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Initiating Coverage Report

BENITEC Silencing is golden

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Date: 28 November 2011

Name: Benitec Limited Country: Australia

Price: AUD 0.014

ISIN Code: AU000000BLT8

Reuters Code: BLT.AX

Market Cap (AUD m): 13.2

EV (AUD m): 11.0

Cash & cash eq. (AUD m): 5.6

Shares outstanding (m): 941.3

Volume: 5.1 million

Free float: 100%

52-week Range: AUD 0.014-0.045

AUD m (1 USD = AUD 0.94) 2009A 2010A 2011A

000's 000's 000's

Revenues 311 182 345 Net Loss/Profit (2,470) (4,640) (3,535) Net loss per share (cents) (0.80) (1.21) (0.68) R&D costs (1,127) (1,211) 1,280 Cash increase/(decrease) (10) (1,211) 6,018

Cash and marketable sec. 1,866 651 6,654

Chief Research Analyst

Marcel Wijma MSc

+1 (917) 460 6185 (US)

+31 (6) 1818 0596 (NL)

m.wijma@leeuwenhoeck.com

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Contents

Executive Summary .................................................................................................................................. 6

1. Australian Biotech: An overview ........................................................................................................... 7

2. Company Overview ................................................................................................................................ 9

3. RNAi Technology ................................................................................................................................ 12

4. Product Pipeline ................................................................................................................................... 18

5. Management Capabilities .................................................................................................................... 27

6. Competitive Landscape ....................................................................................................................... 30

7. Recent headlines .................................................................................................................................. 33

8. Patents Coverage ................................................................................................................................. 34

9. Swot Analysis ....................................................................................................................................... 37

10. Financials ........................................................................................................................................... 38

11. Forward Looking Statements ............................................................................................................. 39

12. Glossary ............................................................................................................................................ 540

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Executive Summary BENITEC LIMITED

§ Benitec Limited (ASX: BLT) is an Australia-based listed biotechnology company with a platform technology in the fast growing area of gene silencing. Benitec holds the dominant IP position in DNA-directed RNA interference (ddRNAi) worldwide as a platform for the development of human therapeutics. Benitec has a pipeline of in-house and partnered therapeutics based on its ddRNAi technology platform.

§ Its pipeline is focused on infectious diseases, cancer, orphan diseases and chronic pain associated with cancer, with four programs that are being developed internally. Next to these programs, the company has two programs that are out-licensed (Tacere Therapeutics, USA) or co-developed (Biomics Biotechnologies, China).

§ The company holds the predominant patent position in the use of ddRNAi for human therapeutic treatments. This technology has several advantages over the other RNAi modality, siRNA, in long term, and even permanently, silencing the targeted gene and therefore provides a possible cure for many previously untreatable diseases and conditions which are associated with the expression of that gene.

§ According to several market reports the global RNAi market is estimated to be worth USD 4 billion by 2017. Next to that, Benitec is targeting multi-billion dollar markets in infectious diseases, cancer and chronic pain. With its strong IP position, Benitec has every opportunity to profit from the strong growth in the RNAi market.

§ In a Phase I/II clinical trial in AIDS lymphoma patients, the ddRNAi technology clearly showed that the ddRNAi therapy is safe and feasible. The trial was undertaken together with the City of Hope hospital in Duarte California. The City of Hope announced earlier this year that it will initiate a second clinical trial based on the positive outcome of the first trial. This second trial will test an improved version of the treatment.

§ Benitec has funded its research and development activities through equity funding and cash inflows via partnerships. Earlier this year, the company successfully raised AUD 8 million with a rights issue. With a cash balance of AUD 7 million, the company has ample means to further develop its pipeline and to enter into value added partnerships with big pharma.

§ Certain important news expected in the next 12 months could drive the stock up. This includes progress on all programs in the preclinical stage, commencement of at least one clinical trial, partnering with or licensing of Benitec’s IP to pharmaceutical companies, further patent application success and expansion of Benitec’s intellectual property.

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1. Australian Biotech: An overview

Australia is the leading location of biotechnology companies in Asia-Pacific with almost 450 biotechnology companies and 600

medical technology companies. The majority of these companies are in human therapeutics that are supported by world-class medical

research organisations, and that have been successful in doing multi-million dollar partnerships with international big

pharmaceutical companies. Currently, there are 111 ASX-listed life science companies with 72 core biotechnology companies.

Australia is home to numerous world class medical research organizations, including the Garvan Institute, Institute for Molecular

BioScience, Menzies Research Institute, John Curtin School of Medical Research, Walter and Eliza Hall Institute of Medical

Research (WEHI), Australian Institute of Bioengineering and nanotechnology, Brain Institute, Diamentina Institute, The Lowy

Research Centre, Victor Chang Cardiac Research Institute, Baker Medical Research Institute, The Burnett Centre and South

Australian Research & Development Institute. According to E&Y’s Beyond Borders Global Biotechnology Report 2011,

Australia is showing a mixed picture. On the positive side there have been a number of successful acquisitions and signed

partnerships. Less positive is that is very hard for younger companies to gain access to capital.

A 2009 survey of listed Australian biotechnology and device companies indicated there were 63 clinical trials

underway or planned; 13 of which were Phase III and 30 Phase II.

The existing biotech business infrastructure and expertise and the burgeoning health care market in Australia

make the future of biotech very lucrative. Australia is the most attractive market for pharmaceutical investment

in the Asia-Pacific region, which is primarily due to its growing and aging population, excellent access to

medicines, and fast-recovering economy. Life expectancy in Australia is 79.2 years for males and 84.1 years for

females, which is among the highest in the world. High life expectancy amongst Australians has led to an

increase in lifestyle diseases resulting in an increase in healthcare spending.

As in 2009, the Australian sector’s financial performance was at least partly colored by exchange rate

fluctuations. The Australian dollar, which had declined by about 16% in 2009, essentially regained the ground it

had ceded in 2010. Consequently, the results of Australian public companies look much healthier when

converted into US dollars than when stated, as reported by Australian companies, in Australian dollars. The

industry’s revenues grew by 17% in US dollars, but they were essentially flat in Australian dollars. And while

Australia appears to be bucking the trend seen in other established clusters by increasing R&D spending, the

reality is that the industry’s R&D spending actually declined by 2% when measured in Australian dollars. As in

the US and Europe, the bottom line continued to improve, as the Australian sector moved more firmly into the

black, growing net income by 26% (or 6% in US dollars).

While CSL continues to dominate the Australian sector, more companies appear to be maturing and

contributing to the sector’s top- and bottom-line growth. Examples include Biota, HalcyGen Pharmaceuticals,

Acrux and Cellestis. Australia has a well-established medical device industry, a strong position in nano-

biotechnology and is internationally regarded for its expertise in stem cell research. Australian biotechnology

companies continue to develop and bring drugs to market, including:

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CSL: the cervical cancer vaccine Gardasil, marketed by Merck & Co.

Biota: the influenza drug Relenza, marketed by GlaxoSmithKline.

Sirtex Medical: the liver cancer treatment SIR-Spheres

Arana Therapeutics (now Cephalon): IP related to anti-tumor necrosis factor (TNF) drugs – Remicade,

marketed by Centocor, and Humira marketed by Abbott Laboratories.

The sector comprises a range of companies, applying biotechnology to health, industrial processing, agriculture

and environmental issues, from start-ups to more developed companies selling products in Australia and

overseas. The biotech sector has matured significantly in recent years. By the end of 2010, 72 biotech

companies were listed at the ASX. These companies had a total market capitalization of USD 21.6 billion. This

compares with a total of USD 18.7 billion at the end of 2009. CSL is Australia’s largest biotechnology

company, with a market cap of over USD 17.5 billion. This is 80% of the total market cap of all listed

Australian biotech companies. The combined market cap of the remaining 62 listed biotechs was USD 4.0

billion at the end of 2010, a tremendous gain of 165% per cent from USD 1.5 billion at the end of 2009.

Industry Developments: Good and bad

According to E&Y latest report Beyond Borders Global Biotechnology Report 2011, Australia’s biotech

investment market is a tale of good news and bad. The good news is that investors have several recent

examples of Australian companies that have successfully been acquired by, or signed partnerships with, larger

corporations — sometimes for staggering amounts. Since March, cash offers have been made for ChemGenex

by Cephalon (US$240 million) and for Celestis by Qiagen (USD 360 million). This comes on the back of a

number of significant technology-validating partnerships secured by Australian biotechs, such as Acrux’s deal

with Lilly, which has driven the Acrux market cap to close to USD 1 billion. Similarly, Mesoblast signed a

license-and-equity deal with Cephalon that has sent its market cap skyrocketing to more than USD 2.5 billion.

