Immuron Ltd — Management Reports 2012

Feb 22, 2012

SHAREHOLDER UPDATE FEBRUARY 2012

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BREAKING NEWS – DR STEWART WASHER JOINS IMMURON BOARD

Earlier this month Immuron was delighted to appoint Dr Stewart Washer as a non-executive director. Dr Washer is currently an investment manager with IB Managers, a fund that invests in clinical stage Australian biotech companies. He is also a nonexecutive director of Healthlinx Ltd (ASX: HTX), and a venture partner with Nestle’s Inventages Fund. He has raised over $50 million in private shareholder and government funds to invest in his companies

Dr Washer has fifteen years senior executive and board experience with commercial technology companies in the medical, food, agricultural and industrial sectors. He was previously Chairman of Resonance Health Ltd and Hatchtech Pty Ltd. Dr Washer was also a member of the AusBiotech Board and the Senate at Murdoch University.

Stewart’s appointment coincides with the expansion of commercialisation activities at Immuron. There is increasing interest from a number of overseas companies in Immuron’s NASH/Fatty Liver product, IMM 124E and the Company expects to devote

considerable resources to discussions and negotiations with multi-national pharmaceutical and biotech companies during 2012. Dr Washer has considerable experience in negotiating successful international commercial partnerships and license agreements and his guidance in this respect will be extremely valuable to Immuron.

Commenting on his appointment, Dr Washer stated “The key attraction of Immuron is its low risk, highly productive technology platform. The platform has already generated a successful product, Travelan[® ] for Travellers’ Diarrhoea, thus validating the technology and removing a considerable amount of the scientific risk that is associated with any technology platform. In addition Immuron’s technology platform has produced a number of products with significant commercial potential.”

“The most exciting of these is IMM124E for the treatment of Nonalcoholic Steatohepatitis (NASH) and Fatty Liver disease.

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NASH has been targeted by many large drug companies in the past with little success and there are no currently approved drugs to treat the disease. Even so, the market is large with off-label drug usage being estimated at US$1.8 billion, and expected growth to US$3.5 billion by 2015. Immuron’s Phase 1/2a clinical trial showed that IMM124E was affecting the course of the disease and not just the symptoms. This could revolutionize the way NASH/Fatty Liver disease is treated.”

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER – JOE BAINI

It has been an eventful and exciting few months since Immuron’s last newsletter, in June 2011. During this time, the company’s business development activities have culminated in the signing of an important licence agreement for Travelan[®] . The agreement is with Paladin Labs in Canada, a significant pharmaceutical company in North America, and is for the territories of Canada, Latin America and sub-Saharan Africa. Importantly, this has involved a large upfront licensing fee of $CAD500, 000 and it provides some indication of the commercial value of Travelan.

In addition to the upfront licensing fee, Immuron has the potential to receive significant revenue-based milestone payments over the period of the licence. Highlighting the confidence Paladin Labs has in Immuron’s platform technology, it has also provided the company with a funding facility of up to $CAD1.5M in the form of a secured debenture that, at the option of Paladin Labs, may be convertible into equity.

It is anticipated that once the rigours of the regulatory process for Travelan in Canada have been completed, Paladin Labs will be able to launch the product into its first markets as early as the second half of 2012, thereby generating revenue for Immuron later this year.

In addition to these secured milestones, Immuron is currently active in registering Travelan in European countries with the view to securing licensing agreements there.

Following the Travelan licence agreement with Paladin Labs, this company has been provided with the first right to negotiate a licence for Immuron’s influenza product for the same territories.

A further exciting event occurred in January 2012 when the US Food and Drug Administration (FDA) cleared Immuron’s investigational new drug (IND) submission for the proposed product (IMM-124E) to treat and/or prevent non-alcoholic steatohepatitis (NASH). Knowing that this clearance took place without a single question or query provides confidence in

Immuron’s technology, the safety associated with Immuron’s products and in the team that delivered this result. I therefore wish to personally thank, Dr. Grant Rawlin, Dr. Yaron Ilan and Target Health Immuron’s regulatory consultant) for the superb work in completing this project. The stage is now set for commencement of a Phase 2B clinical trial, and this is currently subject to the required funds being obtained. The potential revenue stream from a product to treat and/or prevent NASH is substantial, given that there is no approved product in the world for this wide spread and debilitating disease.

Immuron’s IMM-124E may well be the first approved NASH/Fatty Liver product therapeutic on the market.

Two important research projects currently underway illustrate Immuron’s ability to progress concepts with significant potential through third party collaborators. The first is with the prestigious Harvard University to explore the therapeutic effect of Travelan® on radiation patients. The second project is with Monash University to develop a product, based on Immuron’s hyper-immune colostrum technology, for the treatment and/or prevention of a deadly disease associated with Clostridium difficile. Monash University, together with Immuron, is the recipient of an ARC Linkage grant from the Australian government in support of this program.

