PROSPECTUS

HalcyGen Pharmaceuticals Limited ACN 115 832 963

FOR THE OFFER OF 25,000,000 SHARES AT AN ISSUE PRICE OF 50 CENTS EACH TO RAISE \$12,500,000.

IMPORTANT INFORMATION

This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without delay. The Shares offered by this Prospectus should be considered speculative. This Issue is fully underwritten by Tolhurst Limited

San Maria Maria Maria Maria Maria Maria 1999.
Ny INSEE dia mampiasa ny kaodim-paositra 62143. Ilay kaominina mpikambana amin'ny fivondronan-paositra 6214.
I Maria Maria no ben'ny tanàna mandritry ny taona 2008–2014. Ilay k

This Prospectus is dated 23 May 2007 and was lodged with the Australian Securities and Investments Commission (ASIC) on that date. Neither ASIC nor ASX takes any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates.

No application for Shares will be accepted, and no Shares will be issued under this Prospectus until the period of 7 days after the lodgement of this Prospectus has ended. ASIC may extend that period to not more than 14 days by notice in writing to HalcyGen Pharmaceuticals Limited (HalcyGen). This Prospectus will be made available during the exposure period at www.halcygen.com and www.tolhurst.com.au

No Shares will be issued on the basis of this Prospectus after 22 June 2008.

HalcyGen will apply for its admission to the official list of ASX and for admission of the Shares to quotation by ASX within 7 days after the date of this Prospectus.

Important document

It is important that you carefully read this Prospectus in its entirety before deciding to invest in HalcyGen and, in particular, that you consider the assumptions underlying any prospective information and the risk factors that could affect the performance of HalcyGen. You should carefully consider these factors in light of your personal circumstances (including financial and taxation issues) and seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest,

No person is authorised to give any information or to make any representation in connection with the Offer that is not contained in this Prospectus. Any information or representation not contained in this Prospectus may not be relied on as having been authorised by HalcyGen in connection with the Offer.

References are made in this Prospectus to organisations that have dealings with HalcyGen, including counterparties to material contracts referred to in this Prospectus. These organisations have been referred to for information purposes only and have not authorised or caused the issue of this Prospectus and have had no involvement in the preparation of any part of this Prospectus.

Forward-looking statements

Some of the information contained in this Prospectus may constitute forward-looking statements that are subject to various risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "plan", "intend" or other similar words. These statements discuss future objectives or expectations concerning HalcyGen and its business. HalcyGen's actual achievements and results could be significantly different from the achievements and results expressed in or implied by those forward-looking statements. Given the risks, uncertainties and other factors which may effect HalcyGen's actual achievements and results, you should not place undue reliance on any forward-looking statement, which speaks only as of the date of this Prospectus.

Neither HalcyGen nor any other person warrants the future performance of HalcyGen or any return on any investment made under this Prospectus, except as required by law and then only to the extent so required.

Restriction on the distribution of this Prospectus

This Prospectus does not constitute an offer of Shares in any place in which, or to any person to whom, it would not be lawful to do so. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law, and persons (including nominees, trustees or custodians) who come into possession of this Prospectus should seek advice on and observe any of these restrictions. The Shares have not been, and will not be, registered under the US Securities Act 1993 (as amended) and may not be offered or sold in the United States or to, or for the account of or benefit of, US persons. Accordingly neither this Prospectus nor the Application Form may be sent to investors in the United States or otherwise distributed in the United States.

Defined terms and abbreviations

Defined terms and abbreviations used in this Prospectus are explained in the Glossary in section 11.

Electronic Prospectus

A copy of this Prospectus can be viewed in Australia at HalcyGen's website at www.halcygen.com or the Underwriter's website at www.tolhurst.com.au. Any person accessing the electronic version of this Prospectus for the purpose of making an investment in HalcyGen must be an Australian resident and must only access the Prospectus from within Australia.

If you wish to apply for Shares, you may either:

complete and return the Application Form which accompanies this Prospectus; or
print a copy of the Application Form from the above internet address and complete and return it.

If you view an electronic copy of this Prospectus, please ensure that you have received the entire Prospectus accompanied by the Application Form. If you give another person access to the Application Form, you must, at the same time and by the same means give the other person access to the entire Prospectus and any supplementary documents. While the Prospectus is current. HalcyGen will send to you, on request and free of charge, paper copies of the Prospectus and any supplementary documents and Application Forms.

Photographs

Photographs used throughout this Prospectus do not depict assets of HalcyGen.

INVESTVIEN FRIGHT RESER

HalcyGen is currently developing two potential "SuperGenerics" SUBA-Itraconazole and Minocycline -- which have been licensed from Mayne on an exclusive world-wide basis
With the potential for patent protection and improved performance. SuperGenerics may offer a premium pricing opportunity in comparison with generic drugs. SuperGenerics also have a similar regulatory risk profile to generics, as they are based on existing registered pharmaceuticals compared to the set of the set of the set of the set of the set of the set of the set of the s
Patents for improvements to both licensed Mayne products have been granted in the USA and Australia and are awaiting examination in Europe, Japan, Canada, Singapore and New Zealand
HalcyGen aims to be one of a select few Australian companies with pharmaceuticals in pivotal phase III clinical trials - with SUBA-Itraconazole expected to be in phase III clinical trials in late 2007/ Gally 2008

Requiatory filing for SUBA-traconazole (argented for 2008
FlalcyGen is currently seeking a global marketing partner for product sales of SUBA-Itraconazole
The Minooycline formulation is currently ready for clinical trials and will be evaluated in phase II during 2008.
Current worldwide sales of other existing formulations of Itraconazole and Minocycline (including both branded and generic versions) are in excess of US\$1.0 billon.
Product development and manufacture of SUBA-Itraconazole and B Minocycline to be undertaken by Mayne in accordance with the tem is of the ticence agreements.

These investment highlights are discussed in more detail in the Prospectus. You should read the Prospectus in its entirety before. making a decision to invest in HaldyGen.

BUSINESS AND INVESTMENT RISKS

An investment in HaloyGen should be considered speculative. A number of factors may affect the future operating and financial performance of HalcyGen and the value of an investment in HalcyGen. These include, but are not limited to:

intellectual property risks associated with HalcyGen and/or Mayne obtaining and maintaining valid patent protection for all products licensed by HalcyGen;
requiatory risks associated with the pharmaceutical requiatory process, including the risk of delays in the clinical trials of each product;
development risks, including the risk that the products licensed to HaldyGen will fail to demonstrate any material benefit or advancement in safely and/or efficacy: https://www.com/
HalcyGen's reliance on its strategic partners and contractors to develop, manufacture, conduct clinical trials and market their products on budget:
product liability and uninsured risks, including the risk that appropriate product liability and other insurances are not available to HalcyGen on acceptable temas or alrail.
risks associated with HalcyGen's reliance on key management and personnel; kainen
nsks ansing from the potential for competition from other pharmaceutical products developed by third parties that may be superior to HaldyGen's excolicist

1 reserand officialsk factors are else issed in section 3.

Gone Company

1.	MESSAGE FROM THE CHAIRMAN	1
2.	DETAILS OF THE OFFER	3
3.	INDUSTRY OVERVIEW	$\overline{7}$
4.	OVERVIEW OF HALCYGEN	12
5.	USE OF FUNDS	17
6.	FINANCIAL INFORMATION AND THE EFFECT OF THE OFFER ON HALCYGEN	20
7.	DIRECTORS	29
8.	RISK FACTORS	33
9.	ADDITIONAL INFORMATION	38
10.	DIRECTORS' AUTHORISATION	52
11.	GLOSSARY	53

SUMMARY OF THE OFFER

The Offer

Share issue price	\$0.50 per Share
Number of Shares to be issued under the Offer	25,000,000
Amount to be raised under the Offer	\$12,500,000
Shares on issue after completion of the Offer	76,099,000
Market capitalisation at the Offer price ⁽¹⁾	\$38,049,500

(1) Based on the total number of Shares on issue following the Offer and the Offer Price

Key Dates

Lodgement of Prospectus with the ASIC	23 May 2007
Openína Date	30 May 2007
Closing Date and latest time for receipt of Application Forms and payment in full for Shares	5pm Melbourne time 19 June 2007
Issue of Shares	27 June 2007
Expected date of dispatch of holding statements	27 June 2007
Shares expected to commence trading on ASX	29 June 2007

The sbove dates are indicative only and may change without notice. HalcyGen reserves the right to amend this indicative timetable, subject to the Corporations Act and the
approval of the Underwriter, by extending the Closi

HalcyGen has reserved the ASX listing code of HGN. At the date of this Prospectus, HalcyGen is not listed on the ASX and this code has not yet been allocated to HalcyGen.

SECTION 1

1999 - Johann Maria III, martxa a f

Dear Investor

On behalf of the Board of Directors, it is my pleasure to invite you to invest in HalcyGen Pharmaceuticals Limited (HalcyGen), a company that has attractive opportunities in the pharmaceutical industry through a strong commercial relationship with Mayne Pharma International Pty Ltd (whose parent company, Mayne Pharma Limited was acquired by Hospira, Inc in February 2007) (Mayne).

By this Prospectus, HalcyGen is offering to issue 25,000,000 Shares at a price of \$0.50 per Share. This Offer is fully underwritten by Tolhurst Limited.

Through its licence agreements with Mayne, HalcyGen aims to bridge the gap between the mainstream pharmaceutical industry and high volume generics companies through the development of new and improved proprietary generic formulations. Such formulations are known as "Improved Chemical Entities" or "SuperGenerics". SuperGeneric formulations aim to improve generic reference pharmaceuticals, in order to create safer, more efficacious and/or easier to use pharmaceuticals.

Like generics, SuperGenerics offer potentially shorter lead times to market compared with the development of new pharmaceuticals. However, unlike generics, SuperGenerics may be granted patent protection as a result of the improvements made to the generic formulation from which they originate, thereby enabling a pricing premium to be applied to sales of the SuperGeneric.

As at the date of this Prospectus, HalcyGen's portfolio of products comprises two potential SuperGenerics - SUBA-Itraconazole and Minocycline - which HalcyGen has licensed from Mayne on an exclusive world-wide basis. HalcyGen also intends to actively investigate other licensing opportunities and is in negotiation with Mayne in respect of an additional pharmaceutical formulation.

Under its existing licences with Mayne, HalcyGen is obliged to use its best endeavours to develop the two licensed potential SuperGenerics. In this regard, HalcyGen is aiming to:

implement both phase II and phase III clinical trials in respect of SUBA-Itraconazole in late 2007 / early 2008; and
manufacture and formulate Minocycline in late 2007 in preparation for its proposed clinical development in 2008. $\bullet$

The licences with Mayne entitle HalcyGen to derive revenues from any eventual worldwide sales of the developed product, including royalties payable by Mayne under its first right of refusal to exclusively market the developed pharmaceuticals in Australia and New Zealand. Subject to the successful completion of SUBA-Itraconazole's phase III clinical trials and regulatory registration. HalcyGen hopes to identify a global marketing partner for SUBA-Itraconzole in the 2008 calendar year.

HalcyGen raised \$4.2 million in September 2006 to begin funding the costs of its product development commitments under the licences with Mayne. HalcyGen has made encouraging progress on the development strategy for SUBA-Itraconazole since that time.

The purpose of this Offer is to provide HalcyGen with the additional financial resources to:

fund the proposed phase II and phase III clinical trials of SUBA-Itraconazole, with the aim of achieving accelerated requiatory registration of the product:
cover the costs of its product development commitments for both SUBA-Itraconazole and Minocycline under its licences with Mayne, and potentially provide some initial funding towards the product development costs associated with additional products that HalcyGen may license in the future;
enable HalcyGen to manage its intellectual property portfolio and support (to the extent it has responsibility for) the prosecution of patent applications for its licensed products and any developed intellectual property;
support HalcyGen's proposed initial activities in identifying a global marketing partner for SUBA-Itraconazole; and
cover HalcyGen's administrative costs and overheads.

Details of the Offer are included in this Prospectus. I recommend that you read it carefully. An investment in HalcyGen should be considered speculative.

The closing date for application and payment is 5pm Melbourne time on 19 June 2007.

On behalf of the Board of Directors, I commend the Offer to you and look forward to welcoming you as a Shareholder.

Yours sincerely

Roger Aston Chairman and Chief Executive Officer HalcyGen Pharmaceuticals Limited 23 May 2007

SFOTION2
DotalS of the Offer

Albert Constant

Barton (Barton Barton)

2.1 Overview of HalcyGen

Through its licence agreements with Mayne, HalcyGen operates as a licensee and developer of pharmaceutical formulations which will potentially have the properties of "SuperGenerics". SuperGenerics aim to improve generic reference pharmaceuticals in order to create safer, more efficacious and/or easier to use pharmaceuticals.

Like generics. SuperGenerics offer potentially shorter lead times to market compared with the development of new pharmaceuticals. However, unlike generics, SuperGenerics may be granted patent protection through the improvements made to the generic formulation from which they originate, thereby enabling a pricing premium to be applied to sales of the SuperGeneric product.

HalcyGen's strategy is to:

· identify and license improved proprietary pharmaceutical formulations of existing generic pharmaceuticals, known as "SuperGenerics":
develop and seek regulatory registration and, where relevant, patent protection, of these SuperGenerics for worldwide sale: and
sub-license the marketing and sales of the developed SuperGenerics to third party marketing partners and receive royalty income from the ultimate product sales.

As at the date of this Prospectus, HalcyGen's portfolio of products comprises two potential SuperGenerics - SUBA-ftraconazole and Minocycline - which HalcyGen has licensed from Mayne. HalcyGen also intends to actively investigate other licensing opportunities and is in negotiation with Mayne in respect of an additional pharmaceutical formulation.

2.2 The Offer

By this Prospectus, HalcyGen invites investors to apply for Shares at an issue price of \$0.50.

The Offer will result in the issue of 25,000,000 Shares and will raise \$12,500,000.

The Offer is fully underwritten by Tolhurst Limited (the Underwriter). Please see section 9.6 for a summary of the Underwriting Agreement, including the events which would entitle the Underwriter to terminate the Underwriting Agreement and details of the fees payable by HalcyGen to the Underwriter.

If the Offer is oversubscribed, the Underwriter will decide which investors will be issued less than the number of Shares applied for and the number of Shares to be issued to those investors in accordance with the allocation policy discussed in section 2.10. The Underwriter's decision is final.

2.3 Purpose of the Offer

The amount raised by the Offer, after deducting costs associated with the Offer, is planned to be used by HalcyGen to:

fund the proposed phase II and phase III clinical trials of SUBA-Itraconazole, with the aim of achieving accelerated regulatory registration of the product;
cover the costs of its product development commitments for both SUBA-Itraconazole and Minocycline under its licences with Mayne, and potentially provide some initial funding towards the product development costs associated with additional products that HaleyGen may license in the future;
· enable HalcyGen to manage its intellectual property portfolio and support (to the extent it has responsibility for) the prosecution of patent applications for its licensed products and any developed intellectual property;
support HalcyGen's proposed initial activities in identifying a global marketing partner for SUBA-Itraconazole; and
· cover HalcyGen's administrative costs and overheads.

Further details of HalcyGen's planned use of funds are set out in sections 5.1 and 5.2.

2.4 Minimum application

The minimum number of Shares that may be applied for under the Offer is 4,000, with a minimum payment of \$2,000, and thereafter in multiples of 1,000 Shares.

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

2.5 Closing Date

HalcyGen will accept applications from the Opening Date until 5pm Melbourne time, on 19 June 2007 or any other date the Directors in their absolute discretion determine, subject to the approval of the Underwriter.

2.6 Offer, acceptance and payment

A completed and lodged Application Form, together with payment for the number of Shares applied for, cannot be withdrawn and constitutes a binding application for, and acceptance of, the number of Shares specified in the Application Form on the terms set out in this Prospectus. The Application Form does not need to be signed to be binding.

An Application Form accompanies this Prospectus for your use.

Payment must be by cheque, money order or bank draft in Australian currency drawn on an Australian branch of a financial institution for the amount of the application money. Cheques, money orders or bank drafts should be made payable to "HalcyGen Pharmaceuticals Limited - Share Offer Account" and crossed "Not Negotiable". Do not forward cash. Receipts for payment will not be issued.

No brokerage or stamp duty is payable on the issue of the Shares.

