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Annual Report 2007

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3 Chairman’s Report

6 R&D Report

10 Corporate Governance Statement

14 Avexa Board

16 Executive Committee

18 Concise Financial Report

19 Directors’ Report

25 Remuneration Report

35 Lead Auditor’s Independence Declaration

36 Discussion and Analysis of the Concise Financial Report

37 Income Statement

38 Statement of Changes in Equity

39 Balance Sheet

40 Statement of Cash Flows

41 Notes to the Financial Statements

44 Directors’ Declaration

45 Independent Audit Report

46 Shareholder Information

Contents

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HIV is a very serious global issue and theregular interaction of all those involved in the development of treatments and managing the problem in the field is vitally important in attacking this scourge.

Avexa Limited – Annual Report 2007 1

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In March 2007, Avexa reached a major milestone with the release of initial results detailing the success of Phase IIb trials of apricitabine. This marked a critical point in the development of this new HIV treatment as it heads towards commercialisation.

Avexa Limited – Annual Report 20072

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Dear Shareholders

I am once again very pleased to be ableto report to you about Avexa’s progressand achievements. I think shareholderscan be well pleased with the Company’sprogress and the value that has been created by our management team, led by Dr Julian Chick, over the three yearssince Avexa was established.

In March 2007, Avexa reached a majormilestone with the release of initial resultsdetailing the success of Phase IIb trials of apricitabine. This marked a critical point in the development of this new HIV treatment as it heads towards commercialisation. Prospects of successare further enhanced by the recentlyreported and extremely encouraging 24week data from the same Phase llb trial.

In an innovative strategic approach not common in Australia, in early 2005 we in-licensed from Shire BioChem, a wholly owned subsidiary of ShirePharmaceuticals Group PLC, the drug that has since become known as apricitabine (ATC). By in-licensing ATC we cut many years off the high riskearly stages of development to focus on managing and directing of the key clinicaltrial work. During the year under review,Avexa’s long term position was furthersecured when we acquired the marketingrights to North America, which to thatpoint had been still held by Shire.

Avexa has developed considerable knowledge and expertise in the HIV fieldover the past few years due to its work

with apricitabine and the early stage integrase project, which continues toprogress. Building on these capabilities,Avexa during the year expanded its development pipeline of novel therapeutictreatments that address multiple HIV targets by concluding a licensing and collaboration agreement with TargetDrugof Shanghai for a CCR5 HIV drug program.

The Company’s efforts and capabilities inthe HIV field were further recognised withthe award of an Australian GovernmentCommercial Ready Grant for $4.3 millionto develop, with the CSIRO, a new generation of HIV antiviral drugs.

As you would be no doubt well aware,HIV is a very serious global issue and the regular interaction of all those involvedin the development of treatments andmanaging the problem in the field is vitally important in attacking this scourge,especially in sub-Sahara Africa. Accordingly,members of the Avexa team are regularand enthusiastic participants in conferencesthat explore and discuss ways to fight this disease. Some of the conferencesparticipated in during 2006-07 includedthe Eighth International Congress on DrugTherapy in HIV Infection held in Glasgowand the European CEO Summit onBusiness and AIDS. In July of this year we also attended the fourth IASConference on HIV Pathogenesis,Treatment and Prevention (IAS 2007) in Sydney.

The Company’s current strategies are focussed on moving apricitabinetowards commercialisation as well as

building on the pipeline of relatively earlystage development projects, especially in the HIV field.

Earlier this year, the Company raised $79 million through a placement to institutions and an over-subscribed rightsissue to shareholders. The level of supportwe received is testament to the confidenceyou have in our management team andthe strategies that are being pursued tocreate value. These funds will go a longway towards funding Phase III trials of apricitabine.

Preparations for Phase III trials of apricitabine are gathering pace and the trials are due to commence towards theend of the year. Although the results of the Phase III trials are not due for sometime, we will continue to obtain data onthe performance of ATC in those patients who have completed the Phase IIb andhave entered the extension phase of the study.

Once again the Directors thank shareholders for their support and we all look forward to another excitingyear and to positive news flow from our projects.

Yours sincerely

Dr Hugh NiallChairman


Chairman’s Report

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Currently there are over 40 million peopleworldwide infected with HIV*. Approximatelyfour million more are infected each year,and with no vaccine available in the foreseeable future, ‘antiretroviral medicines’are the only way to manage this disease.* World Health Organization (WHO).


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Apricitabine

Apricitabine (ATC) is Avexa’s exciting new antiretroviral nucleoside analogue for thetreatment of HIV-infected patients that arefailing current therapies and are harbouringdrug-resistant HIV infections. It is a cytidineanalogue that is a potent inhibitor of theHIV reverse transcriptase (RT) and acts by selective chain termination of viral DNAreplication. ATC is active against all cladesof HIV tested, including strains with resistance mutations such as the 3TC-and FTC-resistance mutation (M184V),thymidine analogue mutations (TAMs) and other nucleoside analogue mutations(NAMs). It has been demonstrated to havea very low potential for drug-drug interactionissues meaning it has the potential to beco-administered with most marketed HIVtherapies and can be taken with or withoutfood. Furthermore ATC has been demonstrated in vitro to have a very low toxicity profile (including mitochondrialtoxicity and myelotoxicity, two key toxicitiesassociated with some other HIV drugs)and there are no significant hepaticmetabolism, glucuronidation or P450interactions. This has been further supported by clinical data where no ATC-related SAEs have been reported.Therefore the evidence to date suggeststhat ATC has the activity and safety profilefor a new HIV therapy to make it anattractive addition to the current HIV treatment regime.

Over the last year considerable progresshas been made in driving ATC towardsPhase III clinical trials and commercialisation,with two additional Phase I trials havingbeen completed and the Phase IIb trialsuccessfully achieving and exceeding itsprimary endpoints.

The first of the two Phase I trials determinedwhether tipranavir (an HIV protease inhibitormarketed by Boehringer-Ingelheim)adversely interacted with ATC. Tipranaviris a new protease inhibitor which is knownto affect the levels of some other HIV drugs,causing difficulties in administering thosedrugs together with tipranavir. Facile co-dosing of ATC with tipranavir without

such difficulties would provide an advantage for ATC and has the potentialto expand clinicians’ HIV armamentarium.The Phase I study showed that ATC could readily be dosed successfully withtipranavir without adverse interactions.There are other protease inhibitors similarto tipranavir, with similar effects, and thus these positive results also supportco-dosing of ATC with other proteaseinhibitors, expanding the ability of ATC to be advantageously combined withdrugs from this class.

The second Phase I trial completed thisyear determined that ATC had no effecton cardiac function in human volunteers.The FDA expects that all prospective antiretroviral candidates in late stagedevelopment undergo cardiac safety studies. This Phase I trial demonstratedonce again the superb safety profile ofATC with no adverse cardiac effects being demonstrated in the study evenwith doses well above those used in the current Phase IIb trial.

The most important and exciting results of the year came from the Phase IIb trial of ATC, with the clear demonstration ofclinical activity of this drug in patients who were failing their current therapy due to drug resistance. The pre-definedprimary trial endpoints of the Phase IIbtrial were not only met successfully, butwere exceeded by a significant margin.ATC demonstrated significant clinicalactivity against a wide range of drug-resistant HIV, including HIV strains harbouring the lamivudine resistancemutation (M184V). In addition, ATC wasactive against virus which has both theM184V mutation and other drug-resistancemutations known as TAMS, which giveresistance to AZT and some other drugs.

No mutations that conferred resistance to ATC were observed in patients treatedover the clinical trial period reported. This indicates that the high genetic barrier(or slow rate at which resistance to ATCdevelops) seen during in vitro studies ismaintained in the clinical setting. The

safety of ATC in this Phase IIb trial wasextremely good. The adverse effect profiledemonstrated that ATC was very well tolerated with very few side effects notedin the trial. In fact there were no drug-relatedwithdrawals from the trial or drug-relatedserious adverse events (SAEs) in the functional monotherapy segment of the Phase IIb. Overall there were feweradverse effects (AE’s) in either ATC armthan in the 3TC control group over thesame period. These results were recentlypresented at the International AIDSSociety meeting in Sydney by Dr PedroCahn, President of the International AIDSSociety. A copy of this presentation can be obtained on the Avexa website.

More recently data from the 24 week segment of the Phase IIb trial wasannounced. In over 80 per cent ofpatients treated with ATC, the level of HIVin the blood was reduced to undetectableafter 24 weeks. Evidence of a reversal indecline in CD4 cell numbers (an essentialimmune cell targeted by HIV) to an increasein CD4 cell numbers in the ATC treatedpatients was also seen. No ATC resistantvirus was detected and the safety profilecontinues to be outstandingly good. Infact 23 patients out of an eligible 24 haveentered the ATC extension study. The factthat such a high percentage of patientscontinue to enter the extension study indicates clearly to Avexa that thesepatients and their clinicians believe thatATC is providing meaningful therapeuticbenefit in their treatment of the HIV disease.

A manufacturing agreement for the production of ATC was signed with theEuropean drug product manufacturingcompany Novasep. The agreement covers the continued production, processoptimisation, and further scale-up of theactive pharmaceutical ingredient (API) ofATC, for use in Phase III clinical trials andin preparation for the commercial launchof the product. Moving forward, theCompany continues to consult with international regulatory authorities todetermine an appropriate strategy to complete ATC’s clinical development as expeditiously as possible.


R&D Report

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Investigations into the potential opportunityfor paediatric use of ATC have been initiated. The excellent safety profile of ATCsupports its use in the growing number ofHIV-infected children with drug-resistantHIV. Encouraging feedback has beenobtained from regulatory authoritiesregarding a possible paediatric clinical trial for ATC. Whilst the adult Phase III program remains the immediate focus,Avexa will also explore the possibilities for ATC in the treatment of HIV-infectedchildren.

Drug Discovery and Development

HIV IntegraseAvexa has identified a novel series of integrase inhibitors that show potent activity against HIV. The current series of compounds exhibit potency equivalentto that of other integrase inhibitors undergoing clinical trials. Importantly the Avexa inhibitors exhibit good activityagainst the HIV integrase enzyme in HIVstrains which are resistant to both Merck’s(Raltegravir) and Gilead’s (Elvitegravir) integrase inhibitors, both now in clinical trials. No HIV integrase inhibitors arepresently approved and on the market asanti-retroviral therapies. Over the past yearseven provisional patents have been filedaround Avexa’s novel integrase inhibitors.

Avexa also has two significant ongoingprograms aimed at generating novel second generation integrase inhibitors.These programs utilise the protein structuralbiology skills at both the St Vincent’sInstitute of Medical Research and CSIROMolecular and Health Technology division.This program is supported by Australiangovernment grants, including aCommercial Ready Grant worth up to$4.3 million dollars. The technologiesutilised in the second generation programsrepresent state of the art technologies,combining protein structural biology withfragment based drug discovery techniques,enabling a rational drug design approachto be followed. These technologies havethe advantage over more traditional techniques as they enable particular siteson the protein to be targeted, ensuring

novelty in mode of action in addition topatentable chemical structures. A novelmode of action provides a competitiveadvantage as it assures no cross resistancewith other inhibitors on the market.

Avexa expects to begin animal studies in 2007 to validate these inhibitors for suitability to progress to formal preclinicaland then clinical studies.

HIV Co-receptor Inhibitors

Avexa has entered into a collaborativeagreement with TargetDrug of Shanghai to develop inhibitors of cellular CCR5 that prevent HIV from binding to cells.TargetDrug has many years experience in the discovery of inhibitors of G-proteincoupled receptors including the HIV clinicallyrelevant CCR5 protein. TargetDrug identifieda series of lead compounds suitable forfurther development as antivirals. Avexa is applying its extensive experience andunderstanding of HIV drug discovery and development to progress these lead compounds into HIV therapies.

Currently the program has several leadcompounds that demonstrate activity in HIVinfected cells at levels at least equivalentto that of Pfizer’s recently approved antiretroviral drug maraviroc, currently themost advanced seen to be unmarketedCCR5 inhibitor in clinical trials. Avexa isworking to improve activity and impartmore desirable drug-like properties to themolecules giving them a competitive edgeover future antivirals. This program is ontarget to move the first of the compoundseries into preclinical studies in 2008.

Antibiotic Resistant Infections

The past year has seen continued successful progression of the program to develop treatments for antibiotic resistantbacterial infections. In a series of studiesundertaken by independent researchers,several compounds have been shown to have greater utility than originally perceived. Originally designed to specifically target vancomycin resistancein Enterococci, the compounds have been shown to have activity against

a much broader range of antibiotic resistantbacteria, including several multidrug resistant superbugs.

