IMUGENE LIMITED — Interim / Quarterly Report 2011

Feb 24, 2011

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Half Year Financial Results and Operations Report

February 2011

Imugene Limited (ASX Code: IMU) specialises in the development and commercialisation of novel animal health products for pigs and poultry. Our range of products under development includes vaccines to prevent important livestock diseases and productivity enhancers to improve the economics of raising commercial livestock.

Imugene has today released its Interim Financial results for the period ended 31 December 2010 reporting revenues of $1,744,294 and a net profit of $743,581.

The Company has returned to profit following the signing of a global licensing agreement in 2010, for which fees of $US1.75 million were received during the last quarter of 2010. Full details of the financials are contained in the attached report. The following commentary provides an update on corporate activity and operational highlights for the previous two quarters.

Highlights

• Exclusive global license to Imugene’s pig & poultry vaccines granted to major international animal health company – technical and material transfer programs well underway

• Imugene’s PRRS vaccine trial successfully completed in 2010 - results again prove commercial efficacy of Imugene’s vaccine

Update on Global and exclusive License Agreement – technical and material transfer programs commence

As announced on 13 October 2010 Imugene granted an exclusive global license to Novartis Animal Health Inc, a business unit within the global Novartis group. This agreement gives Novartis exclusive global rights to all of Imugenes technologies and intellectual properties.

The signing of this commercial agreement is in keeping with Imugenes business model to maximise income from the receipt of research fees, license and royalties from an alliance

ABN 99 009 179 551

Registered Office Level 20, Allendale Square, 77 St Georges Terrace, Perth WA 6000 Tel +61 8 9440 2660 Fax +61 8 9440 2699

www.imugene.com

Interim Financial Report & Update – February 2011

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partner with sufficient expertise and infrastructure to develop, market and exploit the Imugene range of vector vaccines.

We are pleased to report that the technology and material transfer programs are well underway.

The technology transfer process involves, amongst other matters, the transfer of information and accumulated trial data for Imugenes range of vaccines and productivity enhancers, to our partner. With the assistance of Dr Lamb, Dr Sheppard and Sui Lay, the majority of the initial technology transfer process was completed by the end of 2010.

The material transfer process, which involves the physical shipment of vaccines commenced in February 2011.

US based development trial for the novel PRRS vaccine successfully completed

In parallel with partnering discussions and activities, Imugene continued to advance the development of its vaccines independently, including the Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine.

As announced in detail on September 16[th] 2010, the US based PRRS challenge trial that commenced in the preceding quarter was completed in July 2010.

All pigs in the trial were challenged with the live PRRS virus. When compared to pigs who did not receive the vaccine, the pigs vaccinated with the PRRS lead vaccine were found to have:

• lower lung lesion scores,

• reduced levels of the virus in the blood (viraemia), also

• fewer pigs had virus isolated from lung samples.

About Imugene

Imugene specialises in commercialising animal health products for production animals including pigs and poultry.

Imugene owns the worldwide rights to the Fowl Adenoviral Vector Delivery System for poultry and the Porcine Adenoviral Vector Delivery System for pigs. Since establishing a laboratory at La-Trobe University, Victoria, additional vaccine technology has been developed for the pig and poultry industries.

Imugene's poultry and pig vaccine portfolio is targeting a worldwide US$3 billion annual market with several lead vaccine products under development and a strong product pipeline. Consumer demands for disease free and residue free food will bolster Imugene's prospects.

For more information please visit the Imugene Website www.imugene.com or contact:

Dr Warwick Lamb	Mr Graham Dowland	Kyahn Williamson
Managing Director	Chairman	Investor Relations
		Buchan Consulting
+61 2 9870 7330	+61 8 9440 2660	+61 (0) 40 1018 828

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ABN 99 009 179 551

Appendix 4D – 31 December 2010 Half-Year Report

1. Reporting Period

The current reporting period is the period ended 31 December 2010 and the previous corresponding period is for the period ended 31 December 2009.

