins play an important role in reducing inflammation and stimulate other cells to repair tissue damage in joints and tendons. Most patients with musculoskeletal conditions who have undergone the HiQCell treatment have experienced substantial improvements in their symptoms, such as pain and mobility.

Regeneus Ltd Prospectus

3. Business Overview

Cryopreservation

Regeneus in conjunction with cryogenic storage specialist, Cryosite Limited (ASX:CTE) has completed the development of a process for storing a patient’s regenerative cells under cryopreservation for future injections for that same patient. A proportion of the cells from the cell processing step of the process is extracted by a Regeneus technician and cryogenically stored by Cryosite under liquid nitrogen as low as -196C. The stored cells can be held for an extended period of time until required for future injection. At this time, the cryopreservation option is limited to being used for a single indication and for a single course of treatment.

Regeneus has developed assays (analytic procedures) to ensure the viability of the cells after freezing and before future reinjection. The added benefits of cryopreservation with the HiQCell process includes potential further improved medical outcomes from access to repeat injections for a single course of treatment, greater convenience and cost effectiveness on a per-injection basis for the patient. It may also open up the opportunity for Regeneus to work with medical specialists who wish to explore using HiQCell to treat other medical conditions that might be well suited to a course of injections.

B. The HiQCell Patient Care Model

The HiQCell Patient Care Model explains the relationship between the key stakeholders in a HiQCell treatment.

Regeneus works in collaboration with accredited medical specialists including orthopaedic surgeons and sport and exercise physicians who offer HiQCell treatment for their patients. Importantly the medical specialist has the responsibility for the patient at all times. Regeneus licences and trains the medical specialist to carry out the treatment and to supervise the Regeneus and Cryosite processes.

The HiQCell treatment is conducted at accredited medical facilities including hospitals and day surgeries. The facility provides patient admission, pre and post operative care, and in-theatre nursing support. The facility also provides the space for Regeneus to establish, equip, staff and operate a HiQCell processing laboratory where the patient’s adipose tissue is processed to extract the regenerative cells.

Figure 7: Regeneus Patient Care Model

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HiQCell Licenced
Provide support
Medical Specialist Patient referral to
services to
Medical Specialist
Medical Specialist
Medical supervision
Diagnosis and treatment options
HiQCell treatment and follow up
Initial consult
Provide cell processing and referral
Referring Practitioner
P atient
(GP, Physio, etc)
(Under medical
supervision by Specialist)
Host location for HiQCell Lab
and procedure
Provide nursing care
Provide
laboratory equipment
and staffing Medical Facility
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Regeneus Ltd Prospectus

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C. High Quality Product Offering

The HiQCell treatment is a unique offering:

Conducted at highly reputable and accredited hospitals with onsite cell processing laboratories utilizing a strict protocol to provide optimal patient safety and highest quality standards; and
Provided only by medical specialists who are trained and accredited in the diagnosis and treatment of musculoskeletal conditions i.e. qualified Sport and Exercise Physicians and Orthopaedic Surgeons. It is not a cosmetic procedure despite involving liposuction.

D. Sales and Marketing

Regeneus has a business development, scientific and clinical support team who support the HiQCell product and work with sports medicine and orthopaedic specialists in Australia. This team, in conjunction with experienced consulting practitioners, is responsible for training medical specialists in all aspects of the HiQCell process including fat harvest, cell processing and storage of the patient’s regenerative cells. This enables the medical specialist to supervise all aspects of the treatment.

The Regeneus HiQCell team is also responsible for establishing the cell processing laboratory in the hospital facility or day surgery, providing point-ofcare liaison and trained cell processing technicians to support the medical specialist during a HiQCell treatment.

F. Regulatory Environment

Australia

HiQCell is classified as a biological within the framework of the Therapeutic Goods Administration Act 1989. Some biologicals that would otherwise require registration by the Therapeutic Goods Administration ( TGA ) are excluded from the TGA’s regulatory framework. These are specified in the Therapeutic Goods (Excluded Goods) Order No 1 of 2011. Excluded products include human tissue and cells that are part of medical practice and are:

Collected from a patient who is under the clinical care and treatment of a medical practitioner registered under a law of a State or internal Territory; and
Manufactured by that medical practitioner, or by a person or persons under the professional supervision of that medical practitioner, for therapeutic application of a single indication and in a single course of treatment of that patient by the same medical practitioner or by a person or persons under the professional supervision of the same medical practitioner.

The TGA has recently published a guideline with explanations of the medical practitioner exemption and the limits of the exemption[7] . The HiQCell treatment as carried out by medical practitioners exempts the HiQCell product from regulation by the TGA.

Other Markets

Regeneus participates in marketing activities to build awareness of HiQCell to general practitioners and other clinicians who potentially refer patients to medical specialists who conduct the treatment.

Regeneus is currently targeting the UK and Singapore for the expansion of HiQCell. Regeneus has identified these markets as they have a similar regulatory framework to that in Australia.

E. Competition

H. Medical Reimbursement

To date, competition in Australia for adipose based cell treatments for musculoskeletal conditions is largely limited to medical practitioners who perform pointof-care cell therapy procedures. Cytori Therapeutics provides medical practitioners with a point-of-care solution although it is primarily focused on the plastics and cosmetic medicine sector. Other autologous offerings for musculoskeletal conditions include add-on services by cosmetic practitioners conducted in their consulting treatment rooms or clinics.

Additionally there are several other indirectly

competitive treatments that promote pain relief claims for osteoarthritis. These range from tablet supplements, creams, non-steroidal anti inflammatory drugs ( NSAIDs ), cortisone based products, hyaluronic acid ( HA ) based products and other cultured cell based products such as marketed by Orthocell and Sanofi / Genzyme.

Currently HiQCell is not covered by Medicare or any other reimbursement schemes. Clinical validation is critical for mainstream adoption of HiQCell and for initiating dialogue with relevant governmental and private bodies in relation to reimbursement.

Regeneus actively collects and records clinical outcomes of patients through its HiQCell Joint Registry as well as clinical studies in order to build a case for potential reimbursement on the basis of safety, efficacy and cost effectiveness.

7 TGA Excluded of Goods Order No1 of 2011

Regeneus Ltd Prospectus

3. Business Overview

3.3.5 Clinical Validation

Clinical trials are an integral component of our research and development program. Regeneus is committed to obtaining high quality and long-term follow-up data and continually improving its clinical trial protocols.

To date, the use of the HiQCell treatment for osteoarthritis and tendinopathy has shown excellent outcomes. The majority of patients with musculoskeletal conditions who have undergone the treatment have experienced substantial improvements in their symptoms, in particular pain.

Clinical validation is obtained through the following channels:

A. HiQCell Joint Registry

Regeneus has established a HiQCell Patient Outcome Joint Registry to build an understanding of the long term clinical outcomes of the HiQCell treatment for joint osteoarthritis.

Anonymous and confidential patient information is collected and will continue to be collected over a long period of time for clinical research. The data will provide important feedback to identify treatment outcome trends over the long term and future optimum patient selection criteria. It is expected the data will also be important in demonstrating safety, cost and efficacy outcomes for patient medical cost reimbursement.

Registry outcome measures include pain level, sleep patterns, quality of life, analgesia use and joint function scores.

Patient outcomes are followed using validated outcome scores and a pain visual analogue scale assessment. The Visual Analogue Scale ( VAS ) is a subjective tool used to measure the level of symptoms a person is feeling.

No two patients are alike and patients will vary in their response to the HiQCell treatment due to physiological and other factors. HiQCell is a relatively new therapy that has been in commercial use for two years and the large majority of patients are still having a positive response to the treatment. Regeneus will continue to capture long-term data so we can learn more of the duration of HiQCell and long-term treatment effect.

As at 30 June 2013, over 700 joints across 335 patients have been treated in Australia with HiQCell. Of these, 208 joints across 104 patients were followed up for six months or longer with the following outcomes:

At 12 months post-treatment, 69.4% of HiQCell treated patients responded with a 30% or greater reduction in pain. These responders experienced average pain reduction of 79.2%;

Chart 3: Normalised Pain Index for HiQCell responders

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100%
80%
60%
40%
20%
0%
Baseline 2 Weeks 6 Weeks 3 Months 6 Months 12 Months
• All grades of osteoarthritis may benefit from HiQCell;
Chart 4: Median VAS Score for HiQCell Treated Patients (by grade of
osteoarthritis)
HIQCell patient outcome by OA grade
7
6
5
4
3
2
1
0
Baseline 2 Weeks 6 Weeks 3 Months 6 Months 12 Months
Key Grade 2 Grade 3 Grade 4
Pain score as % of baseline
Visual Analogue Score (VAS)
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Regeneus Ltd Prospectus

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The decrease in pain is independent of the patient’s age;

of all patients to be collected pre-treatment and at six and 12 months post treatment.

Chart 5: Median VAS Score for HiQCell responders (by age)

HIQCell patient outcome by OA grade

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6
5
4
3
2
1
0
Baseline 2 Weeks 6 Weeks 3 Months 6 Months 12 Months
Key < 40 yrs 40-60 yrs > 60 yrs
Visual Analogue Score (VAS)
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The trend in reduction of pain shown by patient data from the HiQCell Registry data is consistent with results from the Osteoarthritis Stem Cell Advanced Research Study ( OSCARS Study ) that was conducted between 2010- 2012.

B. Osteoarthritis Stem Cell Advanced Research Study (OSCARS Study)

In 2010, Regeneus initiated a randomised double blind, placebo controlled study of the efficacy and safety of HiQCell for the treatment of knee osteoarthritis. The aim of the study was to determine whether an injection of autologous non-expanded adipose-derived stem cells improve pain and disease progression in patients with moderate to severe knee osteoarthritis.

OSCARS Study Design

Regeneus sponsored the OSCARS study which involved treating 40 patients – 20 patients with the HiQCell procedure and 20 patients with a surgical placebo.

The 20 patients in the test group were treated using the HiQCell treatment while the 20 participants in the control group which served as a placebo group received an intra-articular injection of saline rather than their cells. Each patient from both groups received an injection into only one arthritic knee.

The patients and the treating medical staff did not know which patient received which treatment. Patients were assessed pre-treatment, at one month, three months, six months and 12 months by pain questionnaires, gait analysis, biochemical analysis of cartilage degradation markers in blood and urine and mechanical assessment of quad strength. The trial protocol provided for MRIs

6-month & 12-month Post-Treatment Outcomes

The OSCARS study has provided important information on the safety and efficacy of the HiQCell treatment with the following key treatment outcomes:

Safety:
The treatment process was well tolerated and there were no major medium term safety concerns
Pain Reduction:
Both the treatment and placebo groups experienced significant decrease in total pain scores from baseline. Due to a large placebo effect, there was no significant difference between the HiQCell treatment and placebo on total pain scores.
The trend in the reduction in pain in the treatment group at one, three, six and 12 months post-treatment is similar to that observed in the HiQCell Joint Registry data.

Chart 6: Normalised pain score comparison between HiQCell Registry Data and OSCARS Study Data (includes all HIQCell treated patients, responders and non-responders)

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100%
Registry
80%
60%
40% 32% pain
reduction
(N=81) reduction 42% pain 45% pain
20% reduction
(N=82) (N=83) 56% pain 55% pain
reduction reduction
(N=74) (N=52)
0%
Baseline 2 Weeks 6 Weeks 3 Months 6 Months 12 Months
Pain score as % of baseline
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100%
OSCARS
80%
60%
40%
42% pain
20% reduction (N=20) 53% pain reduction 50% pain 55% pain
reduction (N=20) reduction
(N=20) (N=18)
0%
Pain score as % of baseline Baseline 1 Month 3 Months 6 Months 12 Months
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Regeneus Ltd Prospectus

3. Business Overview

HiQCell has a large treatment effect size;
MRI Analysis;
The progression of cartilage damage for the OSCARs Study patients was assessed by MRI scanning at six months post-treatment by Qmetrics Technologies, an independent contract research organisation that specialises in imaging.
It was found that both groups exhibited a greater proportion of subjects remaining stable than those progressing. In addition, the subjects comprising the treated group had more advanced OA than the control group, which would tend to predispose them toward an accelerated progression of OA; this was not observed. This observation will be reviewed for future studies to see whether it can slow disease progression, a hallmark of OA, at the 12 months mark and beyond.

The OSCARS study continued to the 12-month posttreatment time point. All data collected coupled with data from MRIs, gait analysis and urine analysis for cartilage breakdown products from the pre-treatment, six-month and 12-month post-treatment time points are currently being analysed with the results due for release in FY 2014.

Further Clinical Studies for HiQCell

The OSCARS study is the first clinical study on HiQCell and along with the clinical Registry data is expected to provide for a solid foundation for the commercialization of HiQCell.

Over the medium term, we will be conducting further clinical studies on conditions including knee and other joint osteoarthritis as well as other conditions to continue to expand and apply our knowledge through further R&D initiatives to continually improve our product offerings.

HiQCell Case Studies

Patient 1.

A 26-year old male presented with a chondral lesion in his right knee. Magnetic Resonance Imaging ( MRI ) of this knee revealed the patient had a full thickness chondral lesion in the lateral femoral condyle, a possible meniscal tear and significant bone marrow oedema. This patient’s knee was treated with HiQCell in July 2012. A repeat MRI of the patient’s knee at 6-months post HiQCell treatment revealed that there was a improvement in bone marrow oedema and features indicating early chondral infill of the chondral surfaces.

Prior to treatment with HiQCell, the patient reported experiencing 5.5/10 pain in his right knee. At 1 year post-HiQCell treatment the patient reports pain at a level of 1.5/10 and clinically has had a positive response to the treatment.

Figure 8: Patient 1 MRI

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Regeneus Ltd Prospectus

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Patient 2.

A 64-year old woman was treated with HiQCell in July 2012 for bilateral knee osteoarthritis. MRI of the more severely osteoarthritic knee at 2 months pre-treatment, displayed a range of typical degenerative findings, including grade 3-4 chondral wear of the lateral facet of the patellofemoral compartment, degenerative thickening of the posterior horn of the medial meniscus, and a near complete radial tear of the posterior horn/ posterior root of the medial meniscus.

A repeat MRI of this knee 9 months post-HiQCell treatment showed no articular cartilage regeneration. However, there was no further degeneration of articular cartilage of the lateral facet of the patellofemoral compartment. Notably, the previously identified near complete radial tear of the posterior horn/posterior root of the medial meniscus was much less obvious and had presumably undergone spontaneous healing.

Spontaneous regeneration of the medial meniscus is very unlikely to occur in a patient of this age. Furthermore, a patient’s condition would normally degenerate during this 9-month time frame. Therefore, regeneration of the medial meniscus and arrest of joint degeneration is likely attributed to the HiQCell treatment.

Prior to HiQCell treatment, the patient reported experiencing 3/10 pain on most days in both knees. Clinically the patient has had an excellent response to the HiQCell treatment and now reports being pain free in both knees, when undertaking everyday activities.

Patient 3.

A 24-year old male international mogul skier had been suffering from bilateral patella tendinosis for approximately 12 months. Ultrasound Imaging in September 2011 of his patella tendons showed lesions in both tendons measuring approximately 12mm by 5mm by 5mm in size. At this time, a course of platelet rich plasma therapy was started under ultrasound guidance. The patient had mild to moderate improvement only and was not able to return to skiing.

Prior to receiving bilateral tendon HiQCell treatment In February 2012, the patient reported experiencing 7 out of 10 pain in both knees. By 6-weeks post-HiQCell treatment, the patient reported a pain score of 0 out of 10 in his right knee and 0.5 out of 10 in his left knee. The reduction in pain has been maintained to the 14-month post-treatment time-point with the patient experiencing no pain in either knee. Follow-up ultrasound at 3-months post-HiQCell treatment showed some early tendon infill in both tendons. By 8-months post-HiQCell treatment, ultrasound of the patient’s tendons show good in-fill of the lesions. At this time-point, the patient returned to competing in mogul skiing at international level including 2 podium finishes and victory at a World Cup event.

Figure 10: Patient 3 Ultrasound Images

Figure 9: Patient 2 MRI

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Pre HiQCell Treatment

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3 months post HiQCell Treatment
8 months post HiQCell Treatment
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Regeneus Ltd Prospectus

3. Business Overview

3.3.6 R&D and Product Development

Regeneus has an extensive R&D and product development program in place that is delivering a significant knowledge base about the therapeutic effects of adipose-derived cells and their secretions.

The R&D focus is two-fold. Firstly, to develop knowledge base on the mechanisms of the therapeutic effects of the products. The second focus is to develop successful adipose-based treatments and products for a range of applications and to patent these. The Company has been successful in achieving this across a broad range of applications that range from orthopaedic conditions, through to wound healing and treatment of skin inflammatory conditions.

A. R&D Partners

Regeneus has R&D Collaboration agreements with Macquarie University and the Kolling Institute of Medical Research (part of the North Sydney Local Health District). The agreements are further described in Section 10.4.

B. Development of Cell Secretions Based Product

Recent studies indicate that the therapeutic value of MSCs is largely due to molecules secreted by the cells. These molecules include cytokines and growth factors that signal resident cells, control inflammation, recruit new cells to the site of injury and modulate the localised immune system.

Company research indicates that when secretions are applied to skin, the secretions have a localised anti-inflammatory effect, accelerates wound healing and reduces scarring. The effect of a secretions based product is short term compared to cells and the use of secretions based products may be limited to applications where repeat dosing is easy. Regeneus is working on the development of a cream that contains secretions for topical treatment of a variety of skin conditions including acne and will conduct a toxicology study for this product.

C. Other Initiatives

There are other R&D initiatives focused on improving and enhancing the existing human product e.g. protocol enhancements for HiQCell.

Regeneus is also working on preclinical and safety trials for an allogeneic human cell therapy based on the CryoShot technology platform, as well as other pilot studies and applications for research grants.

3.4 ANIMAL HEALTH

3.4.1 The CryoShot Product

Regeneus Veterinary Division has two products within the existing product platform: AdiCell and CryoShot.

AdiCell is an autologous cell-based treatment for orthopaedic conditions similar to HiQCell that is targeted at the veterinary market. AdiCell was introduced in 2007 and has since been used to treat over 400 canine and equine orthopaedic patients with good reported clinical outcomes. Regeneus’ data indicates that a high percentage (>80%) of dogs respond extremely well to the AdiCell treatment. Typically, treated dogs show increased mobility within 10 days after treatment. They also show reduced lameness and stiffness, a marked reduction in pain and have a significantly lower requirement for medication.

In a sample of 26 dogs treated with the AdiCell treatment, it was observed that the majority of improvement occurred in the first 10 days post treatment, and the treatment effect was long lasting.

Chart 7: AdiCell Treatment Outcomes

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100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
10 1 2 3 4 5 6
Days Month Month Month Month Month Month
Ease of jumping into vehicle/furniture
Ease of Movement after a long rest
Key Lameness at walk
Lameness at Trot
Pain when turning suddenly at play
Owners Score (0 = best, 100 = worst)
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Further follow up questions on 101 dog owners, 9 months post-AdiCell (average age of dog 9.3 years) revealed continued reductions in pain and lameness and increases in mobility and endurance,

These results encouraged the translation of the autologous platform from animal-only (AdiCell) to human (HiQCell).

Regeneus Ltd Prospectus

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Chart 8: 255 days post-AdiCell Treatment Outcomes

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A) Level of pain
More pain than before
treatment 2%
The same as before
treatment
14%
Considerably
less painfull
39%
Slightly
less painfull
25%
Moderately
less painfull
20%
B) Level of lameness
More lame than before
treatment 7%
The same as before
treatment
Considerably 15%
less lame
33%
Slightly
less lame
19%
Moderately
less lame
26%
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Based on the success of AdiCell and working with feedback from the Company’s veterinary partners, Regeneus developed an off-the-shelf allogeneic product, CryoShot, in early 2012. CryoShot has been designed to combine the efficacy of AdiCell, with the convenience of an off-the-shelf product. CryoShot is available in the form of CryoShot canine and CryoShot equine for the treatment of musculoskeletal conditions in canines and equines respectively.

The introduction of CryoShot has reduced interest in AdiCell and Regeneus does not expect AdiCell to be a key focus of the business going forward.

A. Overview of CryoShot Treatment

CryoShot is produced from adipose tissue derived from donor animals. The donor tissue is collected aseptically, processed and cultured to isolate and increase the regenerative cells before being cryogenically frozen and stored in liquid nitrogen. Significant quantities of CryoShot can be produced from a small amount of donor adipose tissue. CryoShot is delivered in individual 2ml vials and stored in cryogenically frozen form to maximise the flexibility in terms of use, shelf life and viability, which contributes to efficacy. CryoShot is stored at the clinic and thawed prior to injection.

Figure 11: Manufacturing and delivery process of CryoShot

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Adipose tissue is collected from
donor animals
Processed to isolate the
regenerative cells
Cultured to increase the
regenerative cells
Frozen in liquid nitrogen
Shipped to the vet
Thawed and injected
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In comparison to AdiCell, CryoShot offers a number of benefits:

Ease of use:
Less invasive procedure for the animal, and less time under anaesthetic
Off the shelf nature of the product
Lower barriers to entry for the veterinarian:
Lack of requirement of investment by the veterinarian (esp. for processing equipment, and re-training staff)
Consistency of concentration of regenerative cells to be injected

Since its introduction in early 2012 under an APVMA permit, CryoShot has been produced and distributed for the treatment of canine and equine musculoskeletal conditions. Early results in dogs on the usage of

Regeneus Ltd Prospectus

3. Business Overview

CryoShot have been positive with demonstration of reduction in pain and improvement in mobility within 10 days of treatment with no need for ongoing surgery or drugs.

CryoShot is being trialled at more than 70 selected veterinarians around Australia. It is distributed nationally in Australia by Provet, the largest veterinary distribution company in Australia.

All manufacturing, distribution and handling of CryoShot is managed in-house at Regeneus.

B. Regulatory Environment

Registration of CryoShot

In Australia, CryoShot is distributed as a pre-registration veterinary product for trialling purposes under an AVPMA permit. Regeneus intends to register the product for broader market penetration and has initiated discussion with regulators in Australia, Europe and US in relation to a global registration pathway for CryoShot. There is currently no cell based product that is registered globally in the veterinary market. Therefore, the Company expects that the registration pathway may take longer than normal and it is anticipated, up to four years given there is no precedent registration pathway, although this timeframe may vary. Registration will require clinical trials to demonstrate safety and efficacy.

3.4.2 Clinical Validation

Early results for CryoShot have been very positive with demonstration of similar treatment outcomes to an AdiCell treatment. These early results have been measured based on description of pain documented by owners of animals who have been treated with CryoShot. Each owner was provided with a validated questionnaire (Brief Pain of Inventory from the University of Pennsylvania) relating to pain; the description of pain, how the pain interferes with normal functions, and overall quality of life.

For canine CryoShot, we have trialled both cultured cells, and cultured cells plus concentrated cell secretions for the treatment of osteoarthritis. Based on 42 completed questionnaires for cultured cells, and 14 completed questionnaires for cultured cells plus concentrated secretions, owners have noticed similar dramatic effects on the reduction of pain in their animals. This appears both in how owners would describe pain, and also how that pain interferes with normal daily functions like walking, running and stairs. Most of this effect happens within the first 10 days, but improvement continues past the two-month mark.

We note that the greatest effects are in the group that has cultured cells plus concentrated secretions. This is a positive outcome as it is the area where the Company believes it has a strong patent position.

At this stage, data is only available for a small sample as the Company is reliant on owners to return the fully completed questionnaire at each time point in a timely manner. To aid this process, Regeneus has added additional resources and focus to aid and assist in this data collection.

Chart 9: Brief Pain Inventory – a validated scoring system which is likely to be used for FDA registration in the USA

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Brief Pain Inventory
60
50
40
30
20
10
0
Day 0 Day 10 1 Month 2 Months 3 Months
Key Cultured Cells Cultured Cells plus Concentrated Supernatant
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Regeneus Ltd Prospectus

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3.4.3 R&D and Product Development

Regeneus has R&D agreements with Quirindi Veterinary Clinic and Illawarra Equine Centre. These relationships enable Regeneus to conduct ethical research on animals with real disease rather than on animals that have had their diseases induced artificially. This gives Regeneus a significant research advantage and has enabled us to perform early stage demonstrations of the therapeutic effects of AdiCell and cell secretionbased products for a range of conditions including tendon and ligament injuries in horses, heart disease in dogs, renal and liver disease in cats and inflammatory skin conditions in dogs. These early stage studies have enabled Regeneus to develop a patent portfolio that gives protection across a broad range of applications and products.

