Metabolic Pharmaceuticals Pty Ltd (Metabolic)

Metabolic is seeking to derive value from the Company’s past investment of over $50 million in the pharmaceutical development of AOD9604. The peptide has proven to be safe and well tolerated in a total of 6 human clinical trials involving 925 humans.

Potential means of deriving value from AOD9604 currently being actively pursued include seeking partners and licensing interest for the use of AOD9604 in:

(i) Over the counter (OTC) products in the United States for fat reduction under a self-affirmed GRAS status.

Metabolic has recently achieved a self-affirmed GRAS (Generally Recognised As Safe) status (conditional on a journal publication of existing safety data) which allows the marketing of AOD9604 into the US market. This means that AOD9604 can be legally added to foods, drinks, nutraceuticals & dietary supplements.

The key advantages of this approach are:

• OTC products are faster and cheaper to get to market than pharmaceuticals undertaking the extensive clinical development route.

• The nutraceutical market for fat reduction, health and well being is large and growing. With success in the US market, it is planned to pursue expansion into European OTC markets via a novel food application and possibly into Australia and key Asian markets.

(ii) The treatment of bone diseases and in bone repair applications.

In February 2011, Metabolic received positive in-vitro data from Mt Sinai hospital in Toronto, Canada confirming that AOD9604 has an ability to stimulate bone formation in cell cultures utilizing human mesenchymal stem cells. Metabolic has previously received positive in-vivo results in four separate rat models of osteoporosis. Utilising these positive results together with the existing substantial human clinical safety data enables Metabolic to seek partnering interest in bone disease and repair applications. Examples might include use as a biologic, such as a bone morphogenic protein (BMP) type product, a stem cell growth factor or coatings to improve the fixation of medical devices.

(iii) The promotion of cartilage and muscle creation for repair.

AOD9604 has shown positive results in cartilage and muscle repair in in-vitro tests completed in March 2012 at the Mt. Sinai Hospital. The studies were conducted in separate cartilage and muscle cell experiments. The positive results mean that AOD9604 has the potential to promote cartilage creation for repair and may have a capacity to enhance the formation of repaired muscle. This may be particularly useful in pharmaceutical development to treat diseases such as osteoarthritis and in applications where muscle mass loss is a dominant factor. Utilising this new data together with the existing substantial human clinical safety data provides AOD9604 with the potential to proceed straight to the phase 2 human clinical development stage.

(iv) Veterinary applications.

Many of the diseases and applications identified above also have relevance to domestic pets. Two prime examples with large markets include obesity and osteoarthritis. Due to the comprehensive safety package already established, it may be possible to seek regulatory approval for the use of AOD9604 in a veterinary product after completing just one successful proof of concept trial in a domestic pet model.

The uses of AOD9604 outlined above target potential application in various conditions, trauma and injuries with $multi-million markets and where there are limited or inadequate treatment options. Metabolic is utilizing a low cost out-licensing and partnering strategy to unlock value in AOD9604 with the aim of generating substantial royalty and partnering income from one or more of these opportunities.

AOD9604 in cosmetics – first product launched by Phosphagenics (ASX:POH) in 2011.