Waiting in the wings are other public companies that could make attractive targets — including Sunshine

Heart, Bionomics, Alchemia, CogState and QrXPharma — as well as private biotechs with products in late-

stage clinical trials positioning themselves for global exposure.

The bad news is that, even as these success stories are proving the viability of biotech investing, capital for

younger companies is close to non-existent. Furthermore, the global financial crisis has driven the largest pool

of Australian capital, retirement (superannuation) funds, away from private equity (and, indeed, away from all

but a very small number of venture funds). The funding situation in Australia, which took a turn for the worse

after the global economic downturn, has yet to return to pre-crisis levels. Australian public biotech companies

raised AUD 146 million (USD129 million) in 2010 — less than half the amount raised in 2009. While investors

are certainly investing in the health care sector, relatively less seems to be going to biotech; instead, money

appears to be primarily headed to medtech companies, which raised approximately AUD 400 million (USD 354

million) during the year, including AUD 85 million in a single IPO (Reva Medical).

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The biotech IPO market remained weak throughout the year. One IPO did get off the ground in the first

quarter, when Brisbane-based CBio raised AUD 7 million (USD 6 million). However, no other Australian

companies were able to go public during the rest of the year, indicating that the IPO window has not really

opened up.

Yearly performance of the Australian life science sector by market capitalization with major indices

16.90%

30.10%25.00%

117.60%

-0.70%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

ASX All Ordinaries(Index)

NASDAQ Composite(Index)

NASDAQ Biotech(Index)

Life Sciences (marketcap A$)

Life Sciences majors(market cap A$)

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2. Company Overview

Benitec Biopharma Limited (ASX:BLT) is an emerging Australian biotechnology company developing

innovative, biologics-based therapies. The Company’s principal activity is to develop and commercialize

therapies primarily for the treatment of infectious diseases, cancer, orphan diseases and chronic pain. Benitec

holds the dominant IP position in DNA-directed RNA interference (ddRNAi) worldwide as a platform for the

development of human therapeutics. Benitec has a pipeline of in-house and partnered therapeutics based on its

ddRNAi technology platform. The technology’s potential to address unmet medical needs and, potentially, to

cure disease results from its demonstrated ability to permanently silence genes that cause or are strongly

associated with the condition. According to several market reports, by 2017 the world RNA Interference

market will be worth USD 4 billion.

Benitec owns an extensive portfolio of products and intellectual property related to ddRNAi, The Company

was founded in 1997 and went public on the ASX in 2001.

Benitec has a growing product pipeline which includes programs in cancer associated pain, drug resistant lung

cancer, Hepatitis B, oculopharyngeal muscular dystrophy and HIV/AIDS.

Partnerships

Tacere (Pfizer)

In 2006, Benitec made a RNAi licence deal with US company Tacere. As part of this deal Benitec secured

upfront payments, milestone payments for using the ddRNAi technology in treating Hepatitis C as well as a 5%

equity stake in Tacere. Tacere Therapeutics, Inc. specialises in the development of novel therapeutics for the

treatment of serious infectious diseases such as Hepatitis C (HCV). Combining expertise in RNA interference

(RNAi), gene medicine, and novel biologicals, Tacere possesses proprietary skills in the identification and

development of RNAi therapeutics. In 2008, Tacere struck a USD 145 million deal with Pfizer to develop and

commercialize its HCV compound TT-033, using Benitec’s ddRNAi technology. Upon commercialization of

TT-033 Tacere would be entitled to receive royalties on net sales by Pfizer.

Biomics (China)

In the field of Hepatitis B, Benitec is collaborating with China based Biomics Biotechnologies, successfully

identifying the genetic target and validating the ddRNAi based gene silencing therapeutic approach . Biomics

was founded by Dr. York Zhu and, since its foundation in 2006, Biomics has grown to be a leading Asian

RNAi therapeutics company with combined technology platforms of full-sites siRNA library, drug targets

screening and identification, siRNA structure modification and drug delivery systems.

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Next to these two large partnerships, Benitec is several other relationships in place with organizations like:

• Revivicor Inc, USA

• Sigma Aldrich

• Artemis Pharmaceuticals

• Promega

• Ambion

• Carnegie Institute

• Alnylam

• Children’s Cancer Institute Australia

• City of Hope, California, USA

• Amsterdam Molecular Therapeutics

• Royal Holloway University of London

• Institut de Myologie, Paris

Business Strategy

Benitec’s strategy is to demonstrate the power of the ddRNAi approach to treat and potentially cure serious

human medical conditions by developing a portfolio of ddRNAi-based therapeutics for infectious disease,

cancer, orphan diseases and cancer-associated pain. Benitec strives to achieve value creation from its

intellectual property (IP) while minimising risk by developing therapeutics to the point of proof of efficacy in

phase II trials. Benitec intends to form either partnerships with large pharmaceutical and/or biotechnology

companies from early-stage development or for the completion of clinical development. Next to that, Benitec

licences its proprietary technology to reagent suppliers like Sigma Aldrich, Millipor, Promega and Pfizer as well

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as other biotech companies like Origene and Integrated DNA Technologies. Especially after the positive

decision of the US Patent and Trademark Office to reissue the US Graham patent, Benitec’s strategy is aimed

at expanding the number of partnerships and licences with its technology.

For applications in non-core areas, Benitec is out licensing its technology. Currently, the company has

outlicensed two programs in organ transplantation and infectious disease. Other programs to be outlicensed are

in discussion. These programs bring in revenues from upfront and milestone payments. For HCV it has

outlicensed its technology to Tacere (see partnerships above). Revivicor is using Benitec’s technology in

xenograft organ transplant.

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3. RNAi Technology

History and background

RNA interference (RNAi) is a natural mechanism for silencing specific genes present in all multicellular

organisms. Genes provide cells with the instructions for making proteins, and proteins — or more specifically

defective proteins — are the cause of a large number of human disease. When a gene is silenced, the cell stops

making the protein encoded by that gene, thereby reducing the occurrence of the associated disease. What later

became understood as RNAi was first observed in plants in 1990, but the first crucial breakthrough in

understanding the RNAi mechanism came from studies of worms. This came in 1998 with the recognition that

long double-stranded RNA (dsRNA) could induce specific gene silencing. Induction of RNAi using dsRNA

quickly became a powerful tool for scientists to study the function of genes in many lower organisms, including

worms and fruit flies. However, this approach initially seemed unworkable in mammalian cells, because of the

tendency of dsRNA to provoke an immune response and cause cell suicide. Such cell suicide makes biological

sense in the true, real-life situation where dsRNA is encountered — namely viral infection — because it

prevents replication and spread of the virus to neighboring cells. For a time, however, it was a major obstacle

to experimental induction of RNAi in mammalian cells. This obstacle was overcome by using relatively small

dsRNAs — long enough to induce RNAi, but small enough to avoid inducing an immune response. Smaller

dsRNAs, known as "small interfering RNAs" (siRNAs), bind to messenger RNAs (mRNAs) and silence the

disease causing gene. These discoveries opened the door for application of RNAi as a new therapeutic strategy.

Petunias and worms

Fire and Mello’s new method of gene silencing was able to explain the

anomalous results obtained from an earlier set of experiments on

petunia pigmentation. In 1990, Dr. Richard Jorgensen and colleagues

attempted to produce a petunia with a deeper color by inserting the

gene for purple pigment into its genome under the control of a stronger

promoter. Instead of turning dark purple, the new petunias were either

entirely white or streaked purple and white. Jorgensen surmised that the

additional copy of the gene suppressed both itself and its endogenous

counterpart, an event he called co-suppression. Fire and Mello’s

findings several years later explained that the inserted gene produced RNA that interfered with gene expression

in a similar manner to what occurred in the C. elegans study. Scientists who described gene silencing in other

plants and fungi were able to show that silencing occurred after the gene had already been transcribed.

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In another paper, also published in 1998, Fire determined that dsRNA targets complementary mRNA by base-

pairing to it and that regulation occurs because the targeted mRNA is degraded before translation. Soon other

researchers observed the same phenomenon in fruit flies, trypanosomes, plants, planaria, hydra and zebrafish,

and the focus turned to identifying this process in mammalian cells. Previous attempts with long dsRNA

caused nonspecific gene regulation. A significant clue to inducing specific gene regulation emerged during the

characterization of the RNAi biochemical machinery in fruit flies. Scientists discovered an enzyme that cleaved

dsRNA into strands 22 nucleotides (nt) long. With this new data in mind, researchers introduced smaller

dsRNA into mammalian cells. This time, the smaller dsRNA molecules specifically interfered with expression

of the targeted gene.

For their work in discovering RNAi and its role in gene silencing, Fire and Mello were awarded the 2006 Nobel

Prize in Physiology or Medicine.

