NEURODISCOVERY LIMITED

ACN 113 824 141

NOTICE OF GENERAL MEETING

TIME : 2:00pm (WST) DATE : Thursday, 22[nd] July 2010 PLACE : Level 11 225 St Georges Terrace Perth WA 6000

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9482 0500.

Notice of General Meeting (setting out the proposed resolution)	3
Explanatory Statement (explaining the proposed resolution)	4
Glossary	6
Annexure – Independent Expert’s Report	7
Proxy Form	attached

TIME AND PLACE OF ME ETING AND HOW TO VOT E

VENUE

The General Meeting of the Shareholders to which this Notice of Meeting relates will be held at 2:00pm (WST) on Thursday, 22[nd] July 2010 at:

Level 11

225 St Georges Terrace Perth WA 6000

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON

To vote in person, attend the General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

(a) post to NeuroDiscovery Limited, PO Box 902, West Perth, Western Australia 6872; or

(b) facsimile to the Company on facsimile number (+61 8) 9482 0505,

so that it is received not later than 2:00pm (WST) on Tuesday, 20[th] July 2010.

Proxy Forms received later than this time will be invalid.

NOTICE OF GENERAL ME ETI NG

Notice is given that the General Meeting of Shareholders will be held at 2:00pm (WST) on Thursday, 22[nd] July 2010 at Level 11, 225 St Georges Terrace, Perth, WA 6000.

The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 2:00pm (WST) on Tuesday, 20[th] July 2010.

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

1. RESOLUTION 1 – APPROVAL OF SHARE SALE AGREEMENT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of Listing Rule 10.1 of the ASX Listing Rules and for all other purposes the Company is authorised to sell 100% of its interest in NeuroSolutions Limited on the terms and conditions set out in the Explanatory Statement accompanying this Notice of Meeting.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by a party to the transactions and any associate of a party to the transaction. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Independent Expert’s Report : Shareholders should carefully consider the accompanying Independent Expert’s Report prepared by BDO Corporate Finance (WA) Pty Ltd for the purpose of Shareholder approval under Resolution 1. The Independent Expert concludes that the proposed transaction is fair and reasonable to the non-associated Shareholders.

DATED: WEDNESDAY, 16 JUNE 2010

BY ORDER OF THE BOARD

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MR MORGAN BARRON COMPANY SECRETARY NEURODISCOVERY LIMITED

EXPLANATORY STATEMEN T

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General Meeting to be held at 2:00pm (WST) on Thursday, 22[nd] July 2010 at Level 11, 225 St Georges Terrace, Perth, Western Australia 6000.

This purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolution in the Notice of Meeting.

1. RESOLUTION 1 – APPROVAL OF SHARE SALE AGREEMENT

1.1 General

The Company has entered into the share sale agreement ( Agreement ) pursuant to which the Company has agreed to sell all of its shares in NeuroSolutions Limited ( NeuroSolutions ) (a company incorporated in England and Wales) to Sevco 5023 Limited ( Sevco ) (a company incorporated in England and Wales) in consideration for:

(a) the sum of GB£150,000 upon completion of the Agreement ( Completion );
(b) the sum of GB£190,000 by way of the Company procuring the sale of the shareholdings in the share capital of the Company owned by David Spanswick ( Spanswick ), Fei-Yue Zhao ( Zhao ) and the University of Warwick ( UW ) (together, the Buy-out Team ), with the Company entitled to keep the proceeds of the sale of such Shares on Completion;
(c) the sum of GB£40,000 payable six months after Completion;
(d) the sum of GB£45,000 payable twelve months after Completion; and
(e) the sum of GB£60,000 to be paid in 15 monthly instalments, each in the sum of GB£4,000, with the first instalment being paid at the end of the month in which this General Meeting is held.

The Company has entered into a debenture deed securing the deferred payments contemplated in paragraphs (c), (d) and (e) above.

NeuroDiscovery was originally formed to exploit certain specialist expertise in the electrophysiology space. This strategy encompassed running a cash-flow positive services business that could discover novel drug candidates and help subsidise the clinical development of a pipeline of those drug candidates in for the potential treatment of conditions such as pain.

NeuroSolutions is a services business which has been wholly owned since NeuroDiscovery’s inception over five years ago and has assisted the Company to fund its previous and current development activities without the need to raise significant capital from the markets.

The Board has for some time been exploring potential restructuring opportunities to identify a sustainable platform from which to generate future shareholder wealth. As part of this restructuring, the Agreement has been reached, subject to shareholder approval, for the sale of the services business to a management buyout team comprising individuals from NeuroSolutions and the UW.

Resolution 1 seeks Shareholder approval for the entry into the Agreement for the disposal of NeuroSolutions pursuant to ASX Listing Rule 10.1, for the disposal of a substantial asset to Sevco, which is an entity controlled by the Buy-out Team, who, together, are substantial shareholders in the Company.

1.2 ASX Listing Rule 10.1

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to, inter alia , a substantial holder (if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the six months before the transaction, in at least 10% of the total votes attached to the voting securities in the entity).

An asset is substantial if its value, or the value of the consideration for it, or in ASX’s opinion, is 5% or more of the equity interests of the company as set out in the latest accounts given to ASX under the ASX Listing Rules.

The Company is seeking shareholder approval for the purposes of ASX Listing Rule 10.1 in relation to the Company disposing of a substantial asset by disposing of its shares in NeuroSolutions Limited to Sevco, pursuant to the Agreement.

For the purposes of ASX Listing Rule 10.1, the Buy-out Team are shareholders in Sevco, with the following holdings of Sevco shares:

(a) Spanswick holds 22 Sevco shares (22.68%);
(b) Zhao holds 22 Sevco shares (22.68%); and
(c) UW holds 22 Sevco shares (22.68%).

The Buy-out Team are also substantial shareholders in the Company holding the following percentages of the total Share capital of the Company:

(a) Spanswick – 4.62%;
(b) Zhao – 4.62%; and
(c) UW – 6.03%.

Together, they hold approximately 15.27% of the Shares in the Company.

The proposed transaction therefore requires Shareholder approval under ASX Listing Rule 10.1.

ASX Listing Rule 10.10 provides that shareholder approval sought for the purpose of ASX Listing Rule 10.1 must include a report on the proposed transaction from an independent expert. Accompanying this Explanatory Statement is an Independent Expert’s Report prepared by BDO Corporate Finance (WA) Pty Ltd concluding that the proposed transaction is fair and reasonable to the non-associated Shareholders.

GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited or the Australian Securities Exchange, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Company or NeuroDiscovery means NeuroDiscovery Limited (ACN 113 824 141).

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

General Meeting means the meeting convened by the Notice of Meeting.

Independent Expert means BDO Corporate Finance (WA) Pty Ltd.

Independent Expert’s Report means the report prepared by the Independent Expert annexed to this Notice of Meeting.

NeuroSolutions means NeuroSolutions Limited (a company incorporated in England and Wales).

Notice of Meeting or Notice of General Meeting means this notice of general meeting including the Explanatory Statement.

Resolution means the resolution set out in the Notice of Meeting.

Sevco means Sevco 5023 Limited (a company incorporated in England and Wales).

Share means a fully paid ordinary share in the capital of the Company.

Share Sale Agreement or Agreement means the share sale agreement between the Company and Sevco 5023 Limited dated 11 June 2010.

Shareholder means a holder of a Share.

WST means Western Standard Time as observed in Perth, Western Australia.

FINANCIAL SERVICES GUIDE AND

INDEPENDENT EXPERT’S REPORT

NEURODISCOVERY LIMITED 15 June 2010

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38 Station Street Subiaco, WA 6008 PO Box 700 West Perth 6872 Australia

Tel: +61 8 9380 8400 Fax: +61 8 9360 4232 www.bdo.com.au

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Financial Services Guide

15 June 2010

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“ BDO ” or “ we ” or “ us ” or “ ours ” as appropriate) has been engaged by NeuroDiscovery Limited (“ NeuroDiscovery ”) to provide an independent expert‟s report on the proposal by Sevco to purchase the entire share capital of NeuroSolutions Limited which is a 100% owned subsidiary of NeuroDiscovery Ltd. You will be provided with a copy of our report as a retail client because you are a shareholder of NeuroDiscovery Limited.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“ FSG ”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

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Who we are and how we can be contacted;
The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;

Any relevant associations or relationships we have; and

Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO Internationa). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

This is a draft document and must not be relied on or disclosed or referred to in any document. We accept no duty of care or liability to you or any third party for any loss suffered in connection with the use of this document.

Financial Services Guide – Page 2

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General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

Fees, Commissions and Other Benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee for this engagement is approximately $17,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report.

We have received a fee from NeuroDiscovery for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 7426 Cloisters Square, Perth WA 6850.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (“ FOS ”). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561.

Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free:1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out at the top of our letterhead on page 1 of this FSG.

