DIMERIX LIMITED — Interim / Quarterly Report 2008

Apr 29, 2008

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ASX Company Announcement

30 April 2008

Investor Update

The Directors of Sun Biomedical Limited (ASX: SBN or the Company) wish to provide the following update to investors in relation to Sun Biomedical Laboratories Inc.’s (“SBL”) operations.

1. Financial Performance for March Quarter

	March 2008 Quarter	December 2007 Quarter
Salesrevenues ($’000) ~~(1)~~	282	120
NumberofOraline units sold	59,111	17,335

(1) unaudited

Sales have improved since the previous quarter however the business continues to operate at a loss. The unaudited net operating loss for the March quarter was $0.4m before non-cash items

The net outflow of cash in the quarter ended 31 March 2008 was $1,032k (per Appendix 4C). The major contributors to the net outflow are summarized below:

	$’000
Payments to Messrs Andrews (former MD) and Paice (former CFO) Payment of creditors outstanding as at 31 December 2007 Net proceeds from share purchase plan in January 2008 Increase in inventory Repayment of vendor promissory note Otheroperating costs	(130) (306) 106 (55) (225) (422)
Netreduction incash	(1,032)

2. Capital Raising

As at 31 March 2008, SBN’s consolidated net working capital position was as follows:

	$’000
Cash Trade and other debtors Inventory Trade and othercreditors	468 225 105 (226)
Net working capital Finalpromissorynote payment dueinJuly2008	572
	(1,104)

Sun Biomedical Limited ABN 18 001 285 230

Investor Communications

Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 |

E: info@sunbiomed.com

ASX:SBN

www.sunbiomed.com

As foreshadowed in the February 2008 investor update, the Board plans to invite shareholders to participate in a capital raising during May/June 2008. The funds raised would be used to continue to progress the sales initiatives discussed in further detail below over the next 12 months.

Separately the Board is having discussions with the holder of the vendor promissory note to defer part of the payment as well as partial conversion of the note into SBN equity.

The capital raising would provide funds for the next 12 months to cover:

• The forecast operating cash flow deficit of the US business whilst sales increase. Management currently estimates that sales from the development of Oraline 8, the BioScreens and China projects (discussed further below) will begin to make a significant impact upon the business in the early 2009;

• The cost of attaining Visualine 510K clearance – $120k;

• The development of the BioScreens cup - $45k;

• The commercialisation of the China joint venture, including the capital expenditure required to increase the production capacity of the current plant to meet the higher demand - $400k;

• The development of Oraline 8 - $100k; and

• FDA Good Manufacturing Practices (“GMP”) compliance and quality control measures - $170k.

3. SBL’s Sales Initiatives

a) Visualine

High production cost and lack of innovation have effectively eliminated Visualine as a competitive product in the largest segment of the US drug testing market, urine testing. As of January 2008, Visualine is not sold by any of SBL’s distributors as the pricing is well above alternative suppliers. Sales of Visualine are predominately to small legacy buyers who have not sought to find less costly alternatives in the market. Currently, Visualine sales amount to around $10k per month. SBL has begun a two pronged approach to solving these twin problems:

(i) BioScreens Agreement

Firstly, by partnering with BioScreens to create a quality, low cost cup and tailoring Visualine to be an integral part of the new BioScreens cup. The BioScreens cup attacks the most value added part of the urine test cup market, the split specimen cup. The new cup has a simple twist mechanism that separates the original urine specimen from the tested portion. It has a more “female friendly” design and is targeted to be a lower cost competitor to the major split specimen cup manufacturer, Inverness.

The development of the new BioScreens cup with SBL’s Visualine card is progressing. SBL is currently in the process of refining its existing membrane product for the new multi-drug cup design whilst BioScreens is seeking competitive quotes for the manufacture of the plastic collection device in China. BioScreens hopes to reach agreement with their preferred manufacturer by May 2008.

