IMUGENE LIMITED — Capital/Financing Update 2004

May 19, 2004

LIMITED

ASX ANNOUNCEMENT

Imugene Licenses New Technology for Pig Gastrointestinal Diseases

May 20, 2004, Sydney:

Imugene today announced the signing of a license to a new platform technology for the prevention, treatment and diagnosis of gastrointestinal diseases in pigs. The "Receptor Mimic Technology" is a new biological method for disease control and, consistent with Imugene's current range of products under development, is safe, residue free, and aims to improve animal health whilst reducing or replacing the use of antibiotics, drugs and chemicals in food producing animals.

The first Receptor Mimic product under development is a biological product to prevent Post Weaning Diarrhoea caused by E, coli bacteria in piglets. The second product being developed will prevent Piglet Oedema Disease, another usually fatal disease in piglets caused by a different strain of E. coli. Further products to be developed will target diseases such as Rotavirus, Clostridia and other bacterial and viral causes of infectious diarrhoea in pigs of economic importance around the world.

Imugene Managing Director Dr Warwick Lamb said, "This is state of the art technology, essentially the next step on from probiotics. The "Receptor Mimic Technology" allows the creation of non-chemical treatments with no residue or side effects, specific for an individual disease. As the treatments will be administered in the drinking water, there is no need for injections or additional animal handling. The treatments can also be easily administered at the appropriate time for each disease, based on the animals age or if there is an outbreak."

The "Receptor Mimic Technology" is to be licensed from the University of Adelaide's commercial arm, Adelaide Research & Innovation Pty Ltd (ARI) and is the result of research by Dr Adrienne Paton. Dr Renato Morona and Professor James Paton, recognised world leaders in this field. The terms of the license grant Imugene exclusive world-wide rights to commercialise the technology by

ABN: 99 009 179 551 Level 1, 14 - 20 Delhi Road, North Ryde NSW 2113 PO Box 307, North Ryde NSW 1870 Tel: +61 2 9870 7330 Fax: +61 2 9888 9338 website: www.imugene.com

creating products for the prevention, treatment and diagnosis of pig gastrointestinal diseases.

Under the license ARI will receive milestone based payments and royalties on commercial sales.

The new technology is a platform technology, with multiple potential applications, particularly against infectious gastrointestinal diseases. With a strong biological product portfolio for infectious diseases already under development by Imugene using the patented Adenoviral Delivery Vectors, the new product range to be developed from the "Receptor Mimic Technology" will further expand and strengthen the product portfolio.

Patents

A wide reaching patent covering the "Receptor Mimic Technology" was filed in September 2000. Further provisional patents to provide additional protection for individual products are also in the process of being filed. As the first products are ready for immediate use in clinical trials, the initial patents will provide a long period of market protection for products at least through to 2019.

How the "Receptor Mimic Technology" works

Infectious organisms (bacteria and viruses) in the gut usually produce disease by one of two mechanisms. The first is the production of toxins that bind to specific receptors on the gut wall. The second is by adhering to specific receptors on the gut wall and then entering the cell to multiply or produce toxins. The "Receptor Mimic Technology" is based on a harmless bacteria, which has been modified to display masses of mimics of these receptors all over the cell surface. Toxin released from the disease causing bacteria binds to the Receptor Mimic and then is excreted from the animal, preventing the binding of the toxin to the receptors on the animal gut wall. This prevents the disease caused by the toxin affecting the animal.

Receptor Mimics can also be created to mimic the adhesion site receptors for infectious organisms, such as viruses, that need to attach to the gut wall to cause disease. As these bacteria or viruses are then unable to attach to the gut wall. they are unable to multiply and produce signs of disease in the animals.

The gut receptors for each type of infectious disease (bacterial, bacterial toxin or viral) are different, and therefore a large range of products can be derived from the "Receptor Mimic Technology", specifically targeting the desired disease.

Dr Lamb said "There is a large range of potential applications for this technology. We have already begun the process of identifying specific diseases that will form the focus of ongoing research and development at the University of Adelaide".

"One of the greatest advantages of this technology is that unlike antibiotics or antimicrobial chemicals available to treat bacterial gut diseases, the 'beneficial' bacteria within the gut are not killed by the Receptor Mimic. "Good" bacteria are required in the intestine as they are essential for normal intestinal health and digestion. The "Receptor Mimic Technology" allows the beneficial bacterial gut flora to maintain the normal balance without the "good" bacteria being killed by an antimicrobial or antibiotic."

Again unlike chemical treatments, the pigs under treatment from the "Receptor" Mimic Technology" are also able to develop immunity to the disease causing bacteria for future protection. The Receptor Mimics, given as dead bacteria. essentially act as a sponge and soak up the toxins as they pass through the gut. As the disease causing $E$ , coli are not being killed, there is no chance of contributing to the development of antibiotic resistance."