The lead compounds have been synthesised in collaboration with investigators at the University ofWollongong, NSW. This collaboration has successfully attracted support fromthe Australian government, having been,and continuing to be, supported by several Australian Research Council andNational Health and Medical ResearchCouncil grants.

Perhaps the most exciting result in thisprogram over the past year has been thedemonstration of activity of Avexa’s leadcompound in a mouse model infectedwith methicillin-resistant Staphylococcusaureus (MRSA: Golden Staph), an organismthat causes a highly significant number of infections in humans. In this study theAvexa compound exhibited very similaractivity to that of GlaxoSmithkline’sBactroban Nasal®. Bactroban Nasal® is a widely used medicine for the treatmentof MRSA colonisation in human nasal passages. Excitingly the Avexa compoundshave a different mode of action to that of Bactroban and should therefore be auseful medicine in the fight against MRSA.

In another study, a separate lead compound in this series was shown toexhibit systemic activity. That is, activityinside the body rather than topically, or on its surface. Such an activity indicatesthis compound could be a potential treatment for MRSA infections in theblood. Avexa continues to explore thepotential for this novel class of anti-bacterials. Another series of in-vivo studieswill begin shortly to further extend the topical utility of the Avexa compounds,and if successful, these findings will triggerthe entry of one of the Avexa compoundsinto formal preclinical studies on its way to a clinical Phase I study.


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Apricitabine is Avexa’s exciting new antiretroviral nucleoside analogue for the treatment of HIV-infected patients that are failing current therapies and are harbouring drug-resistant HIV infections.


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The Board of Directors of Avexa Limitedrecognises the important role that effectivecorporate governance practices can playin the management of the business of a company and the creation of value for the Company’s shareholders. As a result,Avexa and the Board are committed toachieving and maintaining a high standardof corporate governance that is tailored to suit, among other matters, the size of the Company and its business and the characteristics of the industry of which it is a part.

A description of the Company’s main corporate governance practices and policiesis set out in this Statement. In certaininstances, the Company’s approach hasbeen to address the objectives underlyingthe Australian Securities ExchangeCorporate Governance Council’sCorporate Governance Principles and Recommendations (the ASXRecommendations) without strictly complying with the letter of theRecommendations. Accordingly, whileAvexa has adopted a number of the ASXRecommendations, it has not followedothers. The instances in which theCompany’s practices depart from the ASX Recommendations are described and explained in this Statement.

The Board will continue to review and assess the Company’s corporate governance practices and policies as the Company’s business evolves andgrows over time.

The Board of Directors

The Avexa Board is responsible for, andhas the authority to determine, all mattersrelating to the strategic direction, policiesand practices of Avexa. Part of the Board’srole in this regard is to establish goals forSenior Management and for the operationof the Company.

In defining its roles and responsibilities, the Board has not adopted a formal charter, but instead has had regard to the Constitution of Avexa and to the categories of matters that are commonly

understood to be within the province of a company board. The Board’s specificresponsibilities and functions include:

• oversight of the Company, including its control and accountability systems;

• appointing, removing and approvingremuneration for the Chief ExecutiveOfficer;

• input into and final approval of the corporate strategy, business plans,budgets and performance objectivesdeveloped by Senior Management;

• monitoring Senior Management’s performance and implementation of strategy, and ensuring appropriateresources are available;

• approving and monitoring the progressof major capital expenditure, capitalmanagement, budgeting, operationsand acquisitions and divestitures;

• approving communications with shareholders and announcements to the Australian Securities Exchange;

• reviewing and ratifying systems of riskmanagement, internal compliance andcontrol and legal compliance; and

• approving and monitoring financial and other statutory reporting and compliance matters.

The Board has approved a formal delegation to the Chief Executive Officerand other Senior Management of day to day authority over the operations of Avexa’s business.

Board Composition

The Board currently consists of fourDirectors:

• Dr Hugh Niall (Chairman);

• Dr Julian Chick;

• Mr Stephen Cooper; and

• Dr John Sime.

Details of each Director’s relevant skills,experience and expertise and his term of office, in each case as at the date ofthis Annual Report, are set out later in

the Directors’ Report. As is noted in theDirectors’ Report, Dr Chick is the ChiefExecutive Officer of Avexa.

The Board has considered the independence of each of the AvexaDirectors within the framework of theguidance set out in Box 2.1 of the ASXRecommendations, and has classified Dr Niall, Mr Cooper and Dr Sime as independent. At the time of Avexa’s last Annual General Meeting, Avexa hadthree independent Directors comprising Drs Niall and Malta and Mr Cooper. Dr Malta resigned on 31 January 2007.From 1 February 2007 until the appointment of Dr Sime on 7 June 2007,the Company operated with two independent Non-Executive Directors.Throughout the year, the majority of the Board has therefore consisted of independent Directors, including theChairman of the Board.

The Board believes that Dr Chick, the only Executive Director, brings qualities to the Board that greatly enhance itseffectiveness. Dr Chick has an intimateknowledge of both the history and thecurrent operations of the Company.

The Board is of the view that its currentcomposition now reflects an appropriatemix of expertise, knowledge of Avexa’soperations and independence. The size of the Board is also optimal, as a smallboard facilitates efficient decision makingand is appropriate for a company ofAvexa’s size. The Board will continue toassess its composition as opportunitiesarise from time to time to adjust the mix of skills, experience and perspectives represented on the Board.

Each Director of Avexa has the right toseek independent professional advice atthe Company’s expense with the approvalof the Chairman. Each Director is alsoindemnified under the Company’sConstitution and under separate deeds of indemnity.


Corporate Governance Statement

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Board Remuneration andPerformance Evaluations

The Company Constitution and the ASXListing Rules require the total amount ofremuneration payable to Non-ExecutiveDirectors to be approved by shareholdersby ordinary resolution at a general meeting.At the Company’s 2005 inaugural AnnualGeneral Meeting, the Company’s shareholders approved $350,000 as the maximum aggregate amount of remuneration payable to Directors.The Board currently consists of fourDirectors, one of whom (Dr Chick) is an Executive Director.

Non-Executive Directors are paid theirfees out of the maximum aggregateamount approved by shareholders for theremuneration of Non-Executive Directors.Non-Executive Directors do not receiveperformance based bonuses and do notparticipate in equity-based incentive plansof the Company. Non-Executive Directorsare entitled to statutory superannuation.

The details of remuneration received by allof the Company’s Directors are containedin the Remuneration Report.

The Board has carefully considered its composition and the mix of skills, experience and perspectives of its members during the year, resulting in the appointment of Dr Sime to replace Dr Malta who resigned on 31 January2007. The Board is committed to futureannual reviews of its performance, bothindividually and collectively, against bothmeasurable and qualitative factors.

Board Committees

The Board has established an Audit and Risk Committee, which in general isresponsible for any matters relating to theassets and financial affairs of Avexa and to the Company’s external or internal auditfunctions. The Audit and Risk Committee’sspecific responsibilities include:

• monitoring and reviewing the integrity offinancial statements and the effectivenessof internal financial controls;

• making recommendations to the Boardin relation to the appointment of externalauditors and approving the remunerationand terms of their engagement;

• reviewing risk management and internalcompliance and control systems; and

• monitoring and reviewing the independence, objectivity and competency of internal and external auditors.

The Audit and Risk Committee’s charter is posted on the corporate governancesection of Avexa’s website.

The members of the Audit and RiskCommittee are:

• Mr Stephen Cooper (Chairman);

• Dr Hugh Niall; and

• Dr John Sime.

All of the members of the Audit and RiskCommittee are independent Directors.Details of Mr Cooper’s, Dr Niall’s and Dr Sime’s qualifications and attendance at Audit and Risk Committee meetings areset out in the Directors’ Report. Dr Chickis entitled to attend meetings of the Auditand Risk Committee in an ex-officiocapacity only.

The Board requires the Chief ExecutiveOfficer of Avexa and the Chief FinancialOfficer to provide written assurances tothe Board in respect of the accuracy andcompliance of Company financial reportsand of the integrity of the risk managementand internal compliance and control systems as part of the management sign-off process for Avexa’s half year and full year financial statements.

The Board did not have a nominationcommittee or a remuneration committeeduring the year as the Board did not consider formal committees to be necessary. Due to the scale up of operations in respect of the ATC Phase IIIdevelopment program, since the reportingdate the Board has resolved to establisha Remuneration and Nomination Committeein the current year. All matters in relation

to potential new Directors or remunerationhave to date been considered by the fullBoard (except that Dr Chick does not participate in any deliberations in respectof his own remuneration) but in future willbe addressed by the new committee.

Other Corporate GovernancePractices and Policies

Avexa has written policies and proceduresin respect of trading in the Company’ssecurities and compliance with theCompany’s continuous disclosure obligations. These policies and proceduresare posted on the corporate governancesection of Avexa’s website. Avexa’s securities trading policy prohibits the trading of Company securities by Directorsand employees while in possession of price sensitive information.

The Company does not have a formalcode of conduct governing unethical practices or compliance matters. Instead,the Company has individual policies covering matters such as confidentiality,conflicts of interest, fraud and employeediscrimination and harassment. Avexaemployees, contractors and consultantsare made aware of these policies throughthe employees’ policies and proceduresmanual.

The Company has adopted a risk management framework to identify allrisks associated with the Company’s activities, develop appropriate actions and controls to address these risks, monitor performance of the initiativesintroduced to place to manage theserisks, and to periodically reassess theCompany’s risk profile.

External Auditors

KPMG has been Avexa’s external auditorsince the Company’s incorporation in April2004. KPMG meets with the Audit andRisk Committee at least four times eachyear. KPMG will be requested to attendthe annual general meeting and to beavailable to answer shareholder questionsabout its audit of the Company’s financialstatements.


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Shareholder Communications

The Board is committed to keeping shareholders fully informed of Avexa’sactivities through regular and timely communications with all shareholders. As part of this commitment, the Companydistributes a quarterly News Report to shareholders, and posts various information, including Companyannouncements, media briefings, detailsof general meetings, press releases andfinancial reports, on the Company’s website. Avexa also communicates withits shareholders through its Annual Report,which will be issued to those shareholderswho have elected to receive a hard copyreport and posted on the Company’swebsite.

Executive Remuneration

Company remuneration policies and practices, including details of optionsissued under Avexa’s Employee ShareOption Plan, are set out in the RemunerationReport. A copy of the Employee ShareOption Plan is posted on the corporatesection of the Company’s website.

The Company is committed to remuneratingits Senior Management in a manner that is market-competitive and consistent withgood practice, as well as supporting theinterests of shareholders. By remuneratingSenior Management through performanceand long term incentive plans in additionto their fixed remuneration, the Companyaims to align the interests of SeniorManagement with those of shareholders and increase Company performance. Theobjective behind using this remunerationstructure is to drive improved Companyperformance and thereby increase shareholder value as well as aligning theinterests of Executives and shareholders. Corporate and individual performance targets have been established by theBoard for Avexa’s Chief Executive Officer,Dr Chick, as part of his remunerationarrangements. Accordingly, shareholderapproval will also be sought at the 2007Annual General Meeting for the proposedfurther issue of a total of 3,000,000options to Dr Chick under the Employee

Share Option Plan in connection with theperformance targets achieved during thefinancial year ending 30 June 2007 by Dr Chick in his role as the Company’sChief Executive Officer.

Each Option will confer a right upon Dr Chick to subscribe for one fully paidordinary share in Avexa. The exerciseprice for these Options will be $0.63,which represents the Company’s volumeweighted average share price for the 10days of share trading leading up to theannouncement in March 2007 of thePhase IIb ATC 21 day clinical trial results.

The options, which have a five year termfrom the date of grant, are exercisable in three tranches, 40 per cent 12 monthsafter grant, 30 per cent 24 months aftergrant, and 30 per cent 36 months aftergrant provided that the Avexa share pricereaches and maintains for not less than 15 consecutive trading days a value of at least 125 per cent, 150 per cent and175 per cent of the exercise price for the first, second and third tranches of options respectively.

If shareholders do not approve the issueof these options to Dr Chick, Avexa isrequired to ensure that Dr Chick is providedwith alternative benefits of an equivalentafter-tax value to him.

Particulars of the remuneration of theChief Executive Officer, Dr Chick, and Senior Management for the period 1 July2006 to 30 June 2007, including all monetary and non-monetary components,are set out in the Remuneration Report.


Corporate Governance Statement continued

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Over the last year considerable progress hasbeen made in driving ATC towards Phase IIIclinical trials and commercialisation, withtwo additional Phase I trials having beencompleted and the Phase IIb trial successfullyachieving and exceeding its primary endpoints.