NEUODISCOVERY LTD

INDEPENDENT EXPERT’S REPORT

1.	I N TRODUCTI ON .......................................................................... 1
2.	SCOPE OF TH ER EPORT ................................................................ 3
3.	OUTLI N E OF TH E PROPO SAL ........................................................... 5
4.	PRO FI LE OFNEURODI SCOV ERY ....................................................... 6
5.	I N DUSTRY AN ALYSI S ................................................................... 14
6.	V ALUATI ONA PPROACHADOPTED ................................................... 18
7.	V ALUATI ON OFNEUROSOLUTI ON S .................................................. 19
8.	V ALUATI ON OFCON SIDERATI ON ..................................................... 26
9.	I S TH E PROPOSAL FAI R? .............................................................. 27
10.	I S T H E PROPOSAL REASON AB LE? .................................................... 28
11.	CON CLUSI ON ............................................................................ 29
12.	SOURCES OF I N FORMATI ON ........................................................... 30
13.	I N DEPEN DENCE ......................................................................... 30
14.	Q UALI FICATI ON S ....................................................................... 30
15.	DI SCLAI MERS AN D CON S EN TS ......................................................... 32

A PPEN DI X 1 – G LOSSARY

A PPEN DI X 2 – V ALUATI ON M ETH ODOLOGI ES

A PPEN DI X 3 – C OMPARATI V E C OMPAN Y D ESCRI PTION S

15 June 2010

The Directors NeuroDiscovery Limited Level 11, 225 St George‟s Terrace PERTH WA 6000

Dear Sirs

INDEPENDENT EXPERT'S REPORT

1. I N TRODUCTI ON

BDO Corporate Finance (WA) Pty Ltd (“ BDO ”) has been engaged by NeuroDiscovery Limited (“ NeuroDiscovery ”) to prepare an Independent Expert‟s Report (“ our Report” ) to express an opinion as to whether or not the proposal by Sevco 5023 Limited (“ Sevco” ) to acquire the entire share capital of NeuroSolutions Limited (“ NeuroSolutions ”), a 100% owned subsidiary of NeuroDiscovery, is fair and reasonable to non-associated shareholders (“ Shareholders ”) of NeuroDiscovery ( “the Proposal” ). Our Report is to be included in the Explanatory Memorandum to be sent to all Shareholders to assist them in deciding whether to approve or reject the Proposal.

1.1 Purpose of the report

Our Report is prepared pursuant to ASX Listing Rule 10.1 in order to assist the Shareholders in their decision whether to approve the Proposal.

As a part of the Proposal, Sevco will be acquiring NeuroSolutions. Sevco is 100% owned by Professor David Spanswick, Fei Yue and the University of Warwick ( “The Parties” ). The Parties own 8,779,177 NeuroDiscovery shares representing 15.27% of the issued capital of NeuroDiscovery and are therefore, together, “substantial holders” in NeuroDiscovery according to ASX Listing Rule 10.1.

1.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (“ ASIC ”) Regulatory Guide 111 (“ RG 111 ”), „Content of Expert‟s Reports‟ and Regulatory Guide 112 (“ RG 112 ”) „Independence of Experts‟.

In arriving at our opinion, we have assessed the terms of the Proposal as outlined in the body of this report. We have considered:

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How the value of NeuroSolutions compares to the value of the consideration to be paid for NeuroSolutions;
The likelihood of a superior alternative offer being available to NeuroDiscovery;
Other factors which we consider to be relevant to the Shareholders in their assessment of the Proposal; and

BDO CORPORATE FINANCE (WA) PTY LTD

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The position of Shareholders should the Proposal not proceed.

1.3 Opinion

We have considered the terms of the Proposal as outlined in the body of this report and have concluded that the Proposal is fair and reasonable to Shareholders.

1.4 Fairness

In Section 9 we determined how the Proposal consideration compares to the value of NeuroSolutions, as detailed hereunder.

	Ref	Value (£)	Value (£)
		Low	High
Value of NeuroSolutions	7	397,965	397,965
Value of the cash consideration to be received from Sevco	8	485,000	485,000

As both value of NeuroSolutions and the value of the cash consideration to be received from Sevco is denominated in British Pounds Sterling, we have performed our analysis in this currency. The above pricing indicates that, in the absence of any other relevant information the Proposal is fair for Shareholders.

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Valuation Summary
Low & High Ranges
Consideration Payable by Sevco
Value of NeuroSolutions
350.0 370.0 390.0 410.0 430.0 450.0 470.0 490.0
Valuation (£'000 )
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The above graph indicates the Proposal is fair.

1.5 Reasonableness

We have considered the analysis in Sections 11 and 12 of this report, in terms of both:

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advantages and disadvantages of the Proposal; and
alternatives, including the position of Shareholders if the Proposal does not proceed.

In our opinion, the position of Shareholders if the Proposal is approved is more advantageous than the position if the Proposal is not approved. Accordingly, in the absence of any other relevant information and/or a superior proposal we believe that the Proposal is reasonable for Shareholders.

BDO CORPORATE FINANCE (WA) PTY LTD 2

The respective advantages and disadvantages considered are summarised below:

	Advantages and Disadvantages	Advantages and Disadvantages	Advantages and Disadvantages
Section	Advantages	Section	Disadvantages
10.1.1	The Proposal is fair	10.2.1.	Loss of control of NeuroSolutions
10.1.2	NeuroDiscovery will receive a significant	10.2.2	Possible requirement for future capital
	cash injection		raisings
10.1.3	The Company‟s primary focus will be the
	development of NSL 101, with an interest
	retained in NSL 043 if the compound is
	commercialised by Sosei Corporation Ltd
10.1.4	Reduces the dependency on key
	management personnel to operate the
	business

Other key matters we have considered include:

Description
10.3.1	Alternative Proposals
10.3.2	Implications of not approving the Proposal

2. S COPE OF TH E R EPORT

2.1 Purpose of the Report

ASX Listing Rule 10.1 requires that a listed entity must obtain shareholders‟ approval before it acquires or disposes of a substantial asset to a related party or “substantial holder”, when the consideration to be paid for the asset or the value of the asset being disposed constitutes more than 5% of the equity interest of that entity at the date of the last audited accounts. Based on the audited accounts as at 30 June 2009 the value of the asset being disposed is 15.27% of the equity interest of NeuroDiscovery.

A “substantial holder” for the purposes of Listing Rule 10.1 is any party or parties that hold more than 10% of the issued shares of the listed entity. The acquirer is Sevco, a company 100% owned by Professor David Spanswick, Fei Yue and the University of Warwick ( “The Parties” ), who own 8,779,177 NeuroDiscovery shares representing 15.27% of the issued capital of NeuroDiscovery and are therefore “substantial holders” according to ASX Listing Rule 10.1.

Listing Rule 10.10.2 requires the Notice of Meeting for shareholders‟ approval to be accompanied by a report by an independent expert expressing their opinion as to whether the transaction is fair and reasonable to the shareholders whose votes are not to be disregarded in respect of the transaction non-associated shareholders.

BDO CORPORATE FINANCE (WA) PTY LTD 3

Accordingly, an independent experts‟ report is required for the Proposal. The report should provide an opinion by the expert stating whether or not the terms and conditions in relation thereto are fair and reasonable to non-associated shareholders of NeuroDiscovery.

2.2 Regulatory guidance

The Listing Rules do not define the meaning of “fair and reasonable”. In determining whether the Proposal is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

RG 111 does not provide specific guidance in relation to a fair and reasonable report required by the ASX. However, RG 111 provides guidance on how a control transaction should be considered. We do not consider the Proposal to be a control transaction. As such, we have used RG 111 as a guide for our analysis, but have considered the Proposal as if it were not a control transaction.

2.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities subject of the offer. It might also be reasonable if, despite being „not fair‟, the expert believes that there are sufficient reasons for security holders to approve the proposal in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

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a comparison between value of NeuroSolutions and the value of the consideration to be received from Sevco
an investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Section 10 “Is the Proposal Reasonable?”)

Our Report has been prepared in accordance with the guidelines relating to Valuation Engagements as defined by APES 225 Valuation Services. A Valuation Engagement means an engagement or assignment to perform a valuation and provide a valuation report where we determine an estimate of value of the company by performing appropriate valuation procedures and where we apply the valuation approaches and methods that we consider to be appropriate in the circumstances.

BDO CORPORATE FINANCE (WA) PTY LTD 4

3. OUTLI N E OF TH E PROPO SAL

Under the terms of the Proposal, Sevco will pay NeuroDiscovery up to £485,000 for the entire share capital of NeuroSolutions. The breakdown of this consideration comprises of the following components being:

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£150,000 payable in cash on completion of the Proposal;
£40,000 payable in cash six months after completion of the Proposal;
£45,000 payable on the first anniversary of completion of the Proposal;
£190,000 by way of proceeds to be retained by NeuroDiscovery for procuring the sale of shareholdings of David Spanswick, Fei Yue and the University of Warwick. To the extent that the sale proceeds are not equal to or greater than £190,000, the purchase price shall be reduced and there shall be no liability to Sevco for any shortfall. It is a condition of this agreement that each of the shareholders enter into a separate arrangement with NeuroDiscovery to give effect to this clause; and
additional consideration of £60,000, payable by way of monthly installments of £4,000, which will commence at the end of month in which the General Meeting is held and continue for 15 months.