If the Application Form is not completed correctly. HalcyGen can reject it or treat it as valid. HalcyGen's decision as to whether to reject the Application Form or treat it as valid and how to construe, amend or complete it, is final.

Completed Application Forms and accompanying payments must be mailed or delivered to the Share Registrar at:

By mail:	Computershare Investor Services Pty Limited GPO Box D182 Perth WA 6840
By delivery:	Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace Perth WA 6000

Completed Application Forms must reach the Share Registrar by no later than the Closing Date.

2.7 Nature of the Shares

The Shares are ordinary fully-paid Shares and will, once issued, rank equally with existing Shares.

A summary of the rights attaching to the Shares is set out in section 9.3(a).

2.8 Application of money held in trust

All application money received for the Shares offered by this Prospectus will be held in trust in a bank account maintained solely for the purpose of depositing application money received under this Prospectus until the Shares are issued. All application money will be returned (without interest) if the Offer does not proceed.

Investors who are issued less than the number of Shares applied for will receive a refund cheque for the relevant amount of application money (without interest) within 14 days after the Closing Date.

2.9 Issue of Shares

HalcyGen expects to issue the Shares on 27 June 2007. Holding statements in relation to the Shares are expected to be dispatched on 27 June 2007.

2.10 Allocation policy

The allocation of Shares among applicants to the Offer will be determined by the Underwriter in its absolute discretion. The Underwriter will not allocate any Shares until after the Closing Date.

The Underwriter has an absolute discretion regarding the aflocation of the Shares under the Offer and may reject any Application, or allocate fewer Shares than applied for, in its absolute discretion. Where no allocation is made to a particular applicant or the number of Shares allocated is less than the number applied for by an applicant, surplus application moneys will be returned to that applicant. No interest will be paid on refunded application moneys.

2.11 ASX quotation

HalcyGen will apply for its admission to the official list of the ASX and for admission of the Shares to quotation by ASX within 7 days after the date of this Prospectus. If the Shares offered by this Prospectus are not admitted to quotation within 3 months after the date of this Prospectus (or any longer period permitted by ASIC) any issue of Shares is void and HalcyGen will repay, as soon as practicable, without interest, all application money received under this Prospectus.

Subject to approval being granted by ASX, it is expected that the quotation and trading of Shares issued under the Offer will commence on the market operated by ASX on 29 June 2007.

Following the allocation of Shares. Shareholders will be sent an initial statement of holding that sets out the number of Shares that have been allocated to them and the Shareholder's holder identification number or, in the case of issuer-sponsored holders, the securityholder reference number.

fnvestors who sell Shares before they receive their holding statement will do so at their own risk. HalcyGen and the Underwriter disclaim all liability in tort (including negligence), statute or otherwise to persons who trade Shares before receiving their holding statements.

2.12 Taxation implications

The Directors consider that it is not appropriate to give investors advice regarding the taxation consequences of subscribing for Shares under this Prospectus. HalcyGen, its advisers and its officers do not accept any responsibility or liability for any taxation consequences. As a result, investors should consult their own professional tax advisers in connection with subscribing for Shares under this Prospectus.

2.13 Privacy Act

If you complete an Application Form, you will be providing personal information to HalcyGen (either directly to HalcyGen or to the Share Registrar).

HalcyGen collects, uses, discloses and administers all personal information in accordance with relevant privacy legislation, including the Privacy Act 1988 (Cth),

HalcyGen may disclose your personal information to the Underwriter, persons inspecting the Share register, bidders for your securities in the context of takeovers, requiatory bodies (including the Australian Taxation Office), authorised securities brokers, print service providers, mail houses and the Share Registrar.

You can access, correct and update the personal information that HalcyGen holds about you by contacting HalcyGen or the Share Registrar (see the back cover of this Prospectus for relevant contact details).

Please note that if you do not provide the information required on the Application Form. HaloyGen may not be able to accept or process your application.

2.14 Enquiries

Enquiries concerning the Application Form or relating to this Prospectus should be directed to HalcyGen by telephone on (03) 8614 7777 or facsimile on (03) 9614 7022 or email to [email protected].

Enquires about the Offer should be directed to the Underwriter by telephone on (03) 9242 4000.

SECTION 3
Industry OVENIEW

e
Sa

En de la Companion de la Companion de la Companion de la Companion de la Companion de la Companion de la Compa
La companion de la Companion de la Companion de la Companion de la Companion de la Companion de la Companion
La

3.1 Executive summary

The pharmaceutical industry is involved in the development, production and supply of medicines, drugs and other pharmaceutical products used to treat or prevent disease or otherwise to assist in maintaining the quality of life.

There are 3 broad categories of pharmaceuticals:

novel pharmaceuticals which, on average, take around 10 to 12 years and over US\$500 million to develop, but which typically benefit commercially from patent protection;
generic pharmaceuticals which use identical chemistry and functionality of novel pharmaceuticals that have come offpatent, and thus require significantly less time and funding to develop but which are generally not protected by patents; and
* SuperGeneric pharmaceuticals which are "next generation" versions of off-patent pharmaceuticals, typically developed by modifying the formulation and/or drug delivery systems of the reference pharmaceutical. The resulting SuperGeneric may be patentable, and is usually subject to less development time and costs than that associated with novel pharmaceuticals.

This section provides further background information about the pharmaceutical industry, generics and SuperGenerics

3.2 The pharmaceutical industry and the "generic" challenge

During the 1990s there was significant growth in the pharmaceutical and biotechnology industries. However, new drug approvals are slowing. From 1995 through 1999, new drug approvals by the US Food and Drug Administration (FDA) averaged 37 per year. In contrast, during the 3 year period from January 2004 through to December 2006, only 37 new drug approvals were granted.

On average it takes about 10 to 12 years and over US\$500 million to develop a new drug, and there is no guarantee that the drug will be a commercial success. However, as world-wide sales of pharmaceuticals run into the hundreds of billions of dollars, the potential for financial rewards on successfully developing a new drug can be substantial.

Worldwide Pharmaceutical - Sales 2005 - Total Sales US\$565.9 Billion

Historically, a key driver to the growth of the pharmaceutical industry has been the introduction of patent protection for novel drugs. More recently, the ageing population of many Western countries, and their expectations for quality health outcomes. have continued to drive the growth of pharmaceutical sales.

One of the current challenges facing pharmaceutical companies is the expiration of the patents on their drugs and the associated generic competition that often follows.

Patents

Patents provide the patent owner with the legal means to prevent others from making, using, or selling their new invention for a limited period of time (generally 20 years). Patents in the pharmaceutical industry are often directed to the "chemical entity" or "molecule" that has been discovered to have some useful property. Patents are also granted on other aspects of pharmaceutical products, such as drug delivery formulations and improvements in the way a certain drug can be formulated to act in the human body. Manufacturing patents are also commonplace in the pharmaceutical and chemical industries.

The validity of a patent is determined, in the first instance, by the various patent agencies around the globe. Their principal criteria fall into three broad categories:

a i kredne kontrol $\begin{tabular}{|c|c|c|c|} \hline $\cdots$ & $\cdots$ & $\cdots$ \ $\cdots$ & $\cdots$ & $\cdots$ \ $\cdots$ & $\cdots$ & $\cdots$ \ \hline \end{tabular}$

. Novelty is the product, formulation or process novel? That is, has the invention been undertaken previously by others?
Inventive step Is the invention or discovery surprising and unexpected? That is, would an individual skilled in the art have made the invention sooner or later in the normal course of activity or was the invention an inventive step?
. Industrial application Does the invention have clear industrial or clinical application?

Once a patent expires on a drug or product formulation, generic pharmaceutical companies take the opportunity to produce "generic" versions of the off-patent product and market it in direct competition to the original product. As a result, product pricing drops dramatically and the profitability becomes dependent on factors such as manufacturing costs and labour costs.

Generics

A generic drug is a pharmaceutical product which has the same qualitative and quantitative composition of active substances and the same pharmaceutical form as the original reference drug. This identical chemistry and functionality is known as "bioequivalence".

In contrast to the slowing approvals of new drugs, the generics industry has undergone significant growth in recent times. By way of example, in 2004, the FDA Office of Generic Drugs received 474 abbreviated new drug applications for approval to market a generic product. In 2006, almost 800 were received.

The growth in the generics industry can be attributed to a number of factors, including the number of drugs coming off-patent as well as the subsidies and incentives being offered by governments to encourage the launch of generics and manage the ever increasing cost of healthcare.

Global sales of generic drugs (2003) are shown in the diagram below:

With patents on more than 300 drugs expiring in the next four years and increasing generic competition, pharmaceutical companies are under intense pressure to replace these products with new or improved drugs.

Life cycle management

A "life cycle management" strategy is a strategy used by a large number of pharmaceutical companies to extend the term of patent protection of, and thereby maximize and extend the commercial return on, key drugs. Such a strategy involves the development of a "next generation" variation of a product to replace their key drugs when the patent is nearing its expiration date and there is an upcoming risk of generic competition.

Improved versions of the off-patent drug may be achieved through re-formulating the drug, or improving the drug delivery system to provide the patient with more convenient dosing, better safety or efficacy. This development work can be undertaken at a fraction of the cost of developing a new drug, due to the vast amount of human safety and performance data available for a drug that has been on the market during the course of its patent life.

3.3 SuperGenerics

A SuperGeneric drug is a "next generation" version of an existing drug and the result of product "life cycle management". If involves certain changes being made to the formulation and/or drug delivery systems of the original reference off-patent drug, which provide a significant or material advancement in the performance or efficacy of the drug and/or improved safety and reduced side effects.

Potential benefits of SuperGenerics include:

. Renewed patent protection: the new improved formulation or drug delivery system may be patentable, thereby renewing the patent protection available for the drug formulation being marketed
Faster regulatory approval: as SuperGenerics are based on existing approved drugs, the regulatory registration process is typically simpler and shorter than for new drugs
. Improved efficacy: improved formulations of a drug may mean that the drug can work more effectively or that the body can use the drug more effectively
Lower drug dosage: by reformulating a drug or improving its delivery, it is possible to give the patient a lower dose of the drug, but still achieve the same desired drug concentration in the blood - the effect of which is known as improved bioavailability
. Improved safety: typically, lower drug dosages means increased safety and reduced side effects
. Improved patient compliance: a product that has better delivery and lower side effects may be used more compliantly by the patient (for example, the improvements could remove the need for the drug to be taken with food for optimal efficacy)
* Product and pricing differentiation: an improved product can be marketed differently and may command a pricing premium to its generic counterpart
. Increased market size: any significant improvement of safety, efficacy or compliance could lead to greater sales

3.4 Drug development and the regulatory environment

As noted above, the process of developing a new drug is time consuming and expensive and comes with no guarantees of regulatory or commercial success.

The following table summarises at a high level the process involved to register a new drug in the US.

SUMMARY OF NEW DRUG DEVELOPMENT PROCESS IN THE US

(3) An IND is an investigational new drug sonligation which is filed with the FDA to begin to test a drug in people. It shows the regults of previous experiments (2) An NDA is a new drug application which must contain all of the scientific information that the company has gathered as a result of the finee phases of clinical trials.

The approval process of a generic drug is much simpler and quicker as a result of the amount of information already available on the drug itself. The following diagram provides a comparison of the approval process for generic and novel pharmaceuticals.

GENERIC PHARMACEUTICAL . 2 - 4 years

ALGEMENT STA

For SuperGenerics, the process, while likely to be more detailed than that required for a standard generic, is comparatively much simpler and shorter than that for new drugs.

3.5 Marketing, sales and royalties

Distribution and marketing

In the pharmaceutical industry, getting the product to the right patient in the right environment is the task of distribution and marketing. Many drugs are sold directly to hospitals and generally must be administered by a qualified person. Other products may be prescription-based and are sold to pharmacies for on-selling to patients. Finally, there are non-prescription, over-thecounter drugs that the general public can access on an as needs basis. Many important drugs are subsidized by governments in order to reduce the financial burden on patients (for example, via the Australian Pharmaceutical Benefits Scheme),

Royalties and payments

Royalties paid on licences for proprietary pharmaceuticals are highly dependent on the clinical advantage being offered by the new product and whether there is any significant competition.

Furthermore, the licence fees and royalties paid by a marketing partner to a developer of a patented drug are dependent on the stage of development of the drug when the marketing licence arrangement is concluded. The fees and royalties increase correspondingly with the proximity of product to market sales. For instance, a product which is licensed at the pre-clinical phase will typically garner significantly lower royalties than a product which is licensed to a marketing partner following completion of phase III clinical studies.

SECTION 4
OWENVIEW of HaldyGen

4.1 Company history and background

HalcyGen was incorporated on 18 August 2005.

HalcyGen was established to:

identify and license improved proprietary pharmaceutical formulations of existing conventional generic pharmaceuticals known as "SuperGenerics";
develop and seek requlatory registration and, where relevant, patent protection, of these SuperGenerics for worldwide sale; and
sub-license the marketing and sales of the developed SuperGenerics to third party marketing partners and receive royalty íncome on ultimate product sales.

As at the date of this Prospectus, HaloyGen's portfolio of products comprises two potential SuperGenerics-SUBA-ftraconazole and Minocycline - which HalcyGen has licensed from Mayne. HalcyGen also intends to actively investigate other licensing opportunities and is in negotiation with Mayne in respect of an additional pharmaceutical formulation.

4.2 Current SuperGenerics under licence

Anti-fungal - Itraconazole

Itraconazole is a synthetic broad-spectrum anti-fungal agent developed and marketed worldwide by Janssen / Janssen-Cilag under the brand name Sporanox. Anti-fungal agents are often used to address fungal infections in elderly, immuno-suppressed and cancer patients. Global sales of Sporanox and other Itraconazole formulations are currently in excess of US\$600 million.

Itraconazole is difficult to formulate as an orally bioavailable product and therefore most formulations have a relatively low oral bioavailability (that is, a large dose must be administered orally to a patient to ensure that a sufficient concentration of the active incredient is absorbed into the bloodstream). This is caused by the low aqueous solubility of Itraconazole. Consequently, Itraconazole formulations such as Sporanox capsules exhibit a significant food effect and carry an "administer with food" label, requiring the patient to administer the drug in combination with a high energy food intake.

Mayne has developed a patent protected Itraconazole formulation (Superbioavailable Itraconazole or SUBA-Itraconazole) that offers superior oral bioavailability to Sporanox. As a consequence of the superior oral bioavailability, the dose required of SUBA-Itraconazole to achieve comparable levels of absorption into the bloodstream to that achieved by Sporanox is significantly reduced. SUBA-Itraconazole also exhibits an oral bioavailability which is only slightly affected by food and hence may be permitted to be sold with a "take with or without regard to meals" label.

Another competing anti-fungal agent is marketed by Pfizer Inc under the brand name Fluconazole. Fluconazole's sales currently exceed US\$750 million. HalcyGen expects that the SUBA-Itraconazole formulation may also target a portion of the Fluconazole market.

Antibiotic - Minocycline

Minocycline is a member of the broad-spectrum tetracycline antibiotic family. It works by preventing the growth and spread of bacteria. It is marketed under several trade names, including Minomycin, Minocin, Arestin, and Dynacin. Minocycline formulations are the largest selling tetracycline world-wide, with current global sales in excess of US\$400 million.

Minocycline is used to treat bacterial infections including pneumonia and other respiratory tract infections, acne and infections of skin, genital, and urinary systems. It can also be used to eliminate bacteria from the nose and throat.

Minocycline has been used extensively for decades as an antimicrobial agent in humans and has been used in chronic rheumatoid arthritis. The most common adverse effects of Minocycline are: anorexia, nausea and vomiting, dizziness, rash, hypersensitivity reactions and headache. Minocycline is therefore an excellent candidate for side-effect reduction and hence there is a potential market for the development and production of a proprietary SuperGeneric product.

Mayne has developed a patent protected Minocycline re-formulation. HalcyGen proposes to further develop this re-formulation through clinical trials, with the aim of developing a re-formulation which reduces the typical side effects.

4.3 Licensing arrangements with Mayne

The licensing arrangements between HalcyGen and Mayne provide HalcyGen with the opportunity to capitalise on the historic investment made by Mayne in developing the licensed formulations to date.