Development of Oncology Vaccine Product (KollVax)

In early 2013, Regeneus announced a collaboration with the Kolling Institute of Medical Research on a cancer vaccine. The vaccine involves removal of the tumour or a biopsy from the patient in order to produce a personalised vaccine. It is believed that the vaccine stimulates the body’s immune system to see the cancer cells as foreign and helps prevent further growth of the tumour as well as development of new tumours.

Preliminary findings show that Regeneus prepared regenerative cells have a positive impact on the effect of the cancer vaccine.

A safety trial involving over 30 dogs with a variety of cancer types was also conducted. No adverse effects or safety issues occurred and in many cases the vaccine appeared to extend the lifetime of the dog beyond the expected survival time.

The next steps are to perform an efficacy trial in dogs.

Key initial segments of this market could include osteosarcoma, haemangiosarcoma and melanoma in dogs. It is also important to note that for the vaccine to work, the animal must have an intact immune system. Incidence rates for osteosarcoma have been shown to be 57/100,000 dogs / year, haemangiosarcoma 25/100,000 dogs/year, while canine melanoma as been shown to be in the realm of 13/100,000 dogs / year.

The autologous vaccine is a platform technology and it may be possible to use this autologous vaccine for any number of different tumour types.

On the regulatory front, Regeneus has opened a dossier with the USDA (US Department of Agriculture) at the Center for Veterinary Biologics ( CVB ). This is the ruling regulatory authority in the USA for this type of technology.

Pursuant to the R&D Collaboration Agreement with the Kolling Institute of Medical Research (see section 10.4), Regeneus holds the exclusive worldwide rights to commercialise this cancer vaccine in the animal health market, and holds the first right of refusal for the human health market.

Earlier work in a glioma model in rats was very positive, and demonstrated a significant (p<0.05) survival advantage compared with controls (adjuvant only) with remission rates of between 30 to 60%.

Chart 10: Vaccine dosing and rechallenge studies

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100%
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KEY Controls Vaccine 2 doses
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Regeneus Ltd Prospectus

3. Business Overview

3.5 Intellectual Property Portfolio

and we expect that we will be successful in having these patents granted in due course.

Patents

Regeneus has filed 9 families of patent applications that if granted substantially as claimed cover the current products including HiQCell and CryoShot and a range of future products. The 9 patent families have been developed and are owned by the Company. The Company has licenced from Northern Sydney Local Health District exclusive rights to commercialise intellectually property rights relating to technology developed at the Kolling Institute of Medical Research for vaccines for the treatment or prevention of cancer in animals and humans. The portfolio is summarised in Table 7 below. The patent applications have generally been, or will be when the time falls due, filed under the Patent Cooperation Treaty ( PCT ) that allows the making of the applications in most international territories.

Norwood Immunology Opposition

One of the earliest patent applications has been examined and was accepted by the Australian Patent Office (IP Australia) in September 2009. This patent application is currently under opposition in Australia. The corresponding patent application has been examined and granted in New Zealand. Other patent applications are, or will be when the time falls due, progressing through the patent examination processes

The grant of the accepted Australian patent application AU2009201915 is currently being opposed by Norwood Immunology Ltd. In the evidence submitted as part of the opposition, Norwood have attempted to demonstrate, amongst other grounds of opposition, that the patent is not novel nor is it inventive. Regeneus and our patent attorneys have reviewed their evidence and have prepared and lodged with IP Australia our own evidence against their opposition. Regeneus has submitted an amendment to the claims in the patent application in order to improve its patent application and make it stronger from challenge. IP Australia has examined and accepted the amendments. Norwood has opposed the amendment to the claims and we are now awaiting their evidence supporting the opposition to the amendment. Regeneus is confident that the patent will be granted after conclusion of the opposition. Regardless, the opposition does not prevent Regeneus from commercialisation of HiQCell or other products. However if the patent is not granted, the Company’s competitive position may be affected.

Trademarks

Regeneus has registered trademarks over “Regeneus”, “HiQCell”, “AdiCell” and “CryoShot”.

Table 7: Regeneus’ Intellectual Property Portfolio

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Patent Family, Title and date of filing of the first
Subject matter Related products
application
1. Therapeutic methods using adipose Adipose tissue-derived cell suspensions that comprise adipocytes HiQCell, Secretions
tissue-derived cell suspensions comprising for use in the treatment of inflammatory disorders and cartilage
adipocytes. 22/08/2008 or bone disorders.
1A. Therapeutic methods. 22/08/2008 Similar to Family 1 HiQCell, Secretions
2. Therapeutic methods. 17/12/2009 Similar to Family 1 but with the inclusion of additional treatment HiQCell, Secretions
indications.
3. Cell processing method and device. A method of generating a cell suspension from adipose tissue HiQCell
15/03/2011 and a tissue processing device for the performance of the
method.
4. Cell free preparation and uses thereof. Intra-articular use of a cell-free preparation Secretions
14/09/2010
5. Arthroscopy method. 17/12/2010 The delivery of autologous cells into a joint during an arthroscopy HiQCell
procedure
6. Pharmaceutical compositions and topical Topical application of adipose tissue derived cell secretions Secretions
use thereof. 15/03/2011
7. Therapeutic methods and compositions. Treatment of various conditions by remote delivery of adipose HiQCell, CryoShot, Secretions
23/9/2011 tissue derived cell secretions or cell suspensions, including
treatment of various forms of pain. Also products that comprise
a combination of cells and cell secretions.
8. Therapeutics using multiple injections of cells. The patent application has not yet been published and is HiQCell
26/9/2012 currently confidential.
9. Vaccine booster. 24/12/2012 The patent application has not yet been published and is CryoShot, HiQCell
currently confidential.
10. Vaccines for the treatment or prevention The patent application has not yet been published and is Cancer vaccine
cancer. 24/12/2012 currently confidential.
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Regeneus Ltd Prospectus

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04 Board, Management and Corporate Governance

Regeneus Ltd Prospectus

4. Board, Management and Corporate Governance

4.1 Board of Directors

The Regeneus Board has a broad range of experience in the biotechnology industry and in early stage technology companies generally combined with Australian public company, capital markets, financial and commercial expertise.

Executive Chairman

John Martin has served on the Board of the Company since early 2009 and has worked closely with the founders to develop and grow the business since that time. He was appointed Chairman in 2010. John has over 20 years of corporate and commercial experience including roles as CEO and director of ASX listed and private companies and executive and corporate partner of Allens. He has advised and worked with emerging technology and high growth companies for over 12 years including being a co-founder and Director of biotech spin outs from Macquarie University, BTF and Proteome Systems. He is currently a principal of The Channel Group, chairman of Ai-Media and director of Eagle Eye Solutions (Asia Pacific).

CEO

Professor Graham Vesey is a co-founder and founding CEO of Regeneus and has served on the Board since incorporation. Graham is a successful biotechnology entrepreneur, technology innovator and inventor on various patents in the biotechnology area and a highly regarded scientist. He has been the primary driver of the Company’s R&D programs, product innovation and development and IP portfolio. Prior to co-founding Regeneus, Graham was a co-founder and executive Director of BTF, a highly successful Sydney-based biotechnology company and was responsible for developing BTF’s product and patent portfolios. In 2007, BTF was acquired by bioMerieux, a French multinational diagnostic company. Graham is an Adjunct Professor at Macquarie University.

Non–Executive Directors

Associate Professor Ben Herbert is a co-founder and founding Director of the Company and has served on the Board since incorporation. Ben is a Vice-Chancellor Innovation Fellow and Director of Regenerative Science at Macquarie University where he leads a stem cell research group that collaborates on R&D projects with the Company. He is a regular presenter at conferences and in the media on regenerative medicine and stem cell technologies. Ben was previously a Director of the Proteomics Technology Centre of Expertise at the University of Technology, Sydney, co-founder of Proteome Systems and a key member of the team that set up Australia’s first proteomics facility, Australian

Proteome Analysis Facility at Macquarie University in 1995.

Dr Roger Aston is one of the most experienced and commercially astute people in drug commercialisation in Australia. Roger brings more than 20 years experience in the pharmaceutical and healthcare industries in senior roles in the United Kingdom, AsiaPacific and Australia. Roger has held executive, non-executive Director or chairman positions on a number of boards including Peptech Limited (Arana), Cambridge Antibody Technology Limited, Clinuvel Limited, Halcygen Limited, Cambridge Drug Discovery, and psivida Limited. He started his career at major pharmaceutical company Wellcome (now Glaxo Smith Kline) and has also worked for QinetiQ Limited. Roger also served on the federal government’s IRD board sub-committee for biologicals. Roger was formerly CEO of Mayne Pharma Group Limited and currently is a Director and CEO of Pitney Pharmaceuticals Pty Ltd, Chairman of BioLife Limited, Chairman of Immuron Limited, Director of IDT Limited, Chairman of Cynata Limited and Chairman elect of NeuroDiscovery Limited.

Barry Sechos is a non-executive Director who has served as an alternate Director since 2011 and became a full Director in June 2012. He has over 25 years experience as a director, business executive and corporate lawyer. Barry is a Director of the Sherman Group (a strategic investor in the Company), a privately owned investment company. Barry is also a Director of See-Saw Films a film production and finance group and winner of the 2011 Academy Award for Best Picture, Transmission Films a film distribution company, Direct Cash Payments Inc. an ATM deployment company listed on the Toronto Stock Exchange and Sherman Contemporary Art Foundation a charitable cultural organization. He previously held various positions with the Aberdeen Asset Management / EquitiLink Funds Management Group including Director of Aberdeen Asset Management, General Counsel and Compliance Officer to EquitiLink Group and EquitiLink International Management. Barry commenced his professional career as a commercial lawyer at Allen Allen & Hemsley in Sydney, Singapore and London.

Director Disclosure

No Director of the Company has been the subject of any disciplinary action, criminal conviction, personal bankruptcy or disqualification in Australia or elsewhere in the last ten years which is relevant or material to the performance of their duties as a Director of the Company or which is relevant to an investor’s decision as to whether to subscribe for Shares under the Offer.

Regeneus Ltd Prospectus

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4.2 Senior Management

The company has a highly experienced senior management team, some of whom have been involved with the business since inception:

John Martin – Executive Chairman (Please see details of John’s experience above)

Prof Graham Vesey – CEO (Please see details of Prof Vesey’s experience above)

Murray McInnes is Chief Financial Officer and responsible for all of the financial aspects of the group including budgeting, financial and strategic analysis, reporting and monitoring financial performance. Murray has over 25 years of financial management experience. He began his career in the finance industry before establishing his own consultancy in Australia. Murray has focused his business on SME start up, high growth companies across a diverse range of industries including pharmaceuticals, wine, legal, software, tourism, FMG, retail and franchising and manufacturing. Murray’s more recent engagements have included CFO of Smarts Group Pty - sold to NASDAQ in 2011, advisor to Endeavour Shipbrokers (Australia’s largest privately owned brokerage) on its sale to the UK listed ACM and CFO of Centaman Systems Pty Ltd - sold to Jonas Software, Canada.

Steven Barbera is the Commercial Development Director at Regeneus, responsible for the business and service offering of HiQCell in Australia. In this capacity he brings perspective in integrating the scientific knowledge of the Company within the commercial healthcare environment. Steven has extensive general management and Board Director experience in consumer product and service related national and global businesses, at various stages of their development from start-ups through to sophisticated multi-category offerings, notably in the beverages and apparel industries. He has completed studies in Business and Marketing and holds an MBA from Simon Business School at University of Rochester (USA).

Dr Richard Lilischkis is Clinical Development Director - Human Health where he is responsible for the clinical development of the Company’s point-of-care cell therapy (HiQCell) and new indications. Richard is also responsible for the international expansion of the Company’s human treatments. He is a former Associate Professor of cell biology in Germany and biotechnology entrepreneur with a track record of bringing new biological products to market. After founding and profitably running Multiblock GmbH, a German-based pathology diagnostics company, he moved to Australia and joined Prof Graham Vesey at BTF. Richard built BTF’s European business from scratch, generating trust in and reputation of BTF’s products amongst many major

multinational pharmaceutical companies, resulting in substantial sales growth in Europe and internationally.

Duncan Thomson is the Head of the Veterinary Health business unit where he is responsible for the development and commercialisation of the Company’s point-of-care (AdiCell) and off-the-shelf (CryoShot) cell therapy products. He is a trained veterinarian with extensive practical experience in Australia and the UK. Upon completion of his MBA he worked for Novartis Animal Health in Switzerland, the US and Australia in senior strategic marketing and sales roles. Duncan has in previous roles, built sales and marketing teams in the US and Australia and achieved strong sales growth for a variety of newly launched and established vet products.

Dr Charlotte Morgan is Head of Laboratory, R&D. Charlotte is responsible for the research and development of new products, in conjunction with CryoShot production within the laboratory of the Company. Charlotte has extensive experience as a research scientist and the management of research teams to develop IP and convert conceptual products through to finished products for global distribution. After working with Thames Water’s research laboratory in the UK, Charlotte moved to Australia and joined Prof Graham Vesey at BTF where Charlotte led the R&D team that developed the highly successful BioBall product range.

Sandra McIntosh is the Office/HR Manager and the Company Secretary. Sandra has been with the company since 2009. Sandra has 20 years management experience in HR, Customer Service and Finance. Sandra previously worked with Prof Graham Vesey at BTF. Sandra is currently studying a Graduate Diploma of Applied Corporate Governance with Chartered Secretaries Australia.

4.3 Employees

Regeneus currently employs 32 FTE employees.

4.4 Director’s Interests and Remuneration

CEO and Executive Chairman

Regeneus has entered into employment contracts with each of Prof Graham Vesey and John Martin to govern their employment with Regeneus. Prof Vesey is employed in the position of CEO of Regeneus and John Martin is employed in the position of Executive Chairman. Refer to Section 4.5 for further details.

Non-Executive Director Remuneration

Under the Constitution, each Director may be paid remuneration for ordinary services performed as a Director. This remuneration may be divided among

Regeneus Ltd Prospectus

4. Board, Management and Corporate Governance

Directors in such fashion as the Board may determine. The current maximum aggregate remuneration that may be paid to non-Executive Directors is $450,000 per annum. This amount may be increased by approval of the shareholders of the Company in general meeting.

Annual Directors’ fees currently agreed to be paid by Regeneus to non-Executive Directors in FY 2014 are as follows:

Table 8: Annual Non-Executive Directors Fees

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Director Director’s Fees
Assoc. Prof. Ben Herbert $40,000
Barry Sechos $45,000
Dr. Roger Aston $45,000
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Directors may receive additional fees for service on board committees. Such fees are included in the amounts above.

The Directors may also be paid all travelling and other expenses properly incurred by them in attending meetings of the Directors or any committee of Directors or general meetings of the Company or otherwise in connection with their execution of their duties as Directors.

In addition, any Director who is called upon to perform extra services or make special excursions or to undertake any executive or other work for the Company beyond his or her ordinary duties may, subject to law, be remunerated either by a fixed sum or a salary as determined by the Directors. This sum may be either in addition to, or in substitution for his or her share in the remuneration for ordinary services.

Indemnity Insurance and Access

Regeneus has executed a Deed of Indemnity, Access and Insurance with each Director. In summary each Deed provides:

(a)an ongoing indemnity, to the Director against liability incurred by a Director as an officer of the Company unless the liability arises out of lack of good faith;
(b)that the Company will maintain an insurance policy (to the extent permitted by law) for the benefit of the Director which insures the Director against liability for acts or omissions of the Director in the Director’s capacity (or former capacity) as a Director of the Company and for a period of seven years thereafter;
(c) the Director with a limited right of access to Board papers relating to the period during which the Director holds office as a Director of the Company and for a period of seven years thereafter to enable the Director to discharge the Director’s duties or in

connection with any claim arising in that period.

4.5 Executive remuneration

CEO – Prof Graham Vesey

Prof Graham is a founding shareholder, CEO and director of Regeneus. Prof Vesey’s employment contract with Regeneus provides for a fixed base salary of $290,000 per annum and superannuation contributions of 9% (or as otherwise required by law) of his base salary. Prof Vesey’s remuneration package is reviewed annually as part of the annual performance review. Prof Vesey is also eligible for an annual discretionary short-term incentive up to 50% of his base salary which is determined having regard to Prof Vesey’s performance objectives and milestones established annually. Pursuant to the employment contract, Regeneus has agreed to issue options to Prof Vesey as follows:

Table 9: Options to Professor Graham Vesey

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Number of Options over
Exercise price Term
ordinary shares
2,142,855 $0.25 5 years
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The Options will be issued after the formation of the new employee incentive plan. In addition, Prof Vesey is also entitled to further participate in any Regeneus employee incentive share plan, refer to Section 10.6.

Prof Vesey may terminate his employment with Regeneus on 3 months’ written notice. Regeneus may terminate Prof Vesey’s employment on three months’ notice for any reason, and may summarily terminate Prof Vesey’s employment for misconduct. Upon termination, if Prof Vesey is a director or officer of Regeneus or a subsidiary, he must resign that office upon request. Prof Vesey is subject to a 12 month restraint post termination of his employment with Regeneus, in any geographical area where Regeneus has operations (or alternatively in New South Wales).

Executive Chairman – John Martin

Having served as non-executive Chairman of Regeneus since 2010, on 1 September 2012 John Martin was employed as Executive Chairman (reporting to the Board) with a fixed base salary of $290,000 per annum and superannuation contributions of 9% (or as otherwise required by law) of his base salary. Mr Martin’s remuneration package is reviewed annually as part of the annual performance review. Mr Martin is also eligible for an annual discretionary short-term incentive up to 50% of his base salary which is determined having regard to Mr Martin’s performance objectives and milestones established annually. Pursuant to the employment contract, Regeneus has agreed to issue

Regeneus Ltd Prospectus

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options to John Martin as follows:

Table 10: Options to John Martin

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Number of Options over
Exercise price Term
ordinary shares
2,142,855 $0.25 5 years
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The Options will be issued after the formation of the new employee incentive plan. In addition, Mr Martin is entitled to further participate in any employee incentive share plan, refer to Section 10.6. Mr Martin may terminate his employment with Regeneus on 3 months’ written notice. Regeneus may terminate Mr Martin’s employment on three months’ notice for any reason, and may summarily terminate Mr Martin’s employment for misconduct. Upon termination, if Mr Martin is a Director or officer of Regeneus or a subsidiary, he must resign that office upon request. Mr Martin is subject to a 12 month restraint post termination of his employment with Regeneus, in any geographical area where Regeneus has operations (or alternatively in New South Wales).

4.6 Directors’ Shareholdings

Directors are not required under the Constitution to hold any Shares.

The Director’s relevant interests (direct and indirect) in Shares and other securities in Regeneus as at the date of this Prospectus are set out in the following tables:

Table 11: Director’s relevant interests as at date of Prospectus

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Name Shares Options
Prof. Graham Vesey 13,586,408 3,251,799
John Martin 3,095,802 6,466,345
Assoc. Prof. Ben Herbert 8,689,412 -
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The Directors’ relevant interests (direct or indirect) in Shares and other securities in Regeneus as at Listing are set out in the following table:

Table 12: Director’s relevant interests as at Listing

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Name Shares Options
Prof. Graham Vesey 14,695,352 2,142,855
John Martin 6,869,292 2,692,855
Assoc. Prof. Ben Herbert 8,689,412 -
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On Listing, Hestian Pty Ltd will hold 7,444,331 Shares. Barry Sechos is a Director of Hestian Pty Ltd but does not have a relevant interest in the Shares held by Hestian

Pty Ltd. Hestian Pty Ltd is a private investment vehicle owned and controlled by Brian Sherman AM

**Includes Options to be issued to John Martin and Prof Graham Vesey under executive agreements as set out in Section 4.5 and Options to be issued to Wild Rose Pty Ltd under Channel IPO Agreement as set out in Section 10.7.

The Directors may apply for New Shares pursuant to the Offer, Final Directors’ Security Holdings will be notified to the ASX on Listing.

4.7 Corporate Governance

Board of Directors

Regeneus currently has 5 Directors serving on the Board, as follows:

John Martin: Executive Chairman
Professor Graham Vesey: CEO
Associate Professor Ben Herbert: Non-Executive Director (Not Independent)
Dr Roger Aston: Non-Executive Director (Independent)
Barry Sechos: Non-Executive Director (Independent)

The Board is responsible for the overall corporate governance of the Company. Issues of substance affecting the Company are considered by the full Board, with advice from board committees, senior management and other external advisors as required. Each Director must bring an independent view and judgement to the Board and must promptly declare all conflicts of interest. Directors may not participate in discussions or resolutions pertaining to any matter in which the Director has a material personal interest unless the non-conflicted directors have separately agreed to their participation.

The Board’s role in risk oversight includes receiving regular reports from senior management and the Audit and Risk Committee about material risks faced by the Company and applicable mitigation strategies and activities. The reports detail the effectiveness of the risk management program and identify and address material risks such as strategic, business, operational, financial, human resources, product safety and efficacy and legal/regulatory risks.

The responsibilities of the Board are set down in the Company’s Board Charter, which has been prepared having regard to the ASX Corporate Governance Principles. A copy of the Company’s Board Charter is available on the Company’s website at www.regeneus. com.au. Regeneus will also send you a free copy of its Board Charter should you request a copy during the Offer Period.

Regeneus Ltd Prospectus

4. Board, Management and Corporate Governance

Board Committees

The Board has established two standing committees to assist the Board in fulfilling its responsibilities.

Audit and Risk Committee
Remuneration and Nominations Committee

Each of these committees has the responsibilities described in the committee charters (which have been prepared having regard to the ASX Corporate Governance Principles) adopted by the Company. A copy of the charter for each of the above committees is available on the Company’s website at www. regeneus.com.au. Regeneus will also send you a free copy of these charters if you request a copy during the Offer Period.

The Board may also establish other committees from time to time to assist in the discharge of its responsibilities.

Corporate Governance Principles

Regeneus has also adopted various policies, taking into account the recommendations in the ASX Corporate Governance Principles. These policies are on the Company’s website at www.regeneus.com.au:

Code of Business Conduct – This policy sets out the standards of ethical behaviour that the Company expects from its Directors, officers and employees;
Continuous Disclosure Policy – Once listed on ASX, the Company will need to comply with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act to ensure the Company discloses to ASX any information concerning the Company which is not generally available and which a reasonable person would expect to have a material effect on the price or value of the Shares. This policy describes reporting lines and decision-making processes which are designed to ensure that the Company complies with its continuous disclosure obligations;
Risk Management Policy – This policy is designed to assist the Company to identify, assess, monitor and manage risks affecting the Company’s business;
Share Trading Policy – This policy restricts employees and Directors in dealing with the Company’s shares at times when the market may not be fully informed as to the Company’s progress, and explains how insider trading laws affect their dealings in the Company’s Shares;
Shareholder Communications Policy – This policy describes how the Company will ensure effective communication with its Shareholders; and
Diversity Policy – This policy sets out the Company’s commitment to promoting diversity amongst its employees.

Regeneus will also send you a free copy of any of these policies if you request a copy during the Offer Period.

ASX Corporate Governance Principles

The Board has evaluated the Company’s current corporate governance policies and practices in light of the ASX Corporate Governance Principles. Here is a brief summary of the Company’s approach:

Principle 1 — Lay solid foundations for management and oversight

The Board’s responsibilities are defined in the Board Charter. Following the appointment of John Martin as Executive Chairman in September 2012, the Company has also established a clear delineation between the Chairman’s responsibility for the Company’s strategy and stakeholder management and the day-to-day management of operations conferred upon the Chief Executive Officer and other officers of the Company. The Remuneration and Nominations Committee evaluates the performance of senior executives.

Principle 2 — Structure the Board to add value

A majority of the Company’s Board are not independent Directors. The roles of Chairman and Chief Executive Officer are exercised by two separate individuals.