The Proposal specifically excludes all intellectual property rights, patents designs and the like previously owned or used by NeuroSolutions relating to the product pipeline NSL 101 and NSL 043. The rights of NSL 101 have been assigned to NeuroDiscovery on 17 March 2010 and the rights of NSL 043 have been assigned to Sosei Group Corporation (“ Sosei ”), NeuroDiscovery‟s collaborative partner in developing NSL 043, the details of which were released to the market on 17 March 2010.

It is a key assumption that the proceeds from the sale of shareholdings of David Spanswick, Fei Yue and the University of Warwick, to be placed to unrelated parties to form part of the consideration, will be at least equal to £190,000. Based on the number of shares to be sold (8,779,177), a closing price of $0.044 as at 26 May 2010, and an exchange rate of 1 AUD: 0.5726 GBP, we value these shares to be worth approximately £221,000, and thus accept this as a reasonable assumption.

The share structure of NeuroDiscovery is presented in the below table.

	Pre- Proposal		Post-transaction	Post-transaction
	No. of Shares	%	No. of Shares	%
University of Warwick	3,469,187	6.03	~	~
Professor David Spanswick	2,654,995	4.62	~	~
Fei Yue	2,654,995	4.62	~	~
Other shareholders	48,707,007	84.73	57,486,187	100.00
TOTAL	57,486,184	100.00	57,486,187	100.00

BDO CORPORATE FINANCE (WA) PTY LTD 5

4. PROFI LE OF N EURO D I SCOV ERY

4.1 History

NeuroDiscovery Ltd is a research and development company specialising in drug development and providing neuroscience services. NeuroDiscovery was formed in April 2005. In August 2005 NeuroDiscovery acquired a 100% interest in NeuroSolutions which is based in the United Kingdom. After the successful acquisition of NeuroSolutions, NeuroDiscovery listed on the Australian Securities Exchange ( “ASX” ) on 15 August 2005.

NeuroSolutions is a provider of electrophysiology services to the biopharmaceutical industry.

4.2 Drug Discovery and Development Pipeline

4.2.1 NSL-101

NSL-101 was identified by NeuroSolutions from Ampika Limited‟s database of medicinal plants. NeuroSolutions has determined that there was possibility that NSL-101 could be used as a natural product formulation that is effective in easing the symptoms of pain. In November 2006 under a worldwide exclusive licensing agreement with Ampika Limited NeuroSolutions took full ownership of the compound.

In 2008, two Phase II clinical standard trials of NSL-101 were completed. In the first trial, the compound was effective in preventing pain associated with the dental procedure of root planning and scaling used to combat periodontitis. In the second trial which was centered on the treatment of post-operative pain caused by the extraction of a wisdom tooth, NeuroSolutions was unable to measure NSL-101‟s efficacy due to unexpected unknown factors.

The results from the periodontitis trial demonstrate that NSL-101 is a highly effective analgesic and was well tolerated. It was found to be equally effective as the local anaesthetic gel currently applied to patients but with the added benefit of no adverse effects.

The proof of concept achieved with the Phase II trial of NSL-101 in periodontitis led to a new patent filing (in the name of NeuroSolutions). This helped to protect the intellectual property position and form an important data package for discussion with third parties.

On 17 March 2010 NeuroDiscovery was assigned the 100% ownership of NSL-101 from its 100% owned subsidiary NeuroSolutions.

The NeuroDiscovery Board is now conducting a strategic review of the programme to determine the best commercialisation path forward.

4.2.2 NSL-043

NSL-043 is an oral product in the treatment of neuropathic pain, previously under a Collaboration Agreement and development plan between NeuroSolutions, a fully owned subsidiary of NeuroDiscovery, and Japanese biopharmaceutical company Sosei Corporation Ltd.

On 22 December 2009 NeuroDiscovery announced that it will not commit to a Phase II trial and as such the Company‟s ownership in the NSL-043 program fell to approximately 32% under the existing agreement with no further requirement to contribute funding for the future development of the programme. NeuroSolutions and Sosei own all the rights for NSL-043 for territories outside Japan and Asia. NeuroSolutions and Sosei will receive royalties for sales in Japan and Asia.

Subsequent discussions with Sosei were held in order to identify a more appropriate ownership structure of this potential pain drug. As a result the previous Collaboration Agreement was terminated and an Assignment Agreement was entered into, under which NeuroSolutions

BDO CORPORATE FINANCE (WA) PTY LTD 6

assigned its approximate 32% ownership in NSL-043 to Sosei, giving Sosei 100% ownership in the programme.

In return for the assignment, Sosei have also agreed that, for the life of the existing NSL-043 patent, a percentage of any future revenue will be paid to NeuroDiscovery. As of 17 March 2010 the potential percentage revenue payment share to NeuroDiscovery was 32%, however if additional investment occurs this future revenue share would be calculated via an agreed formula in which NeuroDiscovery‟s percentage of revenue is diluted.

4.3 NeuroSolutions’ Specialist Service Business

As well as the drug development programs, NeuroDiscovery operates a profitable contract service business through the provision of specialised electrophysiology assays. The business is operated by NeuroSolutions in the UK and works with some of the world largest multinational pharmaceutical companies. During the financial year 2009 the business unit achieved sales revenue of approximately $2.3 million which was an 8% increase from the previous year. This is a result of existing clients continuing to sign significant, long-term contracts.

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4.4 Historical Balance Sheet – NeuroDiscovery Group and Parent

	Group Parent
	Reviewed as at 31 Dec 2009 $ Audited as at 30 June 2009 $ Audited as at 30 June 2008 $ Audited as at 30 June 2009 $ Audited as at 30 June 2008 $
Balance Sheet
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Financial Assets Loans to subsidiary Plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest-bearing loans and borrowings TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liability TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	1,507,377 1,395,072 1,745,663 1.161,178 1,711,546 795,121 498,430 534,447 8,251 10,939 51,502 94,675 15,470 17,970 1,834
	2,354,002 1,988,377 2,295,580 1,187,399 1,724,319 ~ ~ ~ 3,218,572 5,628,773 ~ ~ ~ 642,162 ~ 130,298 254,488 519,949 ~ ~ 2,985,119 2,985,119 3,351,419 ~ ~
	3,115,417 3,239,607 3,871,368 3,860,734 5,628,773
	5,469,419 5,227,984 6,166,948 5,048,133 7,353,092
	455,182 470,912 789,701 83,347 48,130 ~ ~ 148,863 ~ ~
	455,182 470,912 938,564 83,347 48,130 470,012 475,019 585,260 ~ ~
	470,012 475,019 585,260 ~ ~
	925,194 945,931 1,523,824 83,347 48,130

	4,544,225 4,282,053 4,643,124 4,964,786 7,304,962
	8,695,049 8,629,515 8,508,340 8,629,515 8,508,340 72,401 132,805 174,873 132,805 174,873 (4,223,225) (4,282,267) (4,040,089) (3,797,534) (1,378,251)
	4,544,225 4,282,053 4,643,124 4,964,786 7,304,962

Source: Audited financial statements for the years ended 30 June 2008 and 30 June 2009 and reviewed financial statements for the half-year ended 31 December 2009.

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4.5 Historical Income Statements

	Group	Parent
	Reviewed for the half-year ended 31 Dec 09 $ Audited for the year ended 30 Jun09 $
		Audited for the year ended 30 Jun 08 $ Audited for the year ended 30 Jun 09 $ Audited for the year ended 30 Jun 08 $
Income Statement
Rendering of services Finance income Total Revenue Cost of sales Gross Profit Other income Expenses Research and development expenses Corporate and administrative expenses Impairment of intangible assets Provision for impairment of loans receivable Unrealised foreign exchange (loss)/gain Other Expenses Profit/(loss) before income tax expense Income tax benefit Total Income/(loss) for the period	1,461,241 2,302,907 ~ 62,104	2,034,055 ~ ~ 156,341 61,502 142,384
	1,461,241 2,365,011 (611,777) (1,459,270) 849,464 905,741 13,104 ~ (134,680) (247,381) (392,490) (1,115,810) ~ (366,300) ~ ~ ~ (62,729) (78,356) ~ 257,042 (886,479) ~ 446,301	2,190,396 61,502 142,384 (1,085,750) ~ ~ 1,104,646 61,502 142,384 29,813 ~ ~ (2,218,891) ~ ~ (1,551,865) (480,785) (742,938) ~ ~ ~ ~ (2,000,000) ~ 244,258 ~ ~ ~ ~ ~ (2,392,039) (2,419,282) (600,554) 180,774 ~ ~
	257,042 (440,178)	(2,211,265) (2,419,283) (600,554)

Source: Audited financial statements for the years ended 30 June 2008 and 30 June 2009 and reviewed financial statements for the half-year ended 31 December 2009.