The initial disease target – E. coli Post Weaning Diarrhoea

E, coli is a major cause of disease and economic loss in the intensive pig production industry around the world. The bacteria causes diarrhoea in piglets. (Post Weaning Diarrhoea) resulting in production losses from illness and reduced food intake, as well as death in a percentage of affected piglets. The disease is caused by toxins released from the bacteria that attach to receptors on the gut wall, causing the illness and diarrhoea. The market for E, coli disease prevention treatments in pigs has been estimated to be in excess of US\$450 million per annum.

Animal Trials

The technology has been proven both in vitro and in mouse trials. A Receptor Mimic for Shiga toxin producing $E$ , coli (one of several types of $E$ , coli bacteria) provided 100% protection against the fatal toxic effects of Shiga toxin in mice. As the toxin in mice is identical to the toxin in pigs and people, proof of concept has been achieved. The first two Receptor Mimic products (Post Weaning Diarrhoea and Shiga Toxin) are ready for immediate pig clinical trials and these trials have been designed and scheduled in pigs to allow registration of the product worldwide.

The first independent external trial of the E, coli Receptor Mimic involving 50 pigs, has been designed, and will be undertaken by Primary Industries Research Victoria, one of Australia's leading research facilities in the field of E. coli disease in pigs.

ABN: 99 009 179 551 Level 1, 14 - 20 Delhi Road, North Ryde NSW 2113 PO Box 307, North Ryde NSW 1870 Tel: +61 2 9870 7330 Fax: +61 2 9888 9338 website: www.imugene.com

ABOUT THE UNIVERSITY OF ADELAIDE

The University of Adelaide is one of Australia's best performing research universities. It attracts one of the highest levels of per capita research funding in Australia in terms of winning national competitive grants and other public sector funding. The Australian Government has ranked the University in the recent quality review in the top group of Australian universities. The University is an active participant in Commonwealth-funded Research Centres - being the site of three National Research Centres and a participant in fifteen Cooperative Research Centres. It is also home base for many specialist research centres and units in a wide range of disciplines.

The University of Adelaide has strengths in the areas of medical, plant and animal research, and advances in these fields have spawned numerous successful biotech companies, several of which trade on the Australian Stock Exchange. The University is home to the largest agricultural research complex in the Southern Hemisphere as well as Australia's largest university-owned technology/research park. Commercialisation of the University of Adelaide intellectual property is performed with the assistance of the wholly owned company Adelaide Research & Innovation Pty Ltd (ARI).

The University of Adelaide researchers Dr Adrienne Paton. Dr Renato Morona and Prof James Paton, the inventors of the "Receptor Mimic Technology", lead a highly productive, internationally respected research team, with an extensive network of local and overseas collaborations. They have been highly successful in attracting public and private sector research funding, and are joint recipients with interstate colleagues of a \$15 million NH & MRC Program Grant to study the mechanisms whereby bacteria cause disease in humans.

ABOUT IMUGENE:

Imugene Limited (ASX Code: IMU) is an Australian biopharmaceutical company specialising in the development and commercialisation of animal health products for production animals (pigs and poultry) and companion (pet) animals.

Imugene's products safely prevent disease and parasites in animals, reduce or eliminate the use of antibiotics, harmful chemicals and drugs and, in production animals, reduce the level of antibiotic and chemical residue entering the human food chain.

ABN: 99 009 179 551 Level 1, 14 - 20 Delhi Road, North Ryde NSW 2113 PO Box 307, North Ryde NSW 1870 Tel: +61 2 9870 7330 Fax: +61 2 9888 9338 website: www.imugene.com

Imugene's patented biological chicken productivity enhancer has no competitor in the market that can achieve the modification of the immune system, which results in increased resistance to a range of diseases. The enhanced poultry growth and weight gain in trials to date has delivered results of up to 10% increases with unchanged or improved feed conversion rates. As Imugene's biological productivity enhancer boosts the immune system by using a substance occurring naturally in chickens, there is no residue or risk of contributing to the development of antibiotic resistance.

Imugene's pig and poultry product portfolio is aiming to exploit market segments worth US\$3.5 billion of the existing US\$8 billion annual global spend on existing treatments. The majority of the existing treatments are chemical and antibiotic products that are becoming less effective for disease treatment and productivity enhancement. Compounding the problem of diminishing efficacy, governments and health organisations internationally, are lobbying and legislating against the ongoing use of antibiotics in favour of non-chemical and biological treatment alternatives.

More information:

Mr Graham Dowland, Imugene's Executive Chairman	+61 8 9322 9189
Dr Warwick Lamb, Imugene's Managing Director	+61 2 9870 7330
Visit Imugene Limited's website at:	www.imugene.com