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Dr Julian Chick BSc (Hons), PhD (La Trobe)

Chief Executive Officer and Executive Director

Dr Chick was appointed as Chief Executive Officer and Executive Director of Avexa on 7 September 2004. He graduated with a PhD in Muscle Physiology from La TrobeUniversity in 1998 and joined Amrad Corporation Limited as a Senior BusinessDevelopment Manager in April 2002. Prior to joining Amrad Corporation Limited, Dr Chick had five years experience as an investment adviser and financial consultant with Prudential-Bache Securities, BNP Paribas and Salomon Smith Barney. Dr Chick also spent time working for Foursight Associates as the ‘principal analyst’ reviewinginvestment opportunities for private equity investors and venture capitalists.

Dr Hugh Niall MB, BS, MD (Melb.) FRACP

Chairman and Non-Executive Director

Dr Hugh Niall became Chairman and a Non-Executive Director of Avexa on 7 September2004. Dr Niall has many years experience in the biotechnology industry in Australia andthe United States. From 2003 to 2006 he was Chief Executive Officer of the AustralianStem Cell Centre Limited (ASCC) and from 1995 to 2002 was the Chief Executive Officer of Biota Holdings Limited, a publicly listed company based in Melbourne, whose focus is the discovery and development of new human antiviral pharmaceuticals.

After completing his medical degree and obtaining post-graduate qualifications in medicineat the University of Melbourne, Dr Niall worked overseas at the National Institutes of Health,Bethesda, Maryland, USA and at Harvard University, where he was an Associate Professorof Medicine. Dr Niall has also held senior appointments with the Howard Florey Institute of Experimental Physiology and with Genentech Inc, a major biotechnology company inSouth San Francisco where he was Vice President of Research Discovery and an Officerof the Company.

Dr Niall is the Chair of the Investment Committee of the Genesis Fund of GBS VenturePartners Limited, Chair of the Diabetes Vaccine Development Centre, a Director ofAusgenics Pty Ltd and a Fellow of the Royal Australasian College of Physicians.


Avexa Board

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Dr John Sime MSc (Physical Chemistry), PhD (Biochemistry), FRSC, CChem

Non-Executive Director

Dr Sime joined the board on 7 June 2007 as a Non-Executive Director of the Company. Dr Sime is currently an Adjunct Professor at Swinburne University of Technology in theSchool of Research and Graduate Studies.

Dr Sime is also the former Director of Symbion Health Limited (formerly Mayne GroupLimited) and former Chief Executive Officer of the BioIndustry Association (UK). Dr Simehas more than 25 years experience at SmithKline Beecham Pharmaceuticals (nowGlaxoSmithKline plc), working in the United Kingdom, Tokyo, Jakarta and Australia, and including nine years as Managing Director of Beecham Australia and New Zealand.


Mr Stephen Cooper B Com (Hons), CA

Non-Executive DirectorMr Cooper is a Director of Grant Samuel, a leading independent Australasian investmenthouse, where he provides corporate finance advice to small and large companies across a range of industry sectors. Prior to that, he was Senior Manager for KPMG PeatMarwick, Melbourne, in the area of strategic planning and business development.

Mr Cooper holds a Bachelor of Commerce (Hons) from the University of Cape Town and is an Associate of the Institute of Chartered Accountants (Aust) and Associate of the Chartered Institute of Management Accountants (UK).

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Mr Alan Boyd BA (Hons), ICAEW, ICAA, CICSA

Chief Financial Officer and Company SecretaryMr Boyd has had over 23 years experience in finance, commencing his career and qualifyingas a Chartered Accountant in the UK before emigrating to Australia in 1988. Mr Boyd is also a qualified member of the ICAA and fellow of the CICSA. After 13 years in theaccounting profession Mr Boyd became CFO and Company Secretary of an unlisted public company, later joining high profile listed dotcom Sausage Software Ltd in the samecapacity. Mr Boyd joined Amrad Corporation Limited in November 2002 and under a serviceagreement provided financial and administrative services to Avexa from 1 July 2004 andcompany secretarial services from 1 July 2006 under a service agreement. Mr Boyd formallyjoined Avexa on 1 April 2007.

Dr Julian Chick BSc (Hons), PhD (La Trobe)

Chief Executive Officer and Executive Director

Dr Chick was appointed as Chief Executive Officer and Executive Director of Avexa on 7 September 2004. He graduated with a PhD in Muscle Physiology from La Trobe Universityin 1998 and joined Amrad Corporation Limited as a Senior Business Development Managerin April 2002. Prior to joining Amrad Corporation Limited, Dr Chick had five years experienceas an investment adviser and financial consultant with Prudential-Bache Securities, BNP Paribas and Salomon Smith Barney. Dr Chick also spent time working for FoursightAssociates as the ‘principal analyst’ reviewing investment opportunities for private equityinvestors and venture capitalists

Dr Jonathan Coates BSc (Hons), PhD (Glasgow)

Chief Scientific Officer

Dr Coates obtained his PhD from Glasgow University and has more than 24 years experience in antiviral drug discovery in the pharmaceutical industry. He spent 15 years in the UK at Glaxo Group Research and later Glaxo-Wellcome, where he filled various senior research roles and was one of the inventors of the anti-viral drug 3TC (Epivir for HIVand Zeffix for HBV). Dr Coates has extensive experience in leading program teams towardssuccessful milestones, including clinical trials and three marketed drugs. Dr Coates joinedAmrad Corporation Limited in 1996 to establish a team to develop treatments for infectious diseases. Dr Coates now holds the position of Avexa’s Chief Scientific Officer.

Dr Susan Cox BSc (Hons), PhD (Stockholm), GAICD

Head of Development

Dr Cox graduated with a PhD in Virology from the Karolinska Institute in 1991, and becamean associate professor in 1994. She has 15 years experience in antiviral drug discovery.Dr Cox worked on the anti-CMV drug Foscavir® at Astra, and was previously ProgramDirector at Medivir, where she led antiviral research programs from discovery up to andincluding Phase II studies. Dr Cox joined Amrad Corporation Limited in 1998 and helpedestablish Avexa, where she currently holds the position of Head of Development and isresponsible for later stage projects. She has recently been appointed to the Board of theInternational Society for Antiviral Research (ISAR) and is a graduate of the AustralianInstitute of Company Directors.


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Dr David Rhodes BSc (Hons), PhD (La Trobe)

Head of Discovery

Dr Rhodes graduated with a PhD in Biochemistry from La Trobe University in 1994 andhas more than 10 years experience in HIV research. Dr Rhodes took up a post doctoralfellowship at the Fox Chase Cancer Centre in the US from 1994 to 1995. In 1995, he returned to Australia to the Macfarlane Burnett Centre for Medical Research where he was previously Senior Research Officer. Dr Rhodes joined Amrad Corporation Limitedin 2000 and presently holds the position of Head of Discovery at Avexa.

Ms Shameela Dermott BSc (Hons), (Leeds)

Head of Clinical OperationsShameela Dermott obtained her BSc (Hons) in Pharmacology in 1997 from the University of Leeds, West Yorkshire. Shameela has obtained many years experience in the Pharmaceutical industry within Clinical, Project Management, Data Management,Programming, IVRS, Clinical Logistics and Business Development in the UK with PAREXEL,Fisher Clinical Services and PPD before emigrating to Australia in 2006. She joined Avexain August 2006 as Clinical Research Manager and now holds the position of Head ofClinical Operations.

Dr Elizabeth Fagan BSc, MSc, MD, FRCpath., FACP, FRCP.

VP of Clinical ResearchDr Fagan graduated from London University in Medicine (MB., BS.,) in 1975 followed by an MSc (distinction) in 1982 and MD in virology in 1990. She has more than 25 years experience in clinical medicine (specialties: internal medicine and gastroenterology/hepatology) andwas Director of a viral hepatitis molecular biology laboratory in Chicago. Dr Fagan has more than five years experience in the US biotechnologyand pharmaceutical industry in Clinical Development and was project leader for the HIV project at Tanox Inc, Houston, Texas. She is aFellow of the Royal College of Pathologists, a Fellow of the Royal College of Physicians and Fellow of the American College of Physicians.Dr Fagan is a Professor of Internal Medicine and Paediatrics in Chicago, US. She holds the position of VP of Clinical Research whichincludes Pharmacovigilance/Medical affairs and at Avexa.


Dr John Deadman BSc, PhD (London)

Head of Chemistry

Dr Deadman obtained his PhD in 1989 from the Institute of Cancer Research, London. Dr Deadman has more than 12 years experience in medicinal chemistry, drug design, and formulation/manufacturing aspects, first at the Thrombosis Research Institute andthen as Head of Chemistry at Trigen, where he directed a program from discovery throughto Phase II clinical trials. He is the author of more than 30 research papers and five patents.Dr Deadman moved to Amrad Corporation Limited as Head of Chemistry in 2003 andnow holds the position of Head of Chemistry at Avexa.

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The financial statements and other specific disclosures have been derived from the Avexa Limited full financial report for the financial yearended 30 June 2007. Other information included in the concise financial report is consistent with the Company’s full financial report.

The concise financial report does not, and cannot be expected to, provide as full an understanding of the financial performance, financialposition and financing and investing activities of the Company as the full financial report.

A copy of the Company’s 2007 Annual Financial Report, including the Independent Audit Report, is available to all shareholders, and will be sent to shareholders without charge upon request. The 2007 Annual Financial Report can be requested by telephone(Australia: (03) 9208 4300; Overseas: (613) 9208 4300) and by email ([email protected]).


Concise Financial ReportFor the Year Ended 30 June 2007

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The Directors present their report together with the financial report of Avexa Limited (the Company) for the year ended 30 June 2007 andthe auditor’s report thereon.

Principal Activities

The principal activity of the Company during the course of the financial year was the development and commercialisation of anti-infectivepharmaceutical programs and projects. The Company is a public company listed on the ASX, incorporated and domiciled in Australia, and with a registered office and principal place of business located at 576 Swan Street, Richmond, Victoria 3121.

Avexa Limited is a Melbourne-based biotechnology company with a focus on research and development of anti-infectives. The Companyis developing drugs for the treatment of infectious diseases which have a significant unmet medical need. Avexa has dedicated resourcesand funding for key projects including antiviral drugs for HIV/AIDS and an antibiotic alternative for antibiotic-resistant bacterial infections.The Company’s lead program is apricitabine, for which 21 day data from its Phase IIb clinical trials were reported in March 2007 and the Company is preparing to commence Phase III trials before the end of calendar year 2007. The Company also has exciting programstargeting HIV and drug resistant bacterial infections.

Review and Results of Operations

In its third year of operation the Company’s highlights included successfully completing a capital raising of approximately $80 million, acquiringthe North American marketing rights for its HIV drug apricitabine (ATC) formerly known as AVX754, and announcing positive 21 day datafor its Phase IIb clinical trial for ATC.

In addition, the Company raised approximately $9.5 million through the Avexa 2006 Share Purchase Plan and successfully completedtipranavir co-dosing and cardiac Phase I safety studies for ATC.

Following a placement of 29 million shares to US institutional investors at $0.53 per share to raise gross proceeds of $15.37 million, undera Prospectus dated 21 March 2007 the Company issued a total of 121,796,621 new ordinary shares at $0.53 per share to raise $64.55million before costs by way of a fully underwritten, renounceable rights issue. This capital raising, together with the 2006 Share PurchasePlan conducted in the first half year, has contributed to the Company’s strong cash position at financial year end of $76.87 million.

On 23 January 2007 the Company announced that it had exclusively licensed North American (US and Canada) rights to ATC from Shire for an upfront cash payment of US$10 million (AUD$12.9 million) plus an additional eight million escrowed shares in Avexa. Thelicence deal also includes undisclosed milestones and royalties. The North American market represents around 50 per cent of the globalHIV drugs sales market, with the USA being the single largest market for HIV drugs. The eight million shares were issued in two tranchesof four million shares each in March 2007.

On 19 March 2007 the Company announced positive 21 day results from its Phase IIb clinical trial for ATC. This Phase IIb trial comparedthe effectiveness of ATC in reducing the viral load of patients with drug-resistant HIV with the effectiveness of lamivudine (3TC), a leadingNucleoside Reverse Transcriptase Inhibitor (NRTI) in widespread use. A total of 47 patients completed 21 day dosing. Of these 17 patientsreceived 600mg doses of ATC, 16 received 800mg doses of ATC and the control group of 14 patients were treated with 3TC. The resultsfor patients in both ATC cohorts exceeded the Phase IIb trial primary endpoint by a substantial margin.