4.6 Commentary Regarding Historical Balance Sheet and Historical Profit and Loss

Revenue primarily relates to NeuroDiscovery‟s subsidiary, NeuroSolutions. NeuroSolutions contracting services has grown during the 2009 financial year as it has increased its sales from $2.0M to $2.3M.

NeuroDiscovery significantly reduced research and development expenditure during the financial year 2009 due to the on-set of the global financial crisis. As a result of this global financial crisis and reduced research and development expenditures, NeuroSolutions was unable to contribute to its share of the outstanding costs of development of NSL-043 for the period January to September 2008. As a result of reduced research and development, NeuroDiscovery impaired $366,000 of intangible assets relating to NSL-043.

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4.7 Historical Balance Sheet – NeuroSolutions


	Audited Audited

	As at As at

	30 June 2009 30 June 2008

	£ £
Fixed Assets Tangible Assets Current Assets Debtors Cash at bank Total Current Assets Current Liabilities Creditors Non-Current Liabilities Creditors Provisions Total Non-current Liabilities Net Assets/ (Liabilities) Capital and Reserves Called up share capital Share premium Profit and loss account Shareholders' funds	117,668 220,911 276,285 261,070 113,953 16,475
	390,238 277,545 (188,823) (679,194) (1,297,658) (1,161,975) 0 0
	(1,297,658) (1,161,975)
	(978,575) (1,342,713) 871 871 7,950 7,950 (987,396) (1,351,534)
	(978,575) (1,342,713)

Source: Audited financial statements for the years ended 30 June 2008 and 30 June 2009.

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4.8 Historical Profit and Loss – NeuroSolutions


	Audited Audited

	for year ended for year ended

	30 June 2009 30 June 2008

	£ £
Turnover Cost of sales Gross Profit Research and development costs Administrative expenses Other operating income Operating Profit/ (Loss) Interest receivable Interest payable Profit/ (Loss) on ordinary activities before tax Tax on profit/ (loss) on ordinary activities Profit/(Loss) for the financialyear after taxation	1,053,350 925,040 (593,141) (480,643)
	460,209 444,397 225,362 1,330,399 289,021 287,328 268,654 0
	214,480 (1,173,330) 249 6,334 17,738 18,196
	196,991 (1,185,192) (152,677) (106,481)
	349,668 (1,078,711)

Source: Audited financial statements for the years ended 30 June 2008 and 30 June 2009.

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4.9 Capital Structure

The share structure of NeuroDiscovery as at 18 May 2010 is outlined below:

	Number
Total Ordinary Shares on Issue Top 20 Shareholders Top 20 Shareholders - % of shares on issue	57,486,183 35,912,602
	62.47%

Source: NeuroDiscovery’s share register as at 18 May 2010

The range of shares held in NeuroDiscovery as at 18 May 2010 is as follows:

	No. of Ordinary	No. of Ordinary	%Issued Capital
Range of Shares Held	Shareholders	Shares
1-1,000	36	7,027	0.01%
1,001-5,000	49	165,115	0.29%
5,001-10,000	57	532,290	0.93%
10,001-100,000	255	9,575,678	16.66%
100,001 – and over	74	47,206,073	82.12%
TOTAL	471	57,486,183	100%

Source: NeuroDiscovery’s share register as at 18 May 2010

The ordinary shares held by the most significant shareholders as at 18 May 2010 are detailed below:

	No of Ordinary Shares Held Percentage of Issued Shares (%)
Name
Biotech Capital Ltd The University of Warwick Dr Jonathan Mark Treherne Professor David Spanswick Dr Fei Tue Zhao Ms Margaret Livingston Dr Kevin Lee Waterloo Australia Pty Ltd Scintilla Strategic Mr Justin Hondris Total Top 10 Others Total Ordinary Shares on Issue	8,823,530 15.35% 3,469,187 6.03% 2,808,457 4.89% 2,654,995 4.62% 2,654,995 4.62% 2,375,000 4.13% 1,899,995 3.31% 1,650,000 2.87% 1,550,000 2.70% 1,326,688 2.31%
	29,212,847 50.82% 28,273,336 49.18%
	57,486,183 100%

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Source: NeuroDiscovery’s share register as at 18 May 2010

The most significant option holders of NeuroDiscovery as at 18 May 2010 are outlined below:

	Number of Options Exercise Price ($) Expiry Date
Name
Dr Jonathan Mark Treherne Mr David McAuliffe Ms Melissa Harwood Mr Anthony Rush Mr Xin Fang Mr Tony Evans Mr Andrew Whyment Mr Martyn Jones Mr Haifeng Wei Total Number of Options Cash Raised if Options Exercised	500,000 0.25 30/11/2010 500,000 0.25 30/11/2010 181,974 0.18 4/4/2012 181,974 0.18 4/4/2012 181,974 0.18 4/4/2012 150,000 0.25 30/11/2010 99,258 0.18 4/4/2012 90,987 0.18 4/4/2012 90,987 0.18 4/4/2012
	1,977,154 $436,387

Source: NeuroDiscovery’s share register as at 18 May 2010

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5. I N DUSTRY AN ALYSI S

5.1 Background

The main objective of biotechnology companies is to use science and technology on living organisms as well as components of living things, to alter living or non-living materials for the production of intellectual property and biotechnology products and services. These products and services are applied across various industries including medicine, food science and agriculture. The biotechnology industry is a relatively new industry which was previously limited due to lack of knowledge and technology.

5.2 Products and services

The majority of companies in the biotech industry research and develop products for the human health market. The table below identifies the products and services of the Australian biotechnology industry by market share:

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----- Start of picture text -----

Agri-biotech, 16%
Diagnostics, 13%
Chemical,
Environmental &
Other, 9%
Suppliers, 8%
Human
Theraputics, 49%
Food and/or
Beverages, 4%
Bioinformatics, 1%
----- End of picture text -----

Source: IBIS World

The major markets for the Australian industry‟s products are the pharmaceutical and medical manufacturing industries. Companies in these industries often require the use of organisms, processes or other technologies that have been developed by smaller biotechnology companies.

5.3 Biotechnology companies

Biotechnology companies are usually small to medium sized enterprises and tend to target a sole product line. The initial research and development activities are very capital intensive, with the majority of companies never reaching the commercialisation stage. Assuming a smaller biotech company does near commercialisation of its product, it is not uncommon for the company to licence out its product to larger companies who hold a greater standing in the marketplace.

Public health sectors as well as federal and state governments are significant purchasers of biotechnology industry products and also provide substantial funding to research and development entities in Australia.

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5.4 Industry scope

Most of the organisations operating in the industry are relatively small and therefore concentrate on one product line, although there are a few larger companies such as Commonwealth Scientific and Industrial Research Organisation, CSL Limited, Biota Holdings Limited and Sirtex Medical Limited who engage in more diverse activities and products.

Many companies in the industry spend large amounts on research and development. In the medium to long term, as the industry matures and mergers and acquisition of new market entrants occurs, industry concentration will likely increase.

5.5 Regulation and ethics

The various governmental bodies and statutes that are in place have created a highly regulated industry. As a result, and to assist in protecting the interests of industry participants, the Australian biotechnology industry organisation (AusBiotech) has been created. AusBiotech and the ASX have developed the Code of Best Practice for Reporting by Life Science Companies which aims to promote a better understanding between the industry and the market.

There are also a number of ethical and environmental issues present in the industry. For instance, cloning, stem cell research and genetically modified products have created various ethical and environmental issues which the government is dealing with through stringent regulation.

5.6 Growth drivers

The most crucial sensitivities affecting the performance and size of the biotechnology industry in Australia include the following:

5.6.1 Age

The ageing population is creating demand for more life enhancing and life extending drugs to be developed by the industry.

5.6.2 Economy

The industry relies heavily on investor confidence. A strong and stable economy assists in developing and maintaining this confidence. Ultimately, the potential of the biotechnology industry to bring products to market, may increase the availability of speculative capital used to fund new biotechnology companies and may also assist the development of more established companies.

5.6.3 Expenditure on research and development

The government provides grants and other sources of funding. As such, the structure and amount of government funding will be likely to effect the growth of the industry over the coming years.

5.6.4 Australian Securities Exchange

As with most other industries, a strong and liquid stock market will assist biotechnology companies in their capital raising endeavours.

5.6.5 Industry assistance

The Federal government supports biotechnology research and development through several major research organisations and programs. The assistance provided to the industry is significant and government funding and initiatives are heavily relied upon by industry participants.