The first evidence that dsRNA could lead to gene silencing

came from work in the nematode Caenorhabditis elegans.

Several years ago, researchers Guo and Kemphues were

attempting to use antisense RNA to shut down expression of

the par-1 gene in order to assess its function. As expected,

injection of the antisense RNA disrupted expression of par-1,

but quizzically, injection of the sense-strand control did too.

This result was a puzzle until three years later. It was then that

Fire and Mello first injected dsRNA — a mixture of both sense

and antisense strands — into C. elegans. This injection resulted

in much more efficient silencing than injection of either the

sense or the antisense strands alone. Indeed, injection of just a few molecules of dsRNA per cell was sufficient

to completely silence the homologous gene's expression. Furthermore, injection of dsRNA into the gut of the

worm caused gene silencing not only throughout the worm, but also in its first generation offspring.

The potency of RNAi inspired Fire and Timmons to try feeding nematodes bacteria that had been engineered

to express dsRNA homologous to the C. elegans unc-22 gene. Surprisingly, these worms developed an unc-22

null-like phenotype. Further work showed that soaking worms in dsRNA was also able to induce silencing.

These strategies, whereby large numbers of nematodes are exposed to dsRNA, have enabled large-scale screens

to select for RNAi-defective C. elegans mutants and have led to large numbers of gene knockout studies within

this organism.

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Current Models of the RNAi Mechanism

Both biochemical and genetic approaches have led to the current models of the RNAi mechanism. In these

models, RNAi includes both initiation and effector steps. In the initiation step, input dsRNA is digested into

21-23 nucleotide small interfering RNAs (siRNAs), which have also been called "guide RNAs". Evidence

indicates that siRNAs are produced when the enzyme Dicer, a member of the RNase III family of dsRNA-

specific ribonucleases, processively cleaves dsRNA (introduced directly or via a transgene or virus) in an ATP-

dependent, processive manner. Successive cleavage events degrade the RNA to 19-21 bp duplexes (siRNAs),

each with 2-nucleotide 3' overhangs. In the effector step, the siRNA duplexes bind to a nuclease complex to

form what is known as the RNA-induced silencing complex, or RISC. An ATP-depending unwinding of the

siRNA duplex is required for activation of the RISC. The active RISC then targets the homologous transcript

by base pairing interactions and cleaves the mRNA ~12 nucleotides from the 3' terminus of the siRNA (3, 18,

27, 29). Although the mechanism of cleavage is at this date unclear, research indicates that each RISC contains

a single siRNA and an RNase that appears to be distinct from Dicer.

Because of the remarkable potency of RNAi in some organisms, an amplification step within the RNAi

pathway has also been proposed. Amplification could occur by copying of the input dsRNAs, which would

generate more siRNAs, or by replication of the siRNAs themselves. Alternatively or in addition, amplification

could be effected by multiple turnover events of the RISC.

siRNA versus ddRNAi

DNA-directed RNAi or ddRNAi is used to produce a dsRNA inside the cell. By introducing a DNA construct

into a cell, Benitec's ddRNAi technology triggers the production of double stranded RNA (dsRNA), which is

then cleaved into small interfering RNA (siRNA) by Dicer, a specific type of RNAse III, as part of the RNAi

process. This results in the destruction of the target mRNA and knocks down or silences the expression of the

target gene.

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ddRNAi process

• A DNA construct is inserted into a cell, where it enters the nucleus and continually expresses a form

of double stranded RNA (dsRNA) known as short hairpin RNA (shRNA).

• The shRNA then enters the cytoplasm where it is rapidly cleaved into siRNA by the enzyme Dicer, a

specific type of RNAse III, as part of the natural RNAi process.

• The expressed siRNA, which has been designed to have a specific sequence that corresponds to part

of the target gene to be silenced, enters the cellular RNAi pathway where it becomes associated with

the enzyme complex known as RISC.

• RISC then causes separation of the double stranded siRNi molecule into two single strands. After one

of the single RNA strands (known as antisense) binds to the target RNA, the RISC complex cleaves

the target mRNA. This results in silencing, also known as "knock down", of the target gene

responsible for the disease or condition.

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Advantages of ddRNAi over synthetic siRNA are:

1. ddRNAi approach, does not activate the cell's interferon (stress) response. The interferon response is a

natural cellular defense mechanism that responds to double-stranded RNA, as in a virus, by shutting down

many normal functions and inducing cell apoptosis.

2. ddRNAi produces effective gene silencing with a lower dose than synthetic siRNA because the endogenous

dsRNA production is catalytic. siRNA requires higher and repeated doses to approach the same levels that are

produced within the cell from the introduced ddRNAi construct.

3. ddRNAi provides the ability to control the silencing effect so that it either knocks down or completely

silences the target gene. Control can also be exerted to make the silencing effect transient or permanent. siRNA

technologies under development are only capable of transient silencing and are to an extent dependent on how

much can enter a cell.

4. ddRNAi can be used with a range of efficient delivery options not available to the siRNA approach,

providing additional versatility for therapeutics development. ddRNAi can deliver the construct as a plasmid in

liposomes, in cationic vectors, in viral vectors and in stem cells.

5. siRNA is more expensive to produce because of modifications required to produce stable RNA and much

more material is required to be synthesised to achieve an equivalent dose to that achievable with ddRNAi. The

cost of ddRNAi plasmids is minimal.

6. ddRNAi plasmid constructs can be designed to simultaneously express a number of different siRNA

sequences, allowing the targeting of multiple regions within a gene to enhance knock-down effects and reduce

chances of developing mutation-related resistance, as well as simultaneously targeting multiple genes allowing

for tackling of complex genetic disorders.

These qualities also make ddRNAi well suited to high throughput functional genomics and target validation,

and provide added versatility when developing RNAi targets for drug development. Potential applications of

ddRNAi are:

• Accelerated drug delivery because ddRNAi that validates the target becomes the therapeutic agent.

• Creation of transgenic animals to validate the target. With minimal modifications, the same gene

construct can be converted into a therapeutic agent that blocks the gene's expression in humans.

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• ddRNAi can be developed for the treatment of cancer in combination with chemotherapy. Benitec is

pursuing this approach in its lung cancer program.

Viral infections are also important potential targets for RNAi-based therapies. Reducing the activity of key viral

genes can cripple the virus, and numerous studies have already hinted at the promise of RNAi for treating viral

infections. In laboratory-grown human cells, investigators have stopped the growth of HIV, polio, hepatitis C,

Ebola and other viruses using this approach.

The strength of RNAi as a research tool will also have an enormous potential impact on medicine. Knocking

down a gene’s activity yields a wealth of information about its functions in cellular pathways. Prior to the

discovery of RNAi, the process was laborious and could take months.

Pfizer’s 2009 deal with Tacere Therapeutics Inc. serves as a significant endorsement for Benitec’s ddRNAi

technology. The deal terms entail USD 143 million in upfront and milestone payments. Tacere has strong pre-

clinical data demonstrating efficacy and safety of Benitec’s technology to treat and potentially cure hepatitis C.

This program is close to moving into a clinical trial.

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4. Product Pipeline Benitec has a product pipeline in house and partnered therapeutics based on its proprietary transformational

technology, DNA-directed RNA interference (ddRNAi) for chronic and life-threatening conditions. Benitec

has four development programs underway and expects to enter clinical trials within 2 years. Successful results

from any program could lead to a partnership deal with a major pharma company.

Source: Company filings – Annual report 2010

Cancer associated pain

The chronic pain population is one of the most pressing healthcare issues in the world. Estimates for the size

of the market range from 50-100M persons in the U.S. alone. Chronic pain is an extremely common affliction

from migraine headaches, to fibromyalgia to terminally ill cancer patients. The pharmaceutical market for

powerful, sustained-release painkillers for patients trying to manage chronic pain is estimated at USD 2.3 billion

annually. Of the 500,000 Americans who die of cancer annually, nearly 200,000 suffer horrible pain with no

desirable alternatives. Chronic pain disables more people than cancer or heart disease and costs the American

public more than both diseases combined—estimated at upwards of USD 40 billion in medical expenses

annually. Cancer is a common cause of chronic pain. Pain occurs in 30% of all cancer patients regardless of

stage of disease, and in 90% of patients in advanced stages of cancer. Not only do these patients experience

persistent pain, but it has been reported that about 65% of cancer patients experience breakthrough pain as

well. The breakthrough pain is both frequent and intense. According to a survey of cancer patients by Harris

Interactive, 71% of patients experienced breakthrough pain at least weekly, and 53% reported a pain intensity

rating of 8, 9, or 10 (0 = no pain; 10 = worst pain imaginable). Breakthrough pain has a negative impact on

many spheres of cancer patient's lives.