Given these recent events, especially the licensing to Paladin Labs and the IND clearance by the US FDA, the future has never looked so bright for Immuron. In addition to these secured milestones, Immuron is currently active in the pursuit for listing of Travelan® in European countries with the view to licensing as well, as continuing discussions with multinational pharmaceutical companies who continue to express interest in IMM-124E for NASH and fatty liver. The challenge now is to capitalize on these key events.

NASH/FATTY LIVER DISEASE UPDATE ‐ FDA CLEARS IND & PHASE 2B CLINICAL TRIAL

The NASH project will take Immuron’s platform technology into a very large market characterised by “unmet clinical need” which will require long term use, and therefore generate large revenues. In order to reach this goal, clinical trial data meeting internationally defined and pre-agreed standards is required. In the first instance this involved interaction with the US Food and Drug Administration (FDA) through a process known as an Investigational New Drug (IND) application. The IND consultative process provided Immuron with the opportunity for regulatory guidance as its proposed product (IMM-124E) progresses though its development towards the market. This reduces the risk of sudden and surprising regulatory halts later in the process.

Immuron completed a preliminary meeting with key assessors at the FDA in July 2011. The FDA panel of assessors was supportive at this early stage so Immuron progressed straight to the full submission step. This step involves the submission of a large technical dossier to the FDA for assessment. At this stage of development the submitted dossier focuses on issues such as quality, safety, and whether the trial design will meet the needs for efficacy assessment under regulatory legislation. The process of completing this submission took a concerted effort from the Company’s science team over a period of approximately four months.

As announced to the ASX on 10 January 2012, the FDA cleared Immuron’s IND application which now allows the Company to commence a Phase 2b clinical trial of IMM-124E for the treatment of NASH/Fatty Liver. The IND clearance was achieved without the FDA making any comment about the submission.

This clinical trial will be a double-blind, placebo-controlled and dose ranging multi-centre trial with sites in the United States, Australia and Israel. The trial will involve approximately 120 patients and its principal aims are to determine the safety and efficacy of Immuron’s orally administered IMM-124E in patients with biopsy-confirmed NASH. Dr Arun J Sanyal, Professor of Medicine at Virginia Commonwealth University, has been appointed as global principal investigator for the clinical trial.

IN FOCUS:

By A/Professor Amanda Nicoll - Head of Hepatology, Deputy Director of Gastroenterology and Hepatology, Royal Melbourne Hospital, Victoria.

Liver Disease – the facts:	Liver Disease – the facts:
• The prevalence of non-alcoholic fatty liver disease (NAFLD) is increasing in Australia	• NASH is predicted to be the commonest cause of severe liver disease in the near future, overtaking alcohol and hepatitis C.
• Approximately 10% of patients with NAFLD progress to non-alcoholic steatohepatitis (NASH). 20% of NASH patients progress to cirrhosis	• There are no effective drug therapies for the treatment of NASH and its complications at this time

The Royal Melbourne Hospital is particularly excited about the opportunity to be involved in Immuron’s international clinical trial for the treatment of NASH. The hospital has a large diabetes clinic and two liver clinics that regularly review patients with metabolic syndrome and NASH. Approximately three hundred NASH patients attending the Royal Melbourne Hospital are waiting for new therapies for their condition and would be keen to participate in such a clinical trial. Over 10% of these patients have already developed cirrhosis and complications.

INFLUENZA PRODUCT UPDATE

Immuron’s proposed influenza product (IMM-255) is on course to be potentially the world’s first orally administered and dual-acting product for mucosal protection against influenza viruses as well as the boosting of the immune system to fight infection. This dual action comprises:

• Reducing the risk of influenza infections by binding and inhibiting the influenza virus (known as passive immunity); and

• Treatment of influenza infections by boosting the immune system to fight influenza (immunity boosting).

As we previously reported, IMM-225 was shown to be highly effective in both treating and preventing infection of influenza in mouse models. The study was recently repeated in ferrets and results to date suggest that both the challenge dose and treatment

dose were not optimal, although the data does suggest that influenza virus multiplication was reduced. Mouse and ferret work is continuing, with data expected to support the passive immunity influenza-neutralising specific claims, ie. the “reducing the risk of infection” claim. In parallel, initiation of the first human trial is planned in 2012. It is expected this trial may support claims for increasing the body’s overall resistance to influenza infection, ie. the “treatment” claims, and provide human data to support IMM-255’s progression to a full drug standing.

The anticipated dual action will provide the unique product position and differentiation from existing influenza products available for sale today. One of the key advantages of IMM-255 is that, unlike current flu treatments such as Tamiflu® and Relenza®, it will be targeted as an OTC product, and thus will be

inherently more accessible than prescription drugs, being available from the local pharmacy. Another advantage, which could distinguish IMM-255 from current vaccines, is the data that supports IMM-255 to be effective against several strains of influenza.