Apricitabine (ATC)Over the last year considerable progress has been made in driving ATC towards Phase III clinical trials and commercialisation, with twoadditional Phase I trials having been completed and the Phase IIb trial successfully achieving and exceeding its primary endpoints.

The first of the two Phase I trials determined whether tipranavir (an HIV protease inhibitor marketed by Boehringer-Ingelheim) adverselyinteracted with ATC. The Phase I study showed that ATC could be readily dosed with tipranavir without adverse interactions. These positiveresults support co-dosing of ATC with protease inhibitors.

The second Phase I trial completed this year determined whether ATC had any effect on cardiac function in human volunteers. The FDAexpects that all prospective antiretroviral candidates in late stage development undergo cardiac safety studies. This Phase I trial demonstratedonce again the excellent safety profile of ATC with no adverse cardiac effects being demonstrated in the study, even with doses well abovethose used in the current Phase IIb.


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The most important and exciting results of the year came from the Phase IIb trial of ATC, with the clear demonstration of clinical activity of this drug in patients who were failing their current therapy due to drug resistance. The pre-defined primary endpoints of the Phase IIbtrial were not only met successfully, but were exceeded by a significant margin. As at the date of this report, 16 patients out of a possible18 patients have elected to enter the extension study. This indicates that these patients and their physicians believe that ATC is providingbenefit and helping in the treatment of their disease.

Drug Discovery and Development

HIV IntegraseAvexa has identified a novel series of integrase inhibitors that show potent activity against HIV. Avexa expects to begin animal studies in late 2007 to validate these inhibitors for suitability to progress to formal preclinical and then clinical studies. No HIV integrase inhibitors are presently approved and on the market as anti-retroviral therapies.

Avexa also has two significant ongoing programs aimed at generating novel second generation integrase inhibitors. These programs utilise the protein structural biology skills at both the St Vincent’s Institute of Medical Research and CSIRO Molecular and Health Technologydivision. This program is supported by Australian government grants, including a Commercial Ready Grant, worth up to $4.3 million.

HIV Co-receptor InhibitorsAvexa has entered into a collaborative agreement with TargetDrug of Shanghai to develop inhibitors of CCR5 that prevent HIV binding to cells. TargetDrug has many years of experience in the discovery of inhibitors of G-protein coupled receptors, including the HIV clinicallyrelevant CCR5 protein and has identified a series of lead compounds suitable for further development as antivirals. Avexa is applying itsextensive experience and understanding of HIV drug discovery and development to progress these lead compounds into HIV therapies.

Currently the program has several lead compounds that demonstrate activity in HIV infected cells. Avexa is working to improve activity and impart more desirable drug like properties to the molecules, giving them a competitive edge over future antivirals. Maraviroc is theonly CCR5-targeting inhibitor that has been approved. Avexa’s CCR5 program is on target to move the first of its compound series intopreclinical studies in 2008.

Vancomycin Resistant InfectionsThe past year has seen continued successful progression of the program to develop treatments for vancomycin resistant infections. In a seriesof studies undertaken by independent researchers, several compounds have been shown to have greater utility than originally perceived.Originally designed to specifically target vancomycin resistance in Enterococci, the compounds have been shown to have activity againsta much broader range of antibiotic resistant bacteria, including several multidrug resistant superbugs.

The lead compounds have been synthesised in collaboration with investigators at the University of Wollongong, NSW. This collaborationhas successfully attracted support from the Australian government, having been, and continuing to be, supported by several AustralianResearch Council and National Health and Medical Research Council grants.

Perhaps the most exciting result in this program over the past year has been the demonstration of activity of Avexa’s lead compound in a mouse model infected with methicillin-resistant Staphylococcus aureus (MRSA; Golden Staph) superbug. In this study the Avexacompound exhibited activity very similar to that of GlaxoSmithkline’s Bactroban Nasal®. Bactroban Nasal® is a widely used medicine forthe treatment of MRSA colonisation in human nasal passages. Excitingly the Avexa compounds have a different mode of action to that of Bactroban, and should therefore be a useful medicine in the fight against MRSA. In another study, a separate lead compound in thisseries was shown to exhibit systemic activity. Such an activity indicates this compound could be a potential treatment for MRSA infectionsin the blood.

Another series of in-vivo studies will begin shortly to further extend the topical utility of the Avexa compounds, and if successful, thesefindings will trigger the entry of one of the Avexa compounds into formal preclinical studies on its way to a clinical Phase I study.

Capital and Corporate Structure

The Company has no subsidiary or associated entity interests. Share capital movements for the year are detailed in Note 6 to the financialstatements. Further information regarding the operations and financial position of the Company and its prospects for future financial yearsis required by section 299A of the Corporations Act 2001 and is set out in the Chairman and CEO’s report.


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Unissued Shares Under Option

During the financial year 3,500,000 (2006: 280,000) options to acquire ordinary shares were issued to staff, 4,335,000 (2006: 480,000) to Executive Officers and 300,000 (2006: 1,100,000) to the CEO. Terms and conditions of options issued are provided in the RemunerationReport. 75,000 (2006: nil) options were exercised during the financial year for total proceeds of $18,546 and 225,000 (2006: 100,000)options lapsed upon the departure of employees during the financial year.

At 30 June 2007 there were 11,095,000 options (30 June 2006: 3,260,000) on issue to employees and a further 4,000,000 (30 June 2006:4,000,000) to Shire Biochem Inc. There have been 320,000 options cancelled, 650,000 approved to be issued and 147,500 exercisedafter reporting date and up to the date of this report, such that at the date of this report unissued ordinary shares of the Company underoption are as shown in the following table.

Number of Options on Issue at the Date of this Report Exercise Price Expiry Date

Employee options:

1,360,000 $0.40 30 June 2009600,000 $0.40 30 June 2010500,000 $0.19 30 June 2010100,000 $0.40 30 June 2010

1,352,500 $0.30 30 June 2011615,000 $0.19 25 Sept 201050,000 $0.40 25 Sept 2010

350,000 $0.40 30 June 20115,700,000 $0.63 30 April 2012

Non-employee options:

4,000,000 $0.704# See below#

14,627,500

# The exercise price of the 4,000,000 options issued to Shire Biochem Inc. of 70.4 cents (adjusted following the rights issue to 64.2 cents in accordancewith ASX Listing Rule 6.22) is equal to the volume weighted average price of Avexa shares over the period commencing 30 business days before andending 30 business days after the ASX trading day of 19 March 2007 on which the 21 day results of the Company’s apricitabine (ATC) Phase IIb studywere announced. The exercise period for these options commences on 17 January 2008 and expires on the earlier of 17 January 2012 or the terminationof the Shire Licence Agreement.

Directors

The Directors of the Company at any time during or since the end of the financial year are:

Name, Qualification and Independence Status (Age) Experience, Special Responsibilities and Other Directorships

Dr H Niall Independent Non-Executive Director and Chairman sinceIndependent Non-Executive Director and Chairman (69) 7 September 2004. Member of the Avexa Audit Committee.

Dr J Chick Chief Executive Officer from 7 September 2004Executive Director (38)

Mr S Cooper Independent Non-Executive Director and member of the AvexaIndependent Non-Executive Director (45) Audit Committee from 18 November 2005; appointed Chair of

that committee on 20 December 2005.

Dr J Sime Independent Non-Executive Director and member of the AvexaIndependent Non-Executive Director (66) Audit Committee from 7 June 2007.

Independent Non-Executive Director Dr E Malta resigned on 31 January 2007.


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Directors’ Interests

The relevant interest of each Director in the share capital of the Company, as notified by the Company to the ASX in accordance withS205G(1) of the Corporations Act 2001, as at the date of this report is as shown following:

Number of Number of Options Director Ordinary Shares to Acquire Ordinary Shares

Dr H Niall 1,680,000 -Dr J Chick 956,657 1,400,000#

Mr S Cooper 402,500 -Dr J Sime - -

# Shareholder approval was given on 24 October 2006 to the issue on 1 November 2006 of 300,000 options to CEO Dr Chick with an exercise price of $0.30,a five year term and progressive vesting entitlement.

Due to the small number of Non-Executive Directors on the Board all Non-Executive Directors are members of the Audit Committee. Therole of the Audit Committee ordinarily is to give the Board of Directors assurance regarding the quality and reliability of financial informationprepared for use by the Board in determining policies or for inclusion in the financial report.

Shareholder approval will be sought at the 2007 Annual General Meeting of the Company for the issue of 3,000,000 performance-relatedoptions to Dr Chick which will expire on 30 November 2012 and will have an exercise price of $0.63, based on the Company’s volumeweighted average share price for the 10 days of share trading leading up to the March 2007 announcement of the Phase IIb ATC 21 dayclinical trial results. The options will be issued under the Avexa Employee Share Option Plan (ESOP) and will be exercisable as to 40 percent no earlier than 1 December 2008 and as to 30 per cent no earlier than each of 1 December 2009 and 1 December 2010 providedthat the Avexa share price reaches and maintains for not less than 15 consecutive trading days a value of at least 125 per cent, 150 percent and 175 per cent of the exercise price for the first, second and third tranches of options respectively.

Directors’ Meetings

The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of theDirectors of the Company during the financial year are:

Board Meetings Audit Committee MeetingsDirector Attended Held* Attended Held*

Dr H Niall 15 16 4 4Dr J Chick 15 16 - -Mr S Cooper 15 16 4 4Dr J Sime (appointed on 7 June 2007) 1# 1 - -

* Represents the number of meetings held during the time that the Director held office.# Attended by invitation prior to formal appointment.

Dividends

The Directors do not recommend a dividend be paid or declared by the Company for the year. No dividend has been paid by the Companysince its incorporation on 7 April 2004.

Significant Changes in the State of Affairs

Other than as detailed elsewhere within this financial report, there has been no significant change in the state of affairs of the Company.



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Environmental Regulation

The Company’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.The Directors believe that the Company has adequate systems in place for the management of its environmental requirements and is notaware of any breach of those environmental requirements as they apply to the Company.

Likely Developments

Information about likely developments in the operations of the Company and the expected results of those operations in future financialyears has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to theCompany.

Events Subsequent to Reporting Date

In the interval between the end of the financial year and the date of this report no item, transaction or event of a material and unusual naturehas arisen that is likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results ofthose operations, or the state of affairs of the Company in future financial years.

Indemnification and Insurance of Officers

IndemnificationThe Company has agreed to indemnify the following current Directors of the Company, Dr H Niall, Dr J Chick, Mr S Cooper and Dr J Sime,against liability arising as a result of a Director acting as a Director or other Officer of the Company. The indemnity includes a right to requirethe Company to maintain Directors and Officers’ Liability insurance that extends to former Directors. The indemnity provided by the Companyis an unlimited and continuing indemnity irrespective of whether a director ceases to hold any position in the Company.

Insurance PremiumsSince the end of the financial year, the Company has paid an undisclosed premium for Directors’ and Officers’ Liability insurance, for currentand former Directors and Officers including Executive Officers of the Company. The Directors have not contributed to the payment of thepolicy premium.

The Directors’ and Officers’ Liability insurance policy covers the Directors and Officers of the Company against loss arising from any claimsmade against them during the period of insurance (including company reimbursement) by reason of any wrongful act committed or allegedto have been committed by them in their capacity as Directors or Officers of the Company and reported to the insurers during the policyperiod or if exercised, the extended reporting period.

Company Secretary

On 5 July 2006, Mr Alan Boyd was appointed as Company Secretary. Mr Boyd is a Fellow of the Chartered Institute of Company Secretariesof Australia, member of the Institute of Chartered Accountants of Australia and member of the Institute of Chartered Accountants ofEngland and Wales.

Rounding Off

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amountsin the financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Lead Auditor’s Independence Declaration Under Section 307C of the Corporations Act 2001

The lead auditor’s independence declaration forms part of the Directors’ Report for the year ended 30 June 2007 and is set out on page 35.


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Non-audit Services

The following non-audit services were provided by the Company’s auditor, KPMG during the financial year. The Directors are satisfied thatthe provision of non-audit services is compatible with the general standard for independence imposed by the Corporations Act 2001 andwith the Company’s own Auditor Independence Policy. The nature and scope of each of the non-audit services provided means that auditorindependence was not compromised. KPMG received or is due to receive the following amounts for the provision of the following services:

Audit services:Statutory audit services $ 48,500

Non-audit services:Accounting advice $ 6,000 Tax advisory services $ 12,040Other advisory services $ 50,000

Total $116,540

Remuneration Report

This report outlines the compensation arrangements in place for Directors and Senior Executives of the Company. Sections containedherein have been subject to audit unless otherwise stated. Remuneration is referred to as compensation in this report.