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Drugs are the mainstay of pain management and drug treatment for pain represents a tremendous growth area.

In 2009, the market totaled USD 20 billion in the U.S. and $34 billion worldwide. The worldwide market is

expected to grow to USD 41 billion by 2012. In 2009, analgesics plus anti-arthritics were the most widely

prescribed medications in the U.S. in 2009, with a combined total of over 278 million prescriptions (Source

IMS Health).

Opioid analgesics accounted for approximately USD 8.5 billion of the USD 20 billion U.S. pain market in 2009.

We believe that this strong market growth is supported by the increased use of branded opioid formulations in

novel delivery forms (such as sustained release or extended release opioids) that greatly improve pain

management. Further growth also is resulting from their use for treating chronic pain.

We believe that additional market growth is supported by:

a highly concentrated prescriber base

a demographic shift towards a more elderly population with chronic diseases

more aggressive pain management

Benitec is devising a novel approach to the amelioration of chronic pain, by designing ddRNAi therapeutics

that target a specific spinal enzyme that has been implicated in contributing significantly to the development of

central sensitization-mediated pain (neuropathic pain). The aim of the chronic pain program is to develop a

single intrathecal injection of a ddRNAi construct which results in significant silencing of the spinal enzyme

gene (PKCγ) to provide pain relief equivalent to that achievable by infusion of opioids. While initially the target

clinical group is terminally ill cancer patients, this could be extended to any group of patients suffering chronic

or neuropathic pain as a result of a terminal illness, including HIV/AIDS.

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Furthermore, recent studies have indicated that the silencing of this spinal PKCγ gene also reduces morphine

tolerance resulting from chronic administration. The development of tolerance to opioid analgesics remains a

major hurdle in the clinical treatment of pain, which can currently only be addressed through administration of

higher doses or rotation of different opioid derivatives, increasing the risk and severity of a large number of

potential side effects. The therapeutic applications of the ddRNAi construct Benitec is developing can

therefore be vastly expanded to the treatment of any condition where opioid tolerance is a factor.

After the current proof of concept studies have been completed, the plan is to then conduct preclinical safety

and biodistribution studies, leading to a Phase I/II clinical trial. For this purpose, Benitec is working together

with researchers at the University of Queensland to gather sufficient data for such a trial. In June this year,

Benitec announced that China based researchers have proved the concept. Using a form of Benitec's gene

silencing technology in a rat model, the researchers silenced PKCγ and achieved a significant reduction in pain

without any apparent adverse side effects.

Source: Benitec

HIV/AIDS

The development and use of double and triple drug combinations for the treatment of HIV infection has led to

dramatic improvements in the lives of HIV-infected individuals. But despite the apparent successes of the new

anti-retroviral drugs there are the emerging problems of drug-resistant viral variants and toxicities of the

combination drugs now in use. Therefore, there is still great interest in exploring new antiviral therapeutic

approaches. HIV was the first infectious agent targeted by RNAi, perhaps because the lifecycle and pattern of

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gene expression of HIV is well understood. Synthetic siRNAs and expressed shRNAs have been used to target

several early and late HIV-encoded RNAs in cell lines and in primary haematopoietic cells. Despite the success

of RNAi-mediated inhibition of HIV-encoded RNAs in cell culture, targeting the virus directly represents a

substantial challenge for clinical applications because the high viral mutation rate will lead to mutants that can

escape being targeted. Therefore RNAi mediated down-regulation of the cellular cofactors required for HIV

infection is an attractive alternative or complementary approach.

The delivery of siRNAs or shRNAs to HIV-infected cells is also a challenge. The target cells are primarily T

lymphocytes, monocytes and macrophages. As synthetic siRNAs do not persist for long periods in cells, they

would have to be delivered repeatedly for years to effectively treat the infection. Systemic delivery of siRNAs to

T lymphocytes is probably not feasible owing to the immense number of these cells. Using viral vectors to

deliver anti-HIV-encoding shRNA genes is also problematic, and systemic delivery is not yet practicable

because the immunogenicity of the vectors themselves precludes performing multiple injections. Therefore the

preferred method is to isolate T cells from patients; these T cells are then transduced, expanded and reinfused

into the same patients. In a continuing clinical trial, T lymphocytes from HIV-infected individuals are

transduced ex vivo with a lentiviral vector that encodes an anti-HIV antisense RNA. The transduced cells are

subsequently expanded and reinfused into patients. This type of therapeutic approach would also be applicable

to use ddRNAi vector constructs that encode siRNAs. A different approach is to transduce isolated

haematopoietic progenitor or stem cells with vectors harbouring the therapeutic ddRNAi constructs. These

cells give rise to all the haematopoietic cells capable of being infected by the virus, rendering them immune to

potential future infection. Haematopoietic stem cells are mobilized from the patient and transduced ex vivo

before reinfusion (see graph below). Two clinical trials in which retroviral vectors expressing ribozymes were

transduced into haematopoietic stem cells have demonstrated the feasibility of this approach.

22 | P a g e

Together with the City of Hope Hospital in California, Benitec initiated the first Phase I/II trial of ddRNAi in

lymphoma patients carrying the HIV virus. Patients undergoing a bone marrow transplant for their lymphoma

also received a transfusion of their own blood stem cells that had been transfected with a ddRNAi construct

which expressed a shRNA to knock down a key HIV gene, as well as two other RNA therapeutics in a triple

vector. After two years, the City of Hope researchers concluded that the trial clearly showed that the ddRNAi

therapy was safe and feasible, with the anti-HIV shRNA continuing to be expressed for at least 3 years

following a single treatment, and no adverse effects were seen. The City of Hope announced earlier this year

that it will initiate a second clinical trial based on the positive outcome of the first trial. This second trial will

test an improved version of the treatment. Benitec is exploring options to partner this program so that the

potential of ddRNAi-modified hematopoietic stem cells to treat and ultimately cure HIV/AIDS can be

realized.

Drug resistant lung cancer

Many studies have used siRNAs as an experimental tool to dissect the cellular pathways that lead to

uncontrolled cell proliferation and to cancer. Moreover, RNAi has been proposed as a potential treatment for

cancer. The potential for using RNAi to treat metastatic cancers will of course depend on finding good cellular

targets.

Together with the Children’s Cancer Institute Australia at the University of New South Wales, Benitec intends

to develop a ddRNAi-based therapy against chemotherapy resistance in human non-small cell lung cancer

(NSCLC) cells. The target gene for silencing is beta III tubulin, and Benitec and CCIA scientists have designed

and tested a powerful ddRNAi molecule that significantly knocks down beta III tubulin in human lung cancer

cells. Beta III tubulin is a gene whose high expression is associated with chemotherapy drug resistance in a

range of tumor types, including lung, ovarian, breast and gastric cancers. Benitec is currently working on testing

the ddRNAi molecule in a preclinical model of human lung cancer, as part of the process required for human

clinical trials. Benitec believes that this approach will have the potential to substantially increase the efficacy of

current chemotherapy for lung cancer patients resulting in extension of life and/or decrease in toxicity-related

adverse side effects of current chemotherapy. The Company will continue to develop this with the UNSW

researchers, in particular Professor Maria Kavallaris. The researchers have demonstrated that silencing beta lll-

tubulin in NSCLC using ddRNAi significantly increases the killing of the cancer by chemotherapy drugs. The

scientific team has already published data evidencing the effectiveness of this approach in vitro and in vivo in

the June 2010 edition of Cancer Research. The next stage of the program is focusing on optimizing and

delivering a ddRNAi construct to silence beta III tubulin in human lung cancer cells in an orthotopic model of

human lung cancer in vivo, with the aim of significantly increasing the cancer cells’ susceptibility to being killed

by anti-cancer drugs. Success in this stage will provide support for a Phase I/II trial.

23 | P a g e

Hepatitis B and C Hepatitis induced by the hepatitis B virus (HBV) and by the hepatitis C virus (HCV) is a major health problem.

At present hundreds of millions of individuals are infected worldwide. There is an effective vaccine against

HBV, but this treatment is only useful for the prevention of viral infection and there is no vaccine for HCV.

Therefore, hepatitis caused by these two viruses is an important target for potential RNAi therapy. The first

demonstration of RNAi efficacy against a virus in vivo involved hydrodynamic co-delivery of an HBV replicon

and an expression unit encoding an anti-HBV shRNA in mice. This study demonstrated that a significant

knockdown (99%) of the HBV core antigen in liver hepatocytes could be achieved by the shRNA, providing an

important proof of principle for future antiviral applications of RNAi in the liver.