In particular, HaleyGen is provided with access to Mayne's:

product development skills and services;
international regulatory and technical affairs skills;
proven drug delivery technology;
· commercial product manufacturing capabilities; and
· TGA and FDA licensed manufacturing facility in Salisbury, South Australia.

Under the licences, HalcyGen is obliged to undertake phase II and phase III clinical trials of both Minocycline and SUBA-Itraconazole with the aim of building on the improvements achieved by Mayne to date as well as improving on the functionality of these products through additional development plans.

A summary of the key terms and conditions of the Mayne licence agreements is set out in section 9.5.

4.4 Clinical studies and development

HalcyGen plans to engage contract research organisations in order to facilitate the development of its licensed products through clinical studies.

HalcyGen has engaged CMAX, a division of Institute of Drug Technology Australia Limited, to conduct pilot studies which form part of the phase II clinical trials program in respect of SUBA-Itraconazole. These studies are expected to commence in mid 2007 and will be overseen by HalcyGen.

These further clinical and safety evaluations will enable HalcyGen to develop the potential SuperGenerics it has licensed. Through its relationships with Mayne, CMAX and other third parties, HaloyGen aims to:

· establish GMP conditions for the manufacture of its two products; and
demonstrate the benefits of its products to a standard which will enable regulatory submission for registration purposes.

4.5 Marketing

At appropriate intervals during the development and registration of its licensed SuperGenerics. HalcyGen plans to identify suitable marketing partners to sub-license the products on terms which maximise milestone and royalty revenues for HalcyGen. HalcyGen's marketing partner will be responsible for all promotional, marketing, distribution and sales activities relating to the SuperGenerics.

HalcyGen's reliance on potential marketing partners exposes HalcyGen to the risk that a suitable marketing partner may not be identified or that an agreement on terms suitable to HalcyGen may not be reached. This risk is discussed further in section 8.8.

4.6 Work programs

SUBA-Itraconazole:

· Further pharmacokinetic analysis mid 2007
· Dialoque with requlatory agencies mid 2007
· Clinical exhibit manufacture mid 2007
· Phase III pivotal study late 2007 to early 2008
· Filing for registration 2008
· Licence partner 2008
· Launch 2008/2009

Minocycline:

· Further pharmacokinetic analysis late 2007
· Proof of concept study showing improved safety via phase IIB clinical trials 2008 / 2009
· Manufacture exhibit batches 2008
· Regulatory submission 2009
· Seek partner 2008/2009
· Launch 2010

The above work programs represent HalcyGen's current view as to the likely steps and timing of the implementation of its strategy. However, events may occur which could alter the timetable or make it unachievable. The timetable is highly dependent on the timely and successful manufacturing, at each stage of the clinical development process, of sample drug batches which are compliant with the relevant Australian and US requlatory requirements. Any non-compliance with these requirements could result in delays to the proposed work programs. This risk is discussed further in sections 8.5 and 8.6.

4.7 Intellectual property portfolio

Licensed intellectual property

As a consequence of its licences from Mayne, HalcyGen has global exclusive licences in respect of the patents (and patent applications) set out in the following tables (the Background IP).

Under the licences, Mayne is responsible for prosecuting and maintaining (at its cost) all relevant Background IP patents, patent applications, trade marks and trade mark applications and must consult with HalcyGen and keep it informed in respect of the status of all such activities.

SUBA-Itraconazole -- Background IP

The grant of Australian Patent No. 782469 was originally opposed by Pfizer, Inc.

This opposition was subsequently withdrawn by Prizer prior to the fling of any evidence and the patent proceeded to grant.

Minocycline - Background IP

Australia	614328	fetracycline dosage torm	Granted	-01/02/1989
United States	5277916	Tetracycline dosage form	Granted	14/06/1996 igranted 11/01/1994)
Australia	2003213876	An improved modified release preparation	Granted	11/04/2003
Canada	2480783	An improved modified release preparation	Awaiting examination	11/04/2003
Europe	1513505	An improved modified release preparation	Awaiting examination	11404/2003
dapan	2003-583387	An intereved modified release preparation	Awaiting examination	11/04/2003
New Zealand	535372	An improved modified release preparation	Under examination	11/04/2003
Norway	20044463	An improved modified release preparation	Awaiting examination	11/04/2003
Simpoore	200405834-3	An improved modified release preparation	Granted	11/04/2003
United States	6958161	Modified release coated order preparation.	Granted	12/04/2002

Investors should be aware that patent applications in some jurisdictions may take up to 7 years to be examined before a patent may be granted.

New intellectual property

Any new intellectual property developed in respect of SUBA-Itraconazole and Minocycline as a consequence of the development and manufacturing programs undertaken by Mayne will vest in HalcyGen.

Mayne is required to keep HalcyGen informed of all results of the development program and must notify HalcyGen of any patentable inventions or potentially patentable inventions that are developed during the development program.

HalcyGen has the right, at its own expense, to file, prosecute and maintain patent applications to protect the new intellectual property. If HalcyGen does not file patent application within 12 months of completing the development program, then Mayne may file a patent application in its own name.

The value of any new intellectual property vested in HalcyGen may be adversely affected if one or both of the Mayne licence agreements are terminated or if Mayne does not comply with its obligations in respect of protecting the Background IP. These risks are discussed further in section 8.3.

4.8 Location and facilities

HalcyGen's corporate offices are based at Level 10, 470 Collins Street, Melbourne, Victoria 3000, Australia.

Current development and pilot scale batch production is being undertaken to support phase II and phase III trials of SUBA-Itraconazole and Minocycline at Mayne's Salisbury plant in South Australia.

If either product proceeds to commercial scale production, a manufacturing and services agreement with Mayne will be negotiated in accordance with the requirements of the licences with Mayne. These licences give Mayne a first right of refusal to manufacture the products, and a right to receive royalty payments if not appointed to manufacture the products. The licences are discussed further in section 9.5.

Mayne is required to use commercially reasonable endeavours to seek to agree a manufacturing agreement on commercially reasonable terms, to allow HalcyGen to utilise Mayne's manufacturing facility in Salisbury, South Australia. This facility is GMP certified by the FDA in the US and the TGA in Australia.

SECTION 5 1744

5.1 Proposed use of funds raised

HaldyGen is offering 25,000,000 Shares under the Offer, to raise gross funds of \$12,500,000.

Funds raised from the Offer are intended to be applied as follows:

Description	A\$
Product development
Minocyclíne	4,180,000
SUBA-Itraconazole	2,230,000
Other products	1,120,000
Total product development	7,530,000
Preclinical and clinical trials
Minocyclíne	1,050,000
SUBA-Itraconazole	1,350,000
Other products	750,000
Total preclinical and clinical trials	3,150,000
Intellectual property portfolio management	100.000
Expenses of Offer	887,000
General working capital
Salaries	690,000
Other overheads	143,000
Total general working capital	1,820,000
Total	12,500,000

5.2 Expenditure program

The first focus of HalcyGen's expenditure program is on the product development and manufacture of SUBA-Itraconazole to GMP industry standards, which will be performed by Mayne.

Subsequent dose ranging and pivotal clinical trials aimed towards generating a dossier for registration are expected to be conducted by CMAX and other contract research organisations.

The costs for SUBA-Itraconazole can be broken down in accordance with the table below:

Product development	Formulation development.	2007 (Mayoe)
Precimical and cluded trais	-Process and analytical development	.2007 Anaiytical method (Mayne) Pharmacokinetic study (CMAX) Active pharmaceutical ingredient sourcing IND Application if required
	.Clinical/exhibit manufacture	2007/2008 Facility modification (Mayne) Equipment qualification (Mayne) Precedent batch manufacture (Mayne) Analytical validation with precedent batch (Mayne) Exhibit batch manufacture (Mayne) Specification and limit justification Pivotal phase III Clinical Study (CMAX or other contract research organisation)
Requiatory submission		200E
Qualification commercial plant		2008
Operatorial and performance qualification		2008 2009
Approval and launch		2008 / 2009

CONTRACTOR

A similar process will be implemented for Minocycline commencing in late 2007. Mayne has been engaged to undertake the product development and manufacturing of Minocycline. HalcyGen proposes to engage CMAX or another contract research organisation to undertake the clinical work at hospitals using facilities that are compliant with GCP (Good Clinical Practice).

5.3 Additional funding

The Directors believe the funds raised from the Offer will give HalcyGen sufficient available funds to achieve its objectives as stated in sections 2.3 and 5.1.

However, the funds raised under this Prospectus are unlikely to be sufficient to enable HalcyGen to obtain regulatory approval of the products or undertake pre-sales marketing. As stated in sections 4.1 and 4.5, HalcyGen's strategy is to sub-license its products to marketing partners that are in a position to assist with the marketing and sales of the products. HalcyGen will need to raise additional capital in the future if suitable marketing partners cannot be identified and HalcyGen seeks to market and sell the products without such partners.

HalcyGen may also seek additional funding in the form of industry-based state and federal government grants to assist with development and clinical trialling of its products. There is no guarantee that HalcyGen will be successful in seeking such funding. This risk is discussed in section 8.11.

SECTION 6 Financial information and

a kata ya mwaka wa 1989, wakazi wa 1989, kata ya 1989, kata ya 1989.
Waliozaliwa wa 1989, kata ya mshindi wa 1989, kata ya 1989, kata ya 1989. MONDAY AND REAL ega W, Vari C-FN

6.1 Capital structure on completion of the Offer

The capital structure of HalcyGen following completion of the Offer is summarised below:

Shares	Number
Shares on issue at date of Prospectus	51.099.000
Shares offered pursuant to this Prospectus	25,000,000
Total Shares on issue at completion of the Offer ¹	76,099,000
Options
Options on issue at date of Prospectus	6.250.000
Options offered pursuant to this Prospectus	Νíί
Total Options on issue at completion of the Offer ²	6,250,000

(1) 43,077,800 of these Shares will be subject to escrow (see section 9.7 for further details) (2) All Options will be subject to escrow (see section 9.7 for further details)

The terms and conditions attaching to the Shares and Options are described in sections 9.3(a) and 9.4 of the Prospectus.

6.2 Financial results for previous periods

Set out below is the summarised financial information reflecting the statement of financial position of HalcyGen as at 30 June 2006, and as at 31 December 2006, together with the income statement and statement of cash flows for the period ended 30 June 2006 and the half-year ended 31 December 2006.

Statement of financial position		As at
	Nates	31 December 2006 C.	30 June 2006 参
Current assets
Cash and cash equivalents		3,891,669	28,509
Receivables		4,314	50
Other		10,267
Total current assets		3,906,250	28,559
Total assets		3,906,250	28,559
Current liabilities
Trade and other payables		182,734	7,456
Total current liabilities		182,734	7,456
Total liabilities		182,734	7,456
Net assets		3,723,516	21,103
Equity
Issued capital		4,074,136	30,000
Reserves	$\overline{2}$	10,610
Accumulated losses		(361, 230)	(8, 897)
Total equity		3,723,516	21,103

Income statement		Half-yearly ended 31 December 2006	Period ended 30 June 2006
	Notes	參	参
Continuing operations Revenue
Research expenses Administrative expenses Results from operating activities	3	(88, 865) (234,005) (322, 870)	(9,641) (9,641)
Einance income Finance expenses		43,700	744
Net finance costs		43,700	744
Loss before income tax		(279, 170)	(8,897)
Income tax expense Loss for the period	1	(73, 163) (352, 333)	(8,897)
Statement of cash flows	Nates	Half-yearly ended 31 December 2806 签	Period ended 30 June 2006 参
Cash flow from operating activities Cash paid to suppliers and employees		(151,513)	(2,235)
Net cash used in operating activities		(151, 513)	(2, 235)

Cash flow from investing activities
Interest received	43,700	744.
Net cash from investing activities	43,700	744
Cash flow from financing activities
Proceeds from the issue of share capital	4.214,850	30.000
Payment of transaction costs	(243, 877)
Net cash from financing activities	3,970,973	30,000
Net increase in cash and cash equivalents	3,863,160	28,509
Cash and cash equivalents at beginning of period	28,509
Cash and cash equivalents at end of period	3.891.669	28.509

Natolie

Notes to the financial information

The summarised financial information, for inclusion in the Prospectus, comprises extracts of the 30 June 2006 audited financial report, the 31 December 2006 reviewed financial information and pro forma financial information. It has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (A-IFRS, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board) and the Corporations Act 2001. The summarised financial information has been prepared on an accrual basis and is based on historical costs.

The significant policies which have been adopted in the preparation of this financial information are:

Income tax

The income tax expense on revenue for the period is the tax payable on the current period's taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and by unused tax losses.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the fiability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity

1. Income tax expense, deferred tax assets and liabilities

The prima facie tax, using tax rates applicable in the country of operation, on operating loss differs from the income tax provided in the accounts as follows:

	Half-vear anded 31 December 2006 签	Period ended -30 June 2006 -3
Loss from ordinary activities before income tax expense	(279, 170)	(8,897)
Prima facie tax benefit on loss from ordinary activities at 30% Tax effect of amounts which are not deductible (taxable) in the calculating taxable income Movements in deferred taxes in relation to temporary differences	(83,751) 26	(2,669)
Income tax benefit attributable to ordinary activities Tax effect of current year tax losses for which no deferred tax asset has been recognised Tax effect of costs directly attributable to the issue of ordinary shares for which no deferred tax asset has been recognised	(83, 725) 83,725 73.163	(2,669) 2.669
Income tax expense / (benefit)	73.163

Deferred tax assets have not been recognised because it is not probable that future taxable profits will be available against which HaleyGen can utilise the benefits therefrom.

FILE OFFICE ON HALLOVER HEAR THE MARKET

2. Share-based payments

During the half-year ended 31 December 2006 the following unlisted Options over unissued Shares were issued by HalcvGen:

Options issued	Exercise price	Expiry date
250,000	\$0.10	-30 June 2010

As at 31 December 2006 HalcyGen had on issue 5,250,000 (30 June 2006: 5,000,000) unlisted Options over unissued Shares.

During the half-year ended 31 December 2006 an amount of \$10,610 (period ended 30 June 2006: Nil) was recognised as an expense and corresponding movement in equity in respect of the fair value of Options issued as equity based compensation. Details of the valuation, using the Black Scholes Option Valuation Model, of Options granted during the period are as follows:

Number of options	Exercise price	Expiry date	Risk free interest rate	Volatility	Value per option
250,000	SO.10-	30 Jun 2010 -	- 5.96%	70%-	\$0.0968

3. Research and development expenditure

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and HalcyGen intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment fosses.

6.3 Pro-forma consolidated balance sheet

The principal effect of the Offer will be to:

increase cash reserves by approximately \$12,500,000 less estimated costs of the offer before costs immediately after completion of the Offer; and
increase the number of Shares on issue from 51,099,000 to 76,099,000.

Set out below is an unaudited pro-forma balance sheet of HalcyGen as at 31 December 2006 incorporating the effect of the Offer. It is based on the reviewed balance sheet for HalcyGen as at 31 December 2006. The pro-forma balance sheet illustrates the effect of the Offer as if the Offer had occurred on 31 December 2006, fully subscribed (\$12,500,000) and net of the costs of the Offer.

Details of the costs of the Offer are shown in section 9.16 of the Prospectus and in note (i) below.

Neiton S

Details of the costs of the Offer are shown in section 9.16 of the Prospectus and in note (i) below.

	HaktyGen 31 December 2006 翁	Pro forms adiustments 簋	Pro forma HalcyGen 31 December 2006 参
Current assets
Cash and cash equivalents	3,891,669	11,613,173	15,504,842 - (§)
Receivables	4,314		4,314
Other	10,267		10,267
Total current assets	3,906,250	11,613,173	15,519,423
Total assets	3,906,250	11,613,173	15,519,423
Current liabilities
Trade and other payables	182,734		182,734
Total current liabilities	182,734		182,734
Total liabilities	182,734		182,734
Net assets	3,723,516	11,613,173	15,336,689
Equity
Issued capital	4,074,136	11,779,718	15,853,854 $\langle i \rangle$
Reserves	10,610		10,610 (ii)
Accumulated losses	(361, 230)	$(166, 545)$ (i), (ii)	(527, 775)
Total equity	3,723,516	11,613,173	15,336,689

(i) Cash received includes the proceeds from the issue of 25,000,000 Shares at a price of \$0.50 per Share, to be issued pursuant to this Prospectus. Estimated costs of listing of approximately \$886,827 have been deducted from cash. Details of these estimated costs are as follows:

ASIC lodgement fee	\$2,010
ASX quotation fee	\$59,817
Legal and corporate fees and expenses	\$140,000
Tolhurst Limited's fees and expenses	\$625,000
KPMG's fees and expenses	\$10,000
Printing, mailing, advertising, miscellaneous	\$50,000
Total	\$886,827

Of the above costs, HalcyGen estimates that \$720,282 relates directly to the capital raising under this Prospectus, and has been deducted from equity, and \$166,545 relates to the listing of HalcyGen's existing Shares and has been expensed to profit and loss.