2. Results for Announcement to the Market.

	31 December 2010	31 December 2009	% Change
	$	$
2.1 Revenue from ordinary activities.	1,744,294	206,321	745% Increase
2.2 Profit (loss) from ordinary activities after tax attributable to members.	743,581	(883,074)	16% Decrease
2.3 Net profit (loss) for the period attributable to members.	743,581	(883,074)	16% Decrease
2.4 Amount per security and franked amount per security of interim dividend.	No interim dividends have been paid or provided for during the period.
2.5 Record date for determining entitlements to the dividends and payment date.	Not applicable.
2.6 Brief explanation of any of the figures in 2.1 to 2.4 necessary to enable the figures to be understood.	See Directors Report – Financial Report for the Half-Year Ended 31 December 2010.

3. Net Tangible Assets Per Security

	31 December 2010	31 December 2009
	Cents	Cents
Net tangible assets per security	1.5	1.2

Imugene Limited Appendix 4D – 31 December 2008 Page 1

4. Gain or Loss of Control Over Entities

Not applicable.

5. Details of Dividend and Distribution Payments

No dividends or distributions have been paid or provided for during the period.

6. Dividend Reinvestment Plans

There are no dividend or distribution reinvestment plans in operation.

7. Associates and Joint Venture Entities

Not applicable.

8. Foreign Entities

Not applicable.

9. Audit Dispute or Qualification

None.

Imugene Limited Appendix 4D – 31 December 2008 Page 2

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ABN 99 009 179 551

Interim Financial Report for the Half-Year Ended 31 December 2010

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	Page
Corporate Directory	1
Directors’ Report	2
Auditor’s Independence Declaration	4
Independent Review Report	5
Directors’ Declaration	7
Consolidated Statement of Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Financial Statements	12

ABN 99 009 179 551

Corporate Directory

Directors

Mr Graham Dowland – Non-Executive Chairman Dr Warwick Lamb – Managing Director Mr Roger Steinepreis – Non-Executive Director

Company Secretary

Ms Julie Foster

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Solicitors

Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000

Patent Attorney

McAndrews Held & Malloy Ltd 500 West Madison Street 34[th ] Floor Chicago, IL 60661

Registered and Principal Office

Level 20, Allendale Square 77 St Georges Terrace Perth WA 6000 Telephone: (61 8) 9440 2660 Facsimile: (61 8) 9440 2699

Auditor

BDO Audit (WA) P/L 38 Station Street Subiaco, WA 6008

Bankers

Laboratory

C/ - La Trobe University Kingsbury Drive Bundoora Victoria 3086

Australia and New Zealand Banking Group Limited 77 St Georges Terrace Perth WA 6000

Securities Exchange Listing

Share Register

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000 Australia

Imugene Limited shares are listed on the Australian Securities Exchange (Symbol: IMU)

Website and Email

www.imugene.com Imugene@imugene.com

Telephone: 1300 557 010 International: (61 8) 9323 2000 Facsimile: (61 8) 9323 2033

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Directors’ Report

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The Directors of Imugene Limited present their report on the Consolidated Entity consisting of Imugene Limited (“the Company” or “Imugene”) and the entities it controlled (“Consolidated Entity” or “Group”) during the half-year ended 31 December 2010.

Directors

The names of the Directors of Imugene in office during the half-year and until the date of this report are:

Mr Graham Dowland Dr Warwick Lamb Mr Roger Steinepreis

Each Director held office from 1 July 2010 until the date of this report.

Review and Results of Operations

Operating Results

The Company recorded a net after tax profit of $743,581 (2009: net loss of $883,074) for the half-year ended 31 December 2010.

Summary Review of Operations

In the six months to 31 December 2010, Imugene significantly progressed both its commercial and scientific plans. As announced in early October, 2010, Imugene signed a commercial agreement with Novartis Animal Health Inc, a business unit within the global Novartis Group, one of the world’s leading animal health companies. The agreement provides Novartis with exclusive rights to commercialise Imugenes animal health vaccines in return for license fees, milestone payments, research fees and royalties. During the reporting period, Imugene received a license fee and research fee payments.