HCV now infects an estimated 3% of the world’s population, and is a major cause of chronic liver disease,

which can lead to liver cirrhosis and hepatocellular carcinoma. The market for the next generation of hepatitis

C therapies is potentially worth $20 billion by 2020, according to a recent estimate by William Blair & Co..

More advanced studies have been carried out for RNAi therapies against HCV. The HCV genome is a positive-

strand RNA molecule with a single open reading frame encoding a polyprotein that is processed post-

translationally to produce at least ten proteins. The only therapy currently available is a combination of

interferon and ribavirin, but response to this therapy is often poor, particularly with certain HCV subtypes, and

often leads to the development of drug resistant viral strains due to the genomic mutations under the selective

pressure of therapy.

As with HIV therapeutics, delivery of the siRNAs or shRNA vectors is the main challenge for successful

treatment of HCV. The method of delivery used in several in vivo studies — hydrodynamic intravenous

injection — is not feasible for the treatment of human hepatitis. Benitec’s licensee, Tacere Therapeutics, in

conjunction with Pfizer, have developed a multicassette ddRNAi construct which the y have shown can be

delivered with very high efficiency in the absence of averse effects, using the adeno-associated virus type 8

vector.

Together with its partner Biomics Biotechnology, Benitec is undertaking a program to develop a novel

treatment for hepatitis B, which is planned to be delivered also utilising the experience of Tacere with AAV8.

Both companies have identified more than 100 effective RNAi candidates that can silence the hepatitis B virus

and has selected the five most promising of them for further evaluation and development using ddRNAi

constructs. These constructs will be tested in pre-clinical models of hepatitis B, and ultimately in a China-based

clinical trial of hepatitis B virus-infected patients.

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Source: Benitec

Oculopharyngeal muscular dystrophy Benitec has recently entered the field of orphan disease therapeutics by starting a program to develop a cure to

oculopharyngeal muscular dystrophy (OMPD). OPMD is a rare form of a degenerative muscle disorder, caused

by an autosomal dominant inherited genetic mutation and is a slow progressing, late onset condition, usually

asymptomatic before the fifth or sixth decade of life. The disease is characterised by drooping of the eyelids

(ptosis), swallowing difficulties (dysphagia) and proximal limb weakness due to a decrease in the number of

muscle fibers, variation in size and muscle tissue fibrosis, but affected individuals show normal intellectual,

behavioral, bowel and sexual functions.

OPMD is a form of muscular dystrophy in which symptoms usually first appear between the 30s and 60s, and

primarily involve the muscles of the upper eyelids and the swallowing muscles. As these muscles weaken,

patients have difficulty keeping their eyes open and find that food and liquids are increasingly hard to swallow.

As OPMD progresses, it can weaken the muscles of the limbs, particularly the legs. The disease is more

common in French Canadians, Jews of Central Asian descent (Bukharan Jews), and Hispanics living in New

Mexico, than it is in the general population. The underlying defect is a mutation in a gene on chromosome 14,

identified in 1998. The protein made from this gene is called polyadenylate binding protein 1, or PABPN1.

Because of the genetic defect in OPMD, the protein is slightly longer than normal, containing extra molecules

of the amino acid alanine. The cellular and molecular effects of this lengthening of the PABPN1 protein are the

subject of ongoing investigations. One effect is that clumps form in the nucleus of OPMD-affected muscle

cells. OPMD is dominantly inherited, meaning just one mutated PABPN1 gene, passed from one parent to a

child, is sufficient to cause disease symptoms.

25 | P a g e

DNA testing for OPMD has been available for several years. Without DNA testing, it’s usually not possible to

detect whether or not a person has inherited the OPMD gene defect until he or she reaches middle age.

Presently, no cure or effective medical treatment is available for OPMD. The most common treatment is a

symptomatic surgical intervention to correct ptosis and improve swallowing in severely affected individuals.

However, this does not treat the progressive degradation of the muscular tissue and shows only limited long-

term effectiveness. The condition has a severe impact on the quality of life of patients and often leads to an

untimely death due to swallowing difficulties and chocking as a result of the deterioration of the pharyngeal

muscles.

Oculopharyngeal muscular dystrophy is the result of an abnormal expansion of a trinucleotide repeat in the

coding region of the poly(A) binding protein nuclear 1 gene (PABN1). The genetic mutation is small, well

characterised, located on a relatively small gene and expressed in a limited number of cells, making it a good

candidate to a ddRNAi gene silencing approach. Benitec has entered a collaboration with the Institut de

Myologie, France and the Royal Holloway University of London to explore a number of options in different

approaches to ddRNAi construct development and in vivo delivery options.

26 | P a g e

Source: Benitec

Stem cell based ddRNAi delivery.

The potential application areas of ddRNAi based therapeutics are both numerous and diverse. However, one of

the major remaining challenges is the development of clinical applications is the efficient and targeted in vivo

delivery of ddRNAi vector constructs or siRNA derivatives to specific cells and tissues. Current delivery

vehicles are often based on viral vectors of which the safety and efficacy has been extensively demonstrated but

a number factors limit the efficiency of these vehicles, including the selectivity of transfected cell lines, a

patients natural resistance to the viral family on which the construct is based or development of such resistance

on repeated administration of the therapeutic compounds. Benitec is looking to overcome these delivery

hurdles though the use of stem cells. Stem cells are undifferentiated cells that can replicate themselves without

differentiating, and under specific conditions can differentiate into various specialized cell types. Stem cell

possess a number of interesting characteristics, most notably; (I) they are able to home to sites of chronic

inflammation and cancer tissue thus delivering ddRNAi-based therapeutics selectively to these tissues, (II) they

are able to both supply siRNA to neighboring cells and differentiate in a large number of cell lines, giving way

to large number of therapeutic approaches and (III) they are immune privileged cells, avoiding many problems

associated with an immunological response and allowing for the development of both autologous and

allogeneic stem cell based therapies. The combination of stem cell technology and Benitec’s ddRNAi platform

creates the opportunity to develop new therapeutic applications to a vast range of pathological conditions

including infectious diseases, cancer and genetic disorders. Benitec is actively exploring different options to

extend its patent portfolio towards stem cell based ddRNAi delivery through collaboration with or acquisition

of dedicated stem cell companies.

27 | P a g e

5. Management Capabilities Benitec has been investing in developing a team of experts that have a focus on patient outcomes and can

deliver results. Its board and senior management team are highly experienced in the development and early

stage commercialisation of new therapeutics. Unusually for a company of its size it also has a very highly

regarded group of Chief Investigators assisting in development

Management Team

Peter French, Chief Executive Officer

Peter French, Ph.D, is a cell and molecular biologist who has been extensively involved in both basic and

clinical medical research and commercialisation of biological intellectual property. His research areas of

expertise include cell biology, immunology, infectious disease (including HIV/AIDS), neurobiology and

oncology. Over the past 10 years, Peter has been extensively involved in leadership roles in Australia's

biotechnology industry, including founding the stem cell storage company Cryosite Ltd, a listed public

company, and in 2004 launched six new probiotic-based products in pharmacies Australia-wide with

Probiomics. Peter is a Past President of the Australia and New Zealand Society for Cell and Developmental

Biology and represented Australia's biological scientists on the Board of FASTS, Australia's peak government

lobbying organisation for science and technology. He is currently on the Board of the International Society of

Differentiation. He joined Benitec Ltd as CSO in August 2009 and was appointed CEO in June 2010.

Greg West, Chief Financial Officer

Greg West is a Chartered Accountant and over recent years has worked on ASX listing start-ups. He is a

Director and audit committee Chairman of ITC Limited (a business arm of Wollongong University), IDP

Education Pty Ltd, Education Australia Limited, and Sydney International Film School Pty Limited. Greg

completed his studies with Price Waterhouse and worked in senior finance executive roles in investment

banking with Bankers Trust, Bain & Company (now Deutsche Bank), NZI, and was CFO at the largest

Australian credit union. Greg was formally appointed to the position of Company Secretary in May 2011 and

CFO in August 2011.

Benitec’s Management is assisted by its ‘Chief Investigators Group’, which brings together a number of

internationally renowned scientists in the field of RNAi who are actively working with Benitec to progress its

in-house pipeline and to review the progress of the company’s R&D programs. Peter French is the chairman of

the CIG. Other members are:

28 | P a g e

Michael Graham

Dr Graham’s research interests are in the field of molecular genetics, with a particular focus on the applications

of RNAi in biotechnology. He commenced the development of Benitec’s ddRNAi technology while working in

plant biotechnology at CSIRO and continued this work at QDPI and Benitec, focusing on medical

applications; the core Benitec patent portfolio was developed at this time. Following Benitec’s restructure Dr

Graham moved to the University of Queensland where he continues to work on developing applications of

RNAi in plant biotechnology in an industry collaborative program.