The Board considers the Company is not of a size, nor are its affairs of such complexity to justify the expense of a majority of independent non-executive directors.

Regeneus’ Chairman is an executive chairman, and therefore not an independent Director as recommended by Principle 2. The Board has decided that in view of the small executive team and Mr Martin’s history in working with the founders in building the business, there is value in having Mr Martin operate in an executive capacity so as to spend more time on the Company’s strategy and stakeholder management. As recommended by the ASX Corporate Governance Principles Dr. Roger Aston has been appointed as lead independent director.

The ASX Corporate Governance Principles recognise that it may not be efficient for a smaller board to have a separate nominations committee. Accordingly, the Board has decided to combine the functions of Remuneration and Nominations.

As the Company is still in an early stage of development, it has not yet undertaken a formal review of the Board’s performance. However, the Board has adopted a policy for an annual self-assessment of the Board’s and each Board Committee’s performance. The Board envisages that the first review will take place late in the current financial year.

Regeneus Ltd Prospectus

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Principle 3 — Promote ethical and responsible decisionmaking

Regeneus has adopted a Code of Conduct, as well as a Share Trading Policy and a Diversity Policy.

Principle 4 — Safeguard integrity in financial reporting

Regeneus has established an Audit and Risk Committee to oversee the management of financial and internal risks. Although the ASX Principles recommend that the audit committee be composed entirely of non-executive directors, the Board has included the Executive Chairman as a member of the audit committee due to his relevant expertise. The committee is chaired by an independent director, Mr Sechos.

Principle 7 — Recognise and manage risk

The Company has adopted a Risk Management Policy, which is designed to assist the Company to identify, evaluate and mitigate financial, economic, operational, product safety and efficacy and other risks. In addition, the Board has designated the Audit and Risk Committee to provide focused support in the area of risk management.

Principle 8 — Remunerate fairly and responsibly

Regeneus has established a Remuneration and Nominations committee chaired by an independent Director, Dr Aston, and with a majority of members being independent directors. Regeneus will provide disclosure of its Directors’ and executives’ remuneration in the Remuneration Report in its annual report.

Principle 5 — Make timely and balanced disclosure

Regeneus is committed to providing timely and balanced disclosure to the market in accordance with its Continuous Disclosure Policy.

Principle 6 — Respect the rights of Shareholders

Regeneus has adopted a Shareholder Communications Policy for Shareholders wishing to communicate with the Board. Regeneus uses a variety of channels, including email updates, to ensure that its communication with Shareholders is frequent, clear and accessible.

All Shareholders are encouraged to attend the Company’s annual general meeting, in order to discuss and receive reports on issues relevant to the Company and ask questions of the Board and the Company’s auditors.

Regeneus Ltd Prospectus

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05

Risk Factors

Regeneus Ltd Prospectus

5. Risk Factors

This Section identifies some of the major risks associated with an investment in Regeneus. Investors should read this Prospectus in its entirety and consider the risks described in this Section.

5.1 Nature of Investment

Any potential investor should be aware that subscribing for Shares involves various risks. Participating in the Offer should be considered speculative. The Shares to be issued under the Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or future share price of the Company.

5.2 Company Specific Risks

In addition to the general risks noted in Section 5.3 of this Prospectus, investors should be aware of the specific risks of an investment in the Company. These specific risks, include, but are not limited to, those risks referred to below.

Market Adoption & Ongoing Acceptance

Regeneus’ commercialisation strategy relies on medical specialists, medical facilities and patients accepting the Company’s products for routine use. Medical specialists are historically slow to adopt new technologies, regardless of perceived merits, when older technologies continue to be supported by established providers. Overcoming such inertia often requires significant marketing expenditure or definitive product performance and/or pricing superiority. Market acceptance of a new technology such as Regeneus’ can be difficult to obtain and may involve timeconsuming clinical studies to provide further evidence of the medical benefits of the Company’s products in order to overcome any inertia.

The regenerative medicine industry, and in particular stem cell based therapy remains in its infancy. As the industry matures and market participants compete for market share, there may be negative news flow or controversies in relation to the use of stem cells that may impact the market acceptance of Regeneus’ products and services.

Product Liability

The testing, marketing and sale of Regeneus’ products whether directly or through its licencees involves a risk of product liability claims being brought against the Company. Regeneus seeks to limit its liability for such claims in its agreements with licencees and customers and is also entitled to be indemnified by its licencees in various circumstances. However, limitations of liability are not necessarily effective at law and indemnification may not always be available. Regeneus intends to maintain product liability insurance in respect of its products, however, if the Company is unable to obtain sufficient product liability insurance at an acceptable cost this could prevent or inhibit the commercialisation of products the Company develops.

Regulatory Environment

The regulatory framework in Australia and overseas territories in which Regeneus operates or intends to commercialise its HiQCell product may change and may mean that the Company’s products will require registration by the TGA and/or with other regulators to continue to commercialise the product. Also, for all new overseas jurisdictions and territories that the Company seeks to commercialise its products and services, the regulatory framework may differ from location to location which will require a tailored approach for each location and a delay in commercialisation.

Regeneus is in the process of establishing the registration pathway for its off the shelf product, CryoShot with various key regulatory bodies including APVMA (Australia), EMEA (Europe) and FDA (USA). There is currently no cell based product that has gone through registration in the veterinary market. As there is no established precedent for a product of this type, the process of registration may take longer than anticipated and may delay full commercialisation of CryoShot.

Future Product Development

There are many risks inherent in the development and use of new cell based products for the human and veterinary markets and they may fail during clinical trials or may fail to gain regulatory approval if required. Regeneus cannot guarantee that the development work being undertaken will result in the development of any products, or even if they do, that the products will be marketed or commercially successful.

The time required to develop and obtain regulatory approval for marketable products can be uncertain and in some cases very long and is subject to inherent risks.

Regeneus Ltd Prospectus

5. Risk Factors

Clinical Validation

A core component of the Company’s strategy is the commercialisation and registration of its products (where registration is required). For the registration process, a successful clinical trial will be necessary for the Company to obtain regulatory approval for its products. Such trials can be expensive, time consuming, may be delayed or may fail. This may delay the market adoption rate.

While the HiQCell product does not require registration by the TGA, any negative clinical trial results could have a negative commercial impact on the speed of commercialisation of the treatment.

Reputation Damage

The reputation of Regeneus and its individual brands is important in attracting medical specialists, medical facilities and patients and key employees. Reputational damage could arise due to a number of circumstances, including:

(1) inadequate services or unsatisfactory clinical outcomes for patients:
(2) error, malpractice or negligence of Regeneus’ employees; or
(3) error, malpractice or negligence of the licenced medical specialists performing the treatments.

Negative publicity could adversely impact Regeneus’ reputation which may potentially result in a fall in the number of patients seeking Regeneus’ products.

Technological Development and Competition

Regeneus’ future success will depend on the Company’s ability to market or licence its intellectual property rights and products successfully and develop products and methods that are competitive in the markets where it operates. Regeneus’ current and potential future competitors include companies that have significantly greater resources than the Company. There is no assurance that our competitors will not succeed in developing alternative products that are more effective, easier to use, or more economical than those which has been developed or will be developed by Regeneus.

Intellectual Property

One of the Company’s assets is its IP rights that support the HiQCell and CryoShot technology and other future products. The commercial value of the IP is dependent on legal protections provided by a combination of patent, registered trade-marks, copyright, confidentiality, trade secrecy laws, and other IP rights. These legal mechanisms, however, do not guarantee that the IP will be protected or that the Company’s

competitive position will be maintained.

The grant of IP rights does not inevitably follow after making an application for such rights. Examination of patents, for example, may be expensive and time-consuming and with no guarantee that patent rights will be secured. One of the Company’s patent applications is currently under opposition in Australia. That opposition is further described in Sections 3.5 and 9. The scope of patent claims may vary as amendments are filed during examination if required to overcome objections raised by an examiner. The grant of patent rights does not guarantee that such rights are valid. The grant of patent rights does not guarantee the non-infringement of another party’s patent rights. Examination in one country is not binding on another country. Patent applications lodged in each country are generally subject to an independent search and examination by local patent officers.

The publication of an invention will take place approximately 18 months after filing the earliest patent application for the invention. By that publication other parties will be potentially made aware of the invention, including the details of processes necessary to implement the invention, and if patent rights are not successfully secured, other parties may be free to practice this invention, informed of the details for doing so by virtue of the patent application.

No assurance can be given that others will not challenge the Company’s IP rights in the technology. Regeneus will make assessments on the patent protection strategies in different countries to determine whether patent protection is required and if it is available. Patent protection may not be sought in all countries either because such protection might not be commercially practical or may be unavailable or limited in certain countries.

Litigation may be necessary, where commercially feasible, from time to time to enforce the Company’s rights in the technology. Such litigation can be costly and could have adverse effects on the Company’s activities, business, operating results and financial position. Likewise, a failure to succeed in protecting any such rights may equally have a materially adverse effect on the Company’s activities, business, operating results and financial position.

Although the Company has itself conducted patent searches on publicly available databases, there are limitations on searching. Searches are dependent on the accuracy and effectiveness of the searching method used and the accuracy and scope of the records held.

Even if the accuracy of the records is guaranteed, any search strategy involves a compromise between scope

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and costs. For this reason, the Company’s searches were restricted to reveal the most relevant disclosures. Another limitation is that in most major jurisdictions, patent applications are not published until 18 months from the earliest priority date. This means that for any given search, it is generally not possible to detect patent applications filed within the previous 18 months. No search can ever be entirely inclusive or exhaustive because some forms of disclosure such as prior public use, oral disclosure, prior commercial exploitation or prior publication in non patent literature cannot be searched systematically.

It is possible that third parties may assert IP infringement, unfair competition or like claims against the Company under patent, trade secret or other laws. While the Company is not aware of any claims of this nature, in relation to its intellectual property rights, such claims if made may harm directly and indirectly the Company’s business. If the Company is forced to defend claims of intellectual property infringement whether they are with or without merit or are determined in the Company’s favour, the costs of such litigation will potentially be significant and will divert management’s attention from normal commercial operations. Such disputes may require the Company to develop non-infringing technology or enter into royalty or licensing agreements. Such agreements, if necessary, may be unavailable on terms acceptable to the Company, if at all.

The patent positions of biotechnology companies can be highly uncertain and involve complex legal and factual questions.

Manufacturing and Product Quality

Regeneus’ CryoShot product has not yet been produced on a large scale. If the Company is unable to manufacture products in sufficient quantities or at an appropriate cost level, it may not be able to meet demand for its product which may adversely impact clinical trial and commercial sales of the product. CryoShot is also currently sold under pre-registration and must meet regulatory requirements in order for it to be registered. Failure by the company to meet regulatory requirements could result in restrictions or halting of sales, delays in approval or registration and other enforcement action.

The HiQCell manufacturing process involves the extraction of adipose tissue from a patient in a medical facility theatre setting, preparation of the HiQCell cell suspension from the adipose tissue in an on-site laboratory, and re-injection of the cells into the same patient to treat their condition. All steps of the process are conducted under the medical supervision of the patients Medical Practioner by adherence to a comprehensive protocol performed by trained staff at

the Medical Facility and Regeneus technicians who perform the cell processing.

A comprehensive range of steps are performed to mitigate risk including patient pre-treatment microbiological screening, pre and post cell processing screening, theatre and laboratory procedure protocols, adverse event reporting, Regeneus technician competency testing, and laboratory set up and equipment maintenance standards.

As with any in-situ medical procedure there remains some inherent risks such as infection or protocol deviation that may adversely impact the patient experience and treatment outcome. An inability for Regeneus to maintain a high level of quality and safety in the procedure will potentially limit the ongoing patient uptake of HiQCell.

Health Care Insurers and Reimbursement

In both domestic and foreign markets, treatment volumes are likely to be influenced by the availability and amounts of reimbursements of patients’ medical expenses by third party payer organisations including government agencies, private health care insurers and other health care payers. There is no assurance that reimbursements for any products or services developed and commercialised by Regeneus will be available to patients at all or without substantial delay. Even if such reimbursement is provided, the approved reimbursement amounts may not be sufficient to enable the Company to sell products developed on a profitable basis.

Contractual Arrangements

Regeneus associated medical specialists and veterinarians, independent contractors, customers and suppliers. All contracts including those entered into by the Company carry a risk that the respective parties will not adequately or fully comply with their respective contractual rights and obligations or that these contractual relationships may be terminated.

Regeneus’ contracts with key suppliers are generally standard in nature, in the form of purchase order arrangements that are common in the industry. As the Company moves to expand its commercialisation of the HiQCell product, it will increasingly rely on its key suppliers for quality processing materials required in the HiQCell product. A disruption at one of its key suppliers could cause a substantial delay in availability of the HiQCell product, leading to a delay in commercialising the business and a potential loss of sales.

Regeneus Ltd Prospectus

5. Risk Factors

Limited Operating History

An investment in Regeneus should be evaluated in light of the risks and difficulties often encountered by emerging companies and particularly by such companies in rapidly evolving and technologically advanced biotech fields. As there is limited operating history, there is low visibility and predictability of demand for products and services offered by Regeneus within Australian and in its expansion into other countries.

Key Personnel

Regeneus currently employs or engages as consultants, a number of key members of its management and scientific team. The loss of any of these people’s services could materially and adversely affect the Company and may impede the achievements of its research, product development and commercialisation objectives.

The successful development of the Company will require the services of additional scientific, sales and managerial staff. There can be no assurance that the Company will be able to attract and retain the services of such people, particularly given the competitive and specialised nature of the industry in which the Company operates and this may adversely affect the Company’s prospects for success.

Release from Escrow

Certain shareholders of the Company will be subject to escrow requirements which are designed to protect the integrity of the market and allow the Company to develop a track record. This means that certain Shareholders, namely promoters, founders and associated shareholders will not be able to deal with escrowed Shares for a period of up to 24 months. At the end of the escrow period, these Shares will be released from escrow at the same time which may impact the Share price of the Company if they are traded at that time.

Sufficiency of Funding

Regeneus has limited financial resources and may need to raise additional funds from time to time. In certain circumstances, the Company’s ability to successfully operate will be subject to its ability to raise funds which will be subject to factors beyond the control of the Company and its Directors including cyclical factors affecting the economy and financial and share markets generally.

Speculative Nature of Investment

Any potential investor should be aware that subscribing for Shares involves various risks. The Shares to be issued pursuant to the Offer carry no guarantees with respect to the payment of dividends, return of capital or market value. The success of the Company is dependent on Australian and European market adoptions and obtaining registration for its off-the-shelf product. An investment in the Company should therefore be considered speculative in nature.

No Independent Valuation

No independent valuation has been carried out on the Company or its products. The Directors do not believe that an independent valuation would be meaningful given the likely qualifications and limitations of such valuations and difficulties in determining the likely commercial success of the Company and its products.

5.3 General Risks

Stock Market Fluctuations

Stock market fluctuations in Australia and other stock markets around the world may negatively impact the Share price. Factors that may influence the investment climate in stocks (which may not relate to actual performance of Regeneus) include general economic outlook, movements in commodity prices, exchange rate movements, interest rates, inflation and political developments.

Liquidity and Realisation Risks

There can be no guarantee that an active market for the Shares will develop or that the price of the Shares will increase. There may be relatively few buyers or a relatively high number of sellers of Shares on the ASX at any given time. This may increase the volatility of the market price of Shares. It may also affect the prevailing market price at which the Shareholder is able to sell their Shares. This may result in Shareholders receiving a market price for their Shares that is less than the price paid for their Shares.

General Economic Conditions

Australian and world economic conditions may negatively impact Regeneus’ financial performance. A prolonged deterioration in economic conditions could be expected to have a material adverse impact on the Company.

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Accounting Standards

Changes in accounting standards or the interpretation of those accounting standards that occur after the date of this Prospectus may adversely impact the Company’s reported financial statements.

Absence of Dividends

The ability of the Company to pay any dividend in the future is dependent on many factors including the outcome of the Company’s commercialisation activities and clinical trials. Many of the factors that will affect the Company’s ability to pay dividends and the timing of those dividends will be outside the control of the Company and its Directors. The Directors cannot give any assurance regarding the payment of dividends in the future.

Other

Other risks include those normally found in conducting business, including litigation resulting from breach of agreements or in relation to employees or any other cause.

The above list of risk factors should not be taken as exhaustive of the risks faced by Regeneus or by investors in Regeneus. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of Regeneus and the value of the shares. Therefore, the shares issued pursuant to the Prospectus carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those shares.

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06

Financial Information

Regeneus Ltd Prospectus

6. Financial Information

6.1 Introduction

This financial information section summaries the Company’s selected consolidated financial data derived from the audited consolidated financial statements for the years ended 30 June 2011, 30 June 2012 and the reviewed consolidated financial statements for the six months ended 31 December 2012 in addition to a pro forma statement of financial position as at 31 December 2012.

The financial information has been prepared in Australian Dollars and in accordance with Australian Accounting Standards (including Australian Accounting Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

This section contains the following financial information:

the Historical Consolidated Statement of Comprehensive Income for the financial years ended 30 June 2011, 30 June 2012 and the six months ended 31 December 2012;
the Historical Consolidated Statement of Cash Flows for the financial years ended 30 June 2011, 30 June 2012 and the six months ended 31 December 2012; and
the Historical and Pro forma Consolidated Statement of Financial Position as at 31 December 2012; which assumes completion of the transactions set out in Section 6.7 as at that date, including the Offer under this Prospectus.

The Historical and Pro forma Financial Information have been reviewed by Grant Thornton Corporate Finance Pty Ltd, whose Investigating Accountant’s Report is contained in Section 8.

The information set out in this Section and the Company’s selected consolidated financial information should be read together with:

Management’s discussion & analysis set out in Section 6.3 to 6.5;
the risk factors described in Section 5;
the use of funds described in Section 6.9;
the Investigating Accountant’s Report on the Historical and Pro forma Financial Information set out in Section 8; and

6.2 Audited and reviewed financial statements

Regeneus’ audited consolidated financial statements for the years ended 30 June 2011 and 30 June 2012 and the reviewed consolidated financial statements for the 6 months ended 31 December 2012 were audited and reviewed by Grant Thornton Audit Pty Limited, respectively, and unqualified opinions issued.

6.3 Management’s discussion & analysis of the historical financial information

Products and the current commercialisation stage

Regeneus has launched commercially an autologous cell therapy product prepared at point-of-care for the treatment of human musculoskeletal conditions, called HiQCell and two products for the treatment of canine and equine musculoskeletal conditions, called AdiCell and CryoShot.

The proprietary AdiCell point-of-care treatment was introduced to the animal health market in 2008 for canine orthopaedic conditions and has been used by veterinarians to treat animals with successful treatment outcomes. AdiCell was extended in 2010 to treat equine conditions.

The human health equivalent, HiQCell, was introduced in October 2011 through Sydney Sportsmed Specialists and has since been used commercially to treat over 300 patients to date.

In early 2012, the Company launched its first off-theshelf stem cell therapy product for the animal health market called CryoShot which is an allogeneic (derived from different individual of same species) cell-based product that has been designed to combine the efficacy of AdiCell, with the convenience of an off-theshelf product.

Key components of Regeneus’ Historical Financial Information

Regeneus is still in the early stages of commercialisation and consequently, its operating results predominantly consist of revenue related to the licence fees and treatments, research, clinical and development costs, selling expenses and general and administrative costs.

the other information contained in this Prospectus.

In addition, investors should be aware that past performance is not an indication of future performance.

Regeneus Ltd Prospectus

6. Financial Information

6.4 Historical consolidated statement of comprehensive income

Table 13: The historical statement of comprehensive income has been extracted from the audited consolidated financial statements of Regeneus for the years ended 30 June 2011 and 30 June 2012 and the reviewed consolidated financial statements for the six months ended 31 December 2012

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FY2011Audited FY2012 Audited 1HFY13 Reviewed
$’000 $’000 $’000
Revenue 786 1,186 870
Gross profit 598 941 617
Other income 4 87 63
Overheads
Research and development expenses (1,772) (3,154) (1,770)
Occupancy expenses (118) (347) (238)
Selling expenses (286) (1,016) (1,104)
Corporate expenses (1,074) (1,408) (983)
Operating loss (2,648) (4,897) (3,415)
Depreciation and amortisation (42) (113) (87)
Net finance costs 27 72 (101)
Loss before tax (2,663) (4,938) (3,603)
Income tax benefit 939 1,679 -
Loss after tax (1,724) (3,259) (3,603)
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Revenue

Regeneus generates its revenue from the following sources:

Human Health: licence and service fees in relation to each HiQCell treatment performed from the medical specialist who performs the treatment;
Animal Health: sales of products (CryoShot and AdiCell kits); and
Licence fees: relating to technology access arrangements with research and development partners.

Human Health Revenue

In October 2011, the HiQCell product to treat human musculoskeletal conditions was introduced commercially through Sydney-based medical specialist, Sydney Sportsmed Specialists. There has been a steady growth in the number of treatments with over 300 patients treated in two clinics in Sydney and nine medical specialists licenced to perform the HiQCell treatment. Regeneus receives a licence fee from the specialist for each treatment and a separate cell processing fee.
During the six months ended 31 December 2012, Regeneus continued to generate revenue from HiQCell treatments and also introduced HiQCell, as an adjunct treatment for orthopaedic surgery in November 2012.
In April 2013, the Company introduced through its HiQCell medical specialist network an option for HiQCell patients to have regenerative cells cryogenically stored for future treatments. A separate fee will be charged for this service.
During the six months to 30 June 2013, HiQCell treatments have continued to trend upwards on a monthly basis.
Regeneus has also established a new HiQCell processing facility at John Flynn Hospital on the Gold Coast.

Animal Health Revenue

In March 2012, the Company launched a preregistration trial of CryoShot, an off- the-shelf cell product to treat musculoskeletal conditions in dogs and horses. The product is distributed under APVMA permit 7250. The uptake by veterinarians

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has been very positive with many specialists and key opinion leaders across Australia joining the trial. As an off-the-shelf product, CryoShot is cost-effective, convenient and expected to be similar in efficacy to AdiCell, the Company’s point-of-care animal cell therapy product. Regeneus expects CryoShot to be the focus of the veterinary business going forward and will conduct the necessary efficacy trials to seek registration of this product in national and international veterinary markets.

Due to the introduction of CryoShot, revenue from the sale of AdiCell treatment kits decreased during FY2012. Regeneus anticipates that AdiCell will continue to serve a niche market for point-of-care therapy to treat multiple joints.
CryoShot sales have continued to increase month on month to 30 June 2013 due to re-orders from existing clinics.

Technology Licence Fee Revenue

The technology licence fees reflect payments under the R&D agreements with Quirindi Veterinary Clinic and Illawarra Equine Centre which commenced on 1 January 2012.
In January 2013, the Ku-Ring-Gai Veterinary Hospital licence fee agreement was terminated following a change of ownership of Ku-Ring-Gai Veterinary Hospital.

Gross margin

In FY2011, licence fees were the primary source of revenue which has now changed due to the commercialisation of HiQCell and CryoShot in FY2012 and the first half of FY2013 respectively.

Gross margin, excluding licence fees, increased from 76% in FY2011 to 79% in FY2012 due to the increase in the number of HiQCell treatments. It has decreased for the HY2013 to 70% due to additional direct staff costs and price promotions for CryoShot. Regeneus expects to maintain gross margins at the current level.

Research and development expenses

Regeneus’ research and development expenses arise from both internal and external costs. The internal costs primarily consist of employee salaries and related benefits, and laboratory supplies and equipment expenses. The external costs are consulting costs, various research contracts, clinical trials, prototype and development production costs related to product development.

Increases in R&D in FY2012 and the first half of FY2013 relate to the following expenses:

completion of the treatment phase and commencement of the data analysis phase of the clinical trial of HiQCell at Royal North Shore Hospital;
establishment of a HiQCell Joint Registry;
establishment of an R&D laboratory and cell production facility at the Company’s premises;
new hires of R&D and production scientists; and
two new Technology and R&D agreements with external partners.

All research and development costs are expensed as incurred. Regeneus anticipates that it will continue research and development activities expanding its portfolio of intellectual property.

Occupancy costs

Occupancy costs have increased in line with the expansion of the Company. In June 2011, the Company moved to new leased premises in Gordon, which provided office space and enabled a full research PC2 laboratory to be built.