Dated at Melbourne this 8th day of August, 2007. This report is made with a resolution of the Directors.

Dr H NiallChairman



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Principles of Compensation

The Board assumes full responsibility for compensation policies and packages applicable to Directors and Senior Executives of the Company.The broad compensation policy is to ensure the compensation package appropriately reflects the person’s duties and responsibilities, andthat compensation levels are competitive in attracting, retaining and motivating people who possess the requisite level of skill and experience.Employees may receive at-risk incentive payments remunerated as cash or share options based on the achievement of specific goals relatedto the performance of the individual and the Company as determined by the Directors. Incentives are provided to senior managers for theachievement of individual and strategic objectives with the broader view of creating value for shareholders.

Fixed Compensation

Fixed compensation consists of a base compensation package, which includes Fringe Benefits Tax calculated on any salary packagingarrangements and employer contributions to superannuation funds. Fixed compensation levels for staff are reviewed annually by theSenior Management Group, referred to as the ExCo and comprising the Company’s Key Management Personnel (KMP), through a processthat considers the employee’s personal development, achievement of key performance objectives for the year, industry benchmarks wherever possible and CPI data. Compensation recommendations for staff are given by the appropriate ExCo member to the Chief ExecutiveOfficer (CEO) for approval. The CEO conducts the review of the ExCo members and makes recommendations to the Board for approval.

Key Performance Indicators (KPIs) are individually tailored by the appropriate ExCo member for each employee each year, and reflect anassessment of how that employee can fulfil his or her particular responsibilities in a way that best contributes to Company performanceand shareholder wealth in that year. KPIs and compensation levels are set for the ExCo members by the CEO and for the CEO by theBoard adopting the same process as that adopted for staff, with close alignment to each individual’s role and responsibility within theorganisation and in conjunction with the strategic objectives of the Company.

Performance Linked Compensation and Short Term Performance Incentives

All employees other than Non-Executive Directors may receive at-risk incentive payments and/or share options based on the achievementof specific goals related to (i) performance against individual key performance indicators and (ii) the performance of the Company as a wholeas determined by the Directors based on a range of factors. These factors include traditional financial considerations such as operatingperformance, cash consumption and deals concluded and also industry-specific factors relating to the advancement of the project portfolio,introduction of new projects to the portfolio, collaborations and relationships with scientific institutions, third parties and internal employees.

Employment contracts for staff other than the CEO provide for at-risk incentive compensation of up to 10 per cent of their total fixed compensation package (although higher incentive compensation payments may be made at the Board's discretion). Typically incentivecompensation is split 50 per cent on personal performance and 50 per cent on Company performance.

The Board at its sole discretion determines the total amount of performance-linked compensation payable as a percentage of the totalannualised salaries for all employees employed as at the end of the financial year (with pro rata reductions to the annualised salary madefor any employee not employed for the entire financial year). Once the Board has determined the total performance-linked compensationpayable across the Company, ExCo members assess the performance of each individual staff member within their department, relative to that staff member's KPIs, and decide how much performance-linked compensation should be paid to that person.

The ExCo members have full discretion to recommend that individual employees receive more or less than the performance-linked compensation percentage determined by the Board, dependent upon their assessment of the employee’s performance for the financialyear, provided that the overall amount payable within the ExCo member’s department remains within the stated percentage.

The CEO makes a recommendation annually to the Board in respect of incentive compensation for ExCo members based on the sameprinciples and processes as those adopted for all staff. The Board similarly reviews the performance of the CEO and resolves accordinglyon the appropriate level of performance incentive to be paid.

In respect of 2005 financial year performance, incentive payments of $52,700 were paid to staff in July 2006. An amount of $89,514 has been accrued during the 2007 financial year by way of an employee benefit provision in respect of performance for the 2007 financialyear. $61,900 was approved to be paid after the 30 June 2007 reporting date in respect of staff performance for the 2007 financial year.


Remuneration ReportFor the Year Ended 30 June 2007

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Performance targets set for the 2007 financial year for the CEO and Chief Scientific Officer (CSO) were considered by the Board duringthe year following the completion of the capital raising and release of 21 day Phase IIb results for ATC, and upon the satisfaction of thesetargets, the Board resolved to make 2007 performance incentive payments to the value of $290,000 to the CEO and $100,000 to theCSO respectively as detailed on page 29 of this report.

The CEO has the discretion to recommend the offer of options to acquire ordinary shares to any member of staff in recognition of exemplaryperformance. Such options may vest immediately upon issue given that they are issued as a reward for past performance rather than as along term incentive. Any issue of options proposed as incentive compensation requires approval by the Board and is subject to the optionlimits imposed by the Corporations Act. The Board considers that the performance linked compensation structure is operating effectivelygiven the high degree of achievement by the key management personnel of their stretch performance objectives.

Performance Management and Development System – Unaudited

The Company has established a Performance Management and Development System (PMDS) the objectives of which are to:

• improve the quality of work, efficiency and productivity of all staff through continual skills improvement and through gaining new skillsand knowledge;

• recognise current skills held against identified core competencies;

• develop and implement training plans relevant to Avexa’s business needs;

• identify career streams for all employees, outlining their progression from current skills levels as training and on-the-job learning is implemented; and

• develop a training/development process that provides mobility of skills that supports sound succession planning processes.

At the beginning of each financial year, individual and team performance for the previous year is assessed for every employee by their linemanager and new objectives set for the forthcoming year. These objectives include department and project specific objectives together withindividual stretch objectives, challenging, realistic and personal development objectives tailored to the employee’s role within the organisation.Measurement, management support, target dates and training course requirements are all set. Progress against the objectives is reviewedduring the year and percentage achievement concluded at the end of the year, whereupon the cycle recommences. The outputs of thisprocess form the basis of the assessment of the individual’s personal incentive compensation.

Service Contracts

All Avexa Executive Officers, comprising the ExCo and including the CEO, are employed under contracts with the following commonterms and conditions:

• no fixed term;

• no termination payment prescribed;

• terminable by either party on the giving of three months notice in writing (six months for CEO, CSO and CFO and Company Secretary)except that for the CEO and CSO, the Company may not give notice of termination having effect earlier than 31 December 2008 and31 December 2007 respectively unless it also gives the executive payment in lieu of notice from the time the notice becomes effectiveuntil 31 December 2008 for the CEO and 31 December 2007 for the CSO;

• the Company may terminate any contract for Cause as defined; and

• in the event of a change in control and an Executive’s position becomes surplus to requirements, all that Executive’s options will vestand be exercisable within a 30 day period at the conclusion of which the options will expire. The CFO and Company Secretary willreceive six months payment in addition to the notice period in the event of a change in control.

Long Term Incentive

From time to time Board approval may be sought for the issue of options to acquire ordinary shares to staff and the ExCo members as a means of providing a long term incentive for performance and loyalty. Any such options are issued under the Employee Share OptionPlan (ESOP).

In order to give the incentive a medium to long term impact, the options issued in 2007 and 2006 have an approximate five year life and avesting profile as shown following:


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710,000 525,000 5,900,000to ExCo to ExCo to ExCo

Issues 300,000 100,000 500,000 Members Members 100,000 Membersin 2007 to CEO to Staff to Staff and Staff and Staff to ExCo and Staff*

Exercise price $0.30 $0.40 $0.40 $0.30 $0.30 $0.40 $0.63

Vesting 50% on each 40% on 1 July 40% on 1 July 50% on each 50% on each 40% on 1 July 40% on 1 Mayof 1 July 2007 2006 and 20% 2007 and 20% of 1 July 2007 of 1 July 2007 2007 and 20% 2008 and 30%and 1 July 2008 on each of on each of and 1 July 2008 and 1 July 2008 on each of on each of

1 July 2007, 1 July 2008, 1 July 2008, 1 May 20091 July 2008 1 July 2009 1 July 2009 and 1 May and 1 July 2009 and 1 July 2010 and 1 July 2010#

2010

* For the offer of 5,900,000 options to the ExCo and staff the determination of the exercise price of $0.63 was based on the Company’s volume weightedaverage share price for the 10 days of share trading leading up to the March 2007 announcement of the Phase IIb ATC 21 day clinical trial results.

# Exercisable provided that the Avexa share price reaches and maintains for not less than 15 consecutive trading days a value of at least 125 per cent, 150 per cent and 175 per cent of the exercise price for the first, second and third tranches of options respectively.

The following table details issues of options during the 2006 financial year.480,000 to ExCo

Issues in 2006 600,000 to CEO 500,000 to CEO 180,000 to Staff Members 100,000 to Staff

Exercise price $0.40 $0.19 $0.19 $0.19 $0.40

Vesting 40% on issue; 50% on each of 75% on 26 September 50% on each of 37,500 on each of20% on each of 1 July 2006 and 2006 and 25% on 26 September 2006 26 September 2006 5 October 2007, 1 July 2007 26 September 2007 and 26 September and 21 March 2007;5 October 2008 2007 12,500 on each ofand 5 October 2009 26 September 2007

and 21 March 2008

Other Benefits

In addition to the fixed and at-risk compensation, the Company provides salary continuance cover for its permanent employees engagedin more than 20 hours work per week and pays the administration fees for employees participating in the Aon Master Trust superannuationfund.

The value for ‘Non-cash Benefits’ in the compensation table represents the value of motor vehicle costs salary packaged by an Executive.

Director Compensation

The Constitution and the ASX Listing Rules specify that the aggregate compensation of Non-Executive Directors shall be determined fromtime to time by a general meeting. An amount not exceeding the amount approved by shareholders is then divided between the Directorsas agreed by the Board. An amount of $350,000 was approved at the Company’s inaugural Annual General Meeting held on 4 October 2005.

Non-Executive Directors do not receive performance related compensation and the structure of Non-Executive Director and SeniorManagement compensation is separate and distinct. Non-Executive Directors do not have contracts of employment but are required to evidence their understanding and compliance with the Board policies of Avexa Limited. These Board policies do not prescribe howcompensation levels for Non-Executive Directors are modified from year to year.

Compensation levels are to be reviewed by the Board each year taking into account cost of living changes, changes to the scope of theroles of the Directors, and any changes required to meet the principles of the overall Board policies.

Directors’ base fees since incorporation and up to 30 April 2007 were $40,000 per annum with $80,000 for the Chairman, inclusive of superannuation and of duties associated with participation in the Avexa Audit Committee. These annual Non-Executive compensationlevels were increased to $55,000 and $110,000 for the Non-Executive Directors and Chairman respectively from 1 May 2007.


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Directors’ and Executive Officers’ Compensation Tables

Details of the nature and amount of each major element of the compensation of each Director of the Company and each of the namedOfficers of the Company receiving the highest compensation for the period that the Director or Officer held that position during the currentfinancial year are disclosed in accordance with Accounting Standard AASB 124 Related Party Disclosures and with the Corporations Act2001 in the following table.

No options held by persons in the following compensation tables either lapsed or were exercised during the 2006 and 2007 financialyears, nor were there any termination or retirement benefits awarded.

Details of the Company’s policy in relation to the proportion of compensation that is performance related are provided earlier in this report.For the individuals named in the Directors’ and Executive Officers’ compensation tables, details of their service contracts are providedunder the heading of ‘Service contracts’ earlier in this report. Figures in brackets represent the value of options as a percentage of totalcompensation.

The Company operated throughout the 2006 financial year with an Executive Management Team comprising the CEO and three otherpersons. This group was expanded on 1 July 2006 through the promotion of Dr David Rhodes to Head of Discovery, and on 1 April 2007through the promotion of Ms Shameela Dermott to Head of Clinical Operations and appointment of Mr Alan Boyd to CFO and CompanySecretary as an Avexa employee following the termination of the former service provision agreement.

In the following tables, the fair value of the options granted to Executive Officers has been calculated based on the value at the date ofgrant using a valuation model that takes into account the performance hurdles and vesting period related to those options. The value asdisclosed is the portion of the fair value of the options allocated to this reporting period.