Ken Reed

Dr Reed was the scientific founder of Benitec, whose gene silencing technology came from research conducted

at the Queensland Agricultural Biotechnology Centre (QABC) and CSIRO. Dr Reed was the founding director

of QABC and previously a co-founder of Advanced Breeding Technology Pty Ltd, the first company to

commercialise the use of PCR. He was Deputy Chair of the inaugural Australian Biotechnology Advisory

Council and served for many years on the Australian Government's Genetic Manipulation Advisory Committee

and the Board of the Australian Genome Research Facility. Dr Reed is a Fellow of the Academy of

Technological Sciences and Engineering.

John J Rossi

Professor Rossi is the Lidow family Professor and Chair of the Division of Molecular Biology, Beckman

Research Institute of the City of Hope, and Dean, Graduate School of Biological Sciences, Beckman Research

Institute of the City of Hope, Duarte, Califormia. Dr. Rossi received his doctoral training in genetics at the

University of Connecticut in Storrs and postdoctoral training in molecular genetics at Brown University. His

research has focused on RNA biology and clinical applications of small RNAs. He has published over 200 peer

reviewed articles and numerous reviews and commentaries on RNAi based therapeutics.

York Zhu

Dr. York Zhu, the founder of both Biomics and NT Omics Inc., has 20 years R&D and business experience.

He started his industrial R&D career at Clontech Labs (1993) as an R&D Manager following several years as an

academic in Memorial Foundation in Nagoya, Japan (1987-1989). In 2000, Dr. Zhu worked as Chief

Technology Officer in Genemed R&D headquarters for 4 years, where he was an inventor in several patents

and led the R&D team to develop a gene drug discovery technology platform. Then as Vice President and

Chief Scientist of Zytogene (a spin-off of Genemed) he managed R&D operations to successfully develop over

200 new products for Zymed, which brought the company to a high market value and was acquired by

Invitrogen. In 2005, Dr, Zhu founded NT Omics, and invented Entire siRNA targets (EsT) library technology

which filled the gap in this field. In 2006 Dr. Zhu established Biomics in Nantong, China, where he now serves

as CEO and Chairman. The company is a leading player in RNAi in China.

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Maria Kavallaris

Professor Maria Kavallaris is Head of the Pharmacoproteomics Program at the Children’s Cancer Institute

Australia, and holds a conjoint academic appointment in the Faculty of Medicine, University of New South

Wales. Her research contributions are internationally regarded and include identifying the mechanisms of action

and resistance to anticancer drugs that target cell division; discovering new cytoskeleton interactions in cancer;

and the development of less toxic cancer therapies using nanotechnology. Her program's research

contributions include the identification of novel mechanisms of resistance to anticancer agents that target key

proteins involved in cell division in childhood cancer.

George Dickson

Professor George Dickson is the Director of the Institute of Biomedical and Life Science at the Royal

Holloway, University London. He is a member of a number of influential bodies in the area of gene therapy,

including the European Medicines Agency Committee for Advanced Therapies; the British Society of Gene

Therapy and the European Society of Gene and Cell Therapy. His research includes studying the

pathophysiology and treatment of the muscular dystrophies, atherosclerosis and hyperlipidaemia, and

neurodegenerative disease. Professor Dickson heads Benitec’s OPMD program, along with Dr Capucine

Trollet, at the Institut de Myologie in Paris.

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6. Competitive Landscape Peer Group Company Profile Alnylam Inc. (NASDAQ: ALNM)

Alnylam Pharmaceuticals, founded in 2002, focuses on a wide array of human diseases and is developing

technology that can specifically and potently silence disease-causing genes. Alnylam has unique access to the

critical IP in the field of RNAi therapeutics and is expanding its portfolio by developing and patenting methods

for the delivery of RNAi-based therapeutics in a wide variety of diseases. Alnylam is developing Systemic RNAi

therapeutics, drugs that travel through the bloodstream to reach diseased parts of the body to treat a broad

range of diseases, including cancer, metabolic and autoimmune diseases. The company has three partnered

programs in development: RSV infection in Phase II ([partnered with Cubist), Liver cancer in Phase I

(partnered with Tekmira and Huntington’s Disease (partnered with Medtronics). By 2015, the company expects

to have five RNAi therapeutic programs in advanced clinical development. These include ALN-TTR (for the

treatment of transthyretin-mediated amyloidosis (ATTR), ALN-PCS for the treatment of hypercholesterolemia,

ALN-HPN for the treatment of refractory anemia, and two additional programs that will be named and

advanced into development later in 2011.

Marina Biotech (NASDAQ: MRNA)

Marina Biotech is a biotechnology company, focused on the development and commercialization of

oligonucleotide-based therapeutics utilizing multiple mechanisms of action including RNA interference (RNAi)

and messenger RNA translational blocking. The Marina Biotech pipeline currently includes a clinical program

in Familial Adenomatous Polyposis (a precancerous syndrome) and two preclinical programs -- in bladder

cancer and malignant ascites. Marina Biotech entered into an exclusive agreement with Debiopharm Group for

the development and commercialization of the bladder cancer program. Marina Biotech's goal is to improve

human health through the development of RNAi- and oligonucleotide-based compounds and drug delivery

technologies that together provide superior therapeutic options for patients.

Tekmira (NASDAQ: TKMR)

Tekmira Pharmaceuticals Corporation is a biopharmaceutical company focused on advancing novel RNAi

therapeutics and providing its leading lipid nanoparticle delivery technology to pharmaceutical partners.

Tekmira has been working in the field of nucleic acid delivery for over a decade and has broad intellectual

property covering LNPs. In addition to delivery platform research and development, Tekmira is advancing

three internal RNA interference (RNAi) product candidates: TKM-PLK1, TKM-Ebola and TKM-ApoB.

TKM-PLK1 is being developed as a novel anti-tumour drug in the treatment of cancer. It uses its LNP delivery

system for siRNA to treat cancer. Once at the target site, LNPs are taken up by tumor cells and the siRNA

payload is delivered inside the cell where it reduces expression of the target protein. TKM-Ebola is being

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developed as a novel anti-viral drug in the treatment of Ebola infection. In July 2010, Tekmira was awarded up

to a US $140 million contract from the United States Government's Transformational Medical Technologies

(TMT) Program to advance TKM-Ebola. TKM-ApoB is being developed for the treatment of

hypercholesterolemia, or elevated cholesterol, a condition associated with increased risk of atherosclerosis, a

build-up of cholesterol and fat in artery walls that underlies many cardiovascular diseases, such as angina,

myocardial infarction, congestive heart failure, stroke, transient ischemic attacks or peripheral artery disease.

Silence Therapeutics (LSE: SLN)

Silence Therapeutics plc (AIM: SLN) is a biotechnology company aimed at the discovery, development and

delivery of targeted, systemic RNA interference (RNAi) therapeutics for the treatment of serious diseases.

Silence has a comprehensive short interfering RNA (siRNA) therapeutic platform based on a strong intellectual

property portfolio and large clinical safety database. The Company possesses multiple proprietary siRNA

delivery technology platforms including AtuPLEX™, DACC and DBTC. AtuPLEX enables the broad

functional delivery of siRNA molecules to targeted diseased tissues and cells, while increasing their

bioavailability and intracellular uptake. The DACC delivery system allows functional delivery of siRNA

molecules selectively to the lung endothelium with a long duration of target mRNA and protein knock-down.

The DBTC delivery system enables functional delivery of siRNA molecules selectively to liver cells including

hepatocytes. Additionally, the Company has a platform of novel siRNA molecules based around its AtuRNAi

chemical modification technology, which provides a number of advantages over conventional siRNA

molecules. Silence’s unique RNAi assets also include structural features for RNAi molecules and specific design

rules for increased potency and reduced off-target effects of siRNA sequences.

The Company’s lead internal drug candidate is Atu027, a liposomal formulation in clinical development for

systemic cancer indications. Atu027 incorporates two of the Company’s technologies, AtuRNAi and

AtuPLEX™. Silence is currently conducting an open-label, single-centre, dose-escalation Phase I study with

Atu027 in patients with advanced solid tumors involving single, as well as repeated, intravenous administration.

Interim safety and pharmacokinetic data were presented at the American Society of Clinical Oncology Annual

Meeting in June 2011. The study is expected to be completed in the first half of 2012.