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5.6.6 Taxation

Australian companies that undertake research and development involving innovation or technical risk may be eligible for various tax deductions on research and development expenditure. Eligibility rules for tax concessions and rebates in the industry depend on various qualifications, including amounts of expenditure and certain timing requirements.

5.7 Key Industry Participants

Name	Market Capitalisation
CSL Limited Biota Holdings Limited Sirtex Medical Limited Mesoblast Limited Chemgenex Pharmaceuticals Commonwealth Scientific and Industrial Research Organisation	$18.2 billion $366.8 million $428.3 million $300 million $274 million N/A

Source: IBIS World

CSL Limited

CSL is Australia‟s largest biotechnology company that is involved in research, development, manufacturing and marketing of products to treat and prevent serious human medical conditions.

Commonwealth Scientific and Industrial Research Organisation (“CSIRO”)

CSIRO is a government organisation and is Australia‟s largest scientific research organization and CSIRO invests approximately $100 million on biotechnology related research each year.

Biota Holdings Limited

Biota is an antiviral drug discovery company based in Melbourne, Victoria. Biota‟s first breakthrough was the discovery of zanamivir, the first neuraminidase inhibitor, subsequently marketed by GlaxoSmithKline as Relenza for the treatment of influenza.

Sirtex Medical Limited

Sirtex is a Western Australia company which is involved in research, development and commercialisation of medical products for the treatment or liver cancer. Sirtex developed “SIRSpheres” which uses micro-particle technology to treat liver cancer.

Mesoblast Limited

Mesoblast is a company that is involved in the development of adult stem cell technology for the use of orthopaedic applications. Promising results have been shown in the regeneration of bone and cartilage.

Chemgenex Pharmaceuticals Limited

Chempenex is a biotechnology medical research company that operates in Australia and the United States. Through licensing arrangements the company researches and develops, testing and treatments for human cancer and for the detection and classification of insulin-dependent diabetes, obesity and depression and anxiety.

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Other

It is estimated that this other proportion is made up of approximately 500 small companies each focusing on a single product line. Universities and non-public research bodies traditionally were the major players in the industry, however as the market gradually matures, private and public companies are moving into the industry.

5.8 Outlook

The outlook for the Bio-tech industry is looking promising especially for the smaller bio-tech companies that felt the greatest effect from the global economic crisis. As the effects from the global economic crisis fade, the ability to raise capital through equity increases as investors‟ confidence improves. This will in turn, increase the level of activity in the industry and will ultimately lead to increased research and development, new projects being undertaken and in time the commercialisation of products. Currently in Australia only a small amount of firms have products commercialised being CSL with Gardasil and Biota with Relenza. The income that is received from the sale of these products is contributing considerably to the industry‟s revenue growth prospects. However as the industry matures, a larger proportion of entities will begin to generate sales and move into the profitability stage with growth being driven by boarder range of entities. It is estimated that the revenue growth in the industry will be 3.8% per annum in the five years to 2014-15 an increase on the rate that was experienced in the last few years due to the global economic crisis. By 2014-15 is it estimated that the Australian biotech industry will achieve revenue of $1.97 billion.

Revenue (constant prices) Forecasts Revenue $ million	Growth %
2010-11 1,671.7	2.0
2011-12 1,721.9	3.0
2012-13 1,790.8	4.0
2013-14 1,880.3	5.0
2014-15 1,974.3	5.0
2015-16 2,073.0	5.0

Source: IBIS World

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6. V ALUATI ON A PPROACH A DOPTED

There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

==> picture [11 x 13] intentionally omitted <==

Net Tangible Assets on a going concern basis (“ NTA ”)
Quoted Market Price Basis (“ QMP ”)
Capitalisation of future maintainable earnings (“ FME ”)
Discounted Cash Flow (“ DCF ”)

A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information.

In our assessment of the value of NeuroSolutions we have chosen to employ the following methodologies:

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Capitalisation of future maintainable earnings (“ FME ”)
Net Tangible Assets on a going concern basis (“ NTA ”)

We have chosen these methodologies for the following reasons:

==> picture [11 x 13] intentionally omitted <==

FME has been used based on the NeuroSolutions‟ steady growth rate and mature nature of the business.
NTA has been adopted based on the nature of the assets and liabilities held by the entity.
NeuroSolutions shares are not quoted on a stock exchange therefore we can not use the QMP valuation model.
NeuroSolutions does not have reliable future cash flow or profitability forecasts. Therefore the discounted cash flow model can not be used.

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7. V ALUATI ON OF N EURO S OLUTI ON S

7.1 Future Maintainable Earnings Value

When performing an FME valuation we must determine what the future maintainable earnings of NeuroSolutions are and then determine an appropriate capitalisation multiple to apply to these earnings.

In calculating future maintainable earnings, the figure selected should represent what is currently sustainable. Any anticipated growth in earnings is accounted for via the capitalisation rate. We have reviewed the historical accounts of NeuroSolutions and for each of the three years, made adjustments to the net profit after tax for the following items:

==> picture [11 x 13] intentionally omitted <==

Non-recurring or one-off items such as profit on sale of assets;
Non-operating revenues and expenses;
Unrecorded items; and
Abnormal or non-commercial transactions.

7.1.1 Normalised Earnings

The objective of normalising earnings is to determine the underlying profitability expected to be maintained by NeuroSolutions. Our adjustments are limited to those adjustments obvious from a review of the detailed financial statements and those provided by the management of NeuroDiscovery.

Our normalisation adjustments are set out below:

NeuroSolutions	FY2010 Forecast FY 2009 Audited FY 2008 Audited

Notes	£ £ £
Net Profit/(Loss) before tax Normalisation Adjustments Add back: Q Patch loss i Add back: R&D ii Add back: Audit fee iii Add back: Wages iv Subtract: Depreciation charge V Subtract: Income vi Add back: Cost of Goods Sold vi Total Normalisation Adjustments Normalised Earnings before Interest and tax	156,915 (325,864) (1,185,192) 3,096 51,459 ~ - 479,573 1,330,399 16,000 15,972 13,603 138,000 138,000 138,000 (85,000) (85,000) (85,000) (425,828) (519,548) (540,279) 195,881 228,601 259,334
	(157,851) 309,057 1,116,057 (936) (16,807) (69,135)

In determing our assessment of the FME of NeuroSolutions we have used the historical FY 2008 and FY 2009 results profit and loss before tax. We have also considered the forecasts prepared by NeuroDiscovery for FY2010 after making adjustments for the actual Reviewed results for the 6 months to December 2009. We have also obtained the most recent Management Accounts available, being 30 April 2010, which appear consistent with the forecast.

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The following normalisation adjustments were made to the net profit before tax and interest for NeuroSolutions.

7.1.1.1 Normalisation adjustment

i All NeuroSolutions research and development costs that relate to the NSL-101 and NSL-043 activities have been eliminated. As this will not be part of the sale and NeuroDiscovery will continue to undertake these activities in the future.
ii All revenue and expenditure relating to the Q-Patch programme has been eliminated as this service line of the business has been subsequently sold. Therefore, no costs or revenue is expected to be incurred in the future.
iii Audit fees have been eliminated as that these were only required due to the parent company reporting requirements. NeuroSolutions as a standalone company is not required to undertake statutory audits unless desired by the company.
iv We have removed the wages of personnel that were employed for the purpose of carrying out activities relating to NSL-101 & NSL-043. Mr Treherne‟s wage has also been eliminated as he is the Chairman of NeuroDiscovery and will not be employed by NeuroSolutions going foward.
V It has been noted that the majority of the lab equipment that is used in the contract service business has reached it useful life and needs replacing promptly. Therefore a significant capital equipment investment will need to be undetaken. The above calculations are based on the purchase of new rigs and the respective depreciation of this new capital equipment.
vi We have eliminated the income that has been received from two of NeuroSolutions‟ largest clients for the three years selected in our normalisation adjustments above. These companies have been taken over by larger companies and as a result of these takeovers, these two companies have communicated to NeuroSolutions that there is the potential that no new contracts will be granted to NeuroSolutions for the foreseeable future. However, both companies have indicated a clear intention to return to the services of NeuroSolutions in the future, but until the integration of their respective takeovers is complete they are unable to award further contracts to NeuroSolutions. Therefore based on this information we deemed it appropriate to eliminate the gross profit earned these clients from our model.

7.1.2 Calculating Future Maintainable Earnings

In calculating future maintainable earnings, we have considered the historical levels of normalised earnings to determine an estimated future maintainable earnings position for NeuroSolutions. The purpose of this is to derive a sustainable level of profitability that we consider to be achievable in the future.

We have also considered the forecast earnings of NeuroSolutions for the year ending 30 June 2010.

In our assessment, we have determined that NeuroSolutions will not be profitable going foward and as such have determined that future maintainable earnings will be nil.