BioScreens is planning to promote the product at the upcoming Drug Abuse Testing Industry Association conference in the US at the end of April 2008. Business development efforts for the new cup by BioScreens are continuing and are meeting expectations. The launch of the finished product is still expected to occur in the quarter ending in September 30, 2008.

Sun Biomedical Investor Communications ASX:SBN Limited Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | www.sunbiomed.com ABN 18 001 285 230 E: info@sunbiomed.com

(ii) Visualine Re-Launch

In addition to the BioScreens initiative, Visualine production costs are being tackled by utilizing SBL’s core competence, its test strip chemistry, with lower assembly cost from Mexican contract manufacturers. SBL is lowering both the raw material costs and the assembly labor cost by “doubling up” on the number of tests per test strip. Raw material cost are reduced by 25% and strip assembly cost by over 40% using SBL’s technical know-how to cut the number of test strip per device by 50%. Further reductions in device assembly cost are being achieved through the use of low cost, FDA registered, contract manufacturers. These changes in manufacturing have increased the capacity of Visualine from 10 drugs to 12 drugs per device.

The development of drug formulations and validation testing is progressing on schedule. The re-launch of the product is progressing in sync with the efforts to support the new BioScreens cup and is expected to occur in the quarter ending September 30, 2008.

b) China

The joint venture with SiYi in China is to sell and assemble Oraline products for use by the Ministry of Public Security (MPS) in China and future non-governmental customers in China. MPS has conducted its initial testing of Oraline and requested that SBL further define the detection range of the Oraline product. Like all rapid detection devices, Oraline will provide a positive/negative indication across a narrow range of drug concentrations. MPS has approved an evaluation plan by SBL that will objectively define the lower and upper limits of that detection range. SBL will deliver the results of that evaluation to MPS by the end of June 2008 for their review and confirmation. Provided MPS are satisfied with the results, field trials are projected to begin by November 2008 with purchases increasing during CY 2009.

c)

Oraline VIII

The Oraline VIII development project, directly supervised by Dr. Sun, SBL’s founder and its current Director of Research and Development, is progressing. Prototypes of the new device have been developed and are in SBL’s lab for testing. Oraline VIII will deliver eight drug tests in one device with improved saliva collection. Surveys of SBL distributors in the US, China and Europe have been conducted to determine the new drugs most desired for Oraline VIII. There are ten drugs that will be available in the Oraline VIII product. The current four drugs of Oraline IV and six new drugs will be available in two combinations of four new drugs. Customers will continue to have available the current four drugs and can select one of the two combinations of four drugs. This flexibility allows SBL to offer combinations that are in demand in the US yet also address the different requirements found in China and Europe. Discussions with existing distributors indicate that the ability to test for 8 drugs rather than 4 will provide SBL with a significant advantage over its competitors. The expected launch date for this new product is September 2008.

d) New US Distributors

SBL’s sales strategy in the US remains exclusively focused on finding new Oraline distributors. No sales effort is being directed at Visualine until the planned re-launch in September 2008.

In the first quarter, additional new distributors were added in the US to increase overall sales and to diversify the sales channel for Oraline.

Sun Biomedical Limited ABN 18 001 285 230

Investor Communications Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | E: info@sunbiomed.com

ASX:SBN www.sunbiomed.com

e) Mexico

The small test program of 2,000 Oraline units in Mexican schools has begun. SBL’s distribution partner, Express Diagnostics, has met with government officials and expects a decision regarding the roll out of the program within the next three months. SBL anticipates that if the program is approved for expansion, that no new orders would be received until at least the start of the new school year in September 2008.

f) Europe

Russian and Polish registration of Oraline is progressing with distribution partners in those countries. No sales are projected for these partners in 2008.

