IMUGENE LIMITED — Management Reports 2013

May 1, 2013

IMU SHarEHolDEr UPDaTE APRIL 2013

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IMU SHarEHolDEr UPDaTE APRIL 2013

Dear investors and friends of Imugene,

Since acquiring the Linguet drug delivery technology last year, the Board and Management team has been focused on refining the company’s strategy and validating our technology. The result, as you would have seen from our announcements and company presentations, is solid progress on the Vitamin D target which has now completed feasibility testing and formulation development, and is expected to begin generating revenue as early as 2014. We are also very pleased to report that as a result of the hard work of our development team in the UK, an expanded Vitamin D product range has been created for the orally dissolving tablet (ODT) market. While Vitamin D is an excellent near term opportunity, that will enable us to demonstrate the potential of the Linguet technology, we are concurrently expanding our focus onto two additional targets in the areas of pain and Parkinson’s Disease which represent larger, more lucrative opportunities. This shareholder newsletter is designed to give you further insight into these targets, and our company strategy. Ongoing, this will be a channel to keep you informed of our progress.

In this newsletter, we’ll also introduce the members of the Imugene team. We are committed to careful management of costs and shareholder funds, so you’ll see that the team we have assembled is small in number – but it certainly brings the experience and knowledge that will assist us as we move forward. Furthermore, we are contracting in the resources and experience necessary to achieve our goal while keeping overheads to a minimum.

This week we announced a capital raising via a Share Purchase Plan, which will provide the funding necessary to continue to develop the Vitamin D asset and fast track further parallel product developments.

I hope you enjoy reading our first shareholder newsletter, and I welcome any feedback you may have. This edition is being mailed to you but we plan to email all future copies – so I urge you to register to receive this communication by emailing info@imugene.com or contacting me on +61 (0) 4 0064 2254.

Yours sincerely,

PlATFOrM TECHNOlOGY: How does it work?

Pharmaceutical companies are always looking for ways to improve the way their products function – that is improving the speed at which they can be delivered in the body, making them more effective and reducing side effects. Achieving this offers several commercial benefits: it can extend the patent life of a product; provide a competitive differentiator; and enable a price premium to be charged. This is where Linguet technology comes into play. Linguet uses a style of drug delivery known as ‘buccal technology’, which is where the active ingredient of a drug is absorbed straight into the bloodstream when placed inside the cheek (via the buccal mucosa) or under the tongue (sublingual). Buccal technology allows drugs that are usually poorly absorbed or tolerated via oral administration to be delivered to the bloodstream more effectively. Imugene’s Linguet technology has the added benefit of being able to precisely control the amount and rate of the drug to be delivered into the bloodstream, and allows for lower dosage and rapid onset of delivery as the drug does not pass through the stomach and liver where the active ingredient would otherwise be metabolised.

In addition, an added benefit discovered during formulation development recently is that the Linguet tablet dissolves rapidly when placed in the mouth. This exciting research discovery opens up new business opportunities for expanding the range of Vitamin D products offered, and will in the future facilitate entry into the lucrative orally dissolving tablet (ODT) market. Drugs formulated and administered as an ODT circumvent problems associated with swallowing (sometimes known as dysphagia). A recent report from the UK found that 68% of the general population suffer from some form of difficulty in swallowing their medications.

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Up to 68% of the general population in the UK suffers from difficulty in swallowing tablets.[1] Oral medicine is the largest segment of pharmaceuticals yet there are few solutions for the dysphagia (swallowing problems) market.

1. Strachan i and Greener M Pharmacy in Practice 2005;15: 411–414

Dr Nick Ede IMU SHAREHOLDER UPDATE APril 2013 Executive Director

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OUr STrATEGY: Working with known drugs

The class of drugs Imugene is targeting is referred to as “super generics” – by this we mean taking known drugs or molecules and improving the way they are delivered within the body, to create a differentiated product that can attract a premium price and stand out in the generic drug market.

A low risk strategy: Working with known drugs lessens the development and regulatory risk – especially with over-thecounter products, such as the Vitamin D range. Compared to traditional drug development fewer clinical trials are required, resulting in lower development costs and fewer regulatory hurdles.

Three priority targets: Imugene has selected three priority targets where we have identified a significant need. Our first focus is Vitamin D, a smaller but near term opportunity to validate our technology and rapidly bring a product to market. Our medium term focus is on the larger markets of pain and Parkinson’s Disease.

Early revenue generators: Our strategy is to develop products to regulatory approval, and then secure revenues through a license with a third party.

EU focus: We will focus first on developing drugs for the EU market, which offers a more streamlined path for regulatory approval. Accordingly our team has experience and strong relationships with the industry and regulators here.

“Between 2001 and 2010, drug delivery enhanced products accounted for a third of novel approvals.”

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Source: Pharmaceutical Executive, Nov 1, 2011.
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OUr FOCUS:

Addressing a need for better therapeutics in three large and growing markets

Vitamin D

Imugene’s initial focus is the development of an over-thecounter and prescription supplement of Vitamin D, one of the fastest growing nutrients – in terms of worldwide sales. Vitamin D deficiency is becoming a major public health issue; in Australia 31 per cent of adults are diagnosed as being Vitamin D deficient. Furthermore, because Vitamin D deficiency is a contributing factor in serious health concerns such as bone disorders, diabetes, hypertension and some forms of cancer, Vitamin D testing and treatment is becoming a double digit growth market.

While global sales of Vitamin D supplements are rapidly growing there are also serious limitations with the existing treatments. Oral Vitamin D supplements are absorbed through the gastro-intestinal tract erratically and lead to transient surges of Vitamin D in the blood stream, limiting the effectiveness of the treatment and in some cases resulting in toxicity.