2007 Primary Post Share-BasedBase Employment Payments:

Compensation Non-cash Bonuses/ Superannuation Shares and Total(Salary and Fees) Benefits Incentives Contributions Options Issued Compensation

$ $ $ $ $ $

DirectorsNon-ExecutiveDr H Niall - - - 85,000 - 85,000Mr S Cooper 2,500 - - 40,000 - 42,500Dr J Sime (from 7 June 2007) - - - 3,667 - 3,667

ExecutiveDr J Chick 213,198 28,706 267,535* 50,000 (9%) 53,425 612,864

Total compensation 215,698 28,706 267,535 178,667 53,425 744,031

Executive Officers (Excluding Directors)Current – Key Management PersonnelDr J Coates 202,859 7,952 35,320* 13,000 (26%) 93,154 352,285Dr S Cox 139,749 21,836 - 12,647 (25%) 59,079 233,311Dr J Deadman 130,248 18,029 - 11,723 (22%) 45,398 205,398Dr D Rhodes 118,224 1,136 - 10,640 (24%) 41,903 171,903Ms S Dermott (from 1 April 2007) 40,138 - - 3,612 (41%) 31,091 74,841Mr A Boyd (from 1 April 2007) 43,000 - - 12,000 (46%) 47,737 102,727

Total compensation 674,218 48,953 35,320 63,622 318,362 1,140,475

* CEO and CSO performance incentive compensation in 2007 table on previous page.

For Key Management Personnel titles refer to the table on page 30 of this report.



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Upon the satisfaction of key individual performance indicators, the Board resolved the payment of 2007 performance incentive amounts tothe CEO and CSO to the value of $290,000 and $100,000 respectively, which were settled during the 2007 financial year as shown following.

Nature of Performance Payment CEO Dr Julian Chick CSO Dr Jonathan Coates

Compensation value of limited recourse loan(a) $78,082 $80,850Novated finance lease(b) $71,918 -Cash (gross before tax)(c) $140,000 $19,150

Total performance incentive $290,000 $100,000

(a) A limited recourse loan was provided to each of the CEO ($144,865) and CSO ($150,000) for the sole purpose of facilitating their full participation in therights issue under the 21 March 2007 Prospectus. Dr Coates applied for and received an additional 10,902 shares above his 272,117 share entitlement.Dr Chick took up his full direct and indirect entitlement of 273,331 shares.

The loans are interest free, have a five year term and the shares purchased through the loan funding are subject to a holding lock until the loan has beenrepaid in full. The loans are repayable either in cash or by transfer of title to the shares acquired through the application of the loan proceeds, at the optionof the employee. A compensation value has been calculated and attributed to each loan on the following basis.

Each loan has been valued using a Black Scholes European put option valuation model for the limited recourse component of the loan plus a tax effectedinterest rate for the interest free component. These values have been added together to comprise the total compensation values as shown in the abovetable.

For the Black Scholes option component of the valuation, an interest rate of 6.2 per cent, volatility of 76.9 per cent, an exercise price equal to the rightsissue share price of $0.53, and an underlying share price of $0.765, (being the Company’s last traded share price on the 19 April 2007 date of the loanagreement), have been adopted for the valuation parameters.

For the interest rate component of the loan valuation, a 7 per cent borrowing rate, 7 per cent discount rate and top marginal tax rate of 46.5 per centhave been adopted in the calculation.

Given that the option value attached to the limited recourse loans is considered part of long term incentive compensation rather than as a short termincentive payment, and also given the holding lock over the shares acquired through the loan until the loan has been repaid in full, the compensationvalue for the loan is being brought to account in equal instalments over the five year term of each loan. In respect of these loans, amounts of $15,617and $16,170 have been brought to account in the 2007 remuneration tables for Drs Chick and Coates respectively.

(b) The compensation value comprises lease payments for the first year of a three year novated finance lease agreement, the Fringe Benefits Tax applicableto the vehicle for the period, plus the associated maintenance and running costs, which combine for an aggregate compensation value for the period of $71,918.

(c) Cash performance payments were remunerated through the May 2007 Payroll and PAYG tax deducted accordingly.

2006 Primary Post Share-BasedBase Employment Payments:

Compensation Non-cash Bonuses/ Superannuation Shares and Total(Salary and Fees) Benefits Incentives Contributions Options Issued Compensation

$ $ $ $ $ $

DirectorsNon-ExecutiveDr H Niall 67,278 - - 12,722 - 80,000Dr E Malta (from 1 November 2005) 24,465 - - 2,202 - 26,667Mr S Cooper (from 18 November 2005) 22,677 - - 2,041 - 24,718Ms H Cameron (to 20 December 2005) 5,034 - - 13,786 - 18,820

ExecutiveDr J Chick 190,995 28,339 60,000 40,560 (11%) 39,479 359,373

Total compensation 310,449 28,339 60,000 71,311 39,479 509,578

Executive Officers (Excluding Directors)Current – Key Management PersonnelDr J Coates 184,325 21,430 - 12,150 (11%) 24,027 241,932Dr S Cox 132,929 23,770 - 11,992 (12%) 22,861 191,552Dr J Deadman 117,332 22,589 - 10,561 (9%) 14,823 165,305

Total compensation 434,586 67,789 - 34,703 61,711 598,788

For Key Management Personnel titles refer to the following table.


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Grants, Modifications and Exercise of Options and Rights Over Equity Instruments Granted as Compensation –Unaudited

Details of the vesting profile of the options granted as compensation during the financial year to each applicable person in the Directors’and Executive Officers’ compensation tables is detailed below. There were no options forfeited or exercised during the financial year byany of these persons nor were there any alterations or modifications to existing terms and conditions other than in accordance with ASXListing Rule adjustments to option exercise prices following pro rata issues of securities.

2007 Number andPercentage Financial Years in Value Yet

Executives and Title Options Granted Vested in Year Which Grant Vests to Vest in $

Number DateExecutive DirectorDr J Chick (CEO) 300,000 1 Nov 2006 Nil 2007-2008(i) 27,892

Executive Director 300,000 27,892

Company ExecutivesDr J Coates 175,000 1 July 2006 Nil 2007-2008(i) 16,545(Chief Scientific Officer) 25,000 1 July 2006 Nil 2007-2008(i) 2,364

1,000,000 25 May 2007 Nil 2008-2010(ii) 179,018

Dr S Cox 110,000 1 July 2006 Nil 2007-2008(i) 10,399(Head of Development) 25,000 1 July 2006 Nil 2007-2008(i) 2,364

500,000 25 May 2007 Nil 2008-2010(ii) 89,509

Dr J Deadman 180,000 1 July 2006 Nil 2007-2008(i) 17,017(Head of Chemistry) 25,000 1 July 2006 Nil 2007-2008(i) 2,364

350,000 25 May 2007 Nil 2008-2010(ii) 62,656

Dr D Rhodes 170,000 1 July 2006 Nil 2007-2008(i) 16,072(Head of Discovery) 25,000 1 July 2006 Nil 2007-2008(i) 2,364

400,000 25 May 2007 Nil 2008-2010(ii) 71,607

Ms S Dermott 50,000 1 July 2006 Nil 2007-2010(iii) 5,018(Head of Clinical 500,000 25 May 2007 Nil 2008-2010(ii) 89,509Operations from 1 April 2007)

Mr A Boyd 800,000 25 May 2007 Nil 2008-2010(ii) 143,214(CFO and Company Secretary from 1 April 2007)

Company Executives 4,335,000 710,020

The vesting profile for options issued during 2007 and included in the previous table is as follows:

(i) 50 per cent on 1 July 2007 and 50 per cent on 1 July 2008.

(ii) Exercisable in three tranches 40 per cent on and from 1 May 2008, 30 per cent on and from 1 May 2009, and 30 per cent on and from 1 May 2010 provided that the Avexa share price reaches and maintains for not less than 15 consecutive trading days a value of at least 125 per cent, 150 per centand 175 per cent of the exercise price for the first, second and third tranches of options respectively.

(iii) 40 per cent on 1 July 2007 and 20 per cent on each of 1 July 2008, 1 July 2009 and 1 July 2010.



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2006 Number andPercentage Forfeited in Financial Years in Value Yet

Executives and Title Options Granted Vested in Year Year Which Grant Vests to Vest in $

Number Date

Executive DirectorDr J Chick (CEO) 600,000 5 October 2005 240,000 (40%) - 2006-2010(i) 48,627

500,000 5 October 2005 Nil - 2007-2008(ii) 46,540

Executive Director 1,100,000 95,167

Company ExecutivesDr J Coates (Chief Scientific Officer) 180,000 26 September 2005 Nil - 2007-2008(iii) 13,996

20,000 26 September 2005 Nil - 2007-2008(iv) 1,555Dr S Cox (Head of Development) 150,000 26 September 2005 Nil - 2007-2008(iii) 11,663

20,000 26 September 2005 Nil - 2007-2008(iv) 1,555Dr J Deadman (Head of Chemistry) 100,000 26 September 2005 Nil - 2007-2008(iii) 7,775

20,000 26 September 2005 Nil - 2007-2008(iv) 1,555

Company Executives 490,000 38,099

The vesting profile for options issued during 2006 and included in the previous table is as follows:

(i) 40 per cent on issue and 20 per cent on each of 5 October 2007, 5 October 2008 and 5 October 2009.

(ii) 50 per cent on 1 July 2006 and 50 per cent on 1 July 2007.

(iii) 50 per cent on each of 26 September 2006 and 26 September 2007.

(iv) 75 per cent on 26 September 2006 and 25 per cent on 26 September 2007.

The fair value of options issued has been apportioned evenly over the vesting profile of the option giving rise to a fair value compensationfor the 2007 and 2006 financial years. The options do not entitle the holder to participate in any share issue of the Company or any otherbody corporate.


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Analysis of Bonuses and Incentive Payments – Unaudited

Incentive payments relating to performance in the 2006 financial year of $12,700 to staff and $40,000 to the CEO were made during the2007 financial year under the Company’s PMDS. Accruals for payments of $89,514 to staff have been included in the 2007 result in respectof the 2007 performance year.

Upon the satisfaction of key individual performance indicators, the Board resolved the payment of 2007 performance incentive amounts to the CEO and CSO to the value of $290,000 and $100,000 respectively, which were settled during the 2007 financial year. All amountsare fully vested.

Fair Value of Options

The fair values of the options granted to Executive Directors and Officers in the above tables have been calculated at grant date using abinomial valuation model that takes into account the performance hurdles and vesting period related to those options. The value as disclosedis the portion of the fair value of the options allocated to this reporting period. The following factors and assumptions have been used indetermining the fair value on grant date. Comparative information has not been restated as market conditions were already included in theprior year valuation. A zero dividend yield assumption has been adopted in every valuation.

2007

Number andRecipients of Grant Expiry Fair Value Exercise Price of Shares Risk Free EstimatedOptions Date Date Per Option Price on Value Date Interest Rate Volatility

300,000 to CEO 1 Nov 2006 30 June 2011 $0.1395 $0.30 $0.235 5.88% 76.07%100,000 to Staff 1 July 2006 30 June 2010 $0.1123 $0.40 $0.23 5.78% 77.46%500,000 to Staff 1 July 2006 30 June 2011 $0.1289 $0.40 $0.23 5.78% 77.46%710,000 to ExCo Members and Staff 1 July 2006 30 June 2011 $0.1418 $0.30 $0.23 5.78% 77.46%525,000 to ExCo Members and Staff 1 July 2006 30 June 2011 $0.1418 $0.30 $0.23 5.78% 77.46%100,000 to Staff 1 Nov 2006 30 June 2011 $0.1254 $0.40 $0.235 5.88% 76.07%5,900,000 to ExCo Members and Staff 25 May 2007 30 April 2012 $0.2387 $0.63 $0.635 6.16% 30.91%

Comparative details for the previous financial year are provided in the following table.

2006

Number andRecipients of Grant Expiry Fair Value Exercise Price of Shares Risk Free EstimatedOptions Date Date Per Option Price on Value Date Interest Rate Volatility

600,000 to CEO 5 Oct 2005 30 June 2010 $0.108 $0.40 $0.21 5.38% 76.78%500,000 to CEO 5 Oct 2005 30 June 2010 $0.140 $0.19 $0.21 5.38% 76.78%180,000 to staff 26 Sept 2005 25 Sept 2010 $0.117 $0.19 $0.18 5.25% 76.78%480,000 to ExCo 26 Sept 2005 25 Sept 2010 $0.117 $0.19 $0.18 5.25% 76.78%50,000 to staff 26 Sept 2005 25 Sept 2010 $0.009 $0.40 $0.18 5.25% 76.78%50,000 to staff 21 Mar 2006 21 Mar 2011 $0.168 $0.40 $0.28 5.67% 79.10%



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Post Reporting Date Option Movements

From balance date to the date of this report 320,000 options have been cancelled, 650,000 options approved but not yet issued and 147,500options exercised for a total consideration of $42,682.