During the half year period, Imugene personnel based at the Imugene laboratory at La Trobe University worked successfully on a scientific improvement to the Imugene PAV pig vaccines. The improvement, which dramatically improves the growth of the vaccines and lowers the cost of production, has now been incorporated into the Imugene Porcine Reproductive and Respiratory Syndrome (PRRS) vaccines. Patents have been lodged to protect this important improvement. These patents if granted will allow protection of Imugenes pig vaccines for approximately 20 years from the date of lodgement, greatly increasing the value of the vaccines by increasing their commercial life.

Other laboratory work continued to focus on the production of batches of vaccine material to send to the laboratories of our licensee and the preparation and execution of the technical and material transfer processes.

In parallel with finalising the partnering discussions, Imugene continued to advance the development of its vaccines independently, including the PRRS vaccine. Another successful trial of Imugenes lead PRRS vaccine was completed early in the half year. The trial results confirmed previous positive results and generated important information for the future commercialisation of the PRRS vaccine.

With Imugenes commercial partner taking over responsibility for the commercialisation of Imugenes vaccines, Mr Graham Dowland has relinquished his executive role to become non-executive chairman.

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Directors’ Report

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Auditor’s Independence Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 4 of the half-year financial report.

Signed in accordance with a resolution of the directors made pursuant to s.306 (3) of the Corporations Act 2001 .

On behalf of the Directors

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GRAHAM DOWLAND

Chairman

Perth, Western Australia

25[th] February 2011

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Auditor’s Independence Declaration

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Independent Review Report

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Independent Review Report

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Directors’ Declaration

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In the directors’ opinion:

• (a) the financial statements and notes set out on pages 8 to 13 are in accordance with the Corporations Act 2001, including:

• (i) complying with Accounting Standard AASB 134 ‘Interim Financial Reporting’ and the Corporations Regulations 2001 ; and

• (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date.

• (b) there are reasonable grounds to believe that Imugene Limited will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors made pursuant to section.306(3)(a) of the Corporations Act 2001 .

On behalf of the Directors

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GRAHAM DOWLAND

Chairman

Perth, Western Australia 25[th] February 2011

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ABN 99 009 179 551

Consolidated statement of comprehensive income

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For the half-year ended 31 December 2010

Revenue from continuing operations Other income Research and development Business development Commercialisation expenses Amortisation expense Corporate and administration costs Profit / (loss) before income tax 4 Income tax benefit Net profit / (loss) for the half year Other comprehensive income Total comprehensive income attributable to equity holders of Company Earnings / (loss) per share Basic earnings / (loss) per share (cents per share) Diluted earnings / (loss) per share (cents per share)	Consolidated	Consolidated
	2010 $ 1,744,294 (23,347) (280,054) (70,238) (122,726) (170,570) (333,778) 743,581 - 743,581 - 743,581 0.52 0.51	2009 $
		27,566 178,755 (252,695) (82,726) (285,155) (170,570) (298,249)
		(883,074)
		-
		(883,074)
		- (883,074)
		(0.61) (0.61)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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Consolidated statement of financial position

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As at 31 December 2010

Current assets Cash and cash equivalents Trade and other receivables Tax assets Total current assets Non-current assets Property, plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity	Consolidated	Consolidated
	31-Dec-2010 $ 2,048,771 150,777 230,000 2,429,548 3,646 2,430,315 2,433,961 4,863,509 213,381 115,240 328,621 4,534,888 14,907,453 966,003 (11,338,568) 4,534,888	30-Jun-2010 $
		793,062 180,508 520,000
		1,493,570
		4,226 2,600,885
		2,605,111
		4,098,681
		195,481 111,893
		307,374
		3,791,307
		14,907,453 966,003 (12,082,149)
		3,791,307

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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Consolidated statement of changes in equity

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For the half-year ended 31 December 2010