To address this Imugene has developed a buccal form which overcomes these issues, by delivering a small and controlled dose directly into the bloodstream. We are working with a form of Vitamin D that has been shown to be five times more effective in raising blood serum levels than the traditional supplement. Furthermore, our range has expanded with the introduction of an ODT form of Vitamin D.

Imugene’s high and low dose formulations of Vitamin D have now advanced through initial formulation development and long-term stability studies are progressing. Laboratory testing for the transport of the molecule across the buccal mucosa is now underway. These tests are due for completion by Q3 2013. A bioequivalence clinical study will be conducted in parallel, before regulatory filing in the UK 1H 2014.

With the rapid growth in Vitamin D and the differentiating factor of our product, Vitamin D is the perfect platform to provide a first validation of the Linguet technology and generate early revenues for the company.

Pain

Imugene’s second indication is a Linguet dosing form of a class of drugs known as NSAIDs (non steroidal anti inflammatory drugs), which inhibit the enzyme that plays a critical role in the onset of pain and inflammation.

While a huge global market worth US$5.37 billion per annum, the treatment comes with serious side effects such as gastric irritation and stomach ulcers, particular when used at higher doses or for extended periods of time.

IMU SHAREHOLDER UPDATE APril 2013

Introducing the IMU Team

This makes it a perfect second target for Linguet which can deliver fast relief by providing a lower dose of the active drug with the same efficacy, therefore reducing side-effects and saving on product cost.

The Company has already successfully trialled Linguet formulations of Ibuprofen (Nurofen[®] ®) and Naproxen (Naprogesic®[®] ) in humans with excellent bioavailability outcomes.

Our initial NSAIDS target will be on the $1.4 billion Diclofenac and Ibuprofen markets, which includes treatments such as Voltaren®[®] and Nurofen®[®] .

Parkinson’s Disease

Parkinson’s Disease is a well-known degenerative disease of the brain that impairs motor control, speech, and other functions, that is estimated to affect some seven to 10 million people worldwide. Parkinson’s Disease occurs as a result of the loss of nerve cells in the brain that produce the chemical dopamine. When about 80% of dopamine has been lost, the symptoms of the disease appear.

“More than 1 in 10 people who have Apomorphine hydrochloride experience injection site problems such as lumps, hardening of skin, redness, tenderness, necrosis, ulceration, irritation, itching, bruising or pain”

Source: NHS.co.uk

A common treatment for the late stages of Parkinson’s Disease is apomorphine hydrochloride (marketed in the UK as APO-go[®] , and in Australia as Apomine[®] ). This drug works by stimulating the dopamine receptors to reverse the symptoms of the disease, and is administered by injection or continuous infusion. Currently this drug generates US$100 million in sales per year but the opportunity for expanding its use by reformulating for improved patient compliance is apparent.

While it is an effective treatment the injectable, and most commonly used version of the drug, does come with side effects, including nausea and vomiting. Injection site reactions, including subcutaneous nodules, are common with continuous use and this can sometimes lead to erratic absorption of the drug, reducing its therapeutic benefit.

Imugene is developing a Linguet tablet version of APO-go[®] which can be absorbed directly into the bloodstream when placed inside the cheek or under the tongue. Unlike other oral formulations, the Linguet delivery system allows for rapid onset of action and is therefore a suitable replacement for daily injections. A key differentiator of Linguet and other forms of buccal or sub-lingual technologies is that drugs susceptible to degradation like apomorphine can be formulated to protect the active drug during transport and storage. While this is challenging from a formulation perspective, other developments of sub-lingual drugs with similar properties to apomorphine suggest it is possible.

The ability to improve patient compliance, and reduce side effects associated with painful and frequent injections, could see the apomorphine use increase to around 25% of patients, from the current level of 5.4%, indicating a potential revenue of US$250-$300 million per annum, globally.

Imugene has assembled an experienced Board and Management team to guide the development of its Linguet technology.

Dr Nick Ede, Executive Director As the Executive Director of Imugene, Dr Nick Ede is responsible for the overall operations and execution of Imugene’s strategy. Dr Ede, has more than 25 years of experience in drug discovery and business development and has focused on successfully evolving research concepts into commercial products and processes. Based in Melbourne, Nick has previously held roles at Chiron, EqiTX, Mimotopes and Adistem.

Mr Steve Harris, Non-Executive Chairman Steve Harris is a very well-known and highly regarded member of the pharmaceutical industry in the UK, with a career of over 48 years including roles at ICI Pharmaceuticals (now Astra Zeneca), Merck, Eli Lilly, Boots, Reckitt and Colman (now Reckitt Benckiser) and Gensia. His knowledge, experience and contacts in drug delivery, pharmaceuticals and experience as a public company Director is invaluable in his leadership of the Imugene Board.

Paul Hopper, Non-Executive Director As managing director of investment bank Capello Group and a board member of several ASX listed life science biotech companies, Paul brings knowledge of financial capital markets and corporate governance to the Imugene Board. He will closely guide Imugene’s management team as the strategy to monetise Linguet is executed.

Steve Martin,

Head of Development Steve Martin is a commercial pharmacist in the UK with a track record in delivering established molecules from proof of concept through to regulatory approval. Working for both his own companies and also for differing international pharmaceutical companies, he has been involved in over 80 healthcare and pharmaceutical developments. He specialises in the rapid commercialisation of products using a variety of different drug delivery systems, from sustained release, buccal delivery and solid oral dose delivery dosage forms.

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