Regeneus expects to relocate premises towards the end of 2013 following an agreement with its current landlord. This provides an opportunity to expand the laboratory and back office infrastructure.

Selling and marketing expenses

The main components of selling and marketing expenses are salaries for marketing employees and expenses incurred on marketing initiatives.

Regeneus anticipates that the selling and marketing expenses will increase in the future following the successful commercialisation of all products, resulting in an increased requirement for additional staff and increased marketing initiatives to achieve expanded commercial sales.

Corporate expenses

Corporate expenses, which include employee expenses, overheads, legal and patent costs have increased over the period due to the expanded business, patent applications and increased activities.

Regeneus expects these expenses will continue at similar levels in the short term, however, there will be a requirement to expand the corporate infrastructure, with additional personnel, new reporting systems, training and HR related costs to support the needs of being a public company and to increase the commercial sales of products.

Regeneus Ltd Prospectus

6. Financial Information

Income tax benefit

As Regeneus incurs significant research and development expenditure, the Company is able to access the Federal Government research and development tax incentive grants amounting to $0.9 million in FY2011 and $1.7 million in FY2012. Regeneus anticipates the FY2013 income tax benefit in relation to the R&D to be higher than FY2012.

6.5 Historical consolidated statement of cash flows

Table 14: The historical consolidated statement of cash flows has been extracted from the audited consolidated financial statements of Regeneus for the years ended 30 June 2011 and 30 June 2012 and the reviewed consolidated financial statements for the six months ended 31 December 2012

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FY2011Audited FY2012 Audited 1HFY13 Reviewed
$’000 $’000 $’000
Cash flows from operating activities
Loss after income tax (1,724) (3,259) (3,603)
Non cash flows in profit:
Depreciation and amortisation 42 113 87
Net profit/(loss) on write off of assets - 11 -
Equity settled share based transactions 754 645 214
Share capital issued but not paid at year end 1,027 5 -
R&D tax rebate receivable (939) (1,679) -
R&D tax rebate received 382 939 1,679
Change in operating assets (1,068) (138) (126)
Changes in operating liabilities 475 424 (210)
Net cash used in operating activities (1,051) (2,939) (1,959)
Cash flows from investing activities
Purchase of property, plant and equipment (237) (378) (153)
-
Purchase of intangibles (9) (44)
Net cash provided by (used in) investing activities (246) (422) (153)
Cash flows from financing activities
Proceeds from issuance of shares 1,857 2,300 -
Proceeds from the issue of convertible notes - - 3,935
Net cash provided by financing activities 1,857 2,300 3,935
Net (decrease)/increase in cash and cash equivalents 560 (1,061) 1,823
Cash and cash equivalents
Cash at the beginning of the financial period 1,029 1,589 528
Cash at the end of the financial period 1,589 528 2,351
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Cash flow from operating activities

Historically, cash flows from operating activities have been negative due to the significant Research & Development, selling and general and administrative expenses.

Cash flow from investing activities

Regeneus’ major investing activities have been related to the expenses incurred on the new laboratory equipment at Gordon.

Cash flow from financing activities

Finance activities include $2.3 million raised in FY2012 by an issuance of shares and $3.9 million raised in 1HFY2013 by issuing convertible notes.

At 31 December 2012, the Company had cash and cash equivalents of $2.4 million.

Since December 2012, an additional $1.3 million of convertible notes has been raised to provide working capital.

All convertible notes, and accrued interest will convert into shares, as part of completion of the capital raising set out in this prospectus.

Regeneus Ltd Prospectus

6. Financial Information

6.6 Historical and pro forma consolidated statement of financial position

The pro forma statement of financial position set out below has been prepared to illustrate the effects of the pro forma adjustments set out below and in Section 6.7, as if they had occurred on or before 31 December 2012.

Table 15: The historical consolidated statement of financial position has been extracted from the reviewed consolidated financial statements for the six months ended 31 December 2012.

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As at Minimum subscription Over subscription
31-Dec-12 As at 31 Dec 2012 As at 31 Dec 2012
Reviewed Adjustments Pro forma Adjustments Pro forma
Notes
$’000 $’000 $’000 $’000 $’000
Current assets
Cash and cash equivalents 1,4,5,6,7,9 2,351 9,958 12,309 11,824 14,175
Trade and other receivables 3,5,7 245 1,264 1,509 1,277 1,522
Inventories 192 - 192 - 192
Other assets 206 - 206 - 206
Total current assets 2,994 11,222 14,216 13,101 16,095
Non-current assets
Property, plant and equipment 589 - 589 - 589
Intangible assets 49 - 49 - 49
Total non-current assets 638 - 638 - 638
Total assets 3,632 11,222 14,854 13,101 16,733
Current liabilities
Trade and other payables 2 1,045 (111) 934 (111) 934
Employee entitlements 95 - 95 - 95
Total current liabilities 1,140 (111) 1,029 (111) 1,029
Non-current liabilities
Financial liabilities 1,2 3,935 (3,935) - (3,935) -
Total non-current liabilities 3,935 (3,935) - (3,935) -
Total liabilities 5,075 (4,046) 1,029 (4,046) 1,029
Net assets (1,443) 15,268 13,825 17,147 15,704
Equity
Share capital 2,3,4,5,6,7,8 6,652 16,454 23,106 18,326 24,978
Share option reserve 3,8 1,625 (889) 736 (889) 736
Accumulated losses 2,3,5,7,9 (9,720) (297) (10,017) (290) (10,010)
Total equity (1,443) 15,268 13,825 17,147 15,704
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The pro forma consolidated statement of financial position as at 31 December 2012 reflects the pro forma transactions, the application of the funds from the Offer less the costs associated with the Offer.

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6.7 Pro forma adjustments

The following transactions and events contemplated in this Prospectus, referred to as the Pro forma Adjustments, which are to take place on or before the completion of the Offer are presented as if they together with the Offer had occurred on or before 31 December 2012 and are set out below:

Subsequent event

Regeneus issued a further 2,108,334 convertible notes with a face value amounting to $1.3 million between 1 January 2013 and 12 July 2013 which will have the same terms as the convertible notes issued previously, refer to Section 10.4.

Conversion

The convertible notes with a face value of $5.2 million, plus accrued interest ($0.4 million) have been converted to fully paid ordinary Shares. Total Shares issued may vary depending on the actual date of Listing. See Section 10.4 for more detail. Previously capitalised interest has been recorded against trade and other payables ($0.11 million), and additional interest accrued has been recorded in accumulated losses ($0.3 million).

Employee options exercised

A number of employees have exercised their vested options (12,740,252) in exchange for fully paid ordinary shares. The exercise price paid was financed by a full recourse zero interest loan of $1.5 million from the Company, and is repayable within 4 years. This adjustment reflects the present value of the loan receivable from the options holders, as the loan is interest free, the discounted amount has been recorded against accumulated losses ($0.35 million). A transfer from reserves for forfeited options already vested, exercised options and the option reserve expense has also been adjusted, amounting to $0.9 million.

Pro forma transactions:

Minimum subscription,

The issue of 40,000,000 fully paid ordinary shares at $0.25 each, amounting to $10.0 million.
Cash expenses associated with the offer (including advisory, legal, accounting and administrative fees as well as printing, advertising and other expenses), are estimated to be $1.0 million (inclusive of GST). An amount of $0.6 million has been charged against issued capital and $0.3 million against accumulated losses. GST in respect of the offer costs has been recorded as a receivable.

Over subscription

Reflects the allowance for oversubscriptions of an additional 8,000,000 fully paid ordinary shares at $0.25 each, amounting to $2.0 million, resulting in a total amount raised of $12.0 million.
Cash expenses associated with the oversubscribed offer (including advisory, legal, accounting and administrative fees as well as printing, advertising, and other expenses), are estimated to be $1.2 million (inclusive of GST). An amount of $0.8 million has been charged against issued capital and $0.3 million against accumulated losses. GST in respect of the offer costs has been recorded as a receivable.

Channel options

The issue of 150,000 options which vest immediately to nominees of Channel Group Pty Ltd for IPO services performed, with a fair value of $24,000. The options have an exercise price of $0.25, and expire in 10 years, and are considered non cash offer costs. Refer to Section 10.7.

Directors fees

The payment of outstanding Directors fees previously recorded as a contingent liability amounting to $0.3 million. Refer to Section 10.7.

Lead manager shares

Fully paid ordinary shares are to be issued to the Lead Manager on the successful listing on the ASX, and have been calculated at 1.5% of the total amount raised and are considered non cash offer costs. Refer Section 10.4.

Recognition of a deferred tax asset

A deferred tax asset has not been recognised in relation to the capitalised Offer costs due to the uncertainty surrounding the economic benefits that will flow in future periods.

Regeneus Ltd Prospectus

6. Financial Information

6.8 Pro forma notes and summary of significant accounting policies

Pro forma Cash and Cash Equivalents

The pro forma cash and cash equivalents as at 31 December 2012 reflects the net proceeds of the convertible notes and offer, as well as the payment of Directors fees as set out below:

Table 16: Cash and cash equivalents

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Cash and cash equivalents at 31 December 2012 2,351 2,351
Subsequent event: Proceeds from the convertible notes 1 1,265 1,265
3,616 3,616
Pro forma transactions:
Proceeds from the shares issued under the offer 4,6 10,000 12,000
Payment of the offer costs 5,7 (1,042) (1,176)
Payment of Directors fees 9 (265) (265)
Pro forma cash and cash equivalents 12,309 14,175
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Pro forma Trade and Other Receivables

The pro forma trade and other receivables as at 31 December 2012 reflects the present value of the employee loans provided to exercise their options, and the GST portion of the offer costs:

Table 17: Trade and other receivables

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Trade and other receivables at 31 December 2012 245 245
Subsequent event: Loans to employees to exercise their options 3 1,169 1,169
1,414 1,414
Pro forma transaction:
GST receivable on the offer costs 5,7 95 108
Pro forma trade and other receivables 1,509 1,522
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Pro forma Trade and Other Payables

The pro forma trade and other payables as at 31 December 2012 reflects the capitalised interest expense on the convertible notes which will be converted to fully paid ordinary shares on IPO as set out below:

Table 18: Trade and other payables

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Trade and other payables at 31 December 2012 1,045 1,045
Subsequent event:
Conversion of the capitalised interest on the convertible notes
2 (111) (111)
converted to fully paid ordinary shares
Pro forma trade and other payables 934 934
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Pro forma Financial Liabilities

The pro forma financial liabilities as at 31 December 2012 reflects the issue of convertible notes and subsequent conversion to shares on IPO as set out below:

Table 19: Financial liabilities

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Financial liabilities at 31 December 2012 3,935 3,935
Subsequent events:
Additional convertible notes issued 1 1,265 1,265
Conversion of the convertible notes to fully paid ordinary shares 2 (5,200) (5,200)
Pro forma trade and other payables - -
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Regeneus Ltd Prospectus

6. Financial Information

Pro forma Share Capital

The pro forma share capital and number of shares issued as at 31 December 2012 reflects the conversion of the convertible notes , exercise of options issued to employees, the issue of shares under the offer, and the offer costs capitalised as part of the IPO as set out below:

Table 20: Share capital

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Share capital at 31 December 2012 6,652 6,652
Subsequent events:
Conversion of the convertible notes into fully paid ordinary
2 5,613 5,613
shares
Exercise of employee options via a company funded loan 3 1,518 1,518
13,783 13,783
Pro forma transactions:
Proceeds from the shares issued under the offer 4,6 10,000 12,000
Capital raising costs 5,7 (653) (781)
Capital raising costs (non cash) fair value of options issued 8 (24) (24)
Pro forma share capital 23,106 24,978
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Table 21: Issued capital

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Pro forma
Minimum subscription Oversubscription
Note Number Note Number
Number of shares at 31 December 2012 102,934,566 102,394,566
Subsequent events:
Conversion of the convertible notes to fully paid
2 25,514,055 2 25,514,055
ordinary shares
Employee options exercised 3 12,740,252 12,740,252
141,188,872 141,188,872
Pro forma transactions
Shares issued under the offer 4 40,000,000 5 48,000,000
Lead manager's shares issued for brokerage
8 600,000 8 720,000
services provided
Pro forma number of shares issued 181,788,872 189,908,872
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Regeneus Ltd Prospectus

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Pro forma Accumulated Losses

The pro forma accumulated losses as at 31 December 2012 reflects the capitalised convertible notes interest, discounted employee loan interest, transfer from reserves of forfeited options already vested, exercise options and the option reserve expense, the offer costs allocated to accumulated losses, and the payment of Directors fees.

Table 22: Accumulated losses

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Pro forma
Minimum subscription Oversubscription
Note
$000 $000
Accumulated losses at 31 December 2012 (9,720) (9,720)
Subsequent events:
Capitalised interest on convertible notes (1 Jan 2013 to 17 July
2 (302) (302)
2013)
Discounted interest expense for employee loans provided 3 (350) (350)
Transfer from reserves of forfeited options already vested,
3 914 914
exercise options and the option reserve expense
(9,458) (9,458)
Pro forma transaction:
Offer costs expensed 5,7 (294) (287)
Payment of Directors fees 9 (265) (265)
Pro forma accumulated losses (10,017) (10,010)
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Basis of presentation and use of estimates

The historical and pro forma financial information included in this Prospectus has been presented in accordance with Australian Accounting Standards (including Australian Accounting Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Going concern basis of accounting

The historical and pro forma financial information included in this Prospectus was prepared on a going concern basis that contemplates the realisation of assets and discharge of liabilities in their normal course of business.

Regeneus has incurred a net loss for the years ended 30 June 2011, 30 June 2012 and 6 months ended 31 December 2012, negative operating cash flows from operations and has accumulated losses, therefore material uncertainty exists regarding going concern. The directors have performed a review of the cash flow forecasts and have considered the cash flow needs of the company. Management expects operating losses and negative cash flows will continue for the foreseeable future and anticipates that expenses will increase from current levels because of additional

expenses related to research and development and commercial activities.

Regeneus intends to raise additional capital to finance its activities as set out in this prospectus. In the event that capital is not raised as contemplated in this Prospectus, the Company will need to seek other sources of funding and adjust its expenses from operations. If neither of these is successful, there will be substantial doubts about the Company’s ability to continue as a going concern.

The historical and pro forma consolidated financial information included in this Prospectus does not include any adjustments to reflect the possible future effects of the recoverability and classification of assets and liabilities that may result from the possible inability to continue as a going concern if the capital raising the subject of this Prospectus or other funding is not successful.

Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Regeneus Ltd Prospectus

6. Financial Information

Inventories

Inventories are stated at lower of cost or market. The average cost method has been used to value inventory. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Property and equipment

Plant and equipment are measured at costs less depreciation and impairment losses.

Subsequent costs are included in the asset’s carrying amount of recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation

The depreciable amount of fixed assets are depreciated on either a straight line or reducing balance basis over their useful lives commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the assets.

The depreciation rates used for each class of depreciable assets are:

Office equipment: 2.5% to 67% reducing balance;
Laboratory equipment: 25% reducing balance; and
Leasehold improvements: 20% straight line.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement of comprehensive income.

Intangibles

The amortisation rate used for acquired software is a 25% reducing balance.

Income taxes

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current and deferred income tax expense (income) is charged or credited directly to other comprehensive income instead of the profit or loss when the tax relates to items that are credited or charged directly to other comprehensive income.

Current tax

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Current tax assets and liabilities are offset where a legally enforceable right of set off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur.

Revenue recognition

Revenue is recognised when it is probable that economic benefits associated with the transaction will flow. Revenue is measured at the fair value of the consideration received or receivable. Licence fee revenue is recognised on a straight line basis over the period that the licence covers.

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Revenue relating to the provision of services is recognised when the services are provided.

Research and development

Research and development costs are recognised as an expense when incurred.

Intangible assets include acquired software. Intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight line basis over their estimated useful lives, as these assets are considered finite. Amortisation commences from the date the asset is brought into use. Acquired computer software licences are capitalised on the basis of costs incurred to acquire and install the specific software. Subsequent expenditure is expensed as incurred.

Regeneus Ltd Prospectus

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6.9 Use of Funds from the Offer

Based on the minimum subscription of A$10,000,000, the Company expects to receive A$8,900,000 of net proceeds after deducting the estimated expenses of the Offer payable by the Company.

The table below sets out the proposed use of proceeds from the Offer. This represents current intentions based on the current business plan and business conditions. The amounts and timing of the actual expenditure may vary significantly and will depend upon numerous factors, including the timing and success of the Company’s commercialisation activities and revenue from sales.

Table 23: Use of Funds Detail

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Minimum Subscription
Human Animal Other Total
% of total
$,000 $,000 $,000 $,000
Clinical Development - Vet and Human Products
Clinical Trials for canine CryoShot product registration in Australia 1,751 1,751 18%
and USA [(1) (2)]
New Product R and D - topical secretions 273 273 3%
Pre clinical and safety trials for Human Cyroshot 858 858 9%
Market Development Trials for HiQCell 1,418 1,418 14%
Market Development and Commercialisation
Commercialisation Rollout of HiQCell for Australia & International 1,182 1,182 11%
Commercialisation Rollout of canine CryoShot & equine 1,018 1,018 10%
CryoShot for Australia
Capital Expenditure 700 700 7%
Transaction Costs [ (3)] 1,100 1,100 11%
Working Capital 1,700 1,700 17%
TOTAL $3,731 $2,769 $3,500 $10,000 100%
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Notes:

(1) This includes an estimate of cost of registration of CryoShot
(2) This includes personnel cost, marketing and travel expenses
(3) Transaction costs includes cost of advisers and Lead Managers
(4) Directors’ Fees previously recognised as a contingent liability amounting to A$0.26 million are to be paid out of existing cash resources

Prior to the Offer, the Company has approximately $0.7 million of cash reserves.

Regeneus Ltd Prospectus

6. Financial Information

Regeneus believes that the funds raised under the Offer will be sufficient to fund the Company’s objectives for the next two years.

Figure 12: Key Business Initiatives

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Initiative FY14 FY15
Expand HiQCell footprint to capital cities and major
population centres in Australia
Expand HiQCell to other indication by leveraging existing
treatment networks
Broaden market usage of CryoShot and finalise CryoShot
specification for registration
Commence Cryoshot trial for canine osteoarthritis
Launch HiQCell in UK and Singapore for
Musculoskeletal conditions
Proof of principle and safety study of human CryoShot
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Following completion of the Offer, the Company will have a total cash balance of approximately A$9.3 million. Regeneus believes that the funds raised under the Offer will be sufficient to fund the Company’s expansion and R&D program for the next two years.

The above use of funds also excludes any revenue that is currently being generated from the commercialisation of the HiQCell and CryoShot products.

The Directors confirm that, in their opinion, on completion of the Offer, Regeneus will have enough working capital to carry out its objectives as stated in this Prospectus. In relation to the proposed use of proceeds described above, it should be recognised that there will typically be differences between estimated and actual costs, because events and circumstances frequently do not occur as expected and those differences may be material. In this regard, you should read carefully and consider the risks factors set out in Section 5 of this Prospectus.

Regeneus Ltd Prospectus

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07

Details of the Offer

Regeneus Ltd Prospectus

7. Details of the Offer

7.1 The Offer

By this Prospectus, the Company offers for subscription up to 40,000,000 New Shares at the Offer Price of A$0.25 per New Share to raise A$10,000,000 (Minimum Subscription).

Oversubscriptions of up to a further 8,000,000 New Shares also at the Offer Price of A$0.25 per New Share to raise up to a further A$2,000,000 may also be accepted.

The New Shares offered under this Prospectus will rank equally with the existing Shares on issue.

The rights attaching to the Shares are summarised in Section 10 of this Prospectus.

The Offer is not underwritten.

7.2 The Minimum Subscription

The Minimum Subscription to be raised pursuant to this Prospectus is A$10,000,000.

If the Minimum Subscription has not been raised within four months after the date of this Prospectus, the Company will either repay the Application Monies without interest or issue a supplementary or replacement Prospectus or allow Applicants one month to withdraw their Applications and be repaid their Application Monies.

7.3 Purpose of the Offer

The purpose of the Offer is to:

Raise new capital to fund Regeneus’ commercialisation strategy and ongoing R&D work;
List Regeneus Limited on ASX, which will provide Regeneus with additional financial flexibility to pursue growth opportunities and improved access to capital markets; and
Provide a liquid market for the Shares and an opportunity for employees and other persons to invest in Regeneus.

7.4 How to Apply

The offer includes:

A Broker Firm offer, which is open only to Australian resident Retail Investors who received a firm allocation from their broker;
An Institutional offer, which consists of an institution to bid for Shares made to Institutional investors in Australia and other selected juristictions; and
A general public offer which is open to Australian resident retail investors

If you wish to participate in the Offer, you should complete the Application Form enclosed with or attached to this Prospectus. The Application Form must be completed and payment made in accordance with the instructions set out on the reverse side of the Application Form. Payment for the Shares must be made in full at the issue price of A$0.25 per New Share. Applicants may apply for a minimum parcel of 8,000 New Shares (i.e. $2,000), and thereafter in multiples of 2,000 New Shares.

Completed Application Forms and accompanying cheques must be mailed or delivered to:

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Postal Address Hand Delivery
Regeneus Ltd IPO Offer Regeneus Ltd IPO Offer
c/- Link Market Services Limited c/- Link Market Services Limited
Locked Bag A14 1A Homebush Drive
Sydney South NSW 1235 Rhodes NSW 2138
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Cheques should be made payable to “Regeneus Share Offer Account” and crossed “Not Negotiable”. Completed Application Forms must reach one of the above addresses by no later than 5.00 pm AEST on the Closing Date. Payments by cheque will be deemed to be made when the cheque is honoured by the bank on which it is drawn.

Cash will not be accepted. Receipts for payments will not be issued. You should ensure that sufficient funds are held in the relevant account(s) to cover your cheque(s).

The Company reserves the right to close the Offer early without prior notice. Applicants are therefore encouraged to submit their Application Forms as early as possible. The Company reserves the right to extend the Offer or accept late Applications.

7.5 Allotment

Subject to admission of Regeneus to the official list of the ASX, allotment of New Shares offered by this Prospectus will take place as soon as practicable after the Closing Date. Prior to allotment, all Application Monies shall be held by the Company on trust. The Company, irrespective of whether the allotment of Shares takes place, will retain any interest earned on the Application Monies.

The Directors reserve the right to allot New Shares in full for any Application or to allot any lesser number or to decline any Application. The Company, subject to its discretion, will endeavour to allocate the minimum parcel of New Shares that can be taken up under the Offer, being 8,000 New Shares having a value of A$2,000 and for which an Application is received by the Company in accordance with this Prospectus.

Regeneus Ltd Prospectus

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In determining the ultimate allocation of Shares to each Applicant, the Directors will allocate shares based on satisfying the minimum amount of the offer. Subject that the Directors will endeavour to satisfy as many Applicants as possible but will allocate Shares on a fair and equitable basis, having regard to the requirements of the ASX Listing Rules that the Company has a prescribed minimum number of Shareholders holding a marketable parcel of Shares.

Where the number of New Shares allotted is less than the number applied for, or where no allotment is made, the surplus Application Monies (only where the amount is $1.00 or greater) will be returned by cheque to the Applicant within fourteen days of the allotment date without interest.

If an Application Form is not completed correctly, or if the accompanying payment of the Application Monies is for the wrong amount, it may still be treated as a valid Application. The Directors’ decision whether to treat the Application as valid and how to construe, amend or complete the Application Form is final. However, an Applicant will not be treated as having applied for more Shares than is indicated by the sum of the cheque for the Application Monies.

7.6 Opening and Closing Dates

The proposed opening date for acceptance of the Offer will be 13 August 2013 or such later date as may be prescribed by ASIC.

The Offer will remain open until 5.00pm AEST, 30 August 2013.

The Company reserves the right to open and close the Offer at any other date and time, without prior notice.

Applicants are encouraged to submit their Applications as early as possible.

No Shares will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus.

7.7 Brokerage, commission and stamp duty

No brokerage, commission or stamp duty is payable by Applicants upon acquisition of New Shares under the Offer.

