IMUGENE LIMITED — Interim / Quarterly Report 2004

Apr 29, 2004

LIMITED

ASX ANNOUNCEMENT

Market Update

April 30^th, 2004, Sydney:

PIG AND POULTRY VACCINES

Development work on the portfolio of pig and poultry vaccines is progressing as expected. Imugene is currently developing 10 vaccine and therapeutic products for the pig and poultry markets. Eight of these products have entered the final stage of construction and are due for completion in the next 4-8 weeks. These eight products will all have the new, more powerful promoter (announced 25 September 2003). The three products under contract with our partner. Merial (Jointly owned animal health company of Merck & Aventis), will be delivered for further testing and evaluation are in this final stage of construction.

Included in the remaining products due for completion are:

• New products developed specifically for the Chinese market (see below)
• New Pig productivity enhancers
• New pig vaccine for PRRS (See below)

The two remaining vaccine products not yet in the final stages of construction are a new pig vaccine for the Chinese market and the recently commenced poultry vaccine for Avian Influenza.

Porcine Reproductive and Respiratory Syndrome (PRRS)

Imugene recently completed pig trials that proved the efficacy of a new vaccine developed by Imugene for controlling one of the worlds major pig diseases. The successful pig trials demonstrated that the vaccine prevented the PRRS disease in all vaccinated pigs. This disease is one of the most economically important diseases of pigs worldwide and currently available vaccines have limited efficacy. The basis for the efficacy of the new Imugene PRRS vaccine is the patented "Adenoviral Delivery Vector".

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

Preliminary estimates indicate revenue earned from an effective vaccine would be up to US\$100 million pa. If eradication programs were introduced, the market could be as much as US\$200-300 million pa. The market size is difficult to estimate accurately, as the incidence of the disease is increasing.

APP

Development of the one bacterial vaccine (APP) in the portfolio will cease due to technical difficulties encountered by Intervet. Imugene was not conducting further work on this vaccine and had licensed the technology to Intervet as the APP vaccine does not use the "Adenoviral Delivery Vector" and therefore fell outside our core platform technology. The license rights will revert to Imugene in 12 months.

New Markets

Imugene has commenced negotiations with a potential joint venture party to enter the Chinese and Asian markets. The initial products selected for the Chinese market will be pig vaccines, followed by certain poultry vaccines. Detailed market analysis is underway and the first two pig vaccines specifically for the Chinese market are being prepared.

Imugene Managing Director Dr Warwick Lamb said. "Entering the Chinese market is something Imugene will only undertake with an appropriate joint venture party. We have identified a company with excellent credentials, already well established in our target market in China. With over one billion pigs. China has by far the largest pig population in the world. There are viral diseases in China that are no longer seen in other countries, and the huge number of vaccine doses required for these diseases justifies the manufacture of new vaccines for this market alone

The two vaccine candidates under development for the Chinese market will be completed and ready for testing in the third quarter of this year. We expect the requiatory trials will be undertaken in China shortly thereafter."

Regulatory Process

As part of the normal process in working towards product approval for commercial release, Imugene is actively working with the Office of the Gene Technology Regulator (OGTR) in Australia to ensure approval for the intentional release trials for its pig & poultry products. The approvals being sought will allow product testing in larger numbers of animals and in commercial type environments. Once approval is received these trials will be undertaken.

Imugene expects to demonstrate even greater growth gains under these commercial conditions when compared to the impressive gains already obtained from trials in controlled laboratory settings.

The current expectation is for approval to undertake these larger scale trials will occur in the second half of 2004. The timing is dependent upon the OGTR and their continuing examination the Imugene products.

Patents

Imugene, pursuant to the license with the CSIRO, has exclusive world-wide rights to the Adenoviral Delivery Vector suite of patents and patent applications.

The Pig Adenoviral Delivery Vector patent application is currently under examination in the USA and has been through the formal examination procedure. This process included a meeting between Imugene's Chief Scientific Officer, Dr Mike Sheppard, and the USA examiners. Imugene is confident that this patent application will be granted in the USA.

The Poultry Adenoviral Delivery Vector patent that has been granted in the USA, Australia and New Zealand and has been under examination in Europe. The granting of this patent has been delayed while Imugene enters the appeals process in an attempt to broaden the allowable claims similar to the claims that have been allowed by the USA Patent Office. Imugene is confident of the successful grant of the broader patent claims in Europe upon completion of the appeals process.

NEW PROJECTS

Imugene has previously confirmed that new projects have been reviewed for their commercial potential. Suitable projects must have large markets and complement Imugene's current portfolio of biological animal health products under development and commercialisation. Imugene can now confirm entering the final stages of negotiations for a new platform technology. The new technology is 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.

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

FLEA VACCINE PROJECT

The initial range of possible flea vaccine candidates have now been determined by the Murdoch University researchers. A process for significantly expanding the number of potential vaccine candidates has been identified by Imugene. Negotiations are underway with Murdoch University to increase the candidates proceeding to dog trials.