7.2 Calculation and Application of an Earnings Multiple

We selected a group of public listed companies based in the European Union considered to be comparable due to activities or exposure to a similar end user market and risks to NeuroSolutions to determine an appropriate earnings multiple to apply to the future

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maintainable earnings of NeuroSolutions. A detailed description of the comparable companies are detailed in Appendix 3. In determining an appropriate earnings multiple to apply to NeuroSolutions, the following factors were considered:

economic factors (e.g., economic growth, inflation, interest rates) affecting the market in which NeuroSolutions operates;
strategic attractions of NeuroSolutions – its particular strengths and weaknesses, market position, strength of competition and barriers to entry;
relationship with and dependence on key clients;
stability and quality of earnings;
the asset backing of the underlying business;
dependence on suppliers, customers and key personnel;
the future prospects for the operations of NeuroSolutions; and
the structural and regulatory framework; and share market conditions.

We have reviewed the resultant multiples (observable for publicly listed companies) and adjusted these for:

variations in the factors above between NeuroSolutions and the comparable companies; and
a control premium.

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The table below sets out the earnings multiples of the comparable companies within the European Union we have selected as comparable to NeuroSolutions.


Market	EBIT Multiple
Company Name Currency of origin Capitalisation ($million) Enterprise Value ($ million) Alliance Pharma PLC GBP 74.41 103.45 Vernalis PLC GBP 37.84 13.03 SkyePharma PLC GBP 8.68 115.78 Cyprotex PLC GBP 5.37 3.88 PCB SA EUR 19.70 27.57 IS Pharma PLC GBP 20.45 29.93 Cerep SA EUR 20.31 26.57 Fornix Biosciences NV EUR 36.21 1.05
	Current 2009 2008 2007
	9.18 7.13 5.52 11.54 0.41 0.87 0.49 - 7.57 8.49 12.76 - 8.45 9.43 9.46 - 4.61 4.31 2.71 5.95 9.22 7.76 14.31 - - - 19.99 19.87 0.08 1.70 1.74 6.77
Overall Average Overall Median	5.64 5.67 8.37 11.03 7.57 7.13 7.49 9.15

* Market capitalisation and enterprise value is quoted in currency of origin As at 25 May 2010 Source: Bloomberg

The EBIT multiple figures included in the table above have been calculated using the enterprise value divided by the earnings before interest and tax for the year ended 31 December 2009 or in the event that the 31 December 2009 results have not been released, the last reported period. The Enterprise value is calculated as the market capitalisation rate plus debt, minority interest and preferred shares, minus total cash and cash equivalents. The enterprise value reflects the value of a business excluding the financial gearing of the company.

We have undertaken a review of the historical EBIT muliples of the above companies for the last three financial years. We have placed a weighting on these amounts similar to the weightings that we used in the future maintable earnings calculation.

Based on this analysis we have selected an earnings multiple of between 7 and 8 for NeuroSolutions.

7.2.1 Control Premium

An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

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control over decision making and strategic direction
access to underlying cash flows;
control over dividend policies; and
access to potential tax losses.

If the proposal is successful Sevco will own 100% of NeuroSolutions.

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A market based multiple is calculated using a company‟s share price. A share price is reflective of a minority interest in a company. Therefore, we must add a premium for control to any FME valuation that is calculated using a market based multiple.

We have reviewed the control premia paid by acquirers of comparable companies on security exchanges around the world. We have summarised our findings below:

			Deal Value	Deal EBIT		Average
Transaction			(USD $	Multiple		Control
Period	Target	Acquirer	million)		Currency	Premium
10/12/2007	MGI PHARMA Inc.	Eisai Co Ltd.	3,331.99	770.48	USD	22.60%
24/09/2008	Pharmacopeia Inc.	Ligand	68.7592	~	USD	40.30%
		Pharmaceuticals Inc
27/02/2009	Arana Therapeutics	Cephalon Inc.		~
	Ltd	(Cephalon	272.925		AUD	79.00%
		International
		Holdings, Inc.)
30/01/2009	Tepnel Life Sciences	Gen-Probe Inc.	64.753	48.98	GBP	125.80%
	PLC
30/04/2009	NationsHealth Inc.	Commonwealth		0.76
		Associates Group
		Holdings LLC	3.369		USD	41.20%
		(ComVest
		NationsHealth
		Holdings LLC)
9/06/2009	Capregen PLC	Tarsus Group PLC	5.651	~	GBP	13.90%
Median of the above six transactions						40.30%
Average of the above six transactions						45.20%
Mean of the Commonwealth Associates Group Holdings LLC			and Tarsus Group	Plc Transactions		27.55%

Source: Mergerstat BVR Control Premium Study, Bloomberg

In the table above we have obtained a list of transactions that have occurred in the biotechnology and pharmaceutical industry in the last two years. The control premium has been calculated as the difference between the company‟s share price at the time of the transaction and the actual consideration amount the acquirer offered. In our analysis, we have determined the median control premium is 40.30% and average is 45.20% for the transactions selected in the above table.

We have considered that the transactions involving Tarsus Group PLC and Commonwealth Associates Group Holdings LLC to be more comparable to NeuroSolutions due to the comparable size of these transactions. As such, we have placed a greater emphasis on these two transactions when determining a control premium to be applied to the multiple determined in section 7.2.

On the basis of the above information, we have assessed an appropriate control premium to apply in valuing NeuroSolutions of between 20% to 30%.

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7.2.2 Multiple including Premium for Control

	Low EBIT	High EBIT
	Multiple	Multiple
EBIT Multiple	7	8
Premium for Control	20%	30%
EBIT Multiple including premium for control	8.4	10.4

7.3 Summary of Future Maintainable Earnings Value

We consider that an appropriate multiple to apply to the earnings of NeuroSolutions is between 7 and 8. The application of this multiple to the FME earnings determined in section 7.1 results in the enterprise value shown below:

in the enterprise value shown below:
Section	Low Value £ High Value £ ~ ~ 8.4 10.4
FME 7.1 EBIT Multiple 7.2 Enterprise Value Less Debt Less Surplus Assets and Liabilities Equity Value
	~ ~
	~ ~
	~ ~
	~ ~

Once the enterprise value has been calculated we need to deduct debt facilitates, add any surplus assets and deduct any surplus liabilities. This is because the balance sheet of a company includes all the assets and liabilities required to generate income. However, if there are surplus assets or liabilities then these can be considered additional to the FME value because they are not required to generate income and would have been excluded from the normalised future maintainable earnings.

We have considered that the balance sheet of NeuroSolutions prior to being acquired by Sevco and have assessed there will be no debt facilities or surplus assets and liabilities.

Therefore, we have assessed the FME value of a NeuroSolutions to be nil.

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7.4 Net Tangible Asset Valuation of NeuroSolutions


	As at Reviewed as at Audited as at

	30-Apr-10 31-Dec-09 30-Jun-09

Neurosolutions Balance Sheet	£ £ £
CURRENT ASSETS Cash and cash equivalents Trade and other receivables TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Tax Liabilities Payable Deferred Income Liabilities owing to NeuroDiscovery TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS	392,484 276,820 113,953 140,470 469,500 267,093
	532,954 746,320 381,046 55,810 49,993 117,668
	55,810 49,993 117,668
	588,764 796,313 498,714
	130,961 69,730 116,769 9,918 64,683 24,982 49,920 99,600 37,878 ~ 1,297,658 1,297,658
	190,799 1,531,671 1,477,287
	190,799 1,531,671 1,477,287

	397,965 (735,358) (978,573)

Based on the reviewed Financials Statements for NeuroSolutions for the period ended the 31 December 2009 there is a negative net asset position of £735,358. We have used the 30 April 2010 Management Accounts to provide the most up-to-date Net Tangible Asset Valuation of NeuroSolutions prior to the Proposal. We have gained comfort on the 30 April 2010 balances through supporting information and schedules, and agreed the bank balances, and have no reason to believe that the Balance Sheet is not fairly stated as at 30 April 2010.

The balance sheet at 30 April 2010 includes an intercompany loan balance of £1,257,061 owing to NeuroDiscovery. Part of the conditions of the Proposal is that this loan will be forgiven by NeuroDiscovery. Therefore we have made an adjustment to remove this liability of £1,257,061 from the balance sheet of NeuroSolutions. This will reduce the net asset deficiency to a net asset surplus of £397,965. We have made the following observations and assumptions being:

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The plant and equipment utilised in NeuroSolutions is highly specialised and is unlikely to recover a premium to the book valuation if these assets were disposed;
There are no identifiable intangible assets which might have value; and
There are no indicators that suggest debtors are not recoverable.

Under the net tangible asset valuation methodology assets and liabilities must be adjusted to reflect their market value. From review of the assets and liabilities stated in the 30 April 2010

BDO CORPORATE FINANCE (WA) PTY LTD 25

Management accounts, all items are stated at their market value. We have assessed the value of NeuroSolutions at £397,965 on a net tangible asset valuation basis after taking in account the adjustment for the intercompany loan to NeuroDiscovery.