7.8 ASX Listing

Application to ASX for the admission of Regeneus to the official list of ASX and for official quotation of the shares will be made as soon as practicable following the date of issue of this Prospectus, and in any event within seven days after the date of issue of this Prospectus. If the Company is admitted to the official list of ASX, quotation of the Regeneus shares will commence as soon as practicable following the issue of Clearing House Electronic Sub-register System ( CHESS ) statements.

If ASX does not admit the shares to quotation within three months of the date of this Prosprctus, no Shares will be issued and all Application Monies received under the Offer will be returned to Applicants. Interest will not be paid on any Application Monies refunded. Any interest earned on the Application Monies will be retained by Regeneus.

7.9 ASX Clearing House Electronic Sub-register system

Regeneus will apply to participate in the ASX’s Clearing House Electronic Sub-register System (CHESS), in accordance with the ASX Listing Rules and the ASX Settlement Rules. CHESS is an automated transfer and settlement system for transactions in securities quoted on ASX under which transfers are effected in an electronic form.

When the New Shares become CHESS approved securities, holdings will be registered in one of two subregisters, an electronic CHESS sub-register or an issuer sponsored sub-register. A CHESS participant, or a person sponsored by a CHESS participant, will have their shares registered on the CHESS sub-register. All other shares will be registered on the issuer sponsored sub-register.

Following Allotment, Shareholders will be sent an initial Holding Statement that sets out the number of shares that have been allocated. This Holding Statement will also provide details of a Share Holder Identification Number ( HIN ) or, where applicable, the Securityholder Reference Number ( SRN ) of issuer sponsored holders.

Shareholders will subsequently receive statement showing any changes to their Security holding. Certificates will not be issued.

7.10 Commencement of Trading

Following the issue of New Shares, successful Applicants will receive a holding statement setting out the number of New Shares issued to them under the Offer. It is expected that holding statements will be dispatched by standard post on or about 5 September 2013. It is the responsibility of Applicants to determine their allocation prior to trading in New Shares. Applicants trading in

Regeneus Ltd Prospectus

7. Details of the Offer

New Shares prior to receiving a holding statement do so at their own risk. Regeneus, the Share Registry as well as the Joint Lead Managers disclaim all liability, whether in negligence or otherwise, to persons who sell Shares before receiving their initial holding statement, whether on the basis of a confirmation of allocation provided by any of them, by the Regeneus Offer Information Line, by a broker or otherwise.

Shares are expected to commence trading on ASX on a normal settlement basis on or about 11 September 2013.

7.11 Application Monies and Refunds

Application Monies received under the Offer will be held in a special purpose account until the shares under the Offer are issued to successful Applicants. Any interest earned on Application Monies will be retained by Regeneus.

Application Monies will be refunded (in full or in part, as applicable) in Australian dollars where an Application is rejected, an Application is subject to a scale-back or the Offer is withdrawn or cancelled. No interest will be paid on any refunded amounts.

Refund cheques will be sent as soon as practicable following the close of the Offer.

7.12 Overseas Investors

No action has been taken to register or qualify the Prospectus or otherwise to permit a public offering of the shares in any jurisdiction outside of Australia.

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law. Persons who come into possession of this Prospectus who are not in Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law.

In particular, the Prospectus has not been and will not be registered under the US Securities Act of 1933, as amended, (the ‘US Securities Act’) or the laws of any State of the Security States and may not be offered or sold within the Security States or to, or for the account or benefit of a US Person (as defined in Regulation S of the US Securities Act) except in a transaction exempt from the registration requirements of the Securities Act or applicable US State securities laws.

7.13 Risk Factors

You should read the whole of this Prospectus and consider all of the risk factors that could affect the performance of the shares and other information concerning the shares in light of your own particular investment objectives, financial circumstances and particular needs (including financial and taxation issues) before deciding whether to invest in Regeneus. Some of the risk factors that should be considered by potential investors are set out in Section 5. If you have any questions or are uncertain as to whether and investment in Regeneus is a suitable investment for you, you should seek professional advice from your stockbroker, accountant, financial adviser or other professional adviser before deciding whether to invest in Regeneus.

7.14 Enquiries

If you have any questions in relation to the Offer, please visit the website at www.regeneus.com.au or contact the Company on +612 9499 8010.

Regeneus Ltd Prospectus

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08

Investigating Accountant’s Report

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8. Investigating Accountant’s Report

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Board of Directors Regeneus Ltd 77 Ridge Street Gordon, NSW, 2072

5 August 2013

Level 17, 383 Kent Street Sydney NSW 2000 Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

Dear Directors,

INVESTIGATING ACCOUNTANT’S REPORT ON THE HISTORICAL AND PRO FORMA FINANCIAL INFORMATION AND FINANCIAL SERVICES GUIDE

Introduction

We have prepared this Investigating Accountant’s Report at the request of the Directors of Regeneus Ltd (“Regeneus”) for inclusion in a Prospectus (“Prospectus”) to be dated on or about 5 August 2013 to be issued by Regeneus, in respect of the planned initial public offering on the Australian Securities Exchange.

Expressions defined in the Prospectus have the same meaning in this report.

Scope

Grant Thornton Corporate Finance has been requested to prepare this report on the following financial information:

Historical Financial Information

The Historical Financial Information of Regeneus, as set out in Section 6 of the Prospectus comprises the following:

The consolidated statement of comprehensive income for the years ended 30 June 2011, 30 June 2012 and the 6 months ended 31 December 2012;
The consolidated statement of cash flows for the years ended 30 June 2011, 30 June 2012 and the 6 months ended 31 December 2012;
The consolidated statement of financial position as at 31 December 2012;

(hereafter, the ‘Historical Financial Information’).

Grant Thornton Corporate Finance Pty Ltd ABN 59 003 265 987 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Holder of Australian Financial Services Licence No. 247140

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

Regeneus Ltd Prospectus

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2
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The Historical Financial Information has been extracted from the audited financial statements for the years ended 30 June 2011, 30 June 2012 and the reviewed financial statements for the 6 months ended 31 December 2012, which were audited and reviewed by Grant Thornton Audit Pty Ltd.

Pro forma Financial Information

The Pro forma Financial Information as set out in Section 6.6 of the Prospectus comprises the pro forma consolidated statement of financial position as at 31 December 2012 assuming completion of the Offer and includes the Pro forma Adjustments (“Pro forma Adjustments”) as at that date as disclosed in Section 6.7

(hereafter, the ‘Pro forma Financial Information’).

(collectively the ‘Financial Information’).

The Financial Information is presented in an abbreviated form insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports.

This report has been prepared for inclusion in the Prospectus. Grant Thornton Corporate Finance disclaim any assumption of responsibility for any reliance on this report or on the Financial Information to which this report relates for any purpose other than the purposes for which it was prepared. This report should be read in conjunction with the Prospectus.

Directors Responsibility for the Historical and Pro Forma Financial Information

The Directors have prepared and are responsible for the preparation and presentation of the Historical and Pro forma Financial Information. The Directors are also responsible for the determination of the Pro forma Adjustments as set out in Section 6.7 of the Prospectus.

Our Responsibility

Our responsibility is to express a conclusion on the Historical and Pro forma Financial Information based on our review. We have conducted an independent review of the Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that:

a The Historical Financial Information does not present fairly the Historical Financial Information in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements ) of applicable Accounting Standards in Australia;
b The Pro forma Adjustments do not provide a reasonable basis for the Pro Forma Financial Information;

Regeneus Ltd Prospectus

8. Investigating Accountant’s Report

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c The Pro forma Financial Information has not been prepared on the basis of the assumptions set out in Section 6.7 of the Prospectus; and
d The Pro forma Financial Information does not present fairly the pro forma consolidated statement of financial position as at 31 December 2012 in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia as if the Pro forma Adjustments set out in Section 6.7 of the Prospectus had occurred at 31 December 2012.

Our independent review of the Financial Information has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our procedures consisted of reading relevant Board minutes, reading relevant contracts and other legal documents, enquiries of management personnel and the Directors, and analytical and other procedures applied to Regeneus’ accounting records.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Financial Information.

Conclusion Statements

Review conclusion on the Financial Information

Based on our independent review, which is not an audit, nothing has come to our attention which causes us to believe that:

a The Historical Financial Information does not present fairly the Historical Financial Information in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia;
b The Pro forma Adjustments do not provide a reasonable basis for the Pro Forma Financial Information;
c The Pro Forma Financial Information has not been prepared on the basis of the assumptions set out in Section 6.7 of the Prospectus; and
d The Pro forma Financial Information does not present fairly the pro forma consolidated statement of financial position as at 31 December 2012 in accordance with the measurement and recognition (but not all of the presentation and disclosure requirements) of applicable Accounting Standards in Australia as if the Pro forma Adjustments set out in Section 6.7 of the Prospectus had occurred at 31 December 2012.

Independence and Disclosure of Interest

Grant Thornton Corporate Finance does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased conclusion in this matter. Grant Thornton Corporate Finance will receive a professional fee for the preparation of this report.

Regeneus Ltd Prospectus

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Financial Services Guide

We have included our Financial Services Guide as Appendix A to this report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in this report.

Yours faithfully

GRANT THORNTON CORPORATE FINANCE PTY LTD

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NEIL COOKE Partner

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NICOLE BRADLEY Partner – Audit & Assurance

Regeneus Ltd Prospectus

8. Investigating Accountant’s Report

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Appendix A (Financial Services Guide)

This Financial Services Guide is dated 5 August 2013.

Level 17, 383 Kent Street Sydney NSW 2000 Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

1. About us

Grant Thornton Corporate Finance Pty Ltd (ABN 59 003 265 987, Australian Financial Services Licence no 247140) (“Grant Thornton Corporate Finance”) has been engaged by Regeneus Ltd (“Regeneus”) to provide a report in the form of an Investigating Accountant’s Report for inclusion in a Prospectus dated on or about 5 August 2013 (“the Prospectus”) relating to the offer of shares in the Company (“the Issue”). You have not engaged us directly but have been provided with a copy of the report as a retail client because of your connection to the matters set out in the report.

2. This Financial Services Guide

This Financial Services Guide (“FSG”) is designed to assist retail clients in their use of any general financial product advice contained in the report. This FSG contains information about Grant Thornton Corporate Finance generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the report, and how complaints against us will be dealt with.

3. Financial services we are licensed to provide

Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities and superannuation products and to deal in a financial product by applying for, acquiring, varying or disposing of a financial product on behalf of another person in respect of securities and superannuation products.

4. General financial product advice

The report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. You should consider your own objectives, financial situation and needs when assessing the suitability of the report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment.

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Holder of Australian Financial Services Licence No. 247140

Liability limited by a scheme approved under Professional Standards Legislation

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5. Fees, commissions and other benefits we may receive

Grant Thornton Corporate Finance charges fees to produce reports, including this report. These fees are negotiated and agreed with the entity who engages Grant Thornton Corporate Finance to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this report our fees are charged on a fixed basis. Partners, Directors or employees of Grant Thornton Corporate Finance, Grant Thornton Australia Ltd, or other associated entities, may receive dividends, salary or wages from Grant Thornton Australia Ltd.

6. Associations with issuers of financial products

Grant Thornton Corporate Finance and its authorised representatives, employees and associates may from time to time have relationships with the issuers of financial products. For example, Grant Thornton Australia Ltd may be the auditor of, or provide financial services to the issuer of a financial product and Grant Thornton Corporate Finance may provide financial services to the issuer of a financial product in the ordinary course of its business.

7. Complaints

Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member of the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing and addressed to the Head of Corporate Finance at Grant Thornton Corporate Finance. We will endeavour to resolve all complaints within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service who can be contacted at:

PO Box 579 – Collins Street West Melbourne, VIC 8007 Telephone: 1800 335 405

Grant Thornton Corporate Finance is only responsible for this report and FSG. Grant Thornton Corporate Finance will not respond in any way that might involve any provision of financial product advice to any retail investor.

8. Contact Details

Grant Thornton Corporate Finance can be contacted by sending a letter to the following address:

Head of Corporate Finance Grant Thornton Corporate Finance Pty Ltd Level 17, 383 Kent Street Sydney, NSW, 2000

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09 Intellectual Property Report

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31 July 2013
BY EMAIL (To: [email protected])
Regeneus Ltd
PO Box 20
Gordon NSW 2072
CONFIDENTIAL COMMUNICATION
Attention: Dr Graham Vesey
Dear Graham
IP Report
Our Ref: P022446M:MOB
Your Ref: IP Report

1. BACKGROUND AND SCOPE

This Report has been prepared by Spruson&Ferguson for inclusion in a Prospectus to be issued by Regeneus Limited.

This Report is current as at 25 July 2013, and Spruson&Ferguson is not aware of any material changes to the status of matters discussed below since that date. The information provided below is subject to the matters set out in Section 5 of this Report.

This Report is directed to the patents and patent applications identified in Annexure 1.

2. OVERVIEW OF IP PROTECTION

IP includes patents, registered designs, trade marks, copyright, plant breeders’ rights and rights to require that information be confidential (commonly referred to as ‘know how’ or ‘trade secrets’).

Patents, registered designs, trade marks and copyright are the most common forms of IP which can be enforced by an owner to prevent others from using or otherwise exploiting the IP without the owner’s permission. This Report deals only with IP in the form of patents and applications for patents.

2.1 Monopoly provided by a patent

A patent is a right granted by a government to the inventor of an article, device, substance, process, or method, which is new, inventive and useful, in return for its disclosure to the public at large. The inventor can assign or license this right.

Patents provide the inventor, or the inventor’s assignee, with the exclusive right to exploit the invention for the life of the patent, which is generally 20 years. This exclusive

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right allows the patentee to prevent others from exploiting the invention covered by the patent in the country of grant by instituting an infringement action against the infringing party.

Under Australian law, “exploitation” includes:

(a) where the invention is a product – to make, hire, sell or otherwise dispose of the product, to offer to make, sell, hire or otherwise dispose of it, to use or import it, or to keep it for the purpose of doing any of those things; or
(b) where the invention is a method or process - to use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.

Broadly, in order to be the subject of a patent, the invention must, inter alia , be new and not be obvious at the time of lodging the patent application. Subject to limited exceptions, demonstrating, selling, publishing, or discussing the invention in public is likely to preclude the inventor's or its assignee's ability to obtain a valid patent.

Eighteen months after lodgement of an initial patent application, the detailed description of the invention (contained in the complete patent specification) becomes available for public inspection.

2.2 Patent validity

Grant of a patent does not guarantee validity, and an invalid patent is unenforceable. Further, the grant of a patent does not guarantee that all claims of that patent are valid.

The grant of a patent also does not guarantee that the invention defined therein can be exploited without infringing the rights of others.

2.3 Payment of annual fees for patents

Patent applications and patents are subject to the payment of annual fees (annuities or taxes) throughout the life of the application and the granted patent. If annuities are not paid, the patent (or patent application) may lapse.

Spruson&Ferguson has determined from its own records and those of CPA Global, the agent for payment of the annuities, that at the time of this Report there are no overdue fees (i.e. annuities) in respect of the patents.

2.4 International conventions

Australia is a signatory to a number of international conventions that relate to intellectual property. Many of these are administered by the World Intellectual Property Organisation (WIPO), which is an agency of the United Nations. Some features of the most important conventions are discussed below.

2.4.1 Paris Convention

The ‘Paris Convention for the Protection of Industrial Property’ is signed by approximately 170 member states, including Australia. When seeking patent protection in foreign countries, it is necessary to lodge a separate application in each country or region where protection is desired and this may be done under the provisions of the Paris Convention within 12 months of the date of lodging a corresponding patent application in Australia.

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2.4.2 Patent Cooperation Treaty (PCT)

Australia is also a signatory to the PCT. The PCT allows for the lodgement of an ‘international patent application’. This provides for a single application to designate any number of member states in which the patent is to be pursued, and provides priority in those states. The PCT has 146 contracting states (as at 1 February 2013), including most industrialised countries. It is also possible to designate the European Patent Convention (EPC; see below) via the PCT.

The effect of filing an international application is to place an application on foot in each of the designated countries. Usually, the international application is filed within 12 months of lodging a provisional application and claims priority from that provisional application. The use of the PCT permits the effective lodgment and associated fees for each of the designated countries to be delayed by up to a further 18 or 19 months from the 12 month deadline under the Paris Convention. An application is said to be in the "international phase" from after filing the PCT application and until the filing of national applications (or in the case of the EPC, regional application), generally referred to as entering the "national phase".

2.4.3 International Search Report (ISR)

Use of the PCT procedure also means that the results of an early “prior art search” for publications pre-dating the filing date of the application which may be relevant to the patentability of the invention (the ISR), indicating the searcher's opinion on the novelty and inventiveness of the invention, are available before the deadline for paying the national phase fees in the designated countries.

2.4.4 Written Opinion(s)/International Preliminary Report on Patentability (IPRP)

Use of the PCT procedure can also involve certain recognised national patent offices (including the Australian Patent Office; IP Australia) providing comments on the relevance of the material listed in the ISR, in what is known as a Written Opinion. Although it is not compulsory, the PCT applicant can reply to the Written Opinion(s) with rebutting arguments and/or amendments. At the end of this process an IPRP issues. If all claims are said to meet the main three examined patentability requirements under this procedure (novelty, inventive step, industrial applicability), then the IPRP is said to be "clear". Although not binding, a clear IPRP can be helpful in obtaining national patent protection in many jurisdictions. It is also important to note that a non-clear IPRP is not finally determinative of corresponding subsequent national patent application/s filed.

Searches of prior art are not designed to, and do not, indicate whether the commercial exploitation of the patent applicant’s invention will infringe the patent rights of others. An invention with a “clear” IPRP may still infringe patent rights of third parties that a prior art search would not identify.

2.4.5 European Patent Convention (EPC)

Under the ‘European Patent Convention’, it is possible to lodge a single patent application to seek protection in any, or all, of the following European countries: Albania, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Latvia, Monaco, Malta, The Netherlands, Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia,

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Regeneus Ltd Our Ref: P022446M Slovenia, Spain, Sweden, Switzerland, Turkey and the United Kingdom. Several ‘extension states’ exist (Bosnia and Herzegovina, and Montenegro) which also recognize European patents upon request. 2.4.6 Under the EPC a single examination of the “regional” application is conducted by the European Patent Office (EPO). The EPO will conduct their own comprehensive search and examination of an application according to their laws and may raise rejections or objections that cannot be overcome, even on the basis of documents which were recognised as not prejudicial in the IPRP. If an objection or rejection raised by the EPO cannot be overcome by amendment or by submissions, or by a combination of both, the patent application will be refused. Refusal of an application by the EPO means refusal of the application for the purposes of all of the member countries. Allowance (or acceptance) of the application by the EPO can lead to grant of a European patent, which must then be registered (or validated) in the chosen countries of those covered by the EPC to have effect in those countries.

2.4.7 National patents

There is no such thing as a ‘world patent’. In order to obtain protection overseas, a national patent application must be lodged in each relevant jurisdiction. The result of examination of a national application in one country is not binding on any other country (as different to a “regional” application such as under the EPC, as noted at paragraph 2.5.6). Similarly, it is important to note that, in the case of a national application that has been through the PCT proceedings, a clear or favourable IPRP is not binding on a national office. Most national patent offices will conduct their own comprehensive search and examination of an application and may raise rejections or objections that cannot be overcome, even on the basis of documents which were recognised as not prejudicial in the IPRP. If an objection or rejection raised by a national office cannot be overcome by amendment or by submissions, or by a combination of both, the patent application will be refused. The grant of a patent in one country does not guarantee grant in others. Similarly, challenges to patent validity must generally be made in each country of interest. It is only upon grant of a patent in a particular country that the patentee than has enforceable rights in that country for the invention defined in the claims of the granted patent.

2.5 Overview of the Patenting Process

The patenting process typically involves three steps, being: (1) filing of a provisional application; (2) filing of a complete application (which in the case of a PCT application is divided into: (a) international phase; and (b) national phase during which the application is subject to examination before the relevant patent office); and (3) grant of a patent.

The usual first step in obtaining patent protection for an invention typically involves filing a “provisional” patent application. A purpose of the provisional application is to describe the invention and to provide 12 months within which to carry out further experiments/trials to further characterize the invention. The date of lodging the provisional application establishes a “priority date”.

At the end of the 12 month period, the provisional application lapses. In order to maintain the priority date a “complete” patent application must be filed prior to the end of that 12 month period, representing the second step in obtaining patent protection.

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If patent protection is sought in multiple countries, the complete application may be filed as a single “international” application pursuant to the Patent Cooperation Treaty (PCT) described above. This application represents a bundle of applications allowing patent protection to be pursued in countries that are signatories to the PCT.

After the “international phase” of this application, the “national” or “regional” phase is entered in individual signatory countries or regions as desired. Once the international (PCT) application enters this phase it undergoes examination before the relevant national patent office (or the EPO as noted) to determine whether the application proceeds to grant or is refused. Typically, that substantive examination will include an assessment of whether the claimed invention satisfies the requirements of that jurisdiction for patentable subject matter, novelty, inventiveness and appropriate claim scope in view of what is described in the patent application.

In some circumstances, instead of filing a single complete PCT application, it may be preferable to file multiple complete applications in individual countries under the Paris Convention described above.

Set out below is a schematic diagram of the process generally involved in obtaining patent protection in the context of the three steps referred to above, being: (1) filing of a provisional application; (2) filing of: (a) a complete “international” application resulting in entry into international phase; and (b) national or regional phase application/s, involving prosecution of patent application/s in individual signatory countries or regions; and (3) grant and term of the resulting patent.

Overview of a typical patenting process

		Pending		Granted
		Application		Patent

(1)		(2a)	(2b)	(3)
Provisional		International	National	Grant
Application		Phase	Phase and
			Examination

12		18-19	2-5	To term
months		months	years
	0			20
				years*

subject to payment of renewal fees and potential extension of term in limited circumstances

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3. REGENEUS PATENT APPLICATION PORTFOLIO

Annexure 1 to this Report tabulates the patent applications relevant to the Regeneus IP patent portfolio. Spruson&Ferguson is engaged in its professional capacity to provide patent attorney services in respect of the Regeneus IP patent portfolio.

As shown in Annexure 1 the patents and applications are generally proceeding in the name of either Regeneus or in the name of Cell Ideas Pty Ltd as applicant or coapplicant. Spruson&Ferguson is advised by Graham Vesey that Cell Ideas Pty Ltd is a wholly owned subsidiary of Regeneus Limited. One exception is US Patent Application No. 13/059646 which is proceeding in the name of the inventor, Graham Vesey, as applicant as required under US patent law when the application was filed. Regeneus Pty Ltd is recorded on the official records of the United States Patent and Trademarks Office (USPTO) as the sole assignee of US 13/059646.

A second exception is Australian Application No. 2013203806 which is an application by Northern Sydney Local Health District, as explained below (paragraph 3.10).

For those members of the Regeneus patent portfolio (Annexure 1) which are pending applications rather than granted patents, an expiry date for the cases is not stated. As shown on the “Overview of a typical patenting process” the term of a patent is 20 years from the filing date of the relevant complete application. Under certain circumstances it may be possible to extend the patent term in some jurisdictions (e.g. for a further 3-5 years) if a patent contains claims to pharmaceutical compositions. The filing date of a complete application, such as a PCT application, may be up to 12 months after the earliest priority date claimed by the application. Some countries permit the filing of further applications from an initial complete application under certain circumstances. These further applications are typically referred to as “divisional” applications and may be filed more than 12 months after the earliest priority dated claimed by the application.

A brief description of the invention disclosed in the patent applications is provided below, with reference to the tabulated cases shown in Annexure 1 to this Report.

3.1 Families 1/1A

These applications claim priority to Australian Provisional Patent Application No. 2008904326 filed on 22 August 2008. Application No. 2009201915 was filed on 14 May 2009 as a direct convention application filing in Australia. As noted below, this application has been accepted after full examination by IP Australia and an opposition to the grant of a patent on the application is currently in progress, the opponent being Norwood Immunology Ltd (see Section 4 herein). All other members of this family of cases are either national phase applications from PCT Application No. PCT/AU2009/001070 or Australian divisional applications filed from the Australian national phase case.