As part of the performance-linked compensation strategy, during the 2007 financial year the Company’s Board passed the following resolutionsubject to the receipt of shareholder approval at the Company’s 2007 Annual General Meeting:

• to offer 3,000,000 options to Dr Chick that will be granted on 1 December 2007, will expire on 30 November 2012 and will have anexercise price of $0.63 based on the Company’s volume weighted average share price for the 10 days of share trading in the 2007financial year leading up to the announcement of the Phase IIb 21 day ATC clinical trial results. The options will be exercisable as to 40 per cent no earlier than 1 December 2008 and as to 30 per cent on or after each of 1 December 2009 and 1 December 2010 provided that the Avexa share price reaches and maintains for not less than 15 consecutive trading days a value of at least 125 percent, 150 per cent and 175 per cent of the exercise price for the first, second and third tranches of options respectively.

As part of the Company’s long term incentive strategy, subsequent to reporting date, the Company’s Board of Directors has alsoapproved the offer and issue of:

• 500,000 options to staff at an exercise price of $0.69, which was based on the Company’s closing share price on the 9 July 2007effective date of grant and 150,000 to staff at an exercise price of $0.63 based on a 1 July 2007 effective date of grant. The options will be exercisable as to 40 per cent on or after 1 July 2008 and as to 30 per cent on or after each of 1 July 2009 and 1 July 2010 provided that the Avexa share price reaches and maintains for not less than 15 consecutive trading days a value of at least 125 percent, 150 per cent and 175 per cent of the exercise price for the first, second and third tranches of options respectively.


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Shares Issued on Exercise of Options

During the financial year the Company issued 75,000 ordinary shares upon the exercise of options for total proceeds of $18,546. Since theend of the financial year up to the date of this report the Company has issued 147,500 shares upon exercise of options for total proceedsof $42,682.

Alteration to Option Terms

Other than in accordance with ASX Listing Rule adjustments to option exercise prices following pro rata issues of securities, there hasbeen no alteration to option terms and conditions during or since the end of the financial year up to the date of this report.

Consequences of Performance on Shareholder Wealth – Unaudited

In considering the Company’s performance and how best to generate shareholder value, the Board has regard to a broad range of factors,some of which are financial and others of which relate to the scientific progress on the Company’s projects, relationship building withresearch institutions, projects introduced, staff development etc. The Board has some but not absolute regard to the Company’s resultand cash consumption for the year. It does not utilise earnings per share as a performance measure nor does not contemplate considerationof any dividends in the short to medium term given that all efforts are currently being devoted to build the business and establish self-sustainingrevenue streams. The Company is of the view that any adverse movement in the Company’s share price should not be taken into accountin assessing the performance of employees other than the CEO, for whom the Company’s share price is included within the overall measureof performance against individual objectives.



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Concise Financial Report

To the Directors of Avexa LimitedI declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2007, there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

B W Szentirmay

Melbourne8 August 2007


Lead Auditor’s Independence DeclarationUnder Section 307C of the Corporations Act 2001

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Discussion and Analysis of the Income Statement

The Company’s revenue for the period comprised bank interest of $1,589,000 (2006: $738,000) generated from the operating accountand from investment of surplus funds in capital stable, bank term deposits. Lease income of $151,000 from sub-lease rental arrangementswas generated for the first time this year and grant funding of $136,000 was also secured during the year under the Commercial Readyscheme.

Included within operating expenses for the period are the following significant items:

(i) Contract Research and Development CostsThe increase in costs incurred for the year to $7.7 million (2006: $6.6 million) reflects the conclusion of the Phase IIb trial for Avexa’s anti-HIV drug apricitabine (ATC), plus the preparation for the conduct of the Phase III, including scale up and manufacture of ATC and purchase of Phase III comparator product.

(ii) Employee ExpensesThe increase in employee expenses from $2.5 million to $3.7 million (excluding share-based payments) reflects the effective increase instaff numbers from 22 to 33 as the Company has continued to expand both its chemistry capability to advance earlier stage projects andits development capability to manage the Phase III trials.

Discussion and Analysis of the Balance Sheet

(i) Cash PositionThe Company conducted a share purchase plan in the first half year and a capital raising in March and April 2007, and the net proceedsfrom these raisings contributed over $85 million in net proceeds towards a closing cash position of $76.9 million (2006: $20.2 million).Operational cash outflows have increased from $8.9 million to $15.6 million which reflect the continuation of the Phase IIb trial and commencement of preparation for the much larger Phase III trial activities.

(ii) Contributed Equity49,137,000 shares were issued under the share purchase plan at $0.20 per share whilst 121,796,621 shares were issued under the 21 March 2007 Prospectus at $0.53 per share. A further 29,000,000 shares were issued to sophisticated investors as part of the March2007 capital raising activities at the same $0.53 price per share. During the year 75,000 options were exercised for proceeds of $18,546and 8,000,000 shares issued to Shire Biochem Inc. under the 22 January 2007 amending agreement with Shire as part consideration forthe acquisition by Avexa of the North American rights to ATC. The market value of these shares at the date of issue was $0.455.

(iii) Tax BenefitsGiven the uncertainties associated with their recovery, the Company has not recognised any tax benefits relating to income tax lossesrecorded for the current or prior financial year.

(iv) IntangiblesOn 22 January 2007 the Company announced that it had exclusively licensed North American (US and Canada) rights to apricitabine (ATC) from Shire for an upfront payment of US$10 million plus an additional eight million escrowed shares in Avexa. The Company hasbrought this licence to account as a separately identifiable intangible asset recorded at a cost comprising the cash value paid plus the fair value of the Avexa shares issued to Shire as at the 22 January 2007 acquisition date. The licence deal also includes undisclosed milestones and royalties not brought to account. The cost brought to account comprises cash of $12,895,000 plus fair value of$3,640,000 in respect of the eight million shares issued.

Discussion and Analysis of Statement of Cash Flows

(i) Proceeds from Issue of Share CapitalThe net proceeds from issue of share capital reflect the above issues of equity.

(ii) IntangiblesThe Company expended cash of $12,895,000 as part consideration for the acquisition of ATC North American marketing rights.


Discussion and Analysis of the Concise Financial ReportFor the Year Ended 30 June 2007

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Company

2007 2006Note $’000 $’000

Licence fee and royalty revenue - -

Total revenue - -

Other operating income 2 1,876 738

Contract research and development costs 3(a) (7,708) (6,576)Employee expenses (3,755) (2,533)Share-based payment expense (558) (122)Depreciation and loss on disposal of plant and equipment (79) (52)Amortisation of intellectual property - (6,000)Occupancy costs (576) (332)Consulting costs (944) (592)Professional services (508) (497)Travel and accommodation (595) (405)Raw materials and consumables used (498) (424)Asset management expenses (220) (282)Insurance (142) (169)Corporate administration (424) (87)Intellectual property (641) (62)Other expenses 3(c) (446) (435)

Loss before related income tax expense (15,218) (17,830)Income tax expense - -

Net loss for the year 5 (15,218) (17,830)

Basic earnings per share (ordinary shares) (5.8) (12.1)Diluted earnings per share (ordinary shares) (5.8) (12.1)

The income statement is to be read in conjunction with the notes to the financial statements set out on pages 41 to 43.


Income StatementFor the Year Ended 30 June 2007

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For the Year Ended 30 June 2007

Issued Capital Accumulated Losses Total Equity$’000 $’000 $’000

Opening balance as at 1 July 2006 48,164 (31,244) 16,920

Non-profit items recognised directly in equity:Equity settled share-based payment transactions - 558 558

Total non-profit items recognised directly in equity - 558 558

Loss for the period - (15,218) (15,218)

Total recognised income and expense for the period - (15,218) (15,218)

2006 Share Purchase Plan 9,552 - 9,552Issue to Shire Biochem Inc under 22 January 2007 amending agreement 3,640 - 3,640Placement to sophisticated investors 15,370 - 15,370Shares issued under 21 March 2007 Prospectus 64,257 - 64,257Shares issued on conversion of options 19 - 19Transactions costs relating to placement and Prospectus shares (3,808) - (3,808)

Equity-related transactions 89,030 - 89,030

Closing balance as at 30 June 2007 137,194 (45,904) 91,290

For the Year Ended 30 June 2006

Issued Capital Accumulated Losses Total Equity$’000 $’000 $’000

Opening balance as at 1 July 2005 34,648 (13,536) 21,112

Non-profit items recognised directly in equity:Equity settled share-based payment transactions - 122 122

Total non-profit items recognised directly in equity - 122 122

Loss for the period - (17,830) (17,830)

Total recognised income and expense for the period - (17,830) (17,830)

Placement to sophisticated investors 4,898 - 4,898Shares issued under 3 April 2006 Prospectus 9,487 - 9,487Transactions costs relating to placement and Prospectus shares (869) - (869)

Equity-related transactions 13,516 - 13,516

Closing balance as at 30 June 2006 48,164 (31,244) 16,920

Amounts disclosed in the statement of changes in equity are stated net of tax.

The statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 41 to 43.


Statement of Changes in Equity

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Company

2007 2006Note $’000 $’000

Current assetsCash assets 76,874 20,228Receivables 148 34Other 76 106

Total current assets 77,098 20,368

Non-current assetsIntangibles 16,535 -Property, plant and equipment 345 217

Total non-current assets 16,880 217

Total assets 93,978 20,585

Current liabilitiesPayables 2,212 3,357Employee benefits 347 280Deferred income 90 -

Total current liabilities 2,649 3,637

Non-current liabilitiesEmployee benefits 39 28

Total non-current liabilities 39 28

Total liabilities 2,688 3,665

Net assets 91,290 16,920

EquityIssued capital 6 137,194 48,164Accumulated losses 5 (45,904) (31,244)

Total equity 91,290 16,920

The balance sheet is to be read in conjunction with the notes to the financial statements set out on pages 41 to 43.


Balance SheetAs at 30 June 2007

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Company

2007 2006$’000 $’000

Cash flows from operating activitiesCash receipts in the course of operations 861 783Cash payments in the course of operations (18,072) (10,209)Interest received 1,588 535Income taxes paid - -

Net cash used in operating activities (15,623) (8,891)

Cash flows from investing activitiesPayments for intangibles – marketing licence (12,895) -Payments for property, plant and equipment (207) (144)

Net cash used in investing activities (13,102) (144)

Cash flows from financing activitiesProceeds from issue of share capital 89,198 14,385Costs of raising share capital (3,827) (849)

Net cash provided by financing activities 85,371 13,536

Net increase in cash held 56,646 4,501Cash at the beginning of the financial year 20,228 15,727

Cash at the end of the financial year 76,874 20,228

The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 41 to 43.


Statement of Cash FlowsFor the Year Ended 30 June 2007

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1. Basis of Preparation of Concise Financial Report

The concise financial report has been prepared in accordance with the Corporations Act 2001 and Accounting Standard AASB 1039Concise Financial Reports. The financial statements and specific disclosures required by AASB 1039 have been derived from theCompany’s full financial report for the financial year. Other information included in the concise financial report is consistent with theCompany’s full financial report. The concise financial report does not, and cannot be expected to, provide as full an understanding of the financial performance, financial position and financing and investing activities of the Company as the full financial report.

The financial report is prepared on the historical cost basis and except where stated, does not take into account changing money valuesor fair values of non-current assets.

A full description of the accounting policies adopted by the Company may be found in the Company’s full financial report. These accountingpolicies have been consistently applied by the Company and, except for early adoption of AASB101 Presentation of Financial Statements,are consistent with those of the previous year. The presentation currency is Australian dollars.

Management has discussed with the Audit Committee the development, selection and disclosure of the Company’s critical accountingpolicies and estimates and the application of these policies and estimates. The preparation of financial statements requires managementto make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the periodin which the estimate is revised and in any future periods affected. There have been no material revisions or reclassifications affecting thefinancial performance of the Company during the 2007 financial year.

2. Other Operating Income

Company

2007 2006$’000 $’000

Interest income 1,589 738Lease income 151 -Grant income 136 -

Total other operating income 1,876 738

3. Profit Before Related Income Tax Expense

(a) Individually Material Items included in Profit Before Related Income Tax Expense:Contract research and development expenditure 7,708 6,576Direct research and development expenditure 5,433 3,721

Research and Development 13,141 10,297

(b) Profit Before Related Income Tax Expense has been arrived at after charging the following items:Depreciation of plant and equipment 78 52Amortisation of intellectual property - 6,000Amounts transferred to provisions for employee entitlements 426 278Superannuation payments to defined contribution plans 429 202Operating lease asset rental expense 72 120

(c) Other ExpensesAdvertising and promotion 132 214Workplace administration 129 120Finance expenses 8 5Other expenses 177 96

Total other expenses 446 435


Notes to the Financial StatementsFor the Year Ended 30 June 2006

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4. Segment Reporting

The Company comprises a single business segment (anti-infective research and development) and operates in a single geographical segment,being that of Australia. Therefore the segment details are fully reflected in the results and balances reported in the income statement andbalance sheet.