7.5 Assessment of NeuroSolutions’ Value

The results of the valuations performed are summarised in the table below:

	Low	High
	£	£
Future maintainable earnings (Section 7.1)	~	~
Net tangible assets (Section 7.2)	397,965	397,965

We have assessed the value of NeuroSolutions to be £397,965.

8. V ALUATI ON OF C ON SIDERATI ON

Cash of up to £485,000 pounds is to be received as consideration for the sale of the entire share capital of NeuroSolutions comprising of and payable as follows:

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£150,000 payable in cash on completion of the Proposal;
£40,000 payable in cash six months after completion of the Proposal;
£45,000 payable on the anniversary of completion of the Proposal;
£190,000 by way of proceeds to be retained by NeuroDiscovery for procuring the sale of shareholdings of David Spanswick, Fei Yue and the University of Warwick. To the extent that the sale proceeds are not equal to or greater than £190,000, the purchase price shall be reduced and there shall be no liability to Sevco for any shortfall. It is a condition of this agreement that each of the shareholders enter into a separate arrangement with NeuroDiscovery to give effect to this clause; andadditional consideration of £60,000, payable by way of monthly installments of £4,000, which will commence at the end of month in which the General Meeting is held and continue for 15 months.

We have considered discounting the payments that are not payable immediately, however due to the immaterial variance that is expected to be calculated, BDO has not deemed it necessary.

BDO CORPORATE FINANCE (WA) PTY LTD 26

9. I S TH E PROPOSAL FAI R ?

The following table summaries our assessment of the value of NeuroSolutions compared to the value of the consideration offered by Sevco.

	Ref	Amount (Low)	Amount (High)
		£	£
Value of NeuroSolutions	7	397,965	397,965
Value of consideration offered by Sevco	8	485,000	485,000

The table above indicates that the value of NeuroSolutions is less than the value of the consideration offered by Sevco. This indicates that the proposal is fair.

BDO CORPORATE FINANCE (WA) PTY LTD 27

10. I S TH E PROPOSAL REAS ON ABLE ?

We have considered the position of Shareholders if the Proposal becomes effective and have taken into account the advantages and disadvantages of the Proposal in this assessment.

We have assessed that in all cases the advantages and disadvantages of the Proposal not becoming effective are the inverse of the Proposal becoming effective. Thus for simplicity of evaluation of the Proposal we have set out the significant factors only in the context of the Proposal becoming effective.

10.1 Advantages

Advantage		Description
10.1.1	The proposal is fair.	As set out in Section 10 the Proposal is fair. RG 111 states that an offer is
		reasonable if it is fair.
10.1.2	The company will receive a	On completion of the Proposal NeuroDiscovery will receive £485,000 for
	significant cash injection.	the sale of NeuroSolutions. The funds raised by the disposal of
		NeuroSolutions can be used to invest in new opportunities or be used to
		accelerate NeuroDiscovery‟s research and development programs.
10.1.3	The Company‟s primary	NeuroDiscovery will be purely dedicated to the development of NSL 101,
	focus will be the	with an interest in NSL-043 if commercialized by Sosei Corporation Ltd.
	development of NSL 101	There is a possibility that the market may rerate NeuroDiscovery in terms
	and NSL 043	of ASX share pricing and it may be easier to obtain equity funding for
		future research and development activities if NeuroDiscovery is purely
		dedicated to research the NSL 101 project.
10.1.4	Reduces dependencies of	Professor David Spanswick is heavily involved in the contract service
	key management personnel	business of NeuroSolutions. Without the Professor‟s involvement the
	to operate the business.	service contract business would not be able to continue, which
		represents a significant risk to the ongoing activities of NeuroSolutions.
		By selling NeuroSolutions to Professor David Spanwick‟s company, Sevco,
		NeuroDiscoverys is able to effectively mitigate this risk

10.2 Disadvantages

	Disadvantage	Description
10.2.1	Loss of control of	Based on the Proposal, Sevco is to acquire the entire share capital of
	NeuroSolutions	NeuroSolutions. Therefore, NeuroDiscovery would ultimately lose
		control of its largest revenue and generating unit.
10.2.2	Possible requirement for	NeuroSolutions‟ contracting service division generated AUD$0.8 million
	future capital raisings	of profit for NeuroDiscovery last year. By disposing of this division,
		NeuroDiscovery will not be left with any profitable divisions. As such,
		there may be a requirement for NeuroDiscovery to conduct a capital
		raisings in the near future which will dilute the interest of the current
		shareholders of NeuroDiscovery.

BDO CORPORATE FINANCE (WA) PTY LTD 28

10.3 Other Considerations

10.3.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of NeuroDiscovery a premium over the value ascribed to that resulting from the Proposal.

10.3.2 Implications of the Proposal not being approved

In the event the Proposal does not eventuate, NeuroDiscovery will continue to evaluate further corporate opportunities that are presented to Company.

The current operations o NeuroSolutions are heavily dependent on Professor David Spanwick. If the Proposal does not proceed there is a possibility that Professor David Spanwick may leave NeuroSolutions and the operations of NeuroSolutions may deteriorate without his involvement.

11. CON CLUSI ON

We have considered the terms of the Proposal as outlined in the body of this report and have concluded that the Proposal is fair and reasonable to the non-associated shareholders of NeuroDiscovery.

BDO CORPORATE FINANCE (WA) PTY LTD 29

12. SOURCES OF I N FORMATI ON

This report has been based on the following information:

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Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of NeuroDiscovery and NeuroSolutions for the years ended 30 June 2008 and 30 June 2009
Unaudited management accounts of NeuroDiscovery and NeuroSolutions for the period ended 31 December 2009
Bloomberg;
Biotechnology in Australia, IBIS World Industry Report dated 02 December 2009
Share registry information
Information in the public domain; and
Discussions with Directors and Management of NeuroDiscovery.

13. I N DEPEN DENCE

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $17,000 (excluding GST and reimbursement of out of pocket expenses). Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by NeuroDiscovery in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the NeuroDiscovery, including the non provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to NeuroDiscovery and Sevco and any of their respective associates with reference to ASIC Regulatory Guide 112 “Independence of Experts”. In BDO Corporate Finance (WA) Pty Ltd‟s opinion it is independence of NeuroDiscovery and Sevco and their respective associates.

Neither the two signatories to this report nor BDO Corporate Finance (WA) Pty Ltd have had within the past two years any professional relationship with NeuroDiscovery, or their associates, other than in connection with the preparation of this report.

A draft of this report was provided to NeuroDiscovery and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

14. Q UALI FICATI ON S

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in

BDO CORPORATE FINANCE (WA) PTY LTD 30

the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty years experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 120 public company independent expert‟s reports under the Corporations Act or ASX Listing Rules. These experts‟ reports cover a wide range of industries in Australia.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam‟s career spans 12 years in the Audit and Assurance and Corporate Finance areas.

BDO CORPORATE FINANCE (WA) PTY LTD 31

15. DI SCLAI MER S AN D CON SEN TS

This report has been prepared at the request of NeuroDiscovery for inclusion in the Explanatory Memorandum which will be sent to all NeuroDiscovery Shareholders. NeuroDiscovery engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the Proposal put forward by Sevco to acquire the entire share capital of NeuroSolutions which is a 100% owned subsidiary of NeuroDiscovery.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Explanatory Memorandum. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Explanatory Memorandum other than this report.

BDO Corporate Finance (WA) Pty Ltd has not independently verified the information and explanations supplied to us, nor has it conducted anything in the nature of an audit of NeuroDiscovery or Sevco. However, we have no reason to believe that any of the information or explanations so supplied are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company

The forecasts provided to BDO Corporate Finance (WA) Pty Ltd by NeuroDiscovery and its advisers are based upon assumptions about events and circumstances that have not yet occurred. Accordingly, BDO Corporate Finance (WA) Pty Ltd cannot provide any assurance that the forecasts will be representative of results that will actual be achieved. BDO Corporate Finance (WA) Pty Ltd disclaims any possible liability in respect of these forecasts.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

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Sherif Andrawes Director

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Adam Myers Associate Director Authorised Representative

BDO CORPORATE FINANCE (WA) PTY LTD 32

Appendix 1 – Glossary of Terms

Reference	Definition
The Act The Corporations Act ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange BDO BDO Corporate Finance (WA) Pty Ltd The Company NeuroDiscovery Limited DCF Discounted Future Cash Flows EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortisation FMD Future Maintainable Dividends FME Future Maintainable Earnings NTA Net Tangible Assets The Proposal The acquisition of NeuroSolutions Limited by Sevco Our Report This Independent Expert‟s Report prepared by BDO ROC Return of Capital Schering Plough Schering Plough UK Limited Shareholders Shareholders of NeuroDiscovery Limited not associated with the NeuroSolutions Limited Sepreacor Sepracor Inc Sosei Sosei Group Corporation The Subsidiary NeuroSolutions Limited VWAP Volume Weighted Average Price