The invention disclosed in this family relates generally to the use of an adipose tissuederived cell suspension which comprises adipocytes for the preparation of a pharmaceutical composition for use in the treatment of an inflammatory disorder, the treatment of a cartilage or bone disorder and/or the alleviation of pain associated with an inflammatory disorder in a subject. The invention also includes methods of treatment of such conditions using compositions of the invention. The invention also includes

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pharmaceutical compositions which comprise either an adipose tissue-derived cell suspension which comprises adipocytes; or a cell-free extract which is prepared from an adipose tissue-derived cell suspension, wherein the adipose tissue-derived cell suspension comprises adipocytes; together with a pharmaceutically-acceptable carrier or diluent.

Three of the Australian applications in this family have commenced or have successfully completed (AU2009201915) examination by IP Australia. The Australian national phase application and the divisional applications have been or will be amended during examination to pursue specific aspects of the invention described in the application. Examination reports have issued on two of the applications and, as expected, the reports include objections that the claims lack novelty and inventive step in the light of documents raised in the opposition proceedings. It is intended that responses to the examination reports will be filed.

The New Zealand national phase application was accepted by the Intellectual Property Office of New Zealand after examination and the patent was granted on 1 March 2013. The patent will remain in force until 20 August 2029, assuming renewal fees are paid and the validity of the patent is not successfully challenged.

As a preliminary to examination of the European national phase application, a Supplementary European Search Report has issued. The Search Report identifies documents said to be relevant to the novelty and/or inventiveness of some but not all of the claims. Examination reports have issued on the Singaporean, Australian and US applications, in each case identifying documents said to be relevant to the novelty and/or inventiveness of at least some claims. It is intended that responses to the reports will be filed.

3.2 Family 2

This family consists of three Australian patent applications, being a first application (AU2009251017) having a filing date of 17 December 2009 and two divisional applications. The invention disclosed in this family is generally similar to that of the Family 1 patent applications described above, with the inclusion of additional treatment indications.

Examination of these applications has not yet commenced.

3.3 Family 3

This family consists of a PCT application, namely PCT/AU2012/000272 which was filed on 15 March 2012 and which claims an earliest priority date of 15 March 2011, and an Australian national phase application (AU2012229889). The invention described in this family relates generally to a method of generating a cell suspension from adipose tissue and a tissue processing system or device for the performance of the method.

As per the standard PCT procedures an International Search and Written Opinion was issued by IP Australia. The search identified seven documents, which the Written Opinion indicated left some claims as being novel but all claims as lacking inventiveness. A response to the Written Opinion was not filed and it will now be dealt with as the International Preliminary Report on Patentability (IPRP). As noted elsewhere in this Report (see 2.4.4 herein) the opinion of the international preliminary

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examination as expressed in the IPRP is not binding on any subsequent national examining authority. All major jurisdictions will conduct a full examination of the application after it has entered the “national phase” in that country.

3.4 Family 4

This family consists of a single Australian complete application, AU2010347212 having an earliest priority date of 14 September 2010. The application was originally filed on that date as provisional application number 2010904155, it was later converted to an Australian complete application at which time it was assigned its current number by IP Australia.

The invention described in this application relates generally to intra-articular use of a cell-free preparation.

After filing of the provisional application IP Australia conducted, at the request of the applicant, an “international type search”. The search identified two documents, each of which the searcher classified as documents in the light of which the claimed invention cannot be considered novel or cannot be considered inventive.

Examination of the complete application by IP Australia has not yet commenced. When examination is undertaken it should be expected that the Examiner will at least initially raise the same documents that were identified in the international type search as relevant. During examination there will be opportunity for amendments and submissions to be made in response to objections raised by the Examiner.

3.5 Family 5

This family consists of a PCT application, namely PCT/AU2011/001639, which was filed on 19 December 2011 claiming an earliest priority date of 17 December 2010, and an Australian national phase application (AU 2011342382).

The invention described in this application relates to delivery of cells into a joint during an arthroscopy procedure where the cells are autologous and are harvested and delivered into the joint at the same time as the arthroscopy procedure.

As per the standard PCT procedures an International Search Report and Written Opinion were issued. In those documents the searcher provided an opinion that all claims of the application are novel but that there are a number of publications which the searcher considered renders the claims lacking in inventive step. As part of the international preliminary examination procedure a response to the Written Opinion was filed and the claims were amended. The IPRP was then issued finding all claims novel and inventive. As noted elsewhere in this Report (see 2.5.4 herein) the opinion of the international preliminary examination is not binding on any subsequent national examining authority. All major jurisdictions will conduct a full examination of the application after it has entered the “national phase” in that country.

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National phase applications have been filed in Australia, Singapore, New Zealand and Europe. An examination report has issued for the Australian application, finding all claims novel and inventive.

3.6 Family 6

This family consists of a PCT application and three Australian applications. The PCT application (PCT/AU2012/000274), which was filed on 15 March 2012, claims an earliest priority date of 15 March 2011.

The invention described in this application relates generally to methods for preparing compositions comprising adipose tissue-derived secretions, and the use of such compositions in the preparation of a pharmaceutical composition for topical use. The invention also relates to the use of adipose tissue-derived secretions and pharmaceutical compositions thereof for the topical treatment of a non-inflammatory condition and for the topical treatment of acne.

Prior to filing of the PCT application IP Australia conducted, at the request of the applicant, an international type search on some of the subject matter claimed in the provisional application. The search identified four documents, each of which the searcher classified as documents in the light of which the claimed invention in so far as it relates to the claims that were examined cannot be considered novel or cannot be considered inventive.

The documents cited in the international type search were taken into account in the preparation of the PCT application. During the course of the standard PCT procedures an International Search Report and Written Opinion were issued. Not all claims were searched. The International Search and Written Opinion opined that the majority of the searched claims could not be considered novel or inventive in the light of one or more of the documents that the searcher cited as relevant. The Opinion states that several of the claims were novel and inventive. A response to the Written Opinion was not filed and the IPRP will issue in much the same form as the Written Opinion. As noted elsewhere in this Report (see 2.5.4 herein) the opinion of the international preliminary examination as expressed in the IPRP is not binding on any subsequent national examining authority. All major jurisdictions will conduct a full examination of the application after it has entered the “national phase” in that country.

In order to utilise this PCT application to pursue enforceable patent rights in any country, it will be necessary to enter the national phase by the relevant deadlines in the countries and regions of interest. A national phase application was filed in Australia on 9 April 2013 and two Australian divisional applications were also filed on the same date. An examination report has issued for each of the Australian applications, the reports essentially repeating the issues raised in the Written Opinion. It is intended that responses to the examination reports will be filed. Filing in other countries will be considered prior to the national phase entry deadlines.

3.7 Family 7

This family consists of a PCT application and four Australian applications. The PCT application, (PCT/AU2012/001140), was filed on 21 September 2012 claiming an earliest priority date of 23 September 2011.

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The invention described in this family relates generally to treatment of various conditions by remote delivery of adipose tissue derived cell secretions or cell suspensions, including treatment of various forms of pain. The invention also relates to products that comprise a combination of cells and cell secretions.

As per the standard PCT procedures an International Search Report and Written Opinion issued. All claims were searched. In these documents the searcher provided an opinion that many of the claims were novel but that there were a number of publications which the searcher considered rendered the majority of claims lacking in inventive step. The searcher was of the opinion that certain claims directed to the use of concentrated secretions from cultured adipose tissue-derived cell suspensions for cryopreservation of cells were novel and inventive. The Applicant now has the opportunity to amend the claims and/or to make submissions in reply to the searcher’s opinion as part of an international preliminary examination procedure before finalization of the IPRP.

As noted elsewhere in this Report (see 2.5.4 herein) the opinion of the international preliminary examination as expressed in the IPRP is not binding on any subsequent national examining authority. All major jurisdictions will conduct a full examination of the application after it has entered the “national phase” in that country.

In order to utilise this PCT application to pursue enforceable patent rights in any country, it will be necessary to enter the national phase by the relevant deadlines in the countries and regions of interest. A national phase application was filed in Australia on 9 April 2013 and three Australian divisional applications have also been filed. Examination reports have not yet issued for these Australian applications. Filing in other countries will be considered prior to the national phase entry deadlines.

3.8 Family 8

This family consists of a single Australian application (AU2013204930) which was filed on 12 April 2013 claiming an earliest priority date of 26 September 2012. An examination report has not yet issued for the Australian application. The application has not yet been published.

In order to utilise the earliest priority date to pursue enforceable patent rights in other countries, it will be necessary to file a complete application, which may be a PCT application if rights in multiple countries beyond Australia are to be pursued, by 23 September 2013. If a PCT application is filed to pursue any rights it will then become necessary to enter the national phase by the relevant deadlines in the countries and regions of interest.

3.9 Family 9

This family consists of a single Australian provisional application, namely AU2012905669 filed on 24 December 2012. The co-applicants are Cell Ideas Pty Ltd and Northern Sydney Local Health District. The application has not yet been published.

In order to utilise the earliest priority date afforded by this provisional application to pursue enforceable patent rights it will be necessary to file a complete application by 24 December 2013, which may be a PCT application if rights within and beyond Australia are to be pursued or an Australian complete application for rights within Australia only.

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	The deadline by which that action must be taken is 24 December 2013. If a PCT
	application is filed to pursue any rights it will then become necessary to enter the
	national phase by the relevant deadlines in the countries and regions of interest.
3.10	Australian Patent Application No. 2013203806
	This patent application was filed on 11 April 2013 and claims an earliest priority date of
	24 December 2012. The applicant is Northern Sydney Local Health District (NSLHD).
	We are informed by Regeneus that under the terms of an agreement between Regeneus
	and NSLHD dated 15 October 2012, Regeneus has exclusive and worldwide rights to
	the invention disclosed in this application for the animal health market and an option to
	have exclusive and worldwide rights to commercialise the invention for human health
	applications. The application has not yet been published.
	In order to utilise the earliest priority date to pursue enforceable patent rights in other
	countries, it will be necessary to file a complete application, which may be a PCT
	application if rights in multiple countries beyond Australia are to be pursued, by 24
	December 2013. If a PCT application is filed to pursue any rights it will then become
	necessary to enter the national phase by the relevant deadlines in the countries and
	regions of interest.
4.	Opposition to Australian Patent Application No. 2009201915
4.1	As noted above, this Australian application has been opposed by Norwood Immunology
	Ltd and was also opposed by Artecel Inc. (the latter opposition subsequently withdrawn).
	A generalised description of Australian opposition proceedings is provided in paragraphs
	4.2 to 4.8 to provide a brief understanding of the process.
4.2	Australian patent law provides for pre-grant opposition to a patent application under
	Section 59 of the_Patents Act (1990)_. Pre-grant opposition provides an avenue by which
	a third party may undertake a comprehensive challenge to a patent application.
	Opposition proceedings are undertaken at the Australian Patent Office (known correctly
	as IP Australia).
4.3	An opposition may be commenced by any party within three months after the date that
	acceptance (ie., allowance) of an application is advertised by IP Australia.
	Commencement of opposition proceedings merely requires the filing at IP Australia of a
	Notice of Opposition advising that the named party opposes the grant of a patent on the
	application and the payment of the required official fee.
4.4	All bases of consideration of a patent application are available for challenging an
	application through opposition. Hence, prior art-based grounds of lack of novelty and
	lack of inventive step are included, as are specification-based considerations such as fair
	basis, clarity and sufficient description, as well as the Applicant’s entitlement to the
	invention and whether or not the claimed invention has utility.
4.5	The substantive part of the opposition process commences by the Opponent’s
	Statement of Grounds and Particulars, setting out the case to be answered but not
	including the supporting evidence. In a typical opposition this is followed by submission
	of evidence in support (Opponent), evidence in answer (Applicant) and evidence in reply
	(Opponent). Typically, the evidence includes one or more declarations by relevantly

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	technically skilled individual(s). Although such declarants are engaged by the party
	presenting the declaration as part of their evidence, the declarants are not advocates but
	rather have a role in assisting the decision-maker to fully understand technical issues
	involved in the case and to understand the state of relevant knowledge at the time of the
	invention.
4.6	When all evidentiary steps are complete the matter is heard by a delegate of the
	Commissioner (usually a deputy Commissioner or a senior examiner in the relevant
	technology section), who decides the case based on the evidence and written and oral
	submissions made by the parties. A written decision is issued several months after the
	hearing. An opposition may be wholly successful in that all claims of the application are
	found to be invalid on one or more grounds. An opposition may be wholly unsuccessful
	in that all claims of the application are found to be valid on all grounds. An opposition
	may be partially successful in that it finds in favour of the Opponent on one or more
	grounds and in respect of one or more claims being invalid whilst at the same time
	finding in favour of the Applicant on one or more grounds and in respect of one or more
	claims. Not uncommonly, the delegate’s decision may state that certain claims of the
	application are invalid but that the application does contain patentable subject matter. In
	these cases the decision typically invites the Applicant to amend to overcome the
	negative finding. The Commissioner has the power to award costs to a party; usually
	the award of costs follows the decision. Either party may appeal the decision to the
	Federal Court of Australia.
4.7	Where an opposition is wholly successful and in the absence of a successful appeal to
	the Federal Court of Australia the patent application will be rejected and rights in the
	invention described in that application typically will be lost. Alternatively, where an
	opposition is ultimately unsuccessful, which may only finally be determined after an
	appeal and/or after amendments have been made, a patent will typically be granted on
	the application. Further avenues of appeal may thereafter be available.
4.8	An opposition may be withdrawn by the Opponent at any time. Where that occurs the
	Commissioner will, in effect, conduct a re-examination of the application on the basis of
	any evidence that has been filed.
4.9	In the following paragraphs we provide a brief description of the opposition as it applies
	to AU2009201915. This application was lodged at IP Australia on 14 May 2009,
	underwent expedited examination and, after one adverse examination report was
	overcome, a notice of acceptance was issued by IP Australia on 4 September 2009.
4.10	A Notice of Opposition was filed on 17 December 2009 by Artecel Inc., which then
	served their Statement of Grounds and Particulars, asserting each available ground of
	opposition against one or more claims of the patent application and listing 26 documents
	asserted to be relevant to the grounds of lack of novelty and lack of inventive step.
	Artecel withdrew their opposition on 18 November 2010.
4.11	A Notice of Opposition was also filed on 17 December 2009 by Norwood Immunology
	Ltd (“Norwood”) and their Statement was served on 17 March 2010. The Norwood
	Statement asserted all available grounds of opposition against one or more claims of the
	patent application including that the claims do not define patentable subject matter, that
	the claims lack novelty, that the claims lack inventive step, that claims fail to define the
	invention, that claims are unclear and or not succinct, that the claims are not fairly based

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Regeneus Ltd Our Ref: P022446M	Regeneus Ltd Our Ref: P022446M
	on the description of the invention in the specification, and that the claims lack utility.
	The Norwood Statement listed 39 documents as relevant to the issue of lack of novelty
	and/or lack of inventive step of the claims. As usual in opposition proceedings, the
	Statement indicated that the Opponent seeks the refusal to grant a patent on the
	application, seeks the costs of the opposition proceedings and seeks any other relief the
	Commissioner may deem appropriate.
4.12	All of the typical rounds of evidence (support, answer, and reply) have been completed
	and Regeneus and Norwood have also submitted “further evidence” after obtaining the
	Commissioner’s permission to do so.
4.13	During the evidentiary process, Regeneus filed a request to voluntarily amend the claims
	of the application. The amendments were examined and found acceptable by IP
	Australia.
4.14	A Notice of Opposition to the amendments was filed by Norwood on 12 April 2013.
4.15	The opposition to the amendments generally includes the same formal steps as a
	substantive opposition, namely the opponent’s Statement of Grounds and Particulars
	followed by their evidence in support, then the applicant’s evidence in answer and then
	the opponent’s evidence in reply, although usually over a shorter time period compared
	to a substantive opposition. When the evidentiary stages are completed IP Australia will
	typically hold a hearing and then issue a decision on the amendment. No date has yet
	been set for the hearing of the opposition to the amendments. The decision is
	appealable to the Federal Court of Australia and further avenues of appeal may
	thereafter be available. The substantive opposition is typically paused until the
	amendment opposition is resolved (although there may be cases in which the
	substantive opposition and the amendment opposition are heard together).
4.16	Following that typical procedure, when the opposition to the amendments is resolved, IP
	Australia will conduct a hearing to determine the outcome of the substantive opposition
	to the patent application. No date has yet been set for a hearing. As noted above, a
	decision issued in the opposition is appealable to the Federal Court of Australia and
	further avenues of appeal may thereafter be available..

5. LIMITATIONS AND DISCLAIMERS

5.1 Search limitations

5.1.1 General

The prior art (or “novelty”) searches conducted by the various patent offices to determine whether a patent should be granted are limited in terms of the time periods and the geographical areas covered. Thus, the databases used in searching may not include older published documents and may not cover certain jurisdictions. Further, all searches are subject to the accuracy and scope of the material searched as well as the classification criteria adopted. Accordingly, whilst the searches conducted by various patent offices provide a reasonable indication of patentability, these and other factors make it impossible to guarantee that every relevant prior art record has been identified and considered. Hence, any conclusions regarding the validity of claims in a patent based on patent office searches should be regarded as indicative rather than conclusive.

SPRUSON & FERGUSON

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9. Intellectual Property Report

Regeneus Ltd Our Ref: P022446M 5.1.2 Unpublished Documents Searches cannot locate documents which have not been published at the time of conducting the search. In most countries, publication of a patent application does not occur until 18 months from the earliest priority date. Delays between official publication and the implementation of information onto the relevant databases can also occur.

5.1.3 Non-patent prior art documents and disclosure

No search can ever be considered entirely conclusive or exhaustive because some forms of prior art such as prior public use, oral disclosures, prior commercial exploitation and prior publication in non-patent literature, cannot be searched systematically.

5.1.4 Commercialisation/Secret Use

The commercialization or secret use of an invention that is the subject of a patent application can affect the patentability of the invention and the validity of any patent granted on the invention. Such commercialization or secret use is unlikely to be identified by documentary searches of publicly accessible databases.

5.1.5 Reliance on cited prior art classification

The views expressed in relation to relevance of the prior art cited in various searching and examination reports are based on the relevant classification attributed in such reports.

5.1.6 Searching and other matters relevant to validity Searching may not disclose other matters relevant to validity including, for example, matters relevant to obviousness (i.e. inventive step).

5.2 Examination Reports in one Country Not Binding in Other Countries

Patent applications lodged in each country are generally subject to an independent search and examination by the local patent office, the results of which are not binding in other jurisdictions. Equally, international PCT search and examination reports are not binding on national patent applications during examination in the national phase. Such search and/or examination reports should therefore be regarded as relevant to patentability in the particular jurisdiction and not determinative of patentability elsewhere. Furthermore, grant of a patent in one country does not guarantee that patent/s for the same or related inventions will be granted in other countries.

5.3 Grant of Patent Provides no Guarantee of Validity

Grant of a patent by a national patent office provides an indication rather than a guarantee of its validity. In most jurisdictions, a patent application is subject to substantive examination prior to grant. Although this process confers an initial presumption of validity, in most countries that “presumption” carries no binding legal weight and a patent may be challenged at any time after grant by way of revocation proceedings undertaken in a court of competent jurisdiction. In certain countries a granted patent may be subjected to re-examination by the relevant patent office, particularly if relevant prior art is identified that was not considered during initial examination of the application.

5.4 Grant of Patent Provides no Guarantee of Non-infringement

Grant of a patent provides no guarantee that the patentee is entitled to commercially exploit the patented invention. For example, the working of an invention, even if validly patented, may nevertheless infringe an earlier patent or other intellectual property rights.

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5.5 Scope of Claims May Vary During Examination

It may be possible, and is often necessary, during the examination of a patent application to define the invention more specifically by amendment of the claims to distinguish the invention over relevant prior art. Accordingly, there may be variations in the claims between countries, reflecting in part the different national examination procedures and threshold patentability requirements. Such amendments may affect the scope and hence the commercial significance of the resultant patent protection.

5.6 Opposition Proceedings

Some jurisdictions allow for accepted patent applications to be opposed by any third party. For example, Australia and New Zealand provide for pre-grant opposition whereas Europe provides for post-grant opposition. Successful opposition proceedings to an application may result in some of the claims of the application being refused or may result in all of the claims of the application being refused, in which latter case a patent typically would not be granted on that application. Successful opposition proceedings to a patent may result in some or all of the claims being held invalid or restricted in breadth. A more detailed generalised description of Australian opposition proceedings is provided in Section 4 of this Report.

5.7 Enforcement of Patent Rights

Upon grant of a patent, a patentee may initiate proceedings against an alleged infringer of the patent. In many jurisdictions, damages for infringement may be awarded for infringements occurring from the date of publication of the patent specification, provided certain criteria are met.

5.8 Infringement of the rights of others

As noted above, searches conducted during patent prosecution do not provide any guarantee that the subject inventions may be commercially exploited without risk of infringement of third parties. More particularly, searches focused on novelty and inventive step have different strategies from infringement searches (which seek to establish whether a specific activity is likely to infringe other parties’ patent rights).

5.9 Entitlement to Priority

In order for material disclosed in a patent application to be entitled to the priority date of a corresponding provisional application, there must have been (for Australia under the current patent law) a “real and reasonably clear disclosure” of such material in the provisional application. Similar provisions apply in other jurisdictions. Subject matter not so disclosed is not entitled to the claim to priority, which may affect patentability of the subject invention or the validity of any patent that may be granted.

5.10 Changes to Patent Law

From time to time the statutory basis governing patents in a particular jurisdiction may be amended by the relevant authority, typically the government of that jurisdiction. In addition, the practical effect of the statute may evolve by the development of case law, that is, by the interpretation of the statute by the relevant Courts. The Australian government recently enacted changes to the Patents Act (1990) . The government’s stated intention in introducing those legislative changes was to “raise the bar” on patentability requirements. The changes will apply to all Australian applications for which a request for examination is filed after 15 April 2013. The changes will not apply to any Australian application for which a request for examination was filed before

Page 15

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Regeneus Ltd Prospectus

9. Intellectual Property Report

Regeneus Ltd Our Ref: P022446M 15 April 2013, nor will they apply to any granted patent arising from such an application. Regeneus took action prior to 15 April 2013 to ensure that, as far as was practical, the “pre-15 April 2013 legislation” rather than the new legislation is applicable to their Australian applications that had been filed as of that date.

5.11 Duty of disclosure

In some jurisdictions there is a duty to disclose certain information to the relevant Patent Office. This information can include search results issued in respect of corresponding foreign applications, and/or any prior art information known to the applicant or its agents, which can be considered material to the patentability of the relevant invention. Failure to disclose such information in accordance with jurisdictional requirements can adversely affect the validity and/or enforceability of the relevant patent.

5.12 Reliance on information provided

The preparation of this Report has included access to and reliance on information contained in publicly available databases relevant to the patent applications in Annexure 1. Spruson&Ferguson is not responsible for the accuracy of information available in public databases and we cannot guarantee the accuracy of those databases.

6. Spruson&Ferguson’s interest

Spruson&Ferguson is engaged by Regeneus Limited for professional patent and trademark services. Spruson&Ferguson has been and continues to be involved in the preparation, filing and prosecution of patent applications, including those set out in Annexure 1. Those services include acting as the patent attorneys for Regeneus in the opposition by Norwood to AU2009201915. No Principal of Spruson&Ferguson has any financial interest in Regeneus Ltd over and above the fees charged for the professional work done. The fees charged for that professional work, including the preparation of this Report, are based upon Spruson&Ferguson’s standard rates of charging.

7. Spruson&Ferguson’s expertise

Spruson&Ferguson is one of Australia’s leading patent and trade mark attorney firms, providing a comprehensive range of expertise to our clients in the field of Intellectual Property (IP).

8. Consent

Consent for the inclusion of this Report in a Prospectus to be issued by Regeneus Limited, in the form in which it now appears, has been granted by Spruson&Ferguson and has not been revoked, as at the date of this Report.