5. Accumulated Losses

Company

2007 2006$’000 $’000

Accumulated losses at the beginning of the financial year (31,244) (13,536)Share-based payment expense 558 122Net loss attributable to members of the Company (15,218) (17,830)

Accumulated losses at the end of the financial year (45,904) (31,244)

6. Issued Capital

Terms and Conditions of Ordinary SharesHolders of ordinary shares are entitled to one vote per share at shareholders’ meetings and to receive any dividends as may be declared.In the event of winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

Options to Acquire Ordinary SharesDuring the financial year 8,135,000 options were issued to employees under the Avexa Employee Share Option Plan, 225,000 options toemployees were cancelled and 75,000 were exercised. Movements in options for the current and prior year are provided in the following tables.

Number of Options Options Options Options Number of Options2007 Options at Beginning of Year Granted lapsed Exercised at End of Year

Total employee options 3,260,000 8,135,000 (225,000) (75,000) 11,095,000Shire options 4,000,000 - - - 4,000,000

Total options 7,260,000 8,135,000 (225,000) (75,000) 15,095,000

Number of Options Options Options Options Number of Options2006 Options at Beginning of Year Granted lapsed Exercised at End of Year

Total employee options 1,500,000 1,860,000 (100,000) - 3,260,000Shire options 4,000,000 - - - 4,000,000

Total options 5,500,000 1,860,000 (100,000) - 7,260,000


Notes to the Financial Statements continued

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2007 2006Issued and Paid up Capital $’000 Number $’000 Number

405,863,175 (2006: 197,854,554) ordinary shares, fully paid 137,194 405,863,175 48,164 197,854,554

Movements in issued capital during the year were as follows:

Balance at the beginning of the financial year 48,164 197,854,554 34,648 137,916,452

Issue of shares for cash consideration under Avexa 2006 Share Purchase Plan, net of share issue costs 9,552 49,137,000 - -

Issue of Shares to Shire Biochem Plc pursuant to 22 January 2007 amending agreement 3,640 8,000,000 - -

Placement to sophisticated investors in April 2007 (March 2006) 15,370 29,000,000 4,898 20,408,000

Shares offered under 21 March 2007 (2006: 3 April 2006) Prospectus 59,911 113,596,621 9,487 39,530,102

Oversubscription shares issued pursuant to 21 March 2007 Prospectus 4,346 8,200,000 - -

Issue of shares upon exercise of options 19 75,000 - -

Transaction costs relating to placements and prospectus offers (3,808) - (869) -

Issued capital at the end of the financial year 137,194 405,863,175 48,164 197,854,554

7. Dividends

No dividends were paid or proposed in the current or prior financial years.

8. Contingencies

The Company is not aware of any contingent liabilities or assets capable of having a material impact on the Company.

9. Events Subsequent to Reporting Date

In the interval between the end of the financial year and the date of this report no item, transaction or event of a material and unusual naturehas arisen that is likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results ofthose operations, or the state of affairs of the Company in future financial years.


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In the opinion of the Directors of Avexa Limited (‘the Company’), the accompanying concise financial report of the Company for the financialyear ended 30 June 2007, set out on pages 25 to 44:

(a) has been derived from or is consistent with the full financial report for the financial year; and

(b) complies with Australian Accounting Standard AASB 1039 Concise Financial Reports.

Signed in accordance with a resolution of the Directors.

Dated at Melbourne this 8th day of August, 2007.

Dr H NiallChairman


Directors’ DeclarationFor the Year Ended 30 June 2007

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Independent Auditor’s Report to the Members of Avexa Limited

The accompanying concise financial report of Avexa Limited (the Company) comprises the balance sheet as at 30 June 2007, the incomestatement, statement of changes in equity and statement of cash flows for the year then ended and related notes 1 to 9, derived from theaudited financial report of Avexa Limited for the year ended 30 June 2007 and the discussion and analysis. The concise financial reportdoes not contain all the disclosures required by Australian Accounting Standards.

We have audited information disclosed by the Company, as permitted by the Corporations Regulations 2001, about the remuneration of Directors and Executives (‘remuneration disclosures’), required by Australian Accounting Standard AASB 124 Related Party Disclosures,under the heading ‘remuneration report’ in the Directors’ report and not in the concise financial report. The Company’s Directors areresponsible for the concise financial report and the remuneration disclosures. We have conducted an independent audit of the concisefinancial report and the remuneration disclosures in order to express an opinion on them to the members of the Company.

Directors’ Responsibility for the Concise Financial ReportThe Directors of the Company are responsible for the preparation and presentation of the concise financial report in accordance withAustralian Accounting Standard AASB 1039 Concise Financial Reports and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation of the concise financial report; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on the concise financial report based on our audit procedures. We have conducted an independentaudit in accordance with Australian Auditing Standards, of the financial report and remuneration disclosures of Avexa Limited for the yearended 30 June 2007. The remuneration report in the full financial report also contains information not required by Australian AccountingStandard 124 which is not subject to our audit. Our audit report on the financial report and remuneration disclosures for the year wassigned on 8 August 2007 and was not subject to any modification. The Australian Auditing Standards require that we comply with relevantethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financialreport for the year is free of material misstatement.

Our procedures in respect of the concise financial report include testing that the information in the concise financial report is derived from,and is consistent with, the financial report for the year, and examination on a test basis, of evidence supporting the amounts, discussionand analysis, and other disclosures which were not directly derived from the financial report for the year. These procedures have beenundertaken to form an opinion whether, in all material respects, the concise financial report complies with Australian Accounting StandardAASB 1039 Concise Financial Reports and whether the discussion and analysis complies with the requirements laid down in AustralianAccounting Standard AASB 1039 Concise Financial Reports.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s OpinionIn our opinion the concise financial report of Avexa Limited for the year ended 30 June 2007 complies with Australian AccountingStandard AASB 1039 Concise Financial Reports.

KPMG

B W SzentirmayPartner

Melbourne8 August 2007


Independent Audit ReportFor the Year Ended 30 June 2007

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Share Capital

As at 5 September 2007 the share capital of the Company was:

Issued and paid up capital: 406,010,675 ordinary shares

Number

Number of shares quoted on The Australian Securities Exchange Limited 406,010,675

Avexa Limited ordinary shares have been traded on The Australian Securities Exchange Limited since 23 September 2004 and tradeunder the ASX code AVX. Melbourne is the Home Exchange. The Company’s securities are not quoted on any other stock exchange.

Twenty Largest Shareholders as at 5 September 2007

Name Ordinary Shares Held % of Total Shareholding

HSBC Custody Nominees A/C 2 (Aust) Limited 40,191,742 9.90

Shire BioChem Inc 28,700,000 7.07

Fibre Optics (Aust) Pty Ltd 13,667,914 3.37

National Nominees Limited 13,421,876 3.31

State Trustees Limited 13,159,601 3.24

Jagen Pty Ltd 5,040,012 1.24

ANZ Nominees Limited 4,989,084 1.23

UBS Wealth Management 4,816,648 1.19

Citicorp Nominees Pty Ltd 3,091,882 0.76

JP Morgan Nominees 2,992,566 0.74

Elise Nominees Pty Ltd 2,000,000 0.49

HSBC Custody Nominees 1,822,705 0.45

Merck Sharp & Dohme 1,739,113 0.43

Dr Hugh Niall & Mrs Margaret Niall 1,730,000 0.43

The Walter and Eliza Hall Institute of Medical Research 1,633,135 0.40

Oaktel Investments Pty Ltd 1,600,000 0.39

Sayers Investments (ACT) Pty Limited 1,456,486 0.36

Indira Enterprises Pty Ltd 1,448,123 0.36

Jagen Nominees Pty Ltd 1,354,621 0.33

Mirrabooka Investments Limited 1,350,000 0.33

Substantial Shareholders

The following information is extracted from substantial shareholding notices given to the Company as at 5 September 2007 by shareholderswho hold relevant interests in more than 5 per cent of the Company’s voting shares.

Name Ordinary Shares Held % of Total Shareholding

Shire BioChem Inc 28,700,000 7.07


Shareholder InformationFor the Year Ended 30 June 2007

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Distribution of Shareholders as at 5 September 2007

Range Holders Ordinary Shares Held % of Total Shareholding

1 – 1,000 1,301 867,778 0.21

1,001 – 5,000 3,022 8,477,436 2.09

5,001 – 10,000 1,754 13,999,279 3.45

10,001 – 100,000 4,105 136,632,589 33.65

100,001 and over 433 246,033,593 60.60

Total shareholders 10,615 406,010,675 100.00

The number of shareholders as at 5 September 2007 with less than a marketable parcel of $500 worth of shares, based on the marketprice as at the above date, was 782.

Shares and Voting Rights

As at 5 September 2007, there were 10,615 holders of ordinary shares of the Company.

The voting rights attached to ordinary shares are set out in Rules 5(f) and 40 of the Company’s Constitution. In broad summary, but withoutprejudice to the provisions of those Rules, each shareholder present at a general meeting in person or by a duly appointed representative,proxy or attorney:

(a) on a show of hands, has one vote except if a shareholder has appointed more than one person as a representative, proxy or attorney,in which case none of those persons is entitled to vote or if a person is entitled to vote in more than one capacity, that person is entitledto only one vote; and

(b) on a poll, has one vote for each fully paid share held and for each other share held, has a vote in respect of the share equivalent to theproportion which the amount paid on that share is of the total amounts paid and payable on that share at the time a poll is taken butno amount paid on a share in advance of calls shall be treated as paid on that share.

As at 5 September 2007, there were options over 10,627,500 unissued ordinary shares granted to employees under the Key EmployeeShare Option Plan plus a further four million issued to Shire Biochem Inc. There are no voting rights attached to either the options or theunderlying unissued ordinary shares.

Officers

Chief Executive Officer: Dr Julian Chick Company Secretary: Mr Alan Boyd

Registered Office

Avexa Limited576 Swan StreetRichmond Victoria 3121 AustraliaTelephone 61 3 9208 4300Facsimile 61 3 9208 4004

Share Registry

Computershare Investor Services Pty LimitedYarra Falls452 Johnston StreetAbbotsford Victoria 3067 AustraliaTelephone 1300 850 505 or 61 3 9415 4000Facsimile 61 3 9473 2500Website www.computershare.comEmail [email protected]

Facsimile for receipt of 20 November 2007 Annual General Meeting correspondence only: 61 3 9473 2555.


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Securityholder Information

You can gain access to your Securityholding information in a number of ways. The details are managed via the Company’s registrar,Computershare Investor Services and can be accessed as outlined below. Please note your Securityholder Reference Number (SRN) or Holder Identification Number (HIN) is required for access.

Investor Phone Access Provides telephone access 24 hours a day seven days a week.

Step 1: Call 1300 850 505Step 2: Please say company name – e.g. Avexa.Step 3: Follow the prompts to gain secure, immediate access to your holding details, registration details or payment information.

Internet Account Access Securityholders can access their details via the internet. Computershare provides two levels of access: Read only and online portfolioupdating capability.

View Securityholding (read only access)Step 1: Go to www.computershare.com/au/investorsStep 2: Select Securityholding and enter AVX or Avexa Limited.Step 3: Enter Securityholder Reference Number (SRN) or Holder Identification Number (HIN).Step 4: Read only access to account balance, transaction history, payment instructions, payment history and sign up for electronic

securityholder communications.

Investor Centre (online portfolio updating capability)Step 1: Go to www.computershare.com/au/investorsStep 2: Enter User ID and PIN or access the ‘Register Here’ button.Step 3: Follow the prompts to register. For security purposes, Computershare will generate a PIN and mail it to your registered address.Step 4: View, evaluate and manage your portfolio.

Changing Shareholder Details

Changes to your name or address must be advised in writing to Computershare Investor Services Pty Limited. If you are sponsored by a broker, your notice in writing must be sent to your sponsoring broker.

Avexa Publications Mailing List

The Annual Report is a major source of information about the Company. Shareholders who do not wish to receive this publication canassist the Company to reduce costs by advising Computershare Investor Services Pty Limited in writing. Shareholders will continue toreceive all other shareholder information, including the Notice of Annual General Meeting and Proxy Form. The Annual Report, otherreleases and general Company information are also available on the Company’s website at www.avexa.com.au

Annual General Meeting

10am on Tuesday