(ii) Subsequent to 31 December 2006, 1,250,000 Options were issued to Directors and executives of HalcyGen with a value, calculated using the Black-Scholes Option Valuation Model, of \$314,613, which was expensed at the date of issue of the Options, and a further 1,750,000 Options were issued subsequent to 31 December 2006 with a calculated value of \$498,082, an amount which will be amortised over the 12 month vesting period of these Options.

Central Park 152-158 St George's Terrace Perth WA 6000

GPO Box A29 Perth WA 6837 Australia.

The Directors HalcyGen Pharmaceuticals Limited Level 12 BGC Centre 28 The Esplanade Perth, Western Australia 6000

23 May 2007

Dear Sirs

Investigating Accountant's Report

INTRODUCTION

KPMG has been engaged by HalcyGen Pharmaceuticals Limited ("HalcyGen") to prepare this report for inclusion in the Prospectus to be dated 23 May 2007, and to be issued by HalcyGen, in respect of the proposed underwritten issue of 25 million Shares in HalcyGen at \$0.50 per share.

Expressions defined in the Prospectus have the same meaning in this report.

FINANCIAL INFORMATION

KPMG has been requested to prepare a report covering the Historical and Pro Forma Historical information described below and disclosed in the Prospectus.

Historical Financial Information

The Historical Financial Information, as set out in section 6.2 of the Prospectus, comprises the:

income statements of HalcyGen for the periods ended 30 June 2006 and 31 December 2006;
· statements of cash flows of HalcyGen for the periods ended 30 June 2006 and 31 December 2006;
- balance sheet of HalcyGen as at 30 June 2006 and 31 December 2006; and
· selected notes thereto.

The Historical Financial Information set out in section 6.2 of the Prospectus has been extracted from the financial statements of HalcyGen for the half year ended 31 December 2006, and the year ended 30 June 2006.

The financial statements of HalcyGen for the year ended 30 June 2006 were audited by KPMG in accordance with Australian Auditing Standards. The financial statements of HalcyGen for the half year ended 31 December 2006 were reviewed by KPMG in accordance with Australian Auditing Standards. The audit and review opinions issued to the members of HalcyGen relating to those financial statements were unqualified.

The directors of HalcyGen are responsible for the preparation and presentation of the Historical Financial Information.

The Historical Financial Information is presented in an abbreviated form insofar as it does not include all of the disclosures required by the Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act 2001 ("Corporations Act").

Pro forma Historical Financial Information

The Pro Forma Historical Financial Information, as set out in section 6.3 of the Prospectus, comprises the pro forma, unaudited:

ABN: 51 194 660 183

www.kpmg.com.au

Telephone: +61 8 9263 7171

Facsimile: +61 8 9263 7129

Kamanan manazarta ya

· balance sheet of HalcyGen as at 31 December 2006; and
· selected notes thereto.

The Pro Forma Historical Financial Information has been derived from the Historical Financial Information after adiusting for the pro forma transactions and/or adjustments described in section 6.3 of the Prospectus.

The directors of HalcyGen are responsible for the preparation and presentation of the Pro Forma Historical Financial Information. including the determination of the pro forma transactions and/or adjustments.

The Pro Forma Historical Financial Information is presented in an abbreviated form insofar as it does not include all of the disclosures required by the Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act.

Review of Historical Financial Information

We have reviewed the Historical Financial Information in order to report whether anything has come to our attention which causes us to believe that the Historical Financial Information, as set out in section 6.2 of the Prospectus, does not present fairly the:

íncome statements of HalcyGen for the periods ended 30 June 2006 and 31 December 2006;
statements of cash flows of HalcyGen for the periods ended 30 June 2006 and 31 December 2006;
· balance sheets of HalcyGen as at 30 June 2006 and 31 December 2006; and
· selected notes thereto.

in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and accounting policies adopted by HalcyGen disclosed in section 6.2 of the Prospectus.

Our review has been conducted in accordance with Australian Auditing Standard AUS 902 "Review of Financial Reports," We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances, including:

analytical procedures on the Historical Financial Information;
· a review of work papers, accounting records and other documents;
a comparison of consistency in application of the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by HalcyGen disclosed in section 6.2 of the Prospectus; and
· enquiry of directors, management and others.

The procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Review of Pro Forma Historical Financial Information

We have reviewed the Pro Forma Historical Financial Information in order to report whether anything has come to our attention which causes us to believe that the Pro Forma Historical Financial Information, as set out in section 6.3 of the Prospectus, does not present fairly:

• the pro forma historical financial position of HaleyGen as at 31 December 2006,

on the basis of the pro forma transactions and/or adjustments described in section 6.3 of the Prospectus, and in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and accounting policies adopted by HalcyGen disclosed in section 6.2 of the Prospectus.

Our review has been conducted in accordance with Australian Auditing Standard AUS 902 "Review of Financial Reports", We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances, including:

a review of the pro forma transactions and/or adjustments made to the Historical Financial Information;
· a review of work papers, accounting records and other documents;
a comparison of consistency in application of the recognition and measurement principles in Accounting Standards and

other mandatory professional reporting requirements in Australia, and the accounting policies adopted by HalcyGen disclosed in section 6.2 of the Prospectus; and

· enquiry of directors, management and others.

REVIEW STATEMENTS

Review statement on the Historical Financial Information

Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the Historical Financial Information, as set out in section 6.2 of the Prospectus, does not present fairly the:

income statements of HalcyGen for the periods ended 30 June 2006 and 31 December 2006;
* statements of cash flows of HalcyGen for the periods ended 30 June 2006 and 31 December 2006; and
balance sheets of HalcyGen as at 30 June 2006 and 31 December 2006,

Review statement on the Pro Forma Historical Financial Information

Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the Pro Forma Historical Financial Information, as set out in section 6.3 of the Prospectus, does not present fairly:

• the pro forma historical financial position of HalcyGen as at 31 December 2006,

INDEPENDENCE

KPMG does not have any interest in the outcome of this issue, other than in connection with the preparation of this report and participation in due diligence procedures for which normal professional fees will be received. KPMG is the auditor of HalcyGen and from time to time, KPMG also provides HalcyGen with certain other professional services for which normal professional fees are received.

RESPONSIBILITY

KPMG has consented to the inclusion of this Investigating Accountant's Report in the Prospectus in the form and context in which it is so included, but has not authorised the issue of the Prospectus. Accordingly, KPMG makes no representation regarding, and takes no responsibility for, any other statements, or material in, or omissions from, the Prospectus.

GENERAL ADVICE WARNING

This report has been prepared, and included in the Prospectus, to provide investors with general information only and does not take into account the objectives, financial situation or needs of any specific investor. It is not intended to take the place of professional advice and investors should not make specific investment decisions in reliance on the information contained in this report. Before acting or relying on any information, an investor should consider whether it is appropriate for their circumstances having regard to their objectives, financial situation or needs.

Yours faithfully

Carlo Robeinnen

Grant Robinson Partner

Brigan

Maria Barat

ARTICLE

an masa sa sa

ÝЖ,

an dina Kabupatén

en e al algebra

This section provides some background as to the qualifications and experience of the directors of HalcyGen. It also summarises the corporate governance policies and procedures of HalcyGen. Full documentation may be viewed on HalcyGen's website www.halcvgen.com.

7.1 Directors

Dr Roger Aston, BSc (Hons), PhD - Chairman and Chief Executive Officer

Previously at Weltcome plc (now GlaxoSmithKline). Dr Aston has more than 20 years of experience in the pharmaceutical and biotechnology industries. His previous positions have included CEO of Peptech Limited (Australia), director of Cambridge Antibody Technology Limited (UK) and Chairman of Cambridge Drug Discovery Limited (UK) - now BioFocus plc. Dr Aston was the founder and CEO of Biokine Technology Ltd (UK) prior to its acquisition by the Peptech Group. Dr Aston was also a co-founder of pSivida Ltd. Currently, Dr Aston is Chairman of Clinuvel Pharmaceuticals Limited.

During the past 20 years of his career, Dr Aston has been closely involved in the development of pharmaceutical and biotechnology companies, with extensive experience in negotiating global licence agreements, overseeing product registration activities with the FDA, the establishment and implementation of quidelines and operating procedures for manufacturing and clinical trials, overseeing manufacturing of human and veterinary products, private and public fund-raising activities and the introduction of corporate governance procedures in accordance with Greenbury and Cadbury quidelines (UK) and Sarbanes Oxley (USA).

Mr Craig Bottomley - Executive Director and Chief Operating Officer

Mr Bottomley has over 20 years experience in establishing and developing commercial ventures. He has been involved in the manufacturing, importing, exporting and marketing of products for his own companies. He has established national and international sales distribution channels for both locally developed and imported product lines. His regions of commercial activity have included the United States of America, the United Kingdom, Hong Kong, Singapore and New Zealand.

After the year 2000 he divested his own company interests to focus on investments in public companies. He has close associations with the share broking industry and also with professional investors. He has been involved in numerous capital raisings and business strategies for listed companies.

Hon, Ron Best - Non Executive Director

The Hon. Ron Best is currently a business consultant to PFD Food Services Pty Ltd, one of Australia's largest privately owned food distribution companies. Mr Best provides strategic and practical advice to PDF Food Services.

He was formerly the owner of a highly successful food distribution business, Golden City Frozen Foods, from 1977 to 1985, taking this company from being a small. Bendigo-based business to a large food distribution business across regional Victoria. He was also chairman of the independent Frozen Food Distributors Buying Group from 1983 to 1985, and from 1985 to 1987 he was General Manager of the Glacier Food Group.

Mr Best is a highly respected former Member of the Victorian Parliament where he served from 1988 to 2002. He held a number of senior positions in the National Party, including Parliamentary Secretary, Shadow Minister for Housing and Spokesperson for Health, Racing, Sport & Recreation. He was also a member of the Public Accounts and Estimates Committee, the Environment and Natural Resources Committee and the Road Safety Committee.

Mr Best also served as a board member of the Victorian Health Promotion Foundation for 12 years and this position, combined with his considerable experience as the National Party Spokesperson on Health, provides him with a broad policy understanding of the health industry.

Mr Bruce Mathieson - Non Executive Director

Mr Bruce Mathieson is currently a director and chief executive officer of Australian Leisure and Hospitality Group Limited, a joint venture between Woolworths Limited and the Mathieson Family. The ALH Group owns approximately 260 hotels and 450 retail outlets across Australia, and employs more than 14,000 staff. The total annual turnover of the ALH Group is in excess of \$1.6 billion.

Mr Mathieson has operated in the hotel, leisure and hospitality industry since 1974 and is a well respected member of the Australian business community. He has previously served as a director of the Cariton Football Club. He is trained as an engineer, and brings management and transactional experience from across a number of industries to the Board.

9) {

7.2 Corporate governance

The Board of HalcyGen has established corporate governance policies and procedures which the Directors believe are appropriate, given the current size and activities of HalcyGen.

HalcyGen, including all of its Directors and employees, is committed to maintaining the highest standards of corporate governance and ethical behaviour in all dealings and activities. Subsequent to listing, HalcyGen intends to ensure that, to the extent practicable and appropriate, its policies and procedures are consistent with the ASX Corporate Governance Council's Prínciples of Good Corporate Governance and Best Practice Recommendations. In particular, HalcyGen intends to appoint an independent Chairman.

As at the date of this Prospectus, HalcyGen does not have an audit committee.

7.3 Board charter

The Board monitors the progress and performance of HalcyGen on behalf of its Shareholders, by whom it is elected and to whom it is accountable. The Board charter, which is summarised below, seeks to ensure that the Board discharges its responsibilities in an effective and capable manner.

The responsibilities of the Board under the charter include:

overseeing the control and accountability systems of HalcyGen;
appointing and removing the chief executive officer;
ratifying the appointment and, where appropriate, the removal of the chief financial officer and the company secretary;
having input into, and final approval of, the corporate strategy and performance objectives developed by management;
reviewing and ratifying the systems of risk management, the internal compliance and control measures, the codes of conduct and the external compliance measures implemented by management;
monitoring senior management's performance and the implementation of the corporate strategy;
ensuring appropriate resources are available and approving and monitoring the progress of major capital expenditure, capital management transactions and acquisitions and divestitures;
approving and monitoring financial and other reporting; and
monitoring compliance of tax processes.

7.4 Composition of the Board

It is the policy of HalcyGen that:

the Board comprises individuals with a range of skills, experience and attributes appropriate for HalcyGen and its business; and
the principal criterion for the appointment of new Directors is their ability to add value to HalcyGen and its business.

No formal nomination committee or procedures have been adopted for the identification, appointment and review of the Board membership. However, an informal assessment process, facilitated by the Chairman in consultation with HalcyGen's professional advisors, has been committed to by the Board.

The number of directors must not be less than 3.

At this stage, the Board does not consider the formal establishment of a performance evaluation strategy necessary. Performance evaluation is a discretionary matter for consideration by the entire Board and it will meet annually to assess the performance of the Directors, senior management and the Board as a whole.

7.5 Securities trading policy

Directors, officers and other employees of HalcyGen will be in possession of information relating to HalcyGen and, possibly, other companies. From time to time, some of this information may be classified as "inside information". It is a criminal offence for a person in possession of inside information in relation to a company to trade, or procure another person to trade, in securities of that company. HalcyGen has adopted a securities trading policy that explains the prohibition on insider trading and also limits trading by Directors and employees to specific "trading windows". All trades within the trading windows by Directors and employees must be notified in advance to the Chairman of the Board and clearance must be obtained for the particular trade. Any trading by the Chairman must be approved by the full Board.

The securities trading policy does not restrict participation in HalcyGen's employee share options plan but does restrict trading in the Shares to which Directors or employees become entitled under the plan. However, participation in the plan is subject to the insider trading laws at all times.

7.6 Independent professional advice

Subject to the Chairman's approval (not to be unreasonably withheld), the Directors, at HalcyGen's expense, may obtain independent professional advice on issues arising in the course of their duties.

7.7 External andit

Shareholders in general meetings are responsible for the appointment of the external auditors of HalcyGen, and the Board from time to time will review the scope and performance of those external auditors.

7.8 Identification and management of risk

The Board's collective experience will enable accurate identification of the principal risks that may affect HalcyGen's business. Key operational risks and their management will be recurring items for deliberation at Board meetings.

7.9 Continuous disclosure policy

HalcyGen is committed to continuous disclosure of material information as a means of promoting transparency and investor confidence. The practices of HalcyGen are fully compliant with the ASX Listing Rules, including in particular those regarding continuous disclosure.

7.10 Shareholder communications strategy

HalcyGen places great importance on the communication of accurate and timely information to its Shareholders and market participants and recognises that efficient and continuous contact with stakeholders is an essential part of earning their trust and loyalty.

ASX announcements, half-yearly reports and presentations will be posted to HalcyGen's website regularly.

www.halcygen.com

HalcyGen's register of Shareholders is maintained by Computershare Investor Services Pty Limited.

SECTION 8
RISK 180101S

-1951-1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 -

8.1 Introduction

There are a number of factors, both specific to HalcyGen and of a general nature, which may affect the future operating and financial performance of HalcyGen and the value of an investment in HalcyGen.

Some of these factors can be mitigated by the use of safeguards and appropriate commercial action. However, many are outside the control of HalcyGen and cannot be mitigated.

This section describes certain, but not all, risks associated with an investment in HalcyGen. Each of the risks set out below could, if they eventuate, have a material adverse effect on HalcyGen's financial performance, financial position and cash flows and the price of the Shares.

Prior to making an investment decision, prospective investors should read the Prospectus in its entirety and, in particular, should consider the risk factors described below. You should carefully consider these factors in light of your personal circumstances and seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest.