SBL has begun to actively seek additional European distribution partners in the UK. Limited activity is planned to attract other European partners until the release of Oraline VIII in late 2008.

g) Australia

SBL is concentrating on developing distribution partners in the US and growing the relationship with our partner, SiYi, in China. The Australian market overall is relatively small but the Mining and Metals industry has shown interest in saliva testing. SBL is currently supplying distribution partners in Australia with a small quantity of Oraline products but no investment in marketing or other demand development activities are planned for Australia. The primary focus of SBL business development is in the US and in support of China where government regulation creates market demand.

h) Latin America

SBL has begun to utilize the services of the US Department of Commerce to take advantage of government export programs. This effort is designed to lay the groundwork to measure interest in Latin America and to identify potential partners. The first area of concentration is four countries in Latin America. SBL does not plan to divert resources from the primary focus on the US and China. These initial efforts in Latin America are to capitalize on government services provide to US exporters and to establish awareness of Oraline among a relatively small number of key Latin American distributors. If successful, this effort will lay the basis for a more comprehensive program in 2009 and beyond.

4.

Market Review

As part of the due diligence process for the upcoming capital raising, the Board has appointed a US consulting firm to undertake a review of the market for rapid drug testing in the US. Their area of specialisation is the workplace testing market and therefore their comments largely reflect the views and practices of the laboratories and third party administrators (“TPA”) of employee drug programs. Some of the key points raised are noted below:

• Lab based urine testing is still the predominant mode of drug testing in workplace programs;

• TPAs have the greatest influence in determining which devices get used as end users rely almost exclusively on their recommendations;

Sun Biomedical Limited ABN 18 001 285 230

Investor Communications Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | E: info@sunbiomed.com

ASX:SBN www.sunbiomed.com

• Interest in oral fluid testing peaked between 2005 and 2006 and has since begun to wane. The interest in oral fluids has flattened out because of the federal government’s decision to hold off on approving alternative modes of testing to urine testing. This is unlikely to happen in the near future. Other factors include the shorter window of detection (especially given that 70 – 80% of drug testing is pre-employment screening), the lack of legal precedents and the inability of rapid oral fluid devices to accurately detect THC (marijuana) at the sensitivity levels of a typical urine test;

• There is greater anticipated growth for lab based oral fluid testing as there is still far greater acceptance of this mode of testing in the US;

• Oral fluid testing enjoys a more favourable reputation in countries outside the US. In the US, people’s views are coloured by 25 years of federal government standards which require the use of urine. Further, other countries see urine testing as an intolerable invasion of privacy and do not have the network of testing and collection facilities which have been established in the US;

• There are certain industries/situations for which rapid saliva testing products have particular application such as, mining, construction, random, post accident and pre-commencement of work testing. Consequently, marketing of saliva products should be specifically targeted at these sectors;

• Manufacturers and distributors of rapid devices need to do a better job of promoting the benefits of rapid testing to end users. That is, the loss of productivity and down time associated with having workers leave the work place to provide samples at a collection facility;

• There is no question that the lack of FDA approval is a major limitation with rapid oral fluid testing. However, FDA approval by itself will not open the flood gates for new sales of oral fluid testing. It will remove a significant barrier but not solve the issue entirely. The issues of price, reliability/accuracy remain not to mention the upheaval associated with making such a change when urine is the entrenched medium of testing;

• There are a number of manufacturers who claim to be close to obtaining FDA approval;

• Price, accuracy and ease of use are the three key factors in the sale of urine dip cards and cups.

5. Quality Control Initiatives

SBL has scheduled a June 2008 ISO 13845 audit of its operations in anticipation of the October 2008 renewal of SBL’s ISO certification.

Improvements to SBL’s QA system were completed in March in a number of areas including a re-vamp of the Vendor Evaluation process for all critical raw materials and components used in the manufacture of SBL products.

Customer feedback on the desirability of increasing the line intensity of SBL Oraline and Visualine products have been incorporated into a QA/R&D initiative targeted for completion in July.