Calando

Calando is a clinical stage nanobiotechnology company at the forefront of RNAi therapeutics. The company

develops nanoparticle therapeutics that use its patented sugar (cyclodextrin)-based polymer technologies as a

drug delivery system for siRNA. Calando is a majority-owned subsidiary of Arrowhead Research Corporation

(NASDAQ: ARWR), is a biopharmaceuticals company using proprietary technologies developed at Caltech to

create targeted siRNA-based therapeutics and small molecule nanoparticle drug conjugates. Calando is focused

on the clinical development of RONDEL™, its siRNA delivery technology, and CALAA-01, the associated

drug candidate. Interim clinical results show that CALAA-01 is well tolerated and has demonstrated preliminary

proof of RNAi activity in patients treated with the highest doses. These results represent several notable "firsts"

32 | P a g e

in the field of RNAi, including first to demonstrate definitive RNAi delivery after systemic administration and

first to show dose dependent accumulation in target cells. In addition, CALAA-01 has been shown to mediate

specific gene inhibition in humans as evidenced by mRNA knockdown and protein knockdown in tumor

biopsies.

Quark Pharmaceuticals

Quark Pharmaceuticals, Inc., is a clinical-stage pharmaceutical company engaged in discovering and developing

novel RNAi interference or RNAi-based therapeutics. The Company has a fully integrated drug development

platform that spans therapeutic target identification based on its proprietary gene discovery science and

technology, to clinical drug development. The Company has initially been focusing on RNAi-based

therapeutics for the treatment of diseases associated with oxidative stress and ischemic injury. Quark has three

product candidates in clinical development in five different indications of which four are in Phase II. PF-655

(formerly REDD14NP and RTP801i) is a synthetic siRNA designed to inhibit the expression of Quark’s

proprietary target, RTP801. PF-655 is licensed to Pfizer on an exclusive worldwide basis. PF-655 was well

tolerated in a Phase I/IIa study completed by Quark on Pfizer’s behalf in patients with wet AMD and is

currently being evaluated in Phase II studies for DME and wet AMD.

QPI-1002 is being developed by Quark for the prevention of Acute Kidney Injury (AKI) following major

cardiovascular surgery, and for the prophylaxis of Delayed Graft Function (DGF) following deceased donor

renal transplantation. Phase I studies in both of these patient populations have been completed and an

independent Data Safety Monitoring Board (DSMB) recommended that clinical development of QPI-1002 in

both indications continue to the next phase of development. Phase II clinical studies have been initiated. In

August 2010 Quark granted to Novartis an option for a worldwide exclusive license to QPI-1002 for all

indications.

QPI-1007 is a synthetic siRNA designed to temporarily inhibit expression of the pro-apoptotic protein,

Caspase 2. QPI-1007 utilizes a novel siRNA structure developed by Quark that preserves activity while

attenuating off-target and immunostimulatory effects. QPI-1007 is being developed as a neuroprotectant for

the treatment of non-arteritic ischemic optic neuropathy (NAION) and potentially other optic neuropathies

such as glaucoma that result in the death of retinal ganglion cells (RGCs). Quark is conducting a Phase I dose-

escalation safety study using QPI-1007 in patients suffering from Optic Nerve Atrophy and NAION.

.

33 | P a g e

7. Recent headlines November 18, 2011: Chief Investigators Report on progress with therapeutic programs

November 17, 2011: Benitec reports on significant progress made across all therapeutic programs

October 31, 2011 : New Europe-based collaboration to develop a novel therapeutic for life threatening muscular dystrophy

October 28, 2011 : Benitec’s lead pain program to also target morphine tolerance

October 24, 2011 : Additional Benitec gene silencing patents granted and allowed in Europe and the US

October 6, 2011 : Hepatitis programs boosted by grant and notice of allowance of further ddRNAi patents

September 27, 2011: Benitec presents at the Australian Showcase: Amsterdam 2011 and at BioPartnering Europe

September 19, 2011: Pain Program Receives Clinical Endorsement and Moves Towards the Clinic

August 8, 2011 : IP Position Strengthened with Allowance of Gene Silencing Graham Family Patent in US

July 27, 2011 : Patent granted in Graham Family in the US

June 20, 2011 : Pain Program Validated by Independent Study

May 31, 2011 : Gene Silencing Technology Used by John Hopkins Scientists in the Development of a

Treatment for Radio Resistant Prostate Cancer

May 25, 2011 : RNAi Patent Granted in Japan, Further Expansion of the IP for the HCV Program

May 17, 2011 : Benitec Raises AUD 8 million to Forge Ahead with its Pipeline

May 4, 2011 : Significantly Strengthening of IP Position by more patents granted in US and Europe

March 29, 2011 : Benitec Technology Used by University of Queensland to Develop Treatment for

Cervical Cancer

March 21, 2011 : Second US Clinical Study Announced Using the ddRNAi Technology

February 22, 2011 : HBV RNAi Program Moves to Next Stage

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8. Patent Coverage Benitec's core patents and patent rights are based on this early research and are supported by subsequent filings

that extend the scope and jurisdiction of its intellectual property. Benitec's patent estate represents a dominant

position in DNA-directed gene silencing, and potentially the dominant position in RNAi applications for

humans and mammals. Benitec has over 60 filed patents and has licensed several additional patents that extend

the scope of its patent estate and enhance the utility and value of ddRNAi. Benitec's main patented technology

is DNA-directed RNA interference (ddRNAi), whereby transiently transfected or stably integrated DNA

constructs are transcribed to form double-stranded RNA that induces gene silencing. The issued claims cover

the design of such DNA constructs, whether they are inverted repeats coding for hairpin RNA or sense and

antisense sequences under the control of separate promoters and regardless of the means of delivery.

A major distraction for Benitec resulted from litigation initiated by the Company against Nucleonics in defense

of its Graham family of patents. While Benitec ultimately prevailed, the Company was forced to defend its

patents in re-examinations in all major jurisdictions. Following the conclusion of this litigation in the mid-

2000s, Benitec's patents were re-examined and re-issued in all major jurisdictions except Europe and the US. A

pivotal breakthrough for the company's IP portfolio came in September 2010 when the US Patent Office's

Board of Appeal reversed all previous objections and in effect re-issued Benitec's US patent. This was followed

by the issuance of the Re-Examination Certificate in March 2011, which is the final formal step in reinstating

the patent.

Benitec currently has more than 40 granted or allowed patents globally, including the key jurisdictions of the

US, the UK, Japan, Europe, India, Canada and Australia. There are nearly 50 more patents pending. Benitec

has the dominant patent position for the use of ddRNAi-based gene silencing for humans.

Granted patents exclusively licensed from CSIRO

Patent Country Description

US 6,573,099 US • Synthetic genes for modifying endogenous gene expression in a cell, tissue or organ of a transgenic organism, in particular a transgenic animal or plant. More particularly, the invention provides novel synthetic genes and genetic constructs which are capable of repressing delaying or otherwise reducing the expression of an endogenous gene or a target gene in an organism when introduced thereto.

35 | P a g e

US 7,754,697

US 7,855,071

US 8,067,383

US 8,048670

US 8,053,419

US

US

• A method of modifying gene expression and to synthetic genes for modifying endogenous gene expression in a cell, tissue or organ of a transgenic organism, in particular a transgenic animal or plant. More particularly, the present invention utilises recombinant DNA technology to post-transcriptionally modify or modulate the expression of a target gene in a cell, tissue, organ or whole organism, thereby producing novel phenotypes. Novel synthetic genes and genetic constructs which are capable or repressing delaying or otherwise reducing the expression of an endogenous gene or a target gene in an organism when introduced thereto are also provided.

743316

2005202658

2005211538

2005209648

2008249157

2323726

295108

GB2353282

1035742

3413/DELNP/2005

3901/DELNP/2005

2000/00169/DE

2000-537990

2005-223953

2007-302237

506648

547283

75542

200205122.5

141233

287538

2000/4507

AUS

AUS

AUS

AUS

AUS

Canada

Czech Rep

UK

HK

India

India

India

Japan

Japan

Japan

NZ

NZ

Singapore

Singapore

Singapore

Slovenia

S. Africa

• A method of modifying gene expression and to synthetic genes for modifying endogenous gene expression in a cell, tissue or organ of a transgenic organism, in particular a transgenic animal or plant. More particularly, the invention utilises recombinant DNA technology post-transcriptionally modify or modulate the expression of a target gene in a cell, tissue, organ or whole organism, thereby producing novel phenotypes. Novel synthetic genes and genetic constructs which are capable or repressing delaying or otherwise reducing the expression of an endogenous gene or a target gene in an organism when introduced thereto are also provided.

29514/99 Australia Methods for reducing the phenotypic expression of a nucleic acid of interest in eukaryote cells by providing aberrant RNA molecules, preferably unpolyadenylated RNA molecules comprising at least one target specific nucleotide sequence homologous to the nucleic acid of interest, preferably a sense strand, into the nucleus of the cells.