The following is not intended to be an exhaustive list of the risk factors to which HalcyGen is exposed. This section identifies the areas that the Directors believe to be the major risks associated with an investment in HalcyGen.

8.2 Share investment

Prior to the Offer, there has been no public market for the Shares. There can be no guarantee that an active market in the Shares will develop.

fnvestors should be aware that there are risks associated with investment in companies listed on a stock exchange. The value of the Shares can be expected to fluctuate depending on various factors, including general worldwide economic conditions, changes in government policies, investor perceptions (of the pharmaceutical/biotechnology industry generally as well as of HalcyGen itself), movements in interest rates and stock markets, variations in the operating costs and costs of capital replacement which HalcyGen may in the future require. Accordingly, assuming that the Shares are granted official quotation by ASX, the Shares may trade on the market operated by ASX at higher or lower prices than the issue price under the Offer.

Each potential investor should consider whether the Shares are a suitable investment for them before deciding to invest in the Shares. Any investor in doubt about investing in Shares should consult their stockbroker, accountant, lawyer or other professional adviser immediately.

8.3 Intellectual property risks

HalcyGen's success depends on the ability of HalcyGen or its licensors (including in particular, Mayne) to:

obtain and maintain patents:
· maintain trade secret protection; and
operate without infringing the proprietary rights of third parties.

Maintaining the patent position for the products licensed to HalcyGen involves complex legal and factual questions. The risks and uncertainties faced with respect to patents and other proprietary rights include the following:

. the pending patent applications filed or to which HalcyGen has exclusive rights may not result in issued patents or may take longer than expected to result in issued patents;
the claims of any patents issued may not provide meaningful protection;
the patents issued may not provide a competitive advantage or commercially significant protection:
other companies may challenge patents licensed to HalcyGen, and given the complex nature of the products, this could lead to expensive and lengthy disputes for which there can be no guaranteed outcome; and
other companies may independently develop similar or alternative products.

While HalcyGen plans to implement all reasonable measures to protect the products it licenses, there can be no assurance that these measures will be sufficient.

A Transición

As noted in section 4.7, under the licences between Mayne and HalcyGen, Mayne is responsible for prosecuting and maintaining (at its cost) all relevant patents and patent applications in respect of the licensed Background IP. Accordingly, HalcyGen is subject to the risk that Mayne does not take all appropriate steps to secure such protection. However, Mayne continues to own the Background IP and must consult with HalcyGen and must keep it informed in respect of the status of all such activities.

The value of any new intellectual property vested in HalcyGen under the Mayne licence agreements may be adversely affected if one or both of the Mayne licence agreements are terminated or if Mayne does not comply with its obligations in respect of protecting the Background IP.

8.4 Regulatory risks

The pharmaceutical requlatory regime, which includes preclinical studies and clinical trials of each product in order to establish its safety and efficacy, is uncertain, can take significant periods of time, and require the expenditure of significant resources. Data obtained from preclínical and clinical activities are susceptible to varving interpretations, which could delay, limit or prevent regulatory approval or clearance.

In addition, delays or rejections may be encountered based upon changes in regulatory policy during the period of product development and/or the period of review of any application for regulatory approval or clearance for a product. Delays in obtaining regulatory approvals or clearances:

may adversely affect the marketing of any products developed;
· could impose significant additional costs;
· may diminish any competitive advantages of the product; and
could adversely affect the ability of HalcyGen to receive royalties and generate revenues and profits.

Regulatory approval, if granted, may entail limitations on the indicated uses for which the approved product may be marketed. These limitations could reduce the size of the potential market for such products. Product approvals, once granted, may be withdrawn. Further, manufacturers of approved products are subject to ongoing regulation, including compliance with detailed regulations governing GMP. Failure to comply with manufacturing regulations can result in, among other things, warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production and criminal prosecution.

8.5 Development of products

HalcyGen is relying on its own abilities and that of its strategic alliance partners (including Mayne and CMAX) to successfully develop and commercialise its products. A failure to successfully develop and commercialise these products could lead to a loss of opportunities and adversely impact on HalcyGen's operating results and financial position.

Further, the development and commercialisation of pharmaceutical products is subject to the inherent risk of failure, including the possibility that the products licensed to HalcyGen:

are found to be unsafe or ineffective:
· fail to demonstrate any material benefit or advancement in safety and/or efficacy of a generic product;
fail to receive necessary regulatory approvals;
are difficult or impossible to manufacture on a large scale;
· are uneconomical to market or otherwise not commercially exploitable;
· fail to be developed prior to the successful marketing of a similar product by competitors;
compete with products marketed by third parties that are superior;
· fail to achieve the support or acceptance of physicians, patients or the medical community; and
treat conditions which, due to other developments, have a reduced incidence. For example, developments in other medical treatments, including oncology, could reduce infection incidences and thus the demand for anti-infective drugs, including anti-fungals (such as Itraconazole) and antibiotics (such as Minocycline).

-1951-1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 - 1955 -

8.6 Counterparty risk

HalcyGen is heavily reliant on its strategic partners, including:

Mayne and any other future licensors of products to HalcyGen;
. CMAX and any other contract research organizations engaged by HalcyGen to undertake clinical studies;
. Mayne and any other future manufacturers of products engaged by HalcyGen; and
any development or marketing partners engaged by HalcyGen.

A failure by any of its strategic partners to comply with their commitments could lead to a loss of opportunities for HalcyGen and adversely impact on HalcyGen's operating results and financial position.

8.7 Product liability and uninsured risks

HalcyGen may experience losses due to product liability claims. Product liability insurance may not be adequate or may not be available in sufficient amounts, at an acceptable cost, or at all. A product liability claim, product recall or other claim, as well as any claims for uninsured liabilities or in excess of insured liabilities, may have a significant adverse effect on HalcvGen.

HalcyGen may also experience losses due to failure of laboratory equipment, computer equipment or other facilities used by it or for its benefit. Appropriate insurance coverage may not be adequate or may not be available in sufficient amounts, at an acceptable cost, or at all. Catastrophic loss caused by such failure may have a significant adverse effect on HalcyGen.

8.8 Licensing and marketing risks

HalcyGen currently has no sales and marketing capabilities. HalcyGen intends to sub-license its products during their development to sub-ficensees that are able to market and sell these products on HalcyGen's behalf.

HalcyGen may be unable to establish or maintain such relationships on terms suitable to HalcyGen with appropriate third parties that have effective sales forces, and may be required to market its products directly. HalcyGen may need to raise additional capital in the future if it seeks to commercialise the products directly, but may not be able to build an effective in-house sales capability.

8.9 Pharmaceutical Benefits Scheme

The commercial success of HalcyGen's products may be impacted on whether or not they receive governmental support via schemes such as Australia's Pharmaceutical Benefits Scheme. Continuing focus on low cost generic options for pharmaceuticals that come off-patent may reduce the availability of such support for more expensive SuperGenerics.

8.10 Competition

There is a risk that HalcyGen will not be able to compete profitably in the competitive pharmaceutical and biotechnology industries in the long term. In particular, HalcyGen may not be able to compete successfully against current or future competitors where aggressive pricing policies are employed to capture market share.

The potential exists for the nature and extent of the competition to change rapidly, which may cause loss to HalcyGen. That competition could result in price reductions and reduced gross margins which could materially adversely affect HalcyGen's operating results.

8.11 Unforeseen expenditure risk

HalcyGen's future expansion is dependent upon having adequate capital available to fund its business objectives. The Directors expect that the proceeds from this Offer will provide sufficient capital resources to enable HalcyGen to achieve its initial business objectives, as stated in sections 2.3 and 5.1.

A TYPE OF P

However, expenditure may need to be incurred that has not been taken into account in the preparation of this Prospectus. For example, HalcyGen will need to raise additional capital in the future if suitable marketing partners cannot be identified and HalcyGen seeks to market and sell its products without such partners.

Should HalcyGen require additional funding, there can be no assurance that additional funds will be available on acceptable terms or at all.

8.12 Reliance on key management

HalcyGen depends substantially on its senior management, the loss of whose services might significantly delay or prevent the achievement of its business objectives. Currently, HalcyGen has no insurance against the adverse effects of the loss of senior nersonnel.

The ability of HalcyGen to retain and attract qualified individuals is critical to its success. HalcyGen may not be able to attract and retain such individuals currently or in the future, on acceptable terms, or at all, and the failure to do so would significantly harm the business.

8.13 Legislative risk

The introduction of new legislation or regulations, or amendments to existing legislation or regulations, by governments, developments in existing common law, or the interpretation of the legal requirements in any of the legal jurisdictions which govern HalcyGen's operations or contractual obligations, could impact adversely on the assets, operations and, ultimately, the financial performance of HalcyGen and the Shares.

8.14 Shares eligible for future sales

Following completion of the Offer, the Shares held by HalcyGen's Current Shareholders will be subject to certain restrictions concerning disposal as summarised in section 9.7. Following expiry of the relevant restriction periods, the Shares will be eligible for sale, subject only to compliance with applicable securities laws and regulations. In addition, HalcyGen may issue additional Shares without Shareholder approval in certain circumstances or with Shareholder approval. However, under the Underwriting Agreement, HalcyGen is subject to certain restrictions concerning the issue of additional Shares during the 6 month period following the Closing Date.

No prediction can be made as to the effect, if any, that future sales of Shares, or the availability of Shares for future sales, will have on the market price of Shares prevailing from time to time. Sales of substantial numbers of Shares in HalcyGen, or the perception that such sales could occur, could adversely affect the prevailing market price for the Shares.

SECTION 9
Additional information

9.1 Incorporation of HalcyGen

HalcyGen was registered in Western Australia on 18 August 2005 as a public company limited by Shares.

9.2 HalovGen's tax status

HalcyGen will be taxed as a public company in Australia. The statutory accounts of HalcyGen will be made up to 30 June annually.

9.3 HalcyGen's Constitution

(A) Rights attaching to Shares

The Shares to be issued under this Prospectus will rank equally with the existing fully-paid ordinary Shares in HalcyGen.

The rights and liabilities attaching to Shares are set out in the Constitution, and, in certain circumstances, are regulated by the Corporations Act, the ASX Listing Rules and general law. The Constitution may be inspected during normal business hours at the registered office of HalcyGen at Level 10, 470 Collins Street, Melbourne Victoria 3000.

The following is a summary of the principal rights of the holders of ordinary Shares of HalcyGen. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of HalcyGen's members,

General meeting and notices

Each member is entitled to receive notice of, and to attend and vote at, general meetings of HalcyGen and to receive all notices, accounts and other documents required to be sent to members under the Constitution, the Corporations Act or the ASX Listing Rules.

Voting rights

Subject to any rights or restrictions for the time being attached to any class or classes of shares, at a general meeting of HalcyGen every holder of Shares present in person or by an attorney, representative or proxy has one vote on a show of hands (unless a member has appointed 2 proxies or has appointed a proxy who is also a member, in which case the proxy or proxies has or have no vote on a show of hands) and one vote per Share on a poll.

A person who holds an ordinary share in the capital of HalcyGen which is not fully-paid is entitled, on a poll, to a fraction of a vote equal to the proportion which the amount paid bears to the total issue price of that share.

Where there are 2 or more joint holders of a Share and more than one of them is present at a general meeting, in person or by proxy, attorney or representative, and tender a vote in respect of the Share, HalcyGen will count only the vote cast by, or on behalf of, the member whose name appears first in HalcyGen's register of members.

Issues of further Shares

The Board may, on behalf of HalcyGen, issue, grant Options over or otherwise dispose of unissued Shares to any person on the terms, with the rights, and at the times that the Board decides. However, the Board must act in accordance with the restrictions imposed by the Constitution, the ASX Listing Rules, the Corporations Act and any rights for the time being attached to the class of those shares.

Variation of rights

At present, HalcyGen has on issue one class of shares only, namely the Shares.

Subject to the Corporations Act, if HalcyGen issues different classes of shares or divides issued Shares into different classes, the rights attached to the shares in any class may be varied or cancelled only with the written consent of the holders of at least three-quarters of the issued shares of the affected class, or by special resolution passed at a separate meeting of the holders of the issued shares of the affected class.

Transfer of Shares

Subject to the Constitution, the Corporations Act and the ASX Listing Rules, the Shares are freely transferable.

The Shares may be transferred by any computerised or electronic system of transferring or dealing with Shares established or recognised by the Corporations Act, the ASX Listing Rules or the ASTC Settlement Rules and as otherwise permitted by the Corporations Act or by a document, the usual form of which is permitted by law.

The Board may refuse to register a transfer of Shares only if that refusal would not contravene the ASX Listing Rules or the ASTC Settlement Rules. If the Board refuses to register a transfer, HalcyGen must give the lodging party written notice of the refusal and the reasons for it within 5 business days after the transfer is delivered to HalcyGen. The Board must not register a transfer of Shares if the Corporations Act, the ASX Listing Rules or the ASTC Settlement Rules forbid registration.

Partly-paid Shares

The Board may, subject to compliance with the Constitution, the Corporations Act and the ASX Listing Rules, issue partlypaid ordinary shares upon which there are outstanding amounts payable. See above for voting rights for partly-paid shares and below for dividend rights.

Dividends

Subject to the Constitution and the Corporations Act, the Board may resolve to pay any dividend it thinks appropriate and fix the time for payment. Subject to the terms of issue of the shares, HalcyGen may pay a dividend on one class of shares to the exclusion of another class.

Each share of a class on which the Board resolves to pay a dividend carries the right to participate in the dividend in the same proportion that the amount for the time being paid on the share (excluding any amount paid in advance of calls) bears to the total issue price of the share.

Winding up

Subject to the terms of issue of shares, if HalcyGen is wound up, members will be entitled to participate in any surplus assets of HalcyGen in proportion to the percentage of the capital paid up on their shares.

Dividend reinvestment and Share plans

The Board may adopt and implement dividend reinvestment plans (under which any member may elect that dividends payable by HalcyGen be reinvested by way of subscription for Shares in HalcyGen) and any other share plans (under which any member may elect to forego any dividends that may be payable on all or some of the Shares held by that member and to receive instead some other entitiement, including the issue of Shares).

(B) Directors

The Constitution states that the minimum number of Directors is 3.

(C) Powers of the Board

Except as otherwise required by the Corporations Act, any other law, the ASX Listing Rules or the Constitution, the Board has power to manage the business of HalcyGen and may exercise every right, power or capacity of HalcyGen to the exclusion of the members (except to sell or dispose of the main undertaking of HalcyGen).

(D) Share buy-backs

Subject to the provisions of the Corporations Act and the ASX Listing Rules, HalcyGen may buy back Shares in itself on terms and at times determined by the Board.

9.4 HalcyGen Options

HalcyGen Share Option Plan

HalcyGen has established an Employee Share Option Plan (Plan) to assist in the recruitment, reward, retention and motivation of employees and officers of HalcyGen. Under the rules of the Plan, the Directors may determine which employees or officers are eligible for participation in the Plan and may make offers to those executives to take up Options. The maximum number of Options which may be granted under the Plan is 5% of the total number of issued Shares in HalcyGen at the time of the offer of Options.

Options will be issued free of charge and may be taken up by the eligible employee or officer or a nominee of the eligible person approved by the Board. Options issued under the Plan are not transferable.

Unless the Board determines otherwise, Options may not be exercised until 1 year after the date of grant of the Options and must be exercised within the option period set by the Board on grant of the Options. Any Options not exercised prior to the expiry of the relevant period will automatically lapse.

Options will lapse immediately upon the holder of the Options ceasing to be employed by HalcyGen, or in the case of an officer, when the person ceases to be an officer of HalcyGen.

Options issued under the Plan will not be listed for quotation by the ASX. As at the date of this Prospectus, the following Options have been granted under the Plan:

A Finlay
	250,000		Apr 2007. .	Apr 2007 - 2007 ,,,,,,,,,,,,,,,,,,,,,,,	in System Ber Bergerak
Cirilav	250,000		The contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of The Contract of The Contract of The Contract of The Contract of The Contract 17 Apr 2007	Apr 2008 (17 Apr 2012)	Contract Construction
Total Company of the Company of the Company of the Company of the Company of the Company of the Company of the	. . .	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,		1110311202020202020202020202020202020202
	500.000

Other Options

In addition to Options granted under the Plan, HalcyGen has granted the Options described in the following table.