END

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.

Imugene's pig and poultry product portfolio is aiming to exploit market segments worth US\$3 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.

Imugene's flea control vaccine research is targeting the global market for flea control products worth in excess of US\$1.5 billion per annum. An efficient biological vaccine has the potential to immediately gain a large share of this market from the current "over the counter" chemical treatments.

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

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

Rule 4.7B

Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Introduced 31/3/2000. Amended 30/9/2001

Name of entity

IMUGENE LIMITED

ABN

99 009 179 551

Quarter ended ("current quarter")

31 March 2004

Consolidated statement of cash flows

		Current quarter	Y ear to date
Cash flows related to operating activities			$(9$ months)
		\$A'000	\$A'000
1.1	Receipts from customers
1.2	Payments for (a) staff costs	(221)	(548)
	(b) advertising and marketing
	(c) research and development		(204)
	(d) leased assets
	(e) other working capital	(81)	(262)
1.3	Dividends received
1.4	Interest and other items of a similar nature
	received	21	65
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other – research and development rebate	÷	359
	Net operating cash flows	(281)	(590)

⁺ See chapter 19 for defined terms.

		Current quarter	Year to date $(9$ months)
		\$A'000	\$A'000
1.8	Net operating cash flows (carried forward)	(281)	(590)
	Cash flows related to investing activities
1.9	Payment for acquisition of:
	(a) businesses (item 5)
	equity investments (b) intellectual property (c)		(256)
	(d) physical non-current assets	(2)	(7)
	other non-current assets (e)
1.10	Proceeds from disposal of:
	(a) businesses (item 5) (b) equity investments
	intellectual property (c)
	physical non-current assets (d)
	other non-current assets (e)
1.11 1.12	Loans to other entities Loans repaid by other entities
1.13	Other (provide details if material)
	Net investing cash flows	(2)	(263)
1.14	Total operating and investing cash flows	(283)	(853)
	Cash flows related to financing activities
1.15	Proceeds from issues of shares, options, etc.	15	91
1.16	Proceeds from sale of forfeited shares
1.17 1.18	Proceeds from borrowings Repayment of borrowings
1.19	Dividends paid
1.20	Other - capital raising expenses		(150)
	Net financing cash flows	15	(59)
	Net increase (decrease) in cash held	(268)	(912)
1.21 1.22	Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20	1,974	2,618
1.23	Cash at end of quarter	1,706	1,706

⁺ See chapter 19 for defined terms.

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

		Current quarter \$A'000
1.24	Aggregate amount of payments to the parties included in item 1.2	140
1.25	Aggregate amount of loans to the parties included in item 1.11	Nil

1.26	Explanation necessary for an understanding of the transactions
	Payment of
		executive salaries and superannuation entitlements;
	$\mathbf{ii}$	performance bonus to Mr Dowland and Dr Lamb relating to milestones achieved in
		$2003$ ; and
	iii)	Non executive director's fees for 2003/04.

Non-cash financing and investing activities

$2.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

None.

Details of outlays made by other entities to establish or increase their share in businesses in which $2.2$ the reporting entity has an interest

None.

Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

		Amount available	Amount used
		\$A'000	\$A'000
3.1	Loan facilities	Nil	N/A.
3.2	Credit standby arrangements	Nil	N/A.

⁺ See chapter 19 for defined terms.

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.		Current quarter \$A'000	Previous quarter \$A'000
4.1	Cash on hand and at bank	901	974
4.2	Deposits at call	805	1,000
4.3	Bank overdraft
4.4	Other (provide details)
	Total: cash at end of quarter (item 1.22)	1.706	1,974

Acquisitions and disposals of business entities

		Acquisitions (Item $1.9(a)$ )	Disposals (Item $1.10(a)$ )
5.1	Name of entity	Not Applicable
5.2	Place of incorporation or registration
5.3	Consideration for acquisition or disposal
5.4	Total net assets
5.5	Nature of business

Compliance statement

• This statement has been prepared under accounting policies which comply with accounting $\mathbf{I}$ standards as defined in the Corporations Act (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.
• This statement does /does not* /delete one) give a true and fair view of the matters disclosed. $\overline{2}$

Sign here: ...................................... (Director/Company secretary)

Print name: Mark Pearce

⁺ See chapter 19 for defined terms.

Notes

• $\mathbf{1}$ . The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
• $2.$ The definitions in, and provisions of, AASB 1026: Statement of Cash Flows apply to this report except for the paragraphs of the Standard set out below.
• $6.2$ - reconciliation of cash flows arising from operating activities to $\bullet$ operating profit or loss
• $9.2$ - itemised disclosure relating to acquisitions
• itemised disclosure relating to disposals 9.4
• $12.1(a)$ policy for classification of cash items
• disclosure of restrictions on use of cash 12.3
• 13.1 - comparative information
• 1. Accounting Standards. ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

⁺ See chapter 19 for defined terms.