Yours sincerely SPRUSON & FERGUSON

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Martin O'Brien BSc(Hons) PhD MLS FIPTA Principal [email protected]

SPRUSON & FERGUSON

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Regeneus Ltd Our Ref: P022446M

Annexure 1: Regeneus Patent Portfolio

1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”	1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”	1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”	1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”	1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”	1: “Therapeutic methods using adipose tissue-derived cell suspensions comprising adipocytes”

Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
Australia	Regeneus Pty Ltd	2009284700	22/08/2008	20/08/2009	Pending application
Australia	Regeneus Pty Ltd	2011247866	22/08/2008	08/11/2011	Pending divisional application
Australia	Regeneus Pty Ltd	2013205140	22/08/2008	13/04/2013	Pending divisional application
Australia	Regeneus Pty Ltd	2013205141	22/08/2008	13/04/2013	Pending divisional application
Canada	Regeneus Pty Ltd	2756738	22/08/2008	20/08/2009	Pending application
Europe	Regeneus Pty Ltd	09807756.3	22/08/2008	20/08/2009	Pending application
New Zealand	Regeneus Pty Ltd	591626	22/08/2008	20/08/2009	In force patent: Granted 1 March 2013; expiry date 20 August 2029.
Singapore	Regeneus Pty Ltd	201101019-6	22/08/2008	20/08/2009	Pending application
USA	Graham Vesey (inventor); Assignee is Regeneus PtyLtd	13/059646	22/08/2008	20/08/2009	Pending application

1A: “Therapeutic methods”	1A: “Therapeutic methods”


Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
Australia	Regeneus Pty Ltd	2009201915	22/08/2008	14/05/2009	Pending application: accepted; under Opposition

2: “Therapeutic methods”


Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
Australia	Regeneus Pty Ltd	2009251017	17/12/2009	17/12/2009	Pending application
Australia	Regeneus Pty Ltd	2013203074	17/12/2009	9/04/2013	Pending divisional application
Australia	Regeneus Pty Ltd	2013203060	17/12/2009	9/04/2013	Pending divisional application

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9. Intellectual Property Report

Our Ref: P022446M

3: “Cell processing method and dev	3: “Cell processing method and dev
		ice”

Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
PCT	Regeneus Pty Ltd	PCT/AU2012/000272	15/03/2011	15/03/2012	PCT Application pending
Australia	Regeneus Pty Ltd	2012229889	15/03/2011	15/03/2012	Pending application

4: “Cell free preparation and uses t
		hereof”

Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
Australia	Cell Ideas Pty Ltd	2010347212	14/09/2010	14/09/2010	Pending application

5: “Arthroscopy method”


Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
PCT	Cell Ideas Pty Ltd	PCT/AU2011/001639	17/12/2010	19/12/2011	PCT Application pending
Australia	Cell Ideas Pty Ltd	2011342382	17/12/2010	19/12/2011	Pending application
Singapore	Cell Ideas Pty Ltd	tba	17/12/2010	19/12/2011	Pending application
New Zealand	Cell Ideas Pty Ltd	612473	17/12/2010	19/12/2011	Pending application
Europe	Cell Ideas Pty Ltd	tba	17/12/2010	19/12/2011	Pending application

6: “Pharmaceu
	tical compositions a	nd topical use thereof”

Country	Applicant/Owner	Official No.	Earliest Priority Date	Filing Date	Status
PCT	Cell Ideas Pty Ltd	PCT/AU2012/000274	15/03/2011	15/03/2012	PCT Application pending
Australia	Cell Ideas Pty Ltd	2012229890	15/03/2011	15/03/2012	Pending application
Australia	Cell Ideas Pty Ltd	2013203164	15/03/2011	9/04/2013	Pending divisional application
Australia	Cell Ideas Pty Ltd	2013203165	15/03/2011	9/04/2013	Pending divisional application

Page 18 SPRUSON & FERGUSON

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----- Start of picture text -----

Regeneus Ltd Our Ref: P022446M
7:

“Therapeutic
methods
and
compositions”
Country
Applicant/Owner
Official
No.
Earliest
Filing
Date
Status
Priority
Date
PCT
Cell
Ideas
Pty
Ltd
PCT/AU2012/001140
23/9/2011
21/9/2012
PCT
Application
pending
Australia
Cell
Ideas
Pty
Ltd
2012313352
23/9/2011
21/9/2012
Pending
application
Australia
Cell
Ideas
Pty
Ltd
2013203072
23/9/2011
9/4/2013
Pending
divisional
application
Australia
Cell
Ideas
Pty
Ltd
2013203073
23/9/2011
9/4/2013
Pending
divisional
application
Australia
Cell
Ideas
Pty
Ltd
2013205128
23/9/2011
13/4/2013
Pending
divisional
application
8:

“Therapeutics
using
multiple
injections
of
cells”
Country
Applicant/Owner
Official
No.
Earliest
Filing
Date
Status
Priority
Date
Australia
Cell
Ideas
Pty
Ltd
2012904217
26/9/2012
26/9/2012
Provisional
application
Australia
Cell
Ideas
Pty
Ltd
2013204930
26/9/2012
12/4/2013
Pending
application
9:

“Vaccine
booster”
Country
Applicant/Owner
Official
No.
Earliest
Filing
Date
Status
Priority
Date
Australia
Cell
Ideas
Pty
Ltd
2012905669
24/12/2012
24/12/2012
Provisional
Northern
Sydney
application
Local
Health
District
“Vaccines
for
the
treatment
or
prevention
cancer”
Country
Applicant/Owner
Official
No.
Earliest
Filing
Date
Status
Priority
Date
Australia Northern
Sydney
2013203806
24/12/2012 11/04/2013
Pending
Local
Health
application
District
Page 19 SPRUSON & FERGUSON
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Regeneus Ltd Prospectus

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10

Additional Information

Regeneus Ltd Prospectus

10. Additional Information

10.1 Incorporation

Regeneus was incorporated in New South Wales as a proprietary company limited by shares on 14 August 2007. Regeneus converted to a public company on 22 December 2011.

10.2 Current Capital Structure

The capital structure of the Company as at the date of this Prospectus and following completion of the Offer based on the Minimum Subscription is set out below:

Table 24: Capital Structure Pre and Post Offer

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----- Start of picture text -----

Class of Security Number of Securities
On date of Following
Prospectus completion of
the Offer
Ordinary Shares 102,934,566 181,788,872
Options 27,068,117 14,327,866
Convertible Notes 8,666,667 -
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*Includes Shares to be issued:

on conversion of convertible notes as set out in Section 10.4;
to Peloton Capital, as set out in Section 10.4; and
on exercise of Options, as set out in Section 10.6. **Includes Options to be issued prior to Listing as set out in Section 10.6.

As at Completion of the Offer, the Company will have on issue the following Options:

Table 25: Options

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----- Start of picture text -----

Number of Options Exercise Price
308,040 $0.006
4,621,145 $0.136
100,000 $0.140
6,785,110 $0.250
2,513,571 $0.280
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See information in Section 10.6 below about proposed issue of options by the Company at or about the time of Listing to certain employees and contractors including Prof Graham Vesey and John Martin

10.3 Rights attaching to Shares

The rights attaching to fully paid ordinary Shares in the capital of Regeneus are set out in the Constitution. Those rights will also be subject to the ASX Listing Rules in all respects while the Company maintains its listing on the ASX.

Set out below is a summary of the rights and liabilities

under the Constitution, the ASX Listing Rules and the Corporations Act, which will attach to the Shares of the Company, including the New Shares offered under this Prospectus. This summary does not purport to be exhaustive or to constitute a definitive statement of the rights and liabilities of the Company’s shareholders under the Constitution.

All New Shares issued under this Prospectus will, from the time of issue, rank equally with all the Company’s existing Shares.

Meeting and Voting

Each shareholder will be entitled to receive notice of, and attend and vote at, general meetings of the Company. At a general meeting, every shareholder present in person or by proxy, representative or attorney will have one vote on a show of hands and, on a poll, one vote for each Share held.

Notices

Each shareholder will be entitled to receive all notices, accounts and other documents required to be given to shareholders under the Constitution of the Company, the Corporations Act and the ASX Listing Rules.

Dividends

The Directors are authorised to make all decisions, including as to method and time for payment, regarding dividends in respect of Shares which are permitted under the Corporations Act.

Winding Up

On a winding up of the Company, shareholders will participate in any surplus assets of the Company in proportion to the capital paid up on the shares held by them respectively at the commencement of the winding up.

Transfer

Subject to the Constitution of the Company, the Corporations Act, the ASX Listing Rules and the ASX Settlement Rules, the Shares will be freely transferable.

Creation and Issue of Further Shares

The allotment and issue of any additional Shares will be under the control of the Directors, subject to any restrictions on the allotment of Shares imposed by the Constitution, the Corporations Act and the ASX Listing Rules.

Variation of Rights

The rights, privileges and restrictions attaching to ordinary Shares can be altered with the approval of a resolution passed at a separate general meeting

Regeneus Ltd Prospectus

10. Additional Information

of the holders of ordinary Shares, by a 75% majority of those holders who, being entitled to do so, vote at the meeting or, with the written consent of the holders of at least 75% of the ordinary Shares on issue.

New Shares offered under this Prospectus are fully paid ordinary Shares. There is no liability on a holder of Shares to contribute any further amount to the Company.

Copies of the Company’s Constitution are available for inspection at the registered office of the Company.

10.4 Summary of Material Contracts

Macquarie University R&D Collaboration Agreement

Regeneus has entered into an agreement with Macquarie University ( Macquarie ) dated 30 January 2012. Pursuant to the agreement Regeneus agrees to provide support for Dr Herbert’s Vice Chancellor’s Innovation Fellowship at Macquarie University and undertakes collaborative research with Macquarie University on projects undertaken by Dr Herbert relating to the use of stem cells for clinical applications in humans and animals. Regeneus contributes funding towards project costs.
Intellectual property developed pursuant to the agreement is owned by Regeneus, although Macquarie has a beneficial interest in such intellectual property – such beneficial interest to be agreed by the parties, or failing agreement, as determined by a technical expert based on Macquarie’s inventive share to the item of intellectual property.
Pursuant to the agreement Regeneus grants Macquarie University a perpetual, non-transferrable and royalty free licence to use such intellectual property for internal, non-commercial research and teaching purposes.
The parties retain ownership of their pre-existing intellectual property.
To the extent that Regeneus commercialises any intellectual property, it must pay to Macquarie a royalty stream calculated in accordance with Macquarie’s beneficial interest in that item of intellectual property.

Kolling Insitute of Medical Research Collaboration Agreement

Regeneus has entered into an agreement with the Kolling Institue of Medical Research (Kolling) part of the Northern Sydney Local Health District (NSLHD) dated 15 October 2012. Pursuant to the agreement, NSLHD will carry out a collaborative research project (the Project), investigating a combined vaccine and adipose-derived cell therapy to treat cancer.
Regeneus will pay NSLHD a project management fee in relation to the research and also make in-kind contributions.
Any intellectual property arising from or developed in the course of the Project ( Project IP ) shall be jointly owned by Regeneus and NSLHD in equal shares. Patent costs are to be shared equally.
Regeneus will have the exclusive and worldwide right to commercialise Project IP in the animal market, subject to the payment of commercial royalties on revenue received by Regeneus.
Regeneus also has an option to have an exclusive and worldwide licence of certain of NSLHD’s intellectual property and interest in the Project IP for non-animal market applications.

Quirindi R&D Collaboration and Licence Agreement

Regeneus has entered into an agreement with Quirindi Veterinary Clinic Pty Ltd ( QVC ), Quirindi Feedlot Services Pty Ltd ( QFS ) and Dr Tony Batterham dated 29 December 2010. Pursuant to the agreement, Regeneus and QVC will collaborate on R&D and the commercialisation of certain bone marrow derived products for canine and equine veterinary markets in NSW and bovine veterinary markets in Australia.
Prior to commencing trials with respect to the relevant products, the parties will agree on costs, intellectual property rights and the terms of commercialisation opportunities relating to the products.
Regeneus will pay QVC a fee for trial management, use of QVC facilities and production of products and QVC will pay Regeneus an annual R&D technology access and licence fee.
Regeneus grants to QVC a non-exclusive and non-transferable licence of certain of its intellectual property for QVC to conduct the trials and to perform commercial treatments in the relevant territory, as well as an exclusive and non-transferable licence of certain of its intellectual property to produce a partly-processed canine and equine CellFree.
Regeneus grants to QFS an exclusive and nontransferable licence of certain of its intellectual property to produce, distribute and sell bovine AdiCell, CellFree and bone marrow derived products for BRD applications within the licenced territory within the licenced field. QFS and Regeneus will agree on the production of any bone marrow derived products and the royalties payable to Regeneus.
QVC has an option to renew the term of the licence for a further 5 years on expiry of the agreement on 30 June 2015.

Regeneus Ltd Prospectus

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Regeneus will also appoint Dr Tony Batterham (a principal of QVC) as a veterinary advisor to Regeneus for a 3 year period. In consideration for this role and for participating in the design, conduct and oversight of trials, Regeneus granted Dr Tony Batterham options over 2,310,300 shares in Regeneus to be allotted in three tranches subject to certain vesting conditions. All these options have all vested and been exercised.

Illawarra Equine Collaboration and Licensing Agreement

Regeneus has entered into an agreement with Illawara Equine Centre Pty Ltd ( IEC ) dated 28 February 2012. Pursuant to the agreement, Regeneus and IEC will explore the safety and efficacy of AdiCell and preparations of equine secretions and equine cells for “off-the-shelf” ( OTS ) use to treat equine arthritis and other orthopaedic disorders and potentially commercialise those products.
Prior to commencing trials with respect to the relevant products, the parties will agree on costs and the terms of commercialisation opportunities arising from the research.
Regeneus will pay IEC a fee for trial management, use of IEC facilities and production of products and IEC will pay Regeneus an annual technology access and licence fee.
770,100 options have been issued to IEC under the agreement. The options have an exercise price of 14c and expire on 30 December 2016. These options will be exercised prior to Listing as described in section 10.6 below.
Regeneus grants IEC a non-transferable right and non-exclusive licence of certain of its intellectual property for the purpose of commercialising AdiCell in the Illawarra region of NSW within the field of equine veterinary medicine.
IEC has an option to renew the term of the licence for a further 5 years on expiry of the agreement on 31 December 2016

Agreements with Joint Lead Managers

Peloton Capital and BBY have agreed to provide certain capital raising and corporate advisory services to Regeneus and to act as the Joint Lead Managers to the Offer.
Regeneus has agreed to pay the following fees to Peloton Capital and BBY:
Corporate Advisory Fee to Peloton Capital - $20,000 per calendar month (plus GST) for the expected period leading up to the Offer and completion of the IPO (being 3 months). 50%

of the Corporate Advisory Fees will be rebated against the Capital Raising Fees to be paid to Peloton Capital upon completion of the IPO.

Capital Raising Fee – 5% of total funds raised pursuant to the Offer, such amounts to be paid equally to Peloton Capital and BBY, in respect of funds raised from institutional investors.
Management Fee – 1% of total funds raised pursuant to the Offer, such amounts to be paid equally to Peloton Capital and BBY.
Success Fee to Peloton Capital – Upon the occurrence of a successful IPO and listing, 1.5% of the Offer funds raised, payable in fully paid shares in Regeneus at a price equivalent to the Offer price. These shares will be subject to a 24 month escrow period.
Regeneus is required to reimburse Peloton Capital and BBY for all travel, accommodation and other out of pocket expenses incurred on behalf of Regeneus.
Peloton Capital and BBY will pay the broker application fees referred to in Section 7.7 of this Prospectus out of the fee they receive from Regeneus in respect of the Offer.

Convertible Note Agreement

Regeneus currently has on issue 8,666,667 convertible notes. The convertible notes have been issued pursuant to a convertible note deed dated 26 July 2012. The key provisions of the convertible note deed are as follows:
notes have a face value of $0.60;
notes have a maturity date of 31 August 2013 (which can be extended to 31 August 2014 at the option of Regeneus);
notes pay interest of 10% per annum;
notes are not secured;
notes do not carry a right to vote at meetings of the shareholders of the Company; and
all notes (plus accrued interest) will, at the close of the Offer and prior to the Listing of Regeneus be converted into ordinary shares at a discount of 12% to the Offer Price.
It is expected that a total of 25,514,055 Shares will be issued under the convertible note deed. Depending on the actual date of Listing, additional interest may accrue and additional Shares may therefore be issued.

Shareholders’ Agreement

Regeneus has entered into a Shareholders’ Agreement with its Existing Shareholders. The Shareholders Agreement sets out certain terms relating to the governance of Regeneus, including

Regeneus Ltd Prospectus

10. Additional Information

relating to the appointment and proceedings of Directors, the issue and transfer of Shares and the requirement for Existing Shareholders to approve certain actions by Regeneus (including a decision to List the Company on a stock exchange).

The Shareholders’ Agreement will terminate prior to the Listing of Regeneus.

10.5 Shareholders and Escrow Arrangements

Substantial Shareholders

The interests of Directors in Regeneus on Listing are set out in Section 4.6. In addition, on Listing, it is expected that the following shareholders will have a substantial holding in Regeneus based on the Minimum Subscription:

Table 26: Substantial Shareholders

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----- Start of picture text -----

Name Shares % interest
Thomas Mechtersheimer 13,154,861 7%
George Miklos 9,117,984 5%
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The above Shareholders may apply for New Shares pursuant to the Offer. Final holdings of all substantial Shareholders will be notified to the ASX on Listing.

Escrow Arrangements

Certain of the Directors, Existing Shareholders of the Company and Peloton Capital will be subject to mandatory escrow arrangements under the ASX Listing Rules.

10.6 Employee Incentive Plans

Current employee share option plan

Regeneus currently has in place on employee share option plan ( Current ESOP ) to foster an ownership culture in the Company and to motivate senior management, staff and Directors to achieve performance targets of the Company or their respective business units. The rules of the Current ESOP are summarised in the following paragraphs:

Options may be granted under the ESOP to person who is employed by, or is a Director, officer, executive of the Company or any related body corporate of the Company, and whom the Company’s Remuneration Committee determines is eligible to participate in the Current ESOP (referred to as an Eligible Employee).
Each option entitles the option holder to subscribe for one ordinary Share in the Company.
The specific terms relevant to the grant of options are set out in an option agreement between the Company and the Eligible Employee which shall contain details of the grant date, the expiry date, the exercise price, the vesting term and performance criteria (if any) and other specific terms relevant to those options.
Options are issued for free. The exercise price is determined by the Remuneration Committee and set out in the option agreement between the Company and the Eligible Employee.
Options are not transferable otherwise than by will or the laws or intestacy.
The rules of the Current ESOP allow the
Remuneration Committee who administers the ESOP to set a timetable for vesting of options in order to reward longevity of service. The Remuneration Committee may waive the vesting criteria in certain circumstances, such as the death or permanent disablement of the Eligible Employee or in the event of a takeover of the Company.
The rules of the ESOP also enable the Remuneration Committee to impose performance hurdles that must be met in order for the option holder to be entitled to exercise the options.
Any Shares allocated pursuant to any exercise of the options rank pari passu in all respects with other ordinary Shares of the Company on issue at the date of the allotment, however, when any Shares are allotted pursuant to the exercise of that option during a period in respect of which a dividend is declared, the holder of those Shares is only entitled to receive the divided where the Shares are allotted on or before the relevant dividend entitlement date.
If the Company’s issued capital is reorganised (including consolidation, subdivision, reduction, rights issues or return), then the number of options will be adjusted in accordance with the ASX listing rules.
An option holder is not conferred with any rights to participate in a bonus or new issue of Shares in the Company.
There may be restrictions placed on the Eligible Employee or under their option agreement in dealing with any Shares acquired under the Current ESOP. Any such restrictions will be contained in the option agreement between the Eligible Employee and the Company.
The Remuneration Committee may cancel an option if at any time the Eligible Employee is breach of any terms and conditions of employment of that Eligible Employee.

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An Eligible Employee may forfeit options or Shares if the Eligible Employee has in the opinion of the Remuneration Committee been dismissed with cause or has committed an act of fraud, defalcation or gross misconduct in relation to the affairs of the Company or any related body corporate, and the Remuneration Committee directs that such options or Shares are to be forfeited. If Shares are forfeited, the Company must pay the Eligible Employee an amount for each forfeited Share equal to the lesser of the exercise price paid for the Share and the Share price at the date of the forfeiture of the Share as determined by the Company’s auditor.
After Listing, the total number of Shares that shall be reserved for issuance under the Current ESOP an any other employee share schemes in the Company shall not exceed 12% of the diluted ordinary Share capital in the Company as at the date of issue of the relevant options under the option plan.
Subject to early termination (see below), the options expire ten years following the grant date (expiry date).
If the Eligible Employee is dismissed with cause or has committed an act of fraud, defalcation, or gross misconduct in relation to the affairs of the Company (or its related body corporate) all options expire on the day the Eligible Employee ceases employment.
If the Eligible Employee ceases employment with the Company (or its related body corporate) as a result of the death, permanent disablement or normal retirement of the Eligible Employee or after the age of 55, then all unvested options expire on the day the Eligible Employee ceases employment and all vested options expire 12 months after the day the Eligible Employee ceases employment, or on the expiry date, whichever is the earliest.
If the Eligible Employee ceases employment with the Company (or its related body corporate) as a result of voluntary resignation or redundancy of the Eligible Employee or dismissal by the Company with notice under the Eligible Employee’s employment contract (other than dismissal for gross misconduct etc.), then all unvested options expire on the day the Eligible Employee ceases employment and all vested options expire 30 days after the day of the Eligible Employee ceases employment, or on the expiry date, whichever is earliest.

Loans to exercise Options

Immediately prior to Listing a number of the Options granted under the Current ESOP will be exercised by the holders. Regeneus will lend the consideration for exercise of the Options to holders on the following terms:

the loans will be for a maximum period of four years
the loans will be interest free
the loans will be on a full recourse basis.

Table 27: Details of the Options to be exercised and loans are:

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Number of Options Exercise Price of Total consideration
Options lend to Option
holders
693,090 $0.006 $4,294
1,540,200 $0.054 $82,531
9,286,862 $0.136 $1,260,799
1,220,100 $0.140 $170,814
TOTAL $1,518,438
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The loans will be provided to a number of Option holders, including John Martin and Prof. Graham Vesey. Further details of the loans to John Martin and Prof. Graham Vesey are set out in Section 10.7 below.

Shares allotted and issued on exercise of options rank equally in all respects with other Shares from the date of allotment and issue, subject to any applicable disposal restrictions.

Table 28: Details of Options that will be on issue under the Current ESOP on Listing:

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Number of Options Exercise Price of Options
308,040 $0.006
4,621,145 $0.136
100,000 $0.140
2,513,571 $0.280
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New employee share incentive plan

Regeneus proposes to adopt a new employee incentive plan ( New Plan ) prior to Listing. The New Plan is designed to assist in the reward, motivation and retention of personnel (including executive Directors, eligible employees and contractors). The New Plan is designed to recognise the abilities, efforts and contributions of participants in Regeneus’ performance and success and provide the participants with an opportunity to acquire or increase their ownership interest in Regeneus.

Regeneus will set up a trust (as the vehicle) for acquiring, holding and selling Options and Shares on behalf of employees and contractors participating under the New Plan (Participants). The Trustee of the Trust will be bound by the rules of the New Plan and a trust deed appointing and giving powers to the Trustee in connection with the New Plan.

Regeneus Ltd Prospectus

10. Additional Information

Once established Regeneus will fund the Trust to acquire Options. Options acquired by the Trust will be allocated to Participants in accordance with an invitation to participate. When a Participant accepts an invitation to participate in the New Plan, the Participant’s interests in the Options allocated will be financed by a limited recourse loan from the Trust to the Participant. Such loans will be interest free and limited recourse. Regeneus/the Trustee will also upon request provide an interest free limited recourse loan equal to the amount necessary to pay the exercise price for any Options held by the Trustee for the benefit of a Participant.

Limited recourse means the repayment amount of the loan will be lesser of the amount of the loan and the market value of the Options (or Shares if the Options have been exercised) that were acquired with the loan. Loans must be repaid in full before the Options (or Shares issued on exercise of the Options) can be transferred to the Participant.

The New Plan will operate on an ongoing basis once adopted unless suspended or terminated by the Company. An offer or issue of Options may only be made under the New Plan if the number of such Options, together with the number of Options then on issue pursuant to the New Plan or any other employee share scheme does not exceed 12% of the total number of issued Shares on a fully diluted basis as at the time of the offer.