Hon Best	500,000.	SU.10	.18 Aug 2005	18 Aug 2005	30 June 2010
M Bottomley	2,500,000.	40 0	18 Aug 2005	18 Aug 2005	.30 June 2010
Hou Best	250,000.	$-50.10$	25 July 2006	25 July 2007	30 June 2010
Dr Asrea	625,000.	\$0.60	17. Apr 2007.	17 Apr 2007	17 Apr 2011
Mr Bortomley	375,000.	30.60	17 Apr 2007.	17 Apr 2007	17 Apr 2011
Dr Aston	625,000	30.60	17 Apr 2007.	17 Apr 2008	17.Apr 2012
Mr Bottomiev	375,000	30.60	17 Apr 2007.	17 Apr 2008	17 Apr 2012
Hon Bost	250,000	\$0.60	17. Apr 2007	17 Apr 2008	17. Apr 2012
Mr Mathieson	250,000	50.60	17 Apr 2007	317 Apr 2008	17 Apr 2012
Total	5,750,000

(a) Options granted on incorporation on 18 August 2005

The Options granted by HalcyGen on 18 August 2005 are exercisable at any time prior to 5pm on 30 June 2010, at an exercise price of 10 cents per Option. These Options are transferable, and are subject to the escrow arrangements discussed in section 9.7 below.

HalcyGen has agreed to give the holders of these Option sufficient notice of any proposed new issue of capital (including any proposed bonus or rights issue) to allow the holders an opportunity to exercise their Options prior to the date of determining entitlements to participate in any such issue.

(b) Options granted on 25 July 2006

The Options granted on 27 July 2006 may only be exercised after 25 July 2007 and must be exercised before 30 June 2010, at an exercise price of 10 cents per Option. These Options are transferable, but are subject to the escrow arrangements discussed in section 9.7 below.

(c) Options granted on 17 April 2007

The grant of Options to Directors was approved at HalcyGen's annual general meeting held on 16 April 2007. These Options were granted on 17 April 2007.

Each Option has an exercise price of \$0.60. These Options are not transferable.

The Options granted to the non-executive directors (Hon, Best and Mr Mathieson) may not be exercised until 12 months after their grant and must be exercised within 5 years after their grant.

One half of the Options granted to the executive directors (Dr Aston and Mr Bottomley) may be exercised from the date of grant and must be exercised within 4 years after their grant. The other half of the Options are only able to be exercised in 12 months time, subject to the achievement of certain milestones, and must be exercised within 5 years after their grant.

9.5 Mayne Licence and Development Agreements

On 31 July 2006, HalcyGen and Mayne entered into the Licence and Development Agreement for Minocycline (the Minocycline Licence) and the Licence and Development Agreement for SUBA-Itraconazole (the Itraconazole Licence) (the Minocycline Licence and the Itraconazole Licence, collectively, the Mayne Licence Agreements).

The Minocycline Licence relates to the development of the pharmaceutical product known as Minocycline, and the Itraconazole Licence relates to the pharmaceutical product known as SUBA-Itraconazole (each of these pharmaceutical products, a Developed Product).

The Mayne Licence Agreements are a central component of HalcyGen's business. Any material adverse change in the rights and obligations of HalcyGen and Mayne under the Mayne Licence Agreements may have a materially adverse effect on HalcyGen's operating results and financial position.

The following is a summary of the principal rights and obligations of the parties to the Mayne Licence Agreements.

Grant of licence to HalcvGen

Under the Mayne Licence Agreements, Mayne grants to HalcyGen an exclusive worldwide licence over the background intellectual property of Mayne created or acquired by Mayne prior to 31 July 2006 that relates to each of the Developed Products (including patents, patent applications, trademarks, copyrights, designs, research data and inventions) (Background $IP$ ), to:

develop, manufacture, market and sell the Developed Products (either directly itself or via other distributors) for the treatment of infections and other diseases in humans and animals throughout the world; and
subject to certain conditions, sub-license the rights granted under the Mayne Licence Agreements to other distributors.

Mayne is responsible for prosecuting and maintaining (at its cost) all relevant Background IP patents, patent applications, trade marks and trade mark applications and must consult with HalcyGen and keep it informed in respect of the status of all such activities.

Under the Mayne Licence Agreements, Mayne represents and warrants that, to the best of its actual knowledge and belief, it is the owner of the Background IP and is entitled to grant the licence to the Background IP under the Mayne Licence Agreements. Mayne does not, however, provide any warranty or indemnity in relation to the risk of any Developed Product infringing any third party's intellectual property.

Nothing in the Mayne Licence Agreements gives HalcyGen a proprietary interest in the Background IP.

Mayne's first right of refusal to manufacture the Developed Products

HalcyGen grants to Mayne an exclusive first right of refusal to manufacture the Developed Products for HalcyGen. The parties are required to negotiate exclusively and in good faith, using commercially reasonable endeavours to agree on a manufacturing agreement on commercially reasonable terms, for a period of 6 months from the completion of the development of the Developed Products.

If the parties fail to reach agreement within the 6 month period, HalcyGen may offer the manufacturing rights to any third party on the same terms and conditions as those offered to Mayne.

HalcyGen may amend the terms of any offer made to a third party, provided that those amended terms are first offered exclusively to Mayne for a period of 30 days.

Mayne's right to royalty where Mayne not appointed as manufacturer

If Mayne is not appointed as manufacturer of the Developed Products, HalcyGen must pay to Mayne a royalty of:

30% of all income received from HalcyGen's distributors in relation to sales of the Developed Products in Australia, Canada, the European Union, the United States of America and Japan, and, in respect of the Minocycline Licence, also in relation to sales of Minocycline in Singapore, New Zealand and Norway; and
1% of all other income received from HalcyGen's distributors in relation to sales of the Developed Products where such íncome ís less than A\$2,000,000 per calendar year and 2% where such income is equal to or greater than A\$2,000,000 per calendar vear.

Mayne's first right of refusal to market the Developed Products in Australia and New Zealand

HalcyGen must use best endeavours to market, sell and distribute the Developed Products throughout the world.

HalcyGen grants to Mayne an exclusive first right of refusal to market, promote, distribute and sell the Developed Products in Australia and New Zealand. The parties are required to negotiate exclusively and in good faith, using commercially reasonable endeavours to agree a marketing and distribution agreement on commercially reasonable terms, for a period of 6 months from the day on which HalcyGen notifies Mayne that it wishes to commence negotiations.

If the parties fail to reach agreement within the 6 month period, HalcyGen may offer the marketing and distribution rights to any third party on the same terms and conditions as those offered to Mayne.

Development program and fees

HalcyGen has also engaged Mayne to conduct a development program in relation to the development of each of the Developed Products.

Each Mayne Licence Agreement provides for the establishment of a development committee to oversee the progress of the development program and for bi-annual reporting by Mayne on the progress of the development program.

In consideration for conducting the development program, each month on receipt of an invoice from Mayne, HalcyGen must pay to Mayne a fee calculated by the reference to the hours worked by Mayne employees engaged in the development program, the hours of use of Mayne's manufacturing facilities and the cost of materials and external supplies used.

The fees are not contingent on the successful completion of the development program. The fees are also subject to certain predetermined estimates which, if exceeded, may be increased by agreement between the parties or on the determination of an independent expert appointed by the parties. These fee estimates are included in the costs of product development disclosed in section 5.1.

Ownership of developed intellectual property

As noted in section 4.7, the intellectual property in any improvements (including any modification, development or improvement) made to the Background IP by Mayne in accordance with the development programs and in the Developed Products resulting from the development programs (the Developed IP) vests in HalcyGen.

Mayne must keep HalcyGen informed of all results of the development program and must notify HalcyGen of any patentable inventions or potentially patentable inventions that are developed during the development program.

HalcyGen has the right, at its own expense, to file, prosecute and maintain patent applications to protect the Developed IP. However, if HalcyGen does not file patent applications in respect of any Developed IP within 12 months of the completion of each development program, Mayne may file such patent applications in any country in which HalcyGen has not filed a patent application.

Termination of the Mayne Licence Agreements

The Mayne Licence Agreements do not terminate on expiration of the patents which comprise the Background IP. However, either party may terminate a Mayne Licence Agreement if:

the other party fails to perform its relevant obligations and such failure or breach remains unremedied for a period of 30 days from the date of receipt by the defaulting party of written notice of the breach; or
· an insolvency event occurs in respect of the other party.

HalcyGen may also terminate either Mayne Licence Agreement prior to the conclusion of either development program on 90 days written notice if the market conditions or preliminary results of the development program indicate that commercialisation of the Developed Products will not be feasible.

Effect of termination of the Mayne Licence Agreements

Upon termination of either Mayne Licence Agreement:

ownership of the applicable Background IP and the applicable Developed IP will remain with Mayne and HalcyGen respectively;
HalcyGen must immediately cease use of the Background IP; and
each party must promptly deliver any property, documents and records of the other party in the first party's possession, custody and control.

If HalcyGen terminates either Mayne Licence Agreement on the basis that commercialisation of the Developed Products will not be feasible, HalcyGen must reimburse Mayne for the costs it would have incurred as part of the development program during the following 4 months, including costs of staff hired for the development program. The parties must also commence negotiations in good faith to agree on the development by Mayne of a new product for HalcyGen,

9.6 Underwriting Agreement

HalcyGen has entered into an Underwriting Agreement dated 23 May 2007 with the Underwriter, under which the Underwriter has agreed to fully underwrite the Offer.

If the issue of Shares proceeds, the Underwriter will receive:

a underwriting commission of \$500,000 (representing 4.0% of the total funds to be raised by the Offer); and
a management fee of \$125,000 (representing 1.0% of the total funds to be raised by the Offer).

In addition, HaloyGen is obliged to pay the costs and expenses of the Underwriter related to the Offer, whether or not the Underwriter is paid any underwriting commission.

The Underwriter may terminate the Underwriting Agreement in certain circumstances as follows:

1. (Lodgement of Prospectus) The Company fails to lodge the Prospectus with ASIC on the date specified for lodgement in Schedule 1 of the Underwriting Agreement (being 23 May 2007) or such other date agreed by the parties except where the sole reason for failing to lodge is an act or omission of the Underwriter.
1. (ASX indices fall) The S&P All Ordinaries Index is, at the close of trading on three consecutive Business Days prior to the issue of the Underwritten Shares, at a level which is 90% or less than the level at the close of trading on the date of the Underwriting Agreement.
1. (Change in law) Any of the following occurs:
(a) the introduction of legislation into the parliament of the Commonwealth of Australia or of any State or Territory of Australia;
(b) the public announcement of prospective legislation or policy by the Federal Government or the Government of any State or Territory; or
(c) the adoption by ASIC or its delegates or the Reserve Bank of Australia of any regulations or policy.
1. (Breach of significant contracts) A significant or material contract referred to in the Prospectus is, without the prior written consent of the Underwriter:
(a) breached by the Company;
(b) terminated (whether by breach or otherwise);
(c) altered or amended in any way; or
(d) found to be void or voidable.
(Listina) Either:

(a) ASX makes any official statement to any person, or indicates to the Company or the Underwriter that:

(i) the Company will not be admitted to the official list of ASX; or

(ii) an ASX Approval will not be given (or will be given but subject to non-customary conditions);

(b) an ASX Approval has not been given before the Closing Date; or
(c) the notification given by the Registrar on the day before the Closing Date of the number and identity of the applicants indicates that condition 7 of ASX Listing Rule 1.1 will not be satisfied in relation to holders of Shares.
1. (Prospectus) Without limiting any other paragraph of this schedule:
(a) the Prospectus or any aspect of the Offer does not comply with the Corporations Act, the ASX Listing Rules or other applicable law or regulation;
(b) there is a material omission from the Prospectus;
(c) the Prospectus contains a misleading or deceptive statement;
(d) a statement in the Prospectus becomes misleading or deceptive;
(e) a forecast in the Prospectus becomes incapable of being met or unlikely to be met in the projected time:
(f) the Prospectus does not comply with section 710(1) of the Corporations Act; or
(g) a matter referred to in section 719 of the Corporations Act occurs in respect of the Prospectus.
1. (Supplementary Prospectus) The Underwriter reasonably forms the view that a supplementary or replacement document must be lodged with ASIC under section 719 of the Corporations Act and the Company does not lodge a supplementary or replacement document in the form, with the content and within the time reasonably required by the Underwriter.
1. (Corporations Act) Without limiting any other paragraph of this schedule:
(a) ASIC applies for an order under sections 1324B or 1325 of the Corporations Act in relation to the Prospectus and the application is not dismissed or withdrawn before the Closing Date;
(b) a person gives a notice under section 730 of the Corporations Act in relation to the Prospectus;
(c) ASIC gives notice of intention to hold a hearing in relation to the Prospectus under section 739(2) of the Corporations Act or makes an interim order under section 739(3) of the Corporations Act;
(d) any person whose consent to the issue of Prospectus is required by section 720 of the Corporations Act who has previously consented to the issue of the Prospectus withdraws such consent or any person otherwise named in the Prospectus with their consent withdraws such consent;
(e) ASIC commences any investigation, examination or hearing under Part 3 of the Australian Securities and Investments Commission Act 2001 in relation to the Offer or the Company; or
(f) ASIC gives an infringement notice to the Company under section 1317DAC of the Corporations Act.
1. (Withdrawal) The Company withdraws the Prospectus or the Offer or, without the prior written approval of the Underwriter, the Company lodges a Supplementary Prospectus.
1. (Default) The Company is in default of any of the terms and conditions of the Underwriting Agreement or breaches any warranty or covenant given or made by it under the Underwriting Agreement and that default or breach is either incapable of remedy or is not remedied within 5 business days after it occurs.
1. (Disclosures in due diligence report) Any information supplied by or on behalf of the Company to the Underwriter in relation to the Company or the Offer as part of the due diligence program or otherwise is misleading or deceptive or any of the due diligence information or any part of the verification material is misleading or deceptive.
(Fails to comply) The Company fails to comply with any of the following:

(a) a clause of the Constitution;

(b) a statute:

(c) any policy or quideline of ASIC or any other requirement, order or request made by or on behalf of ASIC or any governmental agency; or

(d) any agreement entered into by it.

1. (Capital structure) The Company alters its capital structure without the prior written consent of the Underwriter.
1. (Constitution altered) The Constitution or any other constituent document of the Company is amended, except as contemplated by the notice of annual general meeting of the Company held on 16 April 2007, without the prior written consent of the Underwriter.
1. (Financial assistance) The Company seeks the approval of Shareholders under section 260B of the Corporations Act, without the prior written consent of the Underwriter.
1. (Business) The Company:

(a) disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property; or

(b) ceases or threatens to cease to carry on business,

in either case without the prior written consent of the Underwriter.

(Hostilities) There is an outbreak of hostilities (whether or not war has been declared) not presently existing, or a major escalation in existing hostilities occurs (whether or not war has been declared), involving any one or more of the following:

(a) Australia;

(b) the United States of America;
(c) any member of the European Union;
(d) the People's Republic of China;
(e) Japan; or
(f) Indonesia.
1. (Act of terrorism) There is an act of terrorism in Australia, the United Kingdom, any member state of the European Union or the United States of America or any diplomatic, military, commercial or political establishment of any of those countries elsewhere in the world which causes loss of life or significant loss or damage to property, or a national emergency is declared in any of those countries.
1. (Market conditions) Any change or disruption in the national or international political, financial or economic conditions, including without limitation any outbreak of avian influenza, SARS or other significant epidemic or pandemic.
1. (Disruption in financial markets) Either of the following occurs:
(a) an unscheduled general moratorium on commercial banking activities in Australia, the United Kingdom or the United States of America is declared by the relevant central banking authority in any of those countries, or there is a material disruption in commercial banking or security settlement or clearance services in any of those countries; or
(b) trading in all securities quoted or listed on ASX, the London Stock Exchange or the New York Stock Exchange is suspended or limited in a material respect for two consecutive business days on which the exchange is scheduled to open for trading.

the effect of which is such as to make it in the reasonable judgment of the Underwriter, impractical to promote the Offer or to enforce contracts to issue the underwritten Shares.