Reference

Definition

The Act
The Corporations Act
ASIC
Australian Securities and Investments Commission
ASX
Australian Securities Exchange
BDO
BDO Corporate Finance (WA) Pty Ltd
The Company
NeuroDiscovery Limited
DCF
Discounted Future Cash Flows
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and amortisation
FMD
Future Maintainable Dividends
FME
Future Maintainable Earnings
NTA
Net Tangible Assets
The Proposal
The acquisition of NeuroSolutions Limited by Sevco
Our Report
This Independent Expert‟s Report prepared by BDO
ROC
Return of Capital
Schering Plough
Schering Plough UK Limited
Shareholders
Shareholders of NeuroDiscovery Limited not associated with the NeuroSolutions
Limited
Sepreacor
Sepracor Inc
Sosei
Sosei Group Corporation
The Subsidiary
NeuroSolutions Limited
VWAP
Volume Weighted Average Price

BDO CORPORATE FINANCE (WA) PTY LTD 33

Appendix 2 – Valuation Methodologies

Valuation methodologies

Methodologies commonly used for valuing assets and businesses are as follows:

Net tangible asset value on a going concern basis (“NTA”)

Asset based methods estimate the market value of an entity‟s securities based on the realisable value of its identifiable net assets. Asset based methods include:

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Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity‟s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity‟s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when entities are not profitable, a significant proportion of the entity‟s assets are liquid or for asset holding companies.

Quoted Market Price Basis

A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security.

Capitalisation of future maintainable earnings (“FME”)

This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

BDO CORPORATE FINANCE (WA) PTY LTD 34

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“ EBIT ”) or earnings before interest, tax, depreciation and amortisation (“ EBITDA ”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME.

Discounted future cash flows (“DCF”)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows.

BDO CORPORATE FINANCE (WA) PTY LTD 35

Appendix 3 - Synopsis of comparable companies

Set out below are companies comparable to NeuroDiscovery. We have selected these comparable companies on the basis of Western European domicile, the nature of core business as described below, and positive earnings multiples.

PCB SA distributes pharmaceutical products in Belgium. Its distribution companies are PCB dis SA, PCB Luxembourg, and PCB International. The group also has a research and development subsidiary, Therapeutica SA, and a pharmaceutical laboratory, Labo M. Visele SPRL. PCB SA supplies pharmacists, retirement homes, and hospitals in Belgium and abroad.

IS Pharma PLC is a pharmaceutical company. The Company has a portfolio of specialist hospital pharmaceutical products and operates internationally through a network of distributors. IS Pharma is currently focused in the areas of critical care, neurology and oncology.

Cerep SA screens chemicals and other substances for use in pharmaceuticals. The Company has a fully integrated technology platform providing data, data analysis, and computer-aided decision tools. Cerep offers its database and expertise, through commercial partnerships, to pharmaceutical, agrochemical and biotechnology companies.

Fornix Biosciences NV is a biomedical company that produces and sells medical appliances, diagnostic and therapeutic allergen products and microbiological products as well as patented drugs of third parties. The company further develops and sells theranostics for the diagnosis and treatment of diseases caused by bacteria and moulds, and diagnostic medical equipment.

GW Pharmaceuticals PLC researches and develops cannabinoid prescription medicines for the treatment of cancer pain, multiple sclerosis, and neuropathic pain.

Alliance Pharma PLC is an independent pharmaceutical company which aims to be the marketing partner of choice for emerging biotech and R&D companies. The Company acquires rights to establish brands and owns various pharmaceutical products.

Vernalis PLC is a bio-pharmaceutical company. The Company has marketed a product that treats immobilising episodes in patients with advanced Parkinson's disease and a product that treats migraines. Vernalis develops products for neurological and central nervous system disorders.

SkyePharma PLC operates a group of companies that research, develop, manufacture and market prescription pharmaceutical products. The Group's products are available in topical, oral, inject-able and inhalation form.

Cyprotex PLC is a drug discovery company. The Group uses experimental screening, virtual screening and discovery partnerships to identify pre-clinical drug candidates.

BDO CORPORATE FINANCE (WA) PTY LTD 36

PROXY FORM

APPOINTMENT OF PROXY NEURODISCOVERY LIMITED ACN 113 824 141

GENERAL MEETING

I/We of

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being a member of NeuroDiscovery Limited entitled to attend and vote at the General Meeting, hereby Appoint Name of proxy OR the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General Meeting to be held at 2:00pm (WST), on Thursday, 22[nd] July 2010 at Level 11, 225 St Georges Terrace, Perth, Western Australia 6000, and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of the Resolution.

OR

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN

Resolution 1 – Approval of Share Sale Agreement

Please note : If you mark the abstain box for the Resolution, you are directing your proxy not to vote on the Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

Signature of Member(s): Date: ____ Individual or Member 1 Member 2 Member 3 Sole Director/Company Secretary Director Director/Company Secretary

Contact Name: _____ Contact Ph (daytime): _________

NEURODISCOVERY LIMITED ACN 113 824 141

Instructions for Completing ‘Appointment of Proxy’ Form

1.

( Appointing a Proxy ): A member entitled to attend and vote at a General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

2.

( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

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( Individual ): Where the holding is in one name, the member must sign.

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( Joint Holding ): Where the holding is in more than one name, all of the members should sign.

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( Power of Attorney ): If you have not already provided the Power of Attorney to the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

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  - ( **Companies** ):  Where the company has a sole director who is also the sole company secretary, that person must sign.  Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone.  Otherwise, a director jointly with either another director or a company secretary must sign.  Please sign in the appropriate place to indicate the office held.

( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(a) post to NeuroDiscovery Limited, PO Box 902, WEST PERTH WA 6872; or
(b) facsimile to the Company on facsimile number +61 8 9482 0505,

so that it is received no later than 2:00pm (WST) on Tuesday, 20[th] July 2010.

AI assistant

ONCOSIL MEDICAL LTD — Proxy Solicitation & Information Statement 2010

65510_rns_2010-06-16_6322a708-6f97-4407-90bb-a8357d54666a.pdf

NEURODISCOVERY LIMITED

ACN 113 824 141

NOTICE OF GENERAL MEETING

TABLE OF CONTENTS

TIME AND PLACE OF ME ETING AND HOW TO VOT E

VENUE

YOUR VOTE IS IMPORTANT

VOTING IN PERSON

VOTING BY PROXY

Proxy Forms received later than this time will be invalid.

NOTICE OF GENERAL ME ETI NG

AGENDA

1. RESOLUTION 1 – APPROVAL OF SHARE SALE AGREEMENT

DATED: WEDNESDAY, 16 JUNE 2010

BY ORDER OF THE BOARD

EXPLANATORY STATEMEN T

1. RESOLUTION 1 – APPROVAL OF SHARE SALE AGREEMENT

1.1 General

1.2 ASX Listing Rule 10.1

GLOSSARY

FINANCIAL SERVICES GUIDE AND

Financial Services Guide

15 June 2010

Financial Services Guide

Information about us

Financial services we are licensed to provide

General Financial Product Advice

Fees, Commissions and Other Benefits that we may receive

Remuneration or other benefits received by our employees

Referrals

Complaints resolution

Internal complaints resolution process

Referral to External Dispute Resolution Scheme

Contact details

NEUODISCOVERY LTD

INDEPENDENT EXPERT’S REPORT

TABLE OF CONTENTS

15 June 2010

INDEPENDENT EXPERT'S REPORT

1. I N TRODUCTI ON

1.1 Purpose of the report

1.2 Approach

1.3 Opinion

1.4 Fairness

1.5 Reasonableness

2. S COPE OF TH E R EPORT

2.1 Purpose of the Report

2.2 Regulatory guidance

2.3 Adopted basis of evaluation

3. OUTLI N E OF TH E PROPO SAL

4. PROFI LE OF N EURO D I SCOV ERY

4.1 History

4.2 Drug Discovery and Development Pipeline

4.2.1 NSL-101

4.2.2 NSL-043

4.3 NeuroSolutions’ Specialist Service Business

4.4 Historical Balance Sheet – NeuroDiscovery Group and Parent

4.5 Historical Income Statements

4.6 Commentary Regarding Historical Balance Sheet and Historical Profit and Loss

4.7 Historical Balance Sheet – NeuroSolutions

4.8 Historical Profit and Loss – NeuroSolutions

4.9 Capital Structure

Source: NeuroDiscovery’s share register as at 18 May 2010

5. I N DUSTRY AN ALYSI S

5.1 Background

5.2 Products and services

5.3 Biotechnology companies

5.4 Industry scope

5.5 Regulation and ethics

5.6 Growth drivers

5.6.1 Age

5.6.2 Economy

5.6.3 Expenditure on research and development

5.6.4 Australian Securities Exchange

5.6.5 Industry assistance

5.6.6 Taxation

5.7 Key Industry Participants

ONCOSIL MEDICAL LTD Proxy Solicitation & Information Statement 2010