Consolidated Balance at 1 July 2009 Loss for the half-year Other comprehensive income Total comprehensive income for the half-year Transactions with owners, in their capacity as owners Balance at 31 December 2009 Balance at 1 July 2010 Profit for the half-year Other comprehensive income Total comprehensive income for the half-year Transactions with owners, in their capacity as owners Balance at 31 December 2010	Contributed Equity Share Based Payment Reserve Accumulated Losses Total $ $ $ $
	14,907,453 966,003 (10,547,108) 5,326,348 - - (883,074) (883,074) - - - -
	- - (883,074) (883,074)
	- - - -
	14,907,453 966,003 (11,430,182) 4,443,274
	14,907,453 966,003 (12,082,149) 3,791,307 - - 743,581 743,581 - - - -
	- - 743,581 743,581
	- - - -
	14,907,453 966,003 (11,338,568) 4,534,888

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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Consolidated statement of cash flows

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For the half-year ended 31 December 2010

Cash flows from operating activities Receipts from customers Payments to suppliers and employees Other income Net cash inflow / (outflow) from operating activities Cash flows from investing activities Interest received Net cash inflow from investing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the half year Cash and cash equivalents at the end of the half year	Consolidated	Consolidated
	2010 $ 1,736,756 (789,113) 301,299 1,248,942 6,767 6,767 1,255,709 793,062 2,048,771	2009 $
		- (1,034,060) 30,754
		(1,003,306)
		26,918
		26,918
		(976,388) 2,487,316
		1,510,928

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the consolidated financial statements

ABN 99 009 179 551

For the half-year ended 31 December 2010

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1. Significant accounting policies

Basis of preparation

These financial statements are general purpose financial statements for the half-year reporting period ended 31 December 2010, which have been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

This half-year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by Imugene Limited during the half-year reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

The accounting policies adopted are consistent with those of the previous financial year and the corresponding half-year reporting period.

2. Profit for the half-year

Profit for the half year ended 31 December 2010 included the following items that were unusual because of their nature, size and incidence:

Income

On 13 October 2010, Imugene entered into a Global Agreement with Novartis Animal Health, giving Novartis exclusive global rights to all of Imugene’s technologies and intellectual properties, including vaccines and productivity enhancers. During the half-year ended 31 December 2010 Imugene received an initial payment of US$1.75 million for reimbursement of past research fees, ongoing research fees and a licensing fee.

The loss for the half year ended 31 December 2009 did not include any items that were unusual because of their nature, size or incidence.

3. Dividends

No dividend has been paid or is proposed in respect of the half-year ended 31 December 2010 (2009: None).

4. Segment Reporting

Management has determined, based on the reports reviewed by the CEO that are used to make strategic decisions, that the Group has one reportable segment being the research, development and commercialisation of animal health technologies.

The CEO reviews internal management reports on a monthly basis that are consistent with the information provided in the statement of comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required, because the information as presented is used by the CEO to make strategic decisions.

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Notes to the consolidated financial statements

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For the half-year ended 31 December 2010

4. Segment Reporting (continued)

Reportable segment revenue

Revenue, including interest income, is disclosed below based on the reportable segment:

Revenue from research, development and commercialisation Revenue from other corporate activities	2010 $	2009 $
	1,702,110 18,837 1,720,947	170,976 35,345
		206,321

Reportable segment assets

Assets are disclosed below based on the reportable segment:

Asset from research, development and commercialisation Assets from other corporate activities: Cash and cash equivalents Other corporate assets	31-Dec-2010 $	30-Jun-2010 $
	2,804,669 2,048,771 10,068 4,863,508	3,299,885 793,062 5,734
		4,098,681

Reportable segment profit / (loss)

Profit / (loss) is disclosed below based on the reportable segment:

Profit / (loss) from research, development and commercialisation (Loss) from other corporate activities	2010 $	2009 $
	1,058,522 (314,941) 743,581	(620,169) (262,905)
		(883,074)

5. Events occurring after balance sheet date

As at the date of this report there are no other matters or circumstances, which have arisen since 31 December 2010 that would materially affect or may significantly affect the operations of the Consolidated Entity, the results of the Consolidated Entity or the state of affairs of the Consolidated Entity not otherwise disclosed in the Consolidated Entity’s half-year financial report.

6. Contingencies

The Consolidated Entity has no contingent liabilities as at balance date.

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