29514/99

ZL99805925.0

99910592.7

507093

Australia

China

Europe

New Zealand

Methods for reducing the phenotypic expression of a nucleic acid of interest in eukaryote cells by providing aberrant RNA molecules, preferably unpolyadenylated RNA molecules comprising at least one target specific nucleotide sequence homologous to the nucleic acid of interest, preferably a sense strand, into the nucleus of plant cells.

36 | P a g e

Benitec-owned Granted Patents

Patent Country Description

550284

200522084

1725660

2007-502094

7727970

NZ

Australia

Europe

Japan

US

A genetic construct comprising a multi-promoter expression cassette comprising at least three promoter/RNAi/terminator components wherein each promoter/RNAi/terminator component comprises a promoter element, a terminator element and an RNAi species operably linked to the promoter element and the terminator element, and wherein each of the RNAi species is different from one another.

GB2377221

91678

2002/07428

UK

Singapore

S. Africa

A method of inducing, promoting or otherwise facilitating a change in the phenotype of an animal cell or group of animal cells including an animal. The modulation of phenotypic expression is accomplished via genotypic manipulation by inducing, promoting or otherwise facilitating the silencing of expressible genetic sequences thus reducing translation of transcript to protein. Expressible genetic sequences contemplated by the invention include not only genes normally resident in a particular cell (i.e. indigenous genes) but also genes introduced through recombinant means or through infection by pathogenic agents such as viruses.

2004243347

543815

2005/09813

200507474-5

Australia

NZ

S. Africa

Singapore

A ribonucleic acid (RNA) for use as interfering RNA in gene silencing techniques to silence a target gene comprising in a 5’ to 3’ direction at least four sequences being a first and second effector sequence 17 to 21 nucleotides in length; a sequence substantially complementary to the second effector sequence; and a sequence substantially complementary to the first effector sequence; wherein the complementary sequences are capable of forming double stranded regions with their respective effector sequences and wherein at least one of the four sequences is substantially identical to the predicted transcript of a region of the target gene; and the RNA further comprising a spacing sequence of one or more nucleotides, the spacing sequence being located between and spacing the first effector sequence and the second effector sequence, or between the sequence substantially complementary to the second effector sequence and the sequence substantially complementary to the first effector sequence.

7,803,611

2006210443

560936

US

Australia

NZ

Compositions and methods suitable for expressing 1-x RNAi agents against a gene or genes in cells, tissues or organs of interest in vitro and in vivo so as to treat diseases or disorders.

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9. SWOT Analysis

Strengths

Dominant patent position in ddRNAi

No direct competitors in ddRNAi

Strong management and human therapy development expertise

Weakness

Operating losses accumulating year-on-year

Most of the products are still at the initial development phase

Field of RNAi is still in early stages of development

Opportunities

Partnerships and license agreement with large pharmaceuticals and early stage bio-tech companies.

Transition from conservative business model to drug developer allows for potential significant valuation re-

rating

Potential markets for RNAi and gene silencing for therapeutic use is enormous

Expansion of patent position through new program results, new target identification and acquisition and cell

therapy delivery opportunity

Threats

Uncertainty of the outcome of Benitec’s research results

Uncertainty about the outcome of clinical trial of the products

Higher level of expenditure than budgeted

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10. Financials For the year ended 30 June 2011, Benitec reported a net loss of AUD 3.5 million compared to a net loss of

AUD 4.6 million in the previous year. Operating revenue amounted to AUD 342,545, up from AUD 181,417.

The rise was due to an unexpected dividend received from Tacere Therapeutics, a US company in which

Benitec has a small interest. Expenses were AUD 3.2 million, up from AUD 2.8 million. Net loss decreased by

30 percent to AUD 3.5 million, with the increase in research & development costs and higher employment and

other costs. The Company has a sound financial position with substantial cash reserves of AUD 6.6 million as

at 1 July 2011.

Financial Summary

AUD $ millions June FY2011 June FY2010 %

Income Statement

Gross Revenue 0.3 0.2 50.0%

Research & Development -1.3 -1.2 8.3%

Employment costs -1.1 -0.9 22.2%

Other costs -0.8 -0.7 14.3%

Settlements -0.7 -2 -65.0%

Net Income (Loss) -3.5 -4.6 -23.9%

Earnings per share (loss) -0.68 -1.21 -43.8%

Balance Sheet

Cash & Cash Equivalents 6.7 0.7 857.1%

Current Assets 0.2 0.4 -50.0%

Current Liabilities 1.2 1 20.0%

Long-term Debts - -

Shareholders’ Equity 86.8 77.5 12.0%

Accumulated losses -84.4 -80.9 4.3%

Cash Flow

Cash from:

Operating Activities -3.3 -2.4 37.5%

Investing Activities 0.2 0.1 100.0%

Financing Activities 9.2 1.1 736.4%

Source: Company filings

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11. Forward Looking Statements Benitec key events for the next 12-24 months include:

Ø completion POC in a preclinical model of pain in vivo

Ø Toxicology studies in chronic pain program

Ø Progress to Phase I trial in chronic pain program

Ø Toxicology studies in NSCLC program

Ø Start Phase I/II clinical trial

Ø Preclinical testing using in vitro and in vivo models of chronic HBV disease

Ø Expand licenses in areas of research use, reagents and human therapeutics

Ø Secure new partnerships in disease areas beyond core focus

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12. Glossary

Clinical Trial: Rigorously controlled test of a drug candidate or a new invasive medical device on humans.

DNA : Deoxyribonucleic acid (DNA) is a nucleic acid that contains the genetic instructions used in the development and functioning of all known living organisms with the exception of some viruses. The main role of DNA molecules is the long-term storage of information

FDA: Food and Drug Administration based in Rockville, Maryland, US, responsible for the drug approval process in the US.

HIV : a virus that attacks white blood cells in the blood, reducing the bodys ability to fight off illness. HIV causes AIDS and can be transmitted through unprotected sex, by drug users who use similar equipment and from an infected mother to her unborn child.

In vitro: In glass or plastic vessels rather than in living systems.

In vivo: In living systems.

Lentivirus: Represents a class of animal and human viruses. Human Immunodeficiency Virus (HIV), the virus that causes AIDS, is a type of lentivirus.

Lymphocytes: A form of small leukocyte (white blood cell) with a single round nucleus, occurring esp. in the lymphatic system

Monocytes: Monocyte is a type of white blood cell, part of the human body's immune system. Monocytes have several roles in the immune system and this includes: (1) replenish resident macrophages and dendritic cells under normal states, and (2) in response to inflammation signals, monocytes can move quickly

Macrophages: Large white blood cells that engulf and digest antigens.

Pharmacokinetics: The study of the bodily absorption, distribution, metabolism, and excretion of drugs.

Phase I clinical trial: Clinical trial to test a new biomedical intervention in a small group of people for the first time to evaluate safety (e.g., to determine a safe dosage range and to identify side effects).

Phase II clinical trial: Clinical trial to study a new biomedical intervention in a larger group of people to determine efficacy and to further evaluate its safety.

Pre-Clinical Trial: Laboratory test of a new drug candidate or a new invasive medical device on animals or cell cultures that is conducted to gather evidence justifying a clinical trial.

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Protein: Molecule consisting of a chain of amino acids. Each protein has unique biological functions.

RNAi : RNA interference (RNAi) is a system within living cells that helps to control which genes are active and how active they are. Two types of small RNA molecules – microRNA (miRNA) and small interfering RNA (siRNA) – are central to RNA interference

Ribonuclease: Ribonuclease (commonly abbreviated RNase) is a type of nuclease that catalyzes the degradation of RNA into smaller components.

siRNA: Small interfering RNA (siRNA), sometimes known as short interfering RNA or silencing RNA, is a class of double-stranded RNA molecules, 20-25 nucleotides in length, that play a variety of roles in biology.

Viral vector: Viral vectors are a tool commonly used by molecular biologists to deliver genetic material into cells. This process can be performed inside a living organism (in vivo) or in cell culture (in vitro). Viruses have evolved specialized molecular mechanisms to efficiently transport their genomes inside the cells they infect

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Analyst: Marcel Wijma MSc Marcel Wijma, Chief Research Officer and managing partner, has a longstanding history in financial biotech research. After selling Van Leeuwenhoeck Research (VLR) to SNS Securities in 2006, he established an award winning analyst team in biotech/life sciences at SNS Securities. In 2009, Marcel was awarded by Financial Times/Starmine as being one of the Top-3 biotech analysts in Europe. Later that year, Marcel purchased VLR from SNS Securities after which the company was reconstituted. At VLR, he leads the professional VLR research organisation, which is augmented by selected external financial researchers with a specialisation in Life Sciences. Mr. Wijma has a Masters degree in Financial Economics from Erasmus University in Rotterdam.

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