More than one million working days are lost each year in Australia alone by people who develop influenza and take time off work to recover. With so many working days being lost each year, IMM-255 will hopefully become a very effective and popular product. It also presents a very small cost in the context of it minimising or potentially eliminating missed days at work or at school. It is also likely to reduce the impact of influenza on the healthcare system, with reduced doctor visits. The total global prescription market is estimated to be $4.2 billion annually, and IMM-255 has the potential to capture a viable portion of it.

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OUR LATEST PARTNER – PALADIN LABS

The following is a snapshot of Paladin Labs highlighting the proven capabilities and calibre of our new partner and the wide reaching scope it brings to Immuron and especially Travelan.

• Founded in 1996, Paladin Labs is a leading specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian & Emerging markets. It is listed on the Toronto Stock Exchange (TSX: PLB) and has a market capitalization of approximately $CAN 911.5 million (31 January 2012).

• Paladin Labs is a proven partner for the Canadian market with significant reach into Latin America and Africa through strategic investments and partnerships. Paladin has successfully partnered with over 30 companies including Pfizer, Bristol- Myers Squibb, Novartis, GlaxoSmithKline, and Teva Pharmaceuticals. Paladin employs 90 people at its Canadian headquarters.

• A healthy, robust business with a demonstrated track record of profitable growth.

More details can be found at www.paladin-labs.com

NYCOMED/TRAVELAN ACTIVITIES 2011

Nycomed first started promoting Travelan in March 2010. In May 2011, Nycomed was acquired by Takeda, a Japanese pharmaceutical company. Nycomed officially became a Takeda company on 1st October 2011.

The key focus of promotion in 2011 was to raise awareness of Travellers’ Diarrhoea and Travelan. The challenge was that consumers are largely unaware about a product that can reduce the risk of Travellers’ Diarrhoea when travelling to high risk destinations, such as South East Asia, South America, Indian Sub-continent, China, Middle East, and Africa. Therefore, a key element of the marketing strategy was to educate both healthcare professionals and consumers about a preventative option instead of treatment after the occurrence.

In 2011 Nycomed focussed its efforts on healthcare professionals, namely general practitioners (GPs), gastroenterologists, pharmacists and pharmacy assistants. This promotion was led by three sales teams – GP reps, hospital specialist reps and pharmacy representatives. The objective was to educate GPs, gastroenterologists and pharmacists in order to increase their confidence to recommend Travelan. In keeping with this strategy, Travelan featured at all medical and pharmacy conferences that Nycomed attended. Throughout the course of the year, Nycomed developed a number of materials to support the promotion of Travelan such as consumer information leaflets and copies of the Otto et al (2011) clinical study[1] . These leaflets were strategically placed in pharmacies, travel medicine clinics and medical centres.

A key aspect of the promotion was increasing distribution of Travelan via pharmacies. At the end of 2010, it was approximately 30%, and is now 48%. By the end of 2012, more than 60% of pharmacies are expected to stock Travelan.

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A new marketing campaign was launched, featuring a traveller suffering from Travellers’ Diarrhoea. A key aspect of promotion to the public was via the Travelan website (www.travelan.com.au). Extensive use was also made of social media on the internet.Nycomed also attended the Adventure Travel and Backpackers Expo in Sydney in November, where Travelan generated significant interest from seasoned travellers.

"Thank you Travelan" – quotes from the Travelan.com.au website.

“ I would just like to thank‐you for the Travelan tablets. They are very good and worked well for me. This time around I took the tablets as advised and I did not get sick or get admitted to hospital. Even my husband and son were fine and none of them got ill on this trip either. I will surely take them the next time I go to India & have also been recommending the tablets to all my relatives & friends who I know are going overseas where these tablets may be of use .” Family from Melbourne visiting relatives in India

“ Thank you for your excellent product! I just recently returned from 3 months of roughing it and backpacking through South East Asia and thanks to you I had a brilliant trip and no problems whatsoever... After much travel through under developed countries over the years, it was time I found a product which ensured I did not get sick like I normally experience and Travelan was it! ” UK Backpacker

“ Thanks to a brochure in the men's room at Melbourne airport, we have finally had our first overseas trip without knowing every toilet location in Thailand and Asia. Usually we come home exhausted and losing 5kilos. We are thrilled with this great product and will never leave Australia without it. Thanks for many great trips to come .” Mr Cowmeadow, Director, Cars R Us.

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1 Otto W et al (2011): Randomised control trials using a tablet formulation of hyper-immune bovine colostrum to prevent diarrhoea caused by enterotoxigenic Escherichia coli in volunteers. Scand J Gastroenterology