Sun Biomedical Investor Communications ASX:SBN Limited Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | www.sunbiomed.com ABN 18 001 285 230 E: info@sunbiomed.com

6. Legal and Regulatory Matters

a) Avitar

A settlement of the claim against Avitar has now been agreed upon and awaiting court confirmation. The terms of the settlement are confidential.

b) FDA update

Oraline

SBL continues to believe that the completion of the required studies for FDA approval should be postponed until preliminary clinical trials have been completed for the existing four drugs of Oraline and the six new drugs in development. At this stage, the earliest date that the company would expect to submit a new 510k application for Oraline would be during quarter 3 of 2009. In the interim, sales in the US will continue to be for “forensic use only” and to international customers.

As previously advised, the estimated cost of achieving 510k point of care clearance for Oraline is in the region of $500k. The Board is continuing to evaluate the merits of pursuing this approval given the significant cost, the probability of success, the likelihood of a competitor getting there first and the level of incremental sales likely to be generated as a result of attaining the approval.

Visualine

As previously advised, SBL received a deficiency letter from the FDA in relation to its 510k point of care (“POC”) submission for Visualine. SBL has met with the FDA and guidance has been obtained regarding the additional clinical studies required in order to achieve 510k POC clearance. SBL has obtained a quote for sourcing and testing of the necessary urine samples for these studies and now expects to lodge a new submission with the FDA by the end of 2008 at an estimated cost of around $120k. The company decided to allow the previous submission to lapse because of the significant cost associated with completing the required studies and hence the need to ensure that it allowed sufficient time for the work to be completed to the required standard. Further, given the current low level of Visualine sales volumes it was decided that the delay would have little impact upon SBL’s revenues. As discussed below, SBL has obtained independent advice that the BioScreens Cup will be adequately covered by its existing FDA approvals provided the product is appropriately labeled.

Third Party Review

The Board also engaged a third party to conduct a full review of the status of SBL’s FDA previous and planned filings to confirm that, with the appropriate resources, SBL’s current plan will be able to secure 510k clearance for both Oraline and Visualine in the timeframes and budgets proposed. The key findings of this review are as follows:

• The proposed timeframes and budgets (as discussed above) for both the Oraline and Visualine 510k POC submissions are aggressive, but achievable provided there are no validation failures/issues;

• The current improvements that SBL is making in Oraline’s performance at the specified cutoff thresholds should be resolved before a new submission is made;

• The BioScreens cup is likely to be covered by SBL’s existing 510k approvals provided the product is marketed for laboratory use only, research use only or investigational use only; and

Sun Biomedical Investor Communications Limited Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | ABN 18 001 285 230 E: info@sunbiomed.com

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• SBL has in progress a number of GMP improvements. This work is likely to take around six months to complete and cost in the region of $170k. Although the specific issues raised in the FDA warning letter of April 2007 have been addressed, management believes that it is necessary for the company to comply with GMP in all aspects of its operations to ensure that it meets all relevant FDA regulations.

FDA Inspections

On 29 April the FDA began an audit based on the April 2007 Warning Letter. This is expected to be completed during May. The Board will keep investors informed of any material issues that arise from this review. As the company has not completed its GMP improvements, it is possible that this audit will result in additional measures to remain FDA compliant.

7. ShockRounds

SBN received an approach from an interested party in relation to the acquisition of the ShockRounds patent. The party met with the inventor of the technology but has chosen not to pursue any further discussions as there is currently no working prototype available for testing. At this time the Board does not wish to divert attention or resources from the SBL business and hence has decided not to incur the additional time and cost required to develop a functioning prototype. The Board remains open to approaches from interested parties to fund the development of the ShockRounds technology without any material financial commitment from SBN

8. Website

The website has now been relaunched. SBL plans to add a “Frequently Asked Questions” section to the Investor Relations page to allow it to respond to investor queries in an efficient and equitable manner.

For further information in relation to this announcement or any aspects of SBN operations please contact:

Jim Hallam

Director

Mobile: 0414965442

Sun Biomedical Limited ABN 18 001 285 230

Investor Communications

ASX:SBN www.sunbiomed.com

Computershare T: +61 1300 850 505 | F: +61 3 9473 2500 | E: info@sunbiomed.com