As at the date of this Prospectus, the Company anticipated that 6,785,110 Options will be issued to the Trust prior to or about the time of Listing, to be held for certain Directors, employees and contractors.

Table 29: Proposed Options

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----- Start of picture text -----

Category Total Number of Options
Board and Related Parties 4,335,710
Other Management and 2,148,000
employees or contractors
Other Existing Shareholders 301,400
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*Further details of these proposed issues are set out in Sections 4.5 (in relation to issues for the benefit of Prof Graham Vesey and John Martin and 10.7 (in relation to issues for the benefit of Wild Rose Pty Ltd)

All Options will be issued with an exercise price of $0.25.

10.7 Related party transactions

Regeneus has entered into a number of agreements with The Channel Group Pty Limited. These agreements are as follows.

Agreement for Services in connection with the IPO

Pursuant to an agreement dated 23 January 2012, Channel Group has agreed to provide project management services to Regeneus in connection with the IPO.

Regeneus has agreed to pay the following fees to Channel Group under the agreement:

A monthly retainer of $10,000 (plus GST) from the start of the engagement up to the opening of the IPO – totalling $80,000;
Reimbursement of all reasonable out of pocket expenses; and
A success fee consisting of 150,000 options upon completion of the offer and listing. The options will have an exercise price of $0.25 each. Channel Group has advised Regeneus that it will direct Regeneus to issue the options to the following persons as its nominees:

Table 30: Channel Group Options

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----- Start of picture text -----

Nominee Number of Options to Expiry date of Options
be issued
Ku Shiao Min 45,000 20/08/2023
Clare Harker 30,000 20/08/2023
Paul Kelly 37,500 20/08/2023
Wild Rose Pty Ltd 37,500 20/08/2023
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Agreement for marketing and communications services

Pursuant to an agreement dated 8 December 2011, Channel Group has agreed to provide certain marketing and communications services to Regeneus.

Regeneus has agreed to pay the following fees to Channel Group under the agreement:

Monthly fees of approximately of $12,500 (plus GST); and
Reimbursement of all reasonable out of pocket expenses.

Regeneus’ Executive Chairman, John Martin is a director and shareholder of Wild Rose Pty Ltd. He is also a director of Channel Group and has a beneficial interest in Channel Group shares through Wild Rose Pty Ltd, which is a corporate trustee of the Martin Family Trust and as such is expected to derive a financial benefit from the fees payable by Regeneus to Channel Group and the issue of the Options to Wild Rose Pty Ltd. The extent of financial benefit which Mr Martin is likely to receive as a direct result of the agreement with Channel Group is not possible to quantify for present purposes. The Board considers the terms of the agreement with Channel Group are on arm’s-length terms. Shareholder approval has not been sought in relation to this financial benefit to Mr Martin because the arm’s-length exception in section 210 of the Corporations Act is considered by the Directors to apply.

Loans to John Martin and Prof Graham Vesey

Immediately prior to Listing, John Martin and Professor Graham Vesey will exercise a number of the Options

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granted to them under the current ESOP. Regeneus will lend the consideration for the exercise of the Options on the same terms as the loans being provided to other Option holders as set out in Section 10.6 above.

Table 31: Loans to John Martin and Professor Graham Vesey

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Nominee Amount of Total number of
loan Options to be
exercised
John Martin $295,925 3,773,490
Prof. Graham Vesey $150,552 1,108,944
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Provision of the loans to John Martin and Prof. Graham Vesey constitute a financial benefit to each of John Martin and Prof. Graham Vesey. Shareholder approval has not been sought in relation to this financial benefit to Mr Martin because the arm’s-length exception in section 210 of the Corporations Act is considered by the Directors to apply.

Unpaid Directors’ Fees

Regeneus has a contingent liability of $264,000 for unpaid Directors’ fees and salary that were unpaid between 2008 and 2009. The Board has determined that payment of these unpaid fees will be made after the Listing of Regeneus.

Table32: Unpaid Directors’ Fees

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Director or Former Director Amount of unpaid fees
Prof. Graham Vesey $132,411
Assoc. Prof. Ben Herbert $22,068
Thomas Mechtersheimer $88,274
Prof. Marc Wilkins $22,068
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There is no interest payable on the outstanding amounts.

10.8 Interests of Directors

Other than as set out in this Prospectus, no Director has had, within 2 years before lodgement of this Prospectus with ASIC, any interest in:

the formation or promotion of the Company;
any property acquired or proposed to be acquired by the Company in connection with its formation or promotion;
any property acquired or proposed to be acquired by the Company in connection with the Offer of the New Shares under this Prospectus.

Other than as set out in this Prospectus, no benefits or amounts have been paid or agreed to be paid to any Director, to induce them to become or qualify as a Director or for services rendered by the Director in connection with the promotion or formation of the Company or the Offer of New Shares under this Prospectus.

10.9 Legal Proceedings

The Directors are not aware of any pending or threatened litigation which may have a material adverse affect on the business or financial condition of the Company.

10.10 ASX Waivers

The Company has applied for a waiver from Listing Rule 1.1 Condition 11 to the extent necessary to permit the Company to have on issue Options that have an exercise price of less than $0.20. Details of the Options on issue are set out in Section 10.5.

10.11 Tax

Investors should seek and rely on their own professional taxation advice in relation to any investment in Regeneus.

10.12 Consents

Each of the following parties referred to below:

has given, and has not, before the issue of this Prospectus, withdrawn its written consent to being named in the Prospectus and to the inclusion, in the form and context in which it is included, of any information described below as being included with its consent; and
each of the parties referred to below, to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Prospectus, other than the reference to its name and any statements or report included in this Prospectus with the consent of that party as described below.

Grant Thornton Corporate Finance Pty Ltd has given its written consent to the inclusion in this Prospectus of its Investigating Accountants Report and to all statements referring to that report or attributed to or derived from that report in the form and context in which they appear and to the references to the historical financial information of the Company in Section 6 and has not withdrawn such consent before the lodgement of this Prospectus with ASIC.

Spruson&Ferguson has given its written consent to the inclusion in this Prospectus of its Intellectual Property Report and to all statements referring to that report in the form and context in which they appear and has not withdrawn such consent before the lodgement of this Prospectus with ASIC.

The Kolling Institute of Medical Research (part of the North Sydney Local Health District) has given its written consent to the inclusion in this Prospectus of the statements by it, including the statements specifically attributed to it, in this Prospectus in the form and context in which they appear and has not withdrawn such

Regeneus Ltd Prospectus

10. Additional Information

consent before lodgement of this Prospectus with ASIC.

Qmetrics Technologies has given its written consent to the inclusion in this Prospectus of the statements by it, including the statements specifically attributed to it, in this Prospectus in the form and context in which they appear and has not withdrawn such consent before lodgement of this prospectus with ASIC.

Each of the patients referred to in the Case Studies in Section 3.3.5 has given his or her written consent to the inclusion in this Prospectus of the statements by him or her, including the statements specifically attributed to him or her, in the Prospectus in the form and context in which they appear and has not withdrawn such consent before lodgement of this Prospectus with ASIC.

Each of the following has consented to being named in the Prospectus in the capacity as noted below:

DibbsBarker, as the Australian legal advisor to Regeneus
Grant Thorton Audit Pty Ltd, as auditor to Regeneus
Peloton Capital Pty Ltd, as Joint Lead Manager to the Offer
BBY Limited, as Joint Lead Manager to the Offer
Link Market Services Ltd, as share registry

There are a number of persons referred to elsewhere in this Prospectus who are not experts and who have not made statements included in this Prospectus nor

are there any statements made in this Prospectus on the basis of any statements made by those persons. These persons did not consent to being named in this Prospectus and did not authorise or cause the issue of this Prospectus.

10.13 Interests of Experts and Advisers

Other than as set out below or elsewhere in the Prospectus, no person performing a function in a professional, advisory or other capacity for this Prospectus has had, within the 2 years before lodgement of this Prospectus with ASIC, any interest

in the formation or promotion of the Company;
any property acquired or proposed to be acquired by the Company in connection with its formation or promotion
any property acquired or proposed to be acquired by the Company in connection with the Offer of the New Shares under this Prospectus

Other than as set out in this Prospectus, no amounts or benefits have been paid or agreed to be paid for services rendered by the person performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus.

It is estimated that the Company will pay the following costs in connection with the preparation and issue of this Prospectus and the making of the Offer (inclusive of GST):

Table 33: Cash Offer Costs

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----- Start of picture text -----

Estimate of Cash Costs Estimate of Cash Costs
Service
Minimum ($) Oversubscription ($)
DibbsBarker - Legal Fees $138,000 $138,000
Grant Thornton - Investigating Accountant Fees $47,000 $47,000
ASIC and ASX Fees $103,000 $105,000
Share Registry Costs $13,000 $13,000
Patent report from Spruson & Ferguson $6,000 $6,000
Joint Lead Manager and Broker Fees $704,000 $836,000
Miscellaneous (Printing, project management and Mail) $31,000 $31,000
Total cash offer costs $1,042,000 $1,176,000
----- End of picture text -----

These costs will be paid by Regeneus from the proceeds of the Offer.

Regeneus Ltd Prospectus

100

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10.14 Inspection of documents

Copies of the following documents will be available for inspection free of charge at the registered office of the Company for at least 13 months after lodgment of this Prospectus:

the written consents to the issue of this Prospectus; and
the Constitution of the Company.

10.15 Reliance on Class Orders

Pursuant to Class Order 00/44, ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an Electronic Prospectus on the basis of a paper prospectus lodged with ASIC and the issue of Shares in response to an electronic Application Form, subject to compliance with certain provisions.

If you have received this Prospectus as an Electronic Prospectus please ensure you have received the entire Prospectus accompanied by the Application Form. If you have not, please contact Regeneus by calling +612 9499 8010 and we will send to you free of charge either a hard copy, a further electronic copy of the Prospectus or both.

10.16 Working Capital Statement

The Directors believe that, on completion of the Offer, the Company will have sufficient working capital to carry out its objectives as stated in this Prospectus.

10.17 Statement of Directors

The Directors report that after due enquiries by them, in their opinion since the date of the audited financial statements in section 6, there have not been any circumstances that have arisen or that have materially affected or will materially affect the assets and liabilities, the financial position, profits or losses or prospects of the Company, other than as disclosed in this Prospectus.

Each Director has consented to the lodgement of this Prospectus.

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John Martin Chairman Regeneus Ltd

Regeneus reserves the right not to accept an Application Form from a person if it has reason to believe that when the person was given access to the electronic Application Form, it was not provided together with the Electronic Prospectus and any relevant supplementary or replacement prospectus or any of these documents were incomplete or altered. In such case the application moneys received will be dealt with in accordance with section 722 of the Corporations Act.

101

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Glossary

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102

11. Glossary

In this Prospectus, unless the context requires otherwise, the following terms have the meaning set out below.

ABN means Australian Business Number

ACN means Australian Company Number

AdiCell means the autologous regenerative cellular therapy for orthopaedic conditions and inflammatory diseases in veterinary animals developed by Regeneus based on adipose-derived cellular material including adult stem cells

APVMA means the Australian Pesticides and Veterinary Medicines Agency

ASIC means Australian Securities and Investments Commission

ASX means Australian Securities Exchange Limited (ACN 008 624 691)

ASX Corporate Governance Principles means the ASX Corporate Governance Council’s principles based framework to corporate performance and accountability

ASX Listing Rules means the rules of the ASX that govern the admission, quotation and removal of securities from the official list of ASX

Allogeneic means taken from different individuals of the same species

Applicant means a person or entity who makes an Application

Application means an application to subscribe for New Shares under this Prospectus

Application Form means the share application form attached to this Prospectus

Application Monies means the amount accompanying an Application Form submitted by an Applicant

Autologous means derived or transferred from the same individual’s body

Board means the Board of Directors of Regeneus

BBY means BBY Limited (ABN 80 006 707 777)

Closing Date means the date on which the Offer is expected to close, being 30 August 2013. This date may be varied without prior notice

Company means Regeneus Ltd (ACN 127 035 358)

Constitution means the constitution of the Company as amended from time to time

Corporations Act means the Corporations Act 2001 (Cth)

Current ESOP means the Company’s Employee Share Option Plan approved on 27 October 2008 described in Section 10.6

CryoShot means frozen allogeneic regenerative cellular therapy for orthopaedic and inflammatory conditions in animals developed by Regeneus based on adiposederived cellular material including adult stem cells

Directors means the directors of the Company from time to time

EMA means the European Medicines Agency

Employee Share Options means options to subscribe for Shares to be issued to eligible persons (including employees and officers) under the current or any other approved ESOP

ESCs means embryonic stem cell

Existing Shareholders means those Shareholders who hold Shares immediately prior to the issue of New Shares pursuant to this Prospectus

Exposure Period means the seven day period after the date of lodgement of this Prospectus with ASIC, which may be extended by ASIC for a further period of seven days(up to a total of 14 days)

FDA means the Food and Drug Administration in the USA

Founding Shareholders means those Shareholders who were an original party to the Shareholders’ Agreement.

GST means Goods and Services Tax in Australia

HiQCell means the autologous regenerative cellular therapy for muscularskeletal conditions and inflammatory diseases in humans developed by Regeneus based on adipose-derived cellular material including adult stem cells

HiQCell Joint Registry means the HiQCell Patient Outcome Joint Registry described in Section 3.3.5

IP means intellectual propery

11. Glossary

Joint Lead Managers means Peloton Capital and BBY

Listing means the admission of Regeneus to the official list of ASX

Shareholding % means in relation to a Shareholder, a fraction the numerator of which is the total number of Shares held by the Shareholder and the denominator of which is the total number of Shares (including the shares held by the Shareholder) on issue

Macquarie means Macquarie University

Minimum Subscription means A$10,000,000

MSCs means mesenchymal stem cells

New Plan means the new employee incentive plan which the Company proposes to adopt prior to Listing described in Section 10.6

New Share means a new Share issued pursuant to this Prospectus

NSAID means non-steroidal anti-inflammatory drugs

Subsidiary means in relation to a body corporate, means a body corporate that is a subsidiary of the first-mentioned body by virtue of Division 6 of the Corporations Act

Successful Applicant means an Applicant who is issued Shares under the Offer

TGA means the Therapeutic Goods Administration in Australia

VAS means the visual analogue scale – a tool used to measure the level of symptoms a person is feeling

Offer means the invitation to apply for Shares under this Prospectus

Offer Price means A$0.25 per New Share

OSCARS Study means the Osteoarthritis Stem Cell Advances Research Study described in Section 3.3.5

Peloton Capital means Peloton Capital Pty Ltd (ABN 22 149 540 018)

Prospectus means this document (including the electronic form of this prospectus) and any replacement or supplementary prospectus in relation to this document

Regeneus means Regeneus Ltd (ACN 127 035 358) and its subsidiaries

Secretions means secretions derived from adiposederived cells used for therapeutic purposes

Share means a fully paid ordinary share in the issued capital of Regeneus

Share Registry means Link Market Services Limited (ABN 54 083 214 537)

Shareholders’ Agreement means the shareholders’ agreement between the existing shareholders of the Company dated the 11th January 2008

Shareholder means a holder of Shares in Regeneus

Regeneus Ltd Prospectus

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12

Application Form

Regeneus Ltd Prospectus

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12. Application Form

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Broker Code Adviser Code

REGENEUS LTD ACN 127 035 358

Offer Application Form

This is an Application Form for Shares in Regeneus Ltd under the Public Offer on the terms set out in the Prospectus dated 5 August 2013. You may apply for a minimum of 8,000 Shares and multiples of 2,000 thereafter. This Application Form and your cheque or bank draft must be received by 5:00pm (AEST) on 30 August 2013.

If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and you should read the entire Prospectus carefully before applying for Shares.

A

Shares applied for Price per Share Application Monies , , at A$0.25 B A$ , , . (minimum 8,000, thereafter in multiples of 2,000)

PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant #1 Surname/Company Name

C

D

E

Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. (or Joint Applicant #3) TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type – if NOT an individual, please mark the appropriate box Company Partnership Trust Super Fund PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/Property name/Building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode Email address (only for purpose of electronic communication of shareholder information)

CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here)

F X

Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any Shares issued as a result of the Offer will be held on the issuer sponsored sub-register.

Telephone Number where you can be contacted during Business Hours Contact Name (PRINT) G ( )

Cheques or bank drafts should be made payable to “Regeneus Ltd” in Australian currency and crossed “Not Negotiable”.

Cheque or Bank Draft Number BSB Account Number H - Total Amount A$ , , .

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LODGEMENT INSTRUCTIONS You must return your application so it is received before 5:00pm (AEST) on 30 August 2013 to: 107 Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235.

Regeneus Ltd Prospectus RGS IPO001

Your Guide to the Application Form

Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced 12. Application Form to each section of the form.

The Shares to which this Application Form relates are Regeneus Ltd Shares. Further details about the shares are contained in the Prospectus dated 5 August 2013 issued by Regeneus Ltd. While the Prospectus is current, Regeneus Ltd will send paper copies of the Prospectus, any supplementary document and the Application Form, free of charge on request.

The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Prospectus. The Prospectus contains important information about investing in the Shares. You should read the Prospectus before applying for Shares.

A Insert the number of Shares you wish to apply for. The Application must be for a minimum of 8,000 Shares and thereafter in multiples of 2,000. You may be issued all of the Shares applied for or a lesser number.
B Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of Shares applied for by the issue price. Amounts should be in Australian dollars. Please make sure the amount of your cheque or bank draft equals this amount.
C Write the full name you wish to appear on the register of Shares. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title.
D Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Regeneus Ltd will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments.
E Please enter your postal address for all correspondence. All communications to you from Regeneus Ltd and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.
F If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your Shares will be issued to Regeneus Ltd’s issuer sponsored subregister.
G Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application.
H Please complete the details of your cheque or bank draft in this section. The total amount of your cheque or bank draft should agree with the amount shown in section B.
Make your cheque or bank draft payable to “Regeneus Ltd” in Australian currency and cross it “Not Negotiable”. Your cheque or bank draft must be drawn on an Australian bank. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected.

If you receive a firm allocation of Shares from your Broker make your cheque payable to your Broker in accordance with their instructions.

LODGEMENT INSTRUCTIONS

This Application Form and your cheque or bank draft must be mailed or delivered so that it is received before 5:00pm (AEST) on 30 August 2013 at:

Mailing Address Hand Delivery Regeneus Ltd Regeneus Ltd C/- Link Market Services Limited C/- Link Market Services Limited Locked Bag A14 1A Homebush Bay Drive Sydney South NSW 1235 Rhodes NSW 2138 (do not use this address for mailing purposes)

Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a shareholder (including your name, address and details of the shares you hold) to be included in the public register of the entity in which you hold shares. Information is collected to administer your shareholding and if some or all of the information is not collected then it might not be possible to administer your shareholding. Your personal information may be disclosed to the entity in which you hold shares. You can obtain access to your personal information by contacting us at the address or telephone number shown on this form. Our privacy policy is available on our website (www.linkmarketservices.com.au).

CORRECT FORMS OF REGISTRABLE NAMES

Note that ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual Usegiven names in full,not initials	Mrs Katherine Clare Edwards	K C Edwards
Company Use Company’s full title,not abbreviations	Liz Biz Pty Ltd	Liz Biz P/L or Liz Biz Co.
Joint Holdings Use full and complete names	Mr Peter Paul Tranche & Ms Mary Orlando Tranche	Peter Paul & Mary Tranche
Trusts Use the trustee(s) personal name(s)	Mrs Alessandra Herbert Smith	Alessandra Smith Family Trust
Deceased Estates Use the executor(s) personal name(s)	Ms Sophia Garnet Post & Mr Alexander Traverse Post	Estate of late Harold Post or Harold Post Deceased
Minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation	Mrs Sally Hamilton	Master Henry Hamilton
Partnerships Use the partners’ personal names	Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith	Fred Smith & Son
Long Names	Mr Hugh Adrian John Smith-Jones	Mr Hugh A J Smith Jones
Clubs/Unincorporated Bodies/Business Names Use offce bearer(s) personal name(s)	Mr Alistair Edward Lilley	Vintage Wine Club
Regeneus Ltd Prospectus Superannuation Funds Use the name of the trustee of the fund	108 XYZ Pty Ltd	XYZ Pty Ltd Superannuation Fund

Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

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13

Corporate Directory

Regeneus Ltd Prospectus

109

13. Corporate Directory

Corporate HQ & Registered Office

77 Ridge Street, Gordon, NSW 2072, Australia

Joint Lead Managers

Peloton Capital Pty Ltd Level 5, 56 Pitt Street Sydney NSW 2000

Postal Address

PO Box 20, Gordon, NSW 2072, Australia Internet: www.regeneus.com.au

BBY Limited Level 17, 60 Margaret Street Sydney NSW 2000

Legal Advisor

Board of Directors

John Martin (Executive Chairman) Prof Graham Vesey (CEO) Assoc Professor Ben Herbert (Non-Executive Director) Dr Roger Aston (Non-Executive Director) Barry Sechos (Non-Executive Director)

Company Secretary

DibbsBarker Level 8, 123 Pitt Street Sydney NSW 2000

Investigating Accountant

Grant Thornton Corporate Finance Pty Ltd Level 17 383-395 Kent St Sydney NSW 2000

Sandra McIntosh

Auditor

Grant Thornton Audit Pty Ltd Level 17 383-395 Kent St Sydney NSW 2000

Patent Attorney

Spruson & Ferguson Level 35, 31 Market Street Sydney NSW 2000

Regeneus Ltd Prospectus

110

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Regeneus Ltd Prospectus

111

Regeneus Ltd ABN 13 127 035 358 PO Box 20 Gordon NSW, 2072 Australia Ph: +61 2 9499 8010 Fx: +61 2 9499 8020 www.regeneus.com.au

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AI assistant

CAMBIUM BIO LIMITED — Capital/Financing Update 2013

64666_rns_2013-09-17_b4dfa261-63aa-437c-a6bf-85440a0a6017.pdf

Prospectus

Important Notice

Offer

Lodgement and Listing

Expiry Date

How to obtain a Prospectus and Application Form

No Financial Advice

Exposure Period

No Offer where Offer would be illegal

Applications

Defined words and expressions

Financial Information and Amounts

Forward-looking Statements

Risks

Photographs and Diagrams

Privacy

Disclaimers

Enquiries

Key Offer Statistics

Important Dates

Dear Investor,

Yours faithfully

Table of Contents

Investment Overview

Table 2: Use of Funds

Human Health

Animal Health

Corporate

G. REGENEUS DIRECTORS

Table 4: List of Board of Directors

02

Regenerative Medicine Overview

2.1 A New Era of Medicine

2.2 Stem Cells

2.3 Mesenchymal Stem Cells from Adipose Tissue

Harvesting MSCs

2.4 Therapeutic Benefits of MSCs

2. Regenerative Medicine Overview

Anti-inflammatory proteins (cytokines)

Growth Factors

2.5 Regenerative Medicine: A Commercial Focus going forward

2.6 Focus on Treatment of Musculoskeletal Conditions

Human Market Opportunity

Chart 2: Arthritis incidence:

Veterinary Market Opportunity

03

3.1 Introduction

3.2 History

3.3 Business Model & Commercialisation Strategy

3.3.1 HiQCell Commercialisation Strategy

3.3.2 CryoShot Commercialisation Strategy

3.3.3 Secretions Product Development

HUMAN HEALTH

Figure 6: Overview of the HiQCell Treatment

3.3.4 The HiQCell Treatment

1: Tissue Harvest

2: Cell Processing

3: Cell Injection

A. Overview of the HiQCell Treatment

4: Cryo Re-injection

Cryopreservation

B. The HiQCell Patient Care Model

C. High Quality Product Offering

D. Sales and Marketing

F. Regulatory Environment

Australia

Other Markets

E. Competition

H. Medical Reimbursement

3.3.5 Clinical Validation

A. HiQCell Joint Registry

B. Osteoarthritis Stem Cell Advanced Research Study (OSCARS Study)

OSCARS Study Design

6-month & 12-month Post-Treatment Outcomes

Further Clinical Studies for HiQCell

HiQCell Case Studies

Patient 1.

CAMBIUM BIO LIMITED Capital/Financing Update 2013