(Financial position) A materially adverse change, or an event that is reasonably likely to result in a materially adverse change, occurs in the financial or trading position of the Company.
1. (Prosecution) Any of the following occur:
(a) a director (or, if he is not a director, the chief executive officer, the chief financial officer or the chief operating officer) of the Company is charged with an indictable offence relating to a financial or corporate matter;
(b) any government agency commences any public proceedings against the Company or any of the directors or senior management of the Company, or announces that it intends to take such action, and such proceedings are not withdrawn within 5 business days; or
(c) any director of the Company is disqualified from managing a corporation under Part 2D.6 of the Corporations Act.
1. (Change in management) A change in the board of directors of the Company or in senior management occurs, without the prior written consent of the Underwriter, or a director of the Company dies or becomes incapacitated.
1. (Insolvency Event) An Insolvency Event (as that term is defined in the Underwriting Agreement) occurs with respect to the Company.
1. (Charge) The Company charges or agrees to charge the whole or a substantial part of its business or property, without the prior written consent of the Underwriter.
1. (Representations and warranties) Any representation or warranty contained in the Underwriting Agreement on the part of the Company is not true or correct.
1. (Public statement) The Company issues a public statement concerning the Offer which has not been approved by the Underwriter.
1. (Force Majeure) A Force Majeure (being any act of God, war, revolution, or any other unlawful act against public order or authority, an industrial dispute, a governmental restraint, or any other event which is not within the control of the parties) affecting the Company's business or any obligation under the agreement lasting in excess of 7 days occurs.

NOTE: If an event set out in paragraphs 10 to 28 (inclusive) above occurs, the Underwriter can only exercise its rights to terminate if the Underwriter determines reasonably that the event:

(a) has or would have had a material adverse effect on the Issue;
(b) has given or could give rise to a contravention by the Underwriter, or the Underwriter being involved in a contravention of the Corporations Act or any applicable law; or
(c) could create a liability for the Underwriter under the Corporations Act.

9.7 Escrow agreements

In accordance with the ASX Listing Rules, HalcyGen has entered into escrow agreements with each of its existing Shareholders in respect of the Shares and Options held by those Shareholders. Details of these arrangements are summarised below.

Directors and Co Sec	15,035,000 Shares	ாமை	24 months from IPO	30 O.A
Directors and Co Sec.	6,250,000 Options	100%	-24 months from IPO.	Nii (300 St.4)
Founders	6,000,000 Shares	100%	24 months from IPO	smon
Otter Initial Investors:	1,400,000 Shares	100%	12 months from IPO	\$0.001
Morgran PW Ltd.	-3,000,000 Shares	Son below	'See below	80.088
	25,204,000 Shares	70.	12 mnths from 18 Sept 2006.

Of the total number of Shares currently on issue the following escrow periods apply:

During the escrow period, the holders of the Shares and Options the subject of the escrow arrangements may not dispose of, or agree to dispose of, those Shares and Options.

Directors and company secretary

Ifn accordance with ASX Listing Rule 9.2, Dr Roger Aston, Mr Craig Bottomley, Hon. Ron Best, Mr Bruce Mathieson, Mr Aaron Finlay (and each of their related entities or persons). Newtonmore Biosciences, Magnum Capital Pty Ltd, Investment Holdings Pty Ltd, Mrs Sophie Finlay, Ms Jill Mathieson, Bremal Pty Limited and Ms Louise Asher, have entered into escrow agreements with HalcyGen in relation to Shares and Options. As such, the relevant Shares and Options held by each Shareholder are subject to an escrow period of 24 months which commences on the date on which quotation of the Shares commences.

Founding shareholders

In accordance with ASX Listing Rule 9.2, Aymon Pacific Pty Ltd and Oaktone Nominees Pty Ltd have entered into escrow agreements with HalcyGen. The Shares held by each Shareholder are subject to an escrow period of 24 months which commences on the date on which quotation of the Shares commences.

Other initial investors

When HalcyGen was incorporated, Shares were also issued to Bampton Nominees Pty Ltd, Brian and Natasha Leedman and Geoffrey Pottier. These Shareholders have entered into voluntary escrow agreements with HalcyGen, under which their Shares are subject to an escrow period of 12 months commencing on the date on which quotation of the Shares commences.

Morgrae Pty Ltd

In accordance with ASX Listing Rule 9.2. Morgrae Pty Ltd has entered into an escrow agreement with HalcyGen, under which:

1,260,000 Shares held by Morgrae Pty Ltd are subject to an escrow period of 24 months which commences on the date on which quotation of the Shares commences:
. 1,600,000 Shares held by Morgrae Pty Ltd are subject to an escrow period of 12 months which commenced on the date on which those Shares were issued (being 18 February 2007); and
140.000 Shares held by Morgrae Pty Ltd are subject to an escrow period of 12 months which commenced on the date on which those Shares were issued (being 18 September 2006).

Morgrae Pty Ltd holds a further 460,000 Shares which are not subject to any escrow period.

Other Current Shareholders

In accordance with ASX Listing Rule 9.2, all other Current Shareholders have entered into escrow agreements with HalcyGen in relation to Shares. Seventy per cent of the Shares held by each such Current Shareholder are subject to an escrow period of 12 months which commenced on the date on which those Shares were issued (being 18 September 2006). This means that 7,561,200 Shares held by these Current Shareholders are not subject to any escrow period.

9.8 Employment agreements

Dr Roger Aston was appointed as chief executive officer and managing director of HalcyGen pursuant to an employment agreement dated 18 July 2005. The terms of Dr Aston's empfoyment were renewed on 1 May 2007 and his empfoyment will now expire on 30 April 2009. Dr Aston also currently acts as the Chairman of HalcyGen,

Dr Aston is paid a salary of \$350,000 per annum (exclusive of a 9% superannuation contribution) and also receives a rental allowance of \$1782 per month. In addition, Dr Aston has been issued 1,250,000 Options to subscribe for Shares with an exercise price of \$0.60, as part of his remuneration package.

All intellectual property rights arising as a result of Dr Aston's efforts during the term of his employment with HalcyGen will vest in HalcvGen.

HalcyGen will depend substantially on Dr Aston to assist with the achievement of its business objectives. The risks associated with such reliance are discussed in section 8.12.

9.9 Dividend policy

The Directors do not currently intend that HalcyGen will pay dividends. The Board is not able to indicate when and if dividends will be paid in the future, as payment of any dividend will depend on the future profitability, financial position and cash requirements of HalcyGen.

9.10 Disclosure of interests and remuneration

Directors are not required under the Constitution to hold any Shares. As at the date of this Prospectus, the Directors have relevant interests in Shares and Options as set out in the table below.

HalcyGen has entered into agreements with its Directors or their related entities for an indefinite period which may be terminated by either party on 3 months written notice or summary notice in the event of a breach in the terms of the agreement, the Director is found guilty of any criminal act, misconduct or negligence or becomes insolvent. There are no termination benefits other than what applicable statute dictates. Details of the nature and amount of each element of the emoluments of each of HalcyGen's Directors are shown in the following table.

Non-executive
Hon Ron Best		184,000
Mr Bruce Mathleson		$-2050000$
Executive
Dr Roger Asten		9.554.000	.250.000
Mr Craig Bottomley		2,250,000	3,250,000
Total	855 OOO	14,035,000	5,750,000

(1) Borrer Aston also receives a rental allowance of \$1782 ser month.

The Constitution provides that the aggregate remuneration of non-executive Directors will be not more than \$200,000 per annum or such other amount that may be determined by Shareholders at a general meeting.

The remuneration of the executive Directors is fixed by the Board and may consist of salary, bonuses or any other elements, but must not be a commission on, or percentage of, profits or other operating revenue.

9.11 Top 10 Current Shareholders

The following table sets out the shareholdings of HalcyGen's top 10 Current Shareholders, and shows the percentage of the total Shares on issue that their shareholding represents both before and after the Offer:

Dr Roger Aston and related entries	9,551,000	18.691%	12.55%
Morgrae Pty Ltd.	3,460,000	6771%	4.55%
Aymon Pacific Pty Ltd.	3,000,000	5.871%	$-4.21\%$
Caktons Nominaes Pty Ltd	3,000,000	5.871%	3.94%
Mr Craig Bottomley and related entities	2,250,000	4.603%	2.96%
M. Bruce Mathleson and related studies.	2,050,000	4.012%	5,32%
Filty Ninth Shacker Pty Ltd	1,350,000	2.842%	1.77%
Mr Aaron Finlay and related emittes.	1,000,000	1957%	1.31%
M Fichard Smith	850,000	1.663%	$-1.12\%$
Kingstrust Phy Ltd.	750,000.	1.468%	$-0.99\%$
Total	27,261,000	53.35%	38.72%

A Not including any Shares which a person may receive on exercise of any Options they may hold, as discussed in section 9.4.

* Mr Bruce Mathieson intends to apply for 2,000,000 Shares under the Offer. The percentage of his post Offer shareholding has been determined assuming that he is granted all the Shares for which he applies.

* Ayrnon Pacific Pty Etd intends to apply for 200,000 Shares under the Offer. The percentage of its post Offer shareholding has been determined assuming that it is granted all the Shares for which it applies

9.12 Fees and benefits

Other than as set out below or elsewhere in this Prospectus, no:

(a) Director of HalcyGen;
(b) person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Prospectus;
(c) promoter of HalcyGen; or
(d) underwriter,

has, or had within two years before lodgement of this Prospectus with ASIC, any interest in:

(e) the formation or promotion of HalcyGen;
$(f)$ any property acquired or proposed to be acquired by HalcyGen in connection with its formation or promotion or in connection with the offer of Shares under this Prospectus; or
(g) the offer of Shares under this Prospectus,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of those persons as an inducement to become, or to qualify as, a Director of HalcyGen or for services rendered in connection with the formation or promotion of HalcyGen or the offer of Shares under this Prospectus.

9.13 Officers' indemnities

HalcyGen, to the extent permitted by law, indernnifies every officer of HalcyGen (and may indemnify any auditor of HalcyGen) against any liability incurred by the person, in the relevant capacity, to another person unless the liability arises out of conduct involving a lack of good faith.

HalcyGen may also make a payment in relation to legal costs incurred by these persons in defending an action for a liability, or resisting or responding to actions taken by a government agency or a liquidator.

9.14 Interests of other persons

Other than as set out below or elsewhere in this Prospectus, no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus, and no promoter of HalcyGen or underwriter to, or financial services licensee named in this Prospectus as a financial services licensee involved in, the Offer holds, or held at any time during the last 2 years before the date of this Prospectus, any interest in:

(a) the formation or promotion of HalcyGen;
(b) any property acquired or proposed to be acquired by HalcyGen in connection with its formation or promotion or in connection with the Offer, or
(c) the Offer.

and no amounts have been paid or agreed to be paid and no benefit has been given or agreed to be given to any of these persons for services rendered by them in connection with the formation or promotion of HalcyGen or in connection with the Offer

Blake Dawson Waldron has provided various legal services and has received or will receive professional fees of approximately \$140,000 for legal work undertaken by them in connection with the Offer and this Prospectus.

KPMG acted as Investigating Accountants to the Offer, and have prepared an Investigating Accountants' Report. KPMG has received or will receive approximately \$10,000 for these services.

Tolhurst Limited is the Underwriter in relation to the Offer and will receive an underwriting commission of equal to \$500,000 and a management fee equal to \$125,000. The underwriting commission and management fee are only payable if the issue of the Shares proceeds. In addition, the Underwriter is to be reimbursed for all reasonable outgoings, costs and expenses it incurs in connection with the Offer, whether or not the Underwriter is paid the underwriting commission. Representatives of Tolhurst Limited, and companies associated with these representatives, currently hold 2,682,000 existing Shares. Directors and representatives of Tolhurst Limited may apply for Shares in the Offer.

9.15 Consents

Each of the parties referred to in this section:

(a) has not authorised or caused the issue of this Prospectus;
(b) does not make, or purport to make, any statement in this Prospectus other than those referred to in this section;
(c) has not made any statement on which a statement in this Prospectus is based, other than as specified in this section; and
(d) to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding. and takes no responsibility for, any part of this Prospectus other than a reference to its name and a statement (if any) included in this Prospectus with the consent of that party as specified in this section.

Tolhurst Limited has given and, at the time of lodgement of this Prospectus, has not withdrawn its written consent to be named in this Prospectus as Underwriters to HalcyGen in respect of the Offer in the form and context in which they are named and takes no responsibility for any part of this Prospectus other than references to its name.

Blake Dawson Waldron have given and, at the time of lodgement of this Prospectus, have not withdrawn their written consent to being named in this Prospectus as legal advisers to HalcyGen in respect of the Offer in the form and context in which they are named and takes no responsibility for any part of this Prospectus other than references to its name.

KPMG has given and, at the time of lodgement of this Prospectus, has not withdrawn their written consent to the inclusion of their Investigating Accountant's Report in the form and context in which it is included, and to being named in this Prospectus as the Investigating Accountant in respect of the Offer in the form and context in which they are named and takes no responsibility for any part of this Prospectus other than references to its name.

Computershare Investor Services Pty Limited has given and, at the date hereof, has not withdrawn its written consent to being named as Share Registrar in the form and context in which it is named. Computershare Investor Services Pty Limited has had no involvement in the preparation of any part of the Prospectus other than being named as Share Registrar. Computershare Investor Services Pty Limited has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for any part of this Prospectus.

9.16 Costs of the Offer

The total costs of the Offer payable by HalcyGen are estimated as follows:

Total	\$886.827
Printing, mailing, advertising, miscellaneous	\$50.000
KPMG's fees and expenses	\$10.000
Tolhurst Limited's fees and expenses	\$625.000
Legal and corporate fees and expenses	\$140,000
ASX quotation fee	\$59,817
ASIC lodgement fee	\$2.010

9.17 Litigation

As at the date of this Prospectus, HalcyGen is not involved in any legal proceedings and the Directors are not aware of any legal proceedings pending or threatened against HalcyGen.

9.18 Documents available for inspection

The following documents are available for inspection during normal business hours at the registered office of HalcyGen:

(a) this Prospectus;
(b) the Constitution; and
(c) the consents referred to in section 9.15 of this Prospectus.

A PRINCIPAL COMPANY A CHRONIC COMPANY AND COMPANY OF COMPANY OR ANY ORDER OF THE COMPANY OF COMPANY OF THE COM
A STATISTIC COMPANY OF THE COMPANY OF THE COMPANY OF THE COMPANY OF THE COMPANY OF THE COMPANY OF THE COMPANY

This Prospectus is issued by HalcyGen and its issue has been authorised by a resolution of the Directors.

In accordance with section 720 of the Corporations Act, each Director has consented in writing to the lodgement of this Prospectus with ASIC.

Dr Roger Aston Chairman and Chief Executive Officer HalcyGen Pharmaceuticals Limited

en de la partida de la partida de la partida de la partida de la partida de la partida de la partida del produ

Where the following terms are used in this Prospectus they have the following meanings:

A\$ or \$ means an Australian dollar.

Application Form means the application form attached to or accompanying this Prospectus.

ASIC means Australian Securities & Investments Commission.

ASTC means ASX Settlement and Transfer Corporation Pty Ltd ABN 49 008 504 532.

ASTC Settlement Rules means the operating rules of ASTC.

ASX means ASX Limited ABN 98 008 624 691 and, where the context requires the market operated by ASX.

ASX Listing Rules means the official listing rules of ASX.

Board means the board of Directors as constituted from time to time.

Closing Date means the closing date for receipt of Application Forms under this Prospectus, being 5pm Melbourne time on 19 June 2007 (unless the Offer is extended or closed early).

Constitution means the constitution of HalcyGen.

Corporations Act means the Corporations Act 2001 (Cth).

Current Shareholders means the current Shareholders in HalcyGen who together hold 51,099,000 Shares and 6,250,000 Options as at the date of this Prospectus.

Directors means the directors of HalcyGen at the date of this Prospectus.

FDA means the United States Food and Drug Administration.

GMP means Good Manufacturing Practice, a part of the pharmaceutical quality assurance process which ensures that products are consistently produced and controlled in conformity with quality standards appropriate for their intended use and as required by the product specification.

HalcyGen means HalcyGen Pharmaceuticals Limited (ACN 115 832 963).

Mayne means Mayne Pharma International Pty Ltd (ACN 007 870 984) (whose parent company, Mayne Pharma Limited was acquired by Hospira, Inc in February 2007).

Minocycline means a tetracycline antibiotic for which HalcyGen has licensed a formulation from Mayne Pharma International with the aim of developing an improved SuperGeneric version of the drug.

Offer means the offer of the Shares under this Prospectus to investors at an issue price of \$0.50 per Share and, where the context requires, the issue of those Shares to applicants or the Underwriter.

Opening Date means 30 May 2007. ASIC may delay the Opening Date for a period of up to 7 days.

Option means an option to subscribe for a fully paid ordinary Share in HaleyGen.

Prospectus means this prospectus.

Share Registrar means Computershare Investor Services Pty Ltd (ACN 078 279 277).

Shares means the fully paid ordinary Shares in the capital of HalcyGen, including the Shares to be issued under the Prospectus.

Shareholder means a holder of a Share.

SUBA-Itraconazole means Super Bioavailable Itraconazole under license from Mayne Pharma International. The term "SUBA" is a registered trademark owned by Mayne.

SuperGenerics means improved pharmaceutical formulations of conventional generic pharmaceuticals.

TGA means Therapeutic Goods Administration of Australia.

Underwriter means Tolhurst Limited.

This page has been left intentionally blank.

	HalcyGen Pharmaceuticals Limited
	ACN 76 115 832 963
	Application Form This Application Form is important. If you are in doubt as to how to deal with it, please						Broker Code			Adviser Code
	contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of the Corporations Act, this Application Form must not be distributed unless
	included in, or accompanied by, the prospectus.
$\mathbf{A}$	I/we apply for					B	I/we lodge full Application Money
							ZN.					ä
	Number of Shares in HalcyGen Pharmaceuticals Limited at A\$0.50 per Shares or such lesser number of Shares which may be allocated to me/us
C.	Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s)
	Title or Company Name		Given Name(s)				Sumame

	Joint Applicant 2 or Account Designation

	Joint Applicant 3 or Account Designation


D	Enter your postal address - Include State and Postcode Unit	Street Number		Street Name or PO Box /Other Information




	City / Suburb / Town								State		Postcode


E.	Enter your contact details
	Contact Name								Telephone Number - Business Hours / After Hours


	CHESS Participant Holder Identification Number (HIN)
							Please note that if you supply a CHESS HiN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made
	х					subregister.	without the CHESS HRN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored
	Cheque details - Make your cheque or bank draft payable to "HalcyGen Pharmaceuticals Limited - Share Offer Account"
G	Drawer			Cheque Number	BSB Number			Account Number			Amount of cheque
										AS
	Drawer			Cheque Number	BSB Number			Account Number			Amount of cheque
										las

$\mathsf I$

$\bar{1}$

$\rightarrow$

How to complete this form

Shares Applied for I A I

Enter the number of Shares you wish to apply for. The application must be for a minimum of 4,000 Shares. Applications for greater than 4,000 Shares must be in multiples of 1,000 Shares.

Application Monies B

Enter the amount of Application Monies. To calculate the amount, multiply the number of Shares by the price per Share.

Applicant Name(s) l C.

Enter the full name you wish to appear on the statement of share holding. This must be either your own name or the name of a company. Up to 3 joint Applicants may register. You should refer to the table below for the correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister System (CHESS) participants should complete their name identically to that presently registered in the CHESS system.

Postal Address In.

Enter your postal address for all correspondence. All communications to you from the Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.

Contact Details IE.

Enter your contact details. These are not compulsory but will assist us if we need to contact you.

$\blacksquare$ CHESS

HalcyGen Pharmaceuticals Limited (the Company) will apply to the ASX to participate in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of Australian Stock Exchange Limited. CHESS, the company will operate an electronic CHESS Subregister of security holdings and an electronic issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the Company's principal register of securities. The Company will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold Shares allotted to you under this Application on the CHESS Subreqister, enter your CHESS HIN. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allocated a Securityholder Reference Number (SRN).

Payment G

Make your cheque or bank draft payable to HalcyGen Pharmaceuticals Limited - Share Offer Account in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank.

Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B.

Cheques will be processed on the day of receipt and as such. sufficient cleared funds must be held in your account as cheques returned unpaid may not be re-presented and may result in your Application being rejected. Pin (do not staple) your cheque(s) to the Application Form where indicated. Cash will not be accepted. Receipt for payment will not be forwarded.

Before completing the Application Form the applicant(s) should read this prospectus to which this application relates. By lodging the Application Form, the applicant agrees that this application for Shares in HaicyGen Pharmaceuticals Limited is upon and subject to the terms of the prospectus and the Constitution of HalcyGen Pharmaceuticals Limited, agrees to take any number of Shares that may be allotted to the Applicant(s) pursuant to the prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form.

Limited

Lodgement of Application

Application Forms must be received at the Perth office of Computershare Investor Services Ptv Limited by no later than 5,00pm AEST on 4 June 2007. Return the Application Form with cheque(s) attached to:

Computershare Investor Services Ptv Limited	OR	Computershare Investor Services Pty
GPO Box D182		Level 2
PERTH WA 6840		45 St Georges Terrace
		PERTH WA SOOD

Privacy Statement

Personal information is collected on this form by Computershare Investor Services Pty Limited ("CIS"), as registrar for securities issuers ("the issuer"), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including material by contacting CIS. You can contact CIS using the details provided on the front of this form or E-mail [email protected]

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 557 010.

Correct forms of registrable title(s)

Note that ONLY legal entities are allowed to hold Shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual - Use given name(s) in full, not initials	Mr John Alfred Smith	J.A Smith
Joint - Use given name(s) in full, not initials	Mr John Alfred Smith & Mrs Janet Marie Smith	John Alfred & Janet Marie Santh
Company - Use company title, not abbreviations	ABC Pty Ltd	ABC P/L ABC Co
Trusts - Use trusfee(s) personat name(s) - Do not use the name of the trust	Mis Penny Smith	Penny Smith Family Trust
Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased	Mr Michael Smith	Estate of Lafe John Smith
Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation	Mr John Alfred Smith	Peter Smith
Partnerships - Use partners personal name(s) - Do not use the name of the partnership	Mr John Smith & Mr Michael Smith	John Smith & Soul
Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc.	Mrs Janet Smith	ABC Tennis Association
Super gration Funds - Use the name of trustee of the fund . Do not you the same of the fund .	John Smith Pty Ltd e Current Francis A (CN)	John Smith Pty Ltd Superannuation Fund

	HalcyGen Pharmaceuticals Limited
	ACN 76 115 832 963
	Application Form This Application Form is important. If you are in doubt as to how to deal with it, please						Broker Code				Adviser Code
	contact your stockbroker or professional adviser without delay. You should read the entire prospectus carefully before completing this form. To meet the requirements of
	the Corporations Act, this Application Form must not be distributed unless included in, or accompanied by, the prospectus.
$\mathbf{A}$	I/we apply for				B			I/we lodge full Application Money
						ZN.							ä
	Number of Shares in HalcyGen Pharmaceuticals Limited at A\$0.50 per Shares or such lesser number of Shares which may be allocated to me/us
C.	Individual/Joint applications - refer to naming standards overleaf for correct forms of registrable title(s)
	Title or Company Name	Given Name(s)					Sumame

	Joint Applicant 2 or Account Designation

	Joint Applicant 3 or Account Designation


	City / Suburb / Town									State		Postcode

E.	Enter your contact details Contact Name								Telephone Number - Business Hours / After Hours


	CHESS Participant
	Holder Identification Number (HIN)				Please note that if you supply a CHESS HiN but the name and address details on your form do not
	х				subregister.									correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HRN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored
G	Cheque details - Make your cheque or bank draft payable to "HalcyGen Pharmaceuticals Limited - Share Offer Account" Drawer		Cheque Number	BSB Number				Account Number				Amount of cheque
											AS
	Drawer		Cheque Number	BSB Number				Account Number				Amount of cheque

$\mathsf I$

$\bar{1}$

$\rightarrow$

How to complete this form

Shares Applied for I A

Enter the number of Shares you wish to apply for. The application must be for a minimum of 4,000 Shares. Applications for greater than 4,000 Shares must be in multiples of 1,000 Shares.

Application Monies B

Enter the amount of Application Monies. To calculate the amount, multiply the number of Shares by the price per Share.

Applicant Name(s) l el

Postal Address D

Contact Details E

Enter your contact details. These are not compulsory but will assist us if we need to contact you.

CHESS F.

HalcyGen Pharmaceuticals Limited (the Company) will apply to the ASX to participate in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd. a wholly owned subsidiary of Australian Stock Exchange Limited. CHESS, the company will operate an electronic CHESS Subregister of security holdings and an electronic issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the Company's principal register of securities. The Company will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold Shares allotted to you under this Application on the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allocated a Securityholder Reference Number (SRN).

Payment G

Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B.

റ

Lodgement of Application

Application Forms must be received at the Perth office of Computershare Investor Services Pty Limited by no later than 5.00pm AEST on 4 June 2007. Return the Application Form with cheque(s) attached to:

Computershare Investor Services Ptv Limited	0R	Computershare Investor Services Pty Limited
GPO Box D182		Level 2
PERTH WA 6840		45 St Georges Terrace
		PERTH WA 6000

Privacy Statement

Personal information is collected on this form by Computershare Investor Services Pty Limited ("CIS"), as registrar for securities issuers ("the issuer"), for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate, to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or E-mail [email protected]

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 557 010.

Correct forms of registrable title(s)

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual - Use given name(s) in full, not initials	Mr John Alfred Smith	J.A Smith
Joint - Use given name(s) in full, not initials	Mr John Alfred Smith & Mrs Janet Marie Smith	John Alfred & Janet Marie Smith
Company - Use company title, not abbreviations	ABC Pty Ltd	ABC P/L ABC Co
Trasts - Use trusfee(s) personat name(s) - Do not use the name of the trust	Mis Penny Smith	Penny Smith Family Trust
Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased	Mr Michael Smith	Estate of Lafe John Smith
Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation.	Mr John Alfred Smith	Peter Smith
Partnerships - Use partners personal name(s) - Do not use the name of the partnership	Mr John Smith & Mr Michael Smith	John Smith & Soft
Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc.	Mrs Janet Smith	ABC Tennis Association
Superannuation Funds - Use the pame of trustee of the fond - Do not use the name of the fund	John Smith Pty Ltd	John Smith Pty Ltd Superannuation Fund

DIRECTORS

Dr Roger Aston Mr Craig Bottomley Hon. Ron Best Mr Bruce Mathieson

COMPANY SECRETARY AND CHIEF FINANCIAL OFFICER

Mr Aaron Finlay

AUSTRALIAN COMPANY NUMBER

115 832 963

REGISTERED OFFICE

Level 10, 470 Collins Street, Melbourne VIC 3000 Telephone: (03) 8614 7777 Facsimile: (03) 9614 7022

CORPORATE OFFICE

Level 10, 470 Collins Street, Melbourne VIC 3000 Telephone: (03) 8614 7777 Facsimile: (03) 9614 7022

WEBSITE

www.halcygen.com

SHARE REGISTRAR

Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace Perth WA 6000 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

UNDERWRITER AND LEAD MANAGER

Tolhurst Limited Level 29, 35 Collins Street Melbourne VIC 3000 Telephone: (03) 9242 4000 Facsimile: (03) 9242 4099

LAWYERS

Blake Dawson Waldron Level 39, 101 Collins Street Melbourne VIC 3000 Telephone: (03) 9679 3000 Facsimile: (03) 9679 3111

INVESTIGATING ACCOUNTANT

KPMG Level 31 Central Park 152-158 St George's Terrace Perth WA 6000 Telephone: (08) 9263 7171 Facsimile: (08) 9263 7129

. . . . . . . . . . . . . . . . . . . .

Level 10, 470 Collins Street, Melbourne VIC 3000

1983 - Jan Jawa

Telephone: (03) 8614 7777 Facsimile: (03) 9614 7022 www.halcygen.com

AI assistant

MAYNE PHARMA GROUP LIMITED — Capital/Financing Update 2007

65396_rns_2007-06-05_b42468f0-0f83-4b62-834f-63b625dec5dc.pdf

PROSPECTUS

HalcyGen Pharmaceuticals Limited ACN 115 832 963

San Maria Maria Maria Maria Maria Maria 1999.Ny INSEE dia mampiasa ny kaodim-paositra 62143. Ilay kaominina mpikambana amin'ny fivondronan-paositra 6214.I Maria Maria no ben'ny tanàna mandritry ny taona 2008–2014. Ilay k

Important document

Forward-looking statements

Restriction on the distribution of this Prospectus

Defined terms and abbreviations

Electronic Prospectus

Photographs

INVESTVIEN FRIGHT RESER

BUSINESS AND INVESTMENT RISKS

Gone Company

SUMMARY OF THE OFFER

The Offer

Key Dates

SECTION 1

Dear Investor

2.1 Overview of HalcyGen

2.2 The Offer

2.3 Purpose of the Offer

2.4 Minimum application

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

2.5 Closing Date

2.6 Offer, acceptance and payment

2.7 Nature of the Shares

2.8 Application of money held in trust

2.9 Issue of Shares

2.10 Allocation policy

2.11 ASX quotation

2.12 Taxation implications

2.13 Privacy Act

2.14 Enquiries

SECTION 3Industry OVENIEW

En de la Companion de la Companion de la Companion de la Companion de la Companion de la Companion de la CompaLa companion de la Companion de la Companion de la Companion de la Companion de la Companion de la CompanionLa

3.1 Executive summary

3.2 The pharmaceutical industry and the "generic" challenge

Worldwide Pharmaceutical - Sales 2005 - Total Sales US\$565.9 Billion

Patents

a i kredne kontrol $\begin{tabular}{|c|c|c|c|} \hline $\cdots$ & $\cdots$ & $\cdots$ \ $\cdots$ & $\cdots$ & $\cdots$ \ $\cdots$ & $\cdots$ & $\cdots$ \ \hline \end{tabular}$

Generics

Global sales of generic drugs (2003) are shown in the diagram below:

Life cycle management

3.3 SuperGenerics

3.4 Drug development and the regulatory environment

SUMMARY OF NEW DRUG DEVELOPMENT PROCESS IN THE US

GENERIC PHARMACEUTICAL . 2 - 4 years

ALGEMENT STA

3.5 Marketing, sales and royalties

Distribution and marketing

Royalties and payments

SECTION 4OWENVIEW of HaldyGen

4.1 Company history and background

4.2 Current SuperGenerics under licence

Anti-fungal - Itraconazole

Antibiotic - Minocycline

4.3 Licensing arrangements with Mayne

4.4 Clinical studies and development

4.5 Marketing

4.6 Work programs

SUBA-Itraconazole:

Minocycline:

4.7 Intellectual property portfolio

Licensed intellectual property

SUBA-Itraconazole -- Background IP

Minocycline - Background IP

New intellectual property

4.8 Location and facilities

SECTION 5 1744

5.1 Proposed use of funds raised

5.2 Expenditure program

CONTRACTOR

5.3 Additional funding

a kata ya mwaka wa 1989, wakazi wa 1989, kata ya 1989, kata ya 1989.Waliozaliwa wa 1989, kata ya mshindi wa 1989, kata ya 1989, kata ya 1989. MONDAY AND REAL ega W, Vari C-FN

6.1 Capital structure on completion of the Offer

6.2 Financial results for previous periods

Natolie

Notes to the financial information

MAYNE PHARMA GROUP LIMITED Capital/Financing Update 2007

San Maria Maria Maria Maria Maria Maria 1999.
Ny INSEE dia mampiasa ny kaodim-paositra 62143. Ilay kaominina mpikambana amin'ny fivondronan-paositra 6214.
I Maria Maria no ben'ny tanàna mandritry ny taona 2008–2014. Ilay k

SECTION 3
Industry OVENIEW

En de la Companion de la Companion de la Companion de la Companion de la Companion de la Companion de la Compa
La companion de la Companion de la Companion de la Companion de la Companion de la Companion de la Companion
La

SECTION 4
OWENVIEW of HaldyGen

a kata ya mwaka wa 1989, wakazi wa 1989, kata ya 1989, kata ya 1989.
Waliozaliwa wa 1989, kata ya mshindi wa 1989, kata ya 1989, kata ya 1989. MONDAY AND REAL ega W, Vari C-FN

SECTION 8
RISK 180101S

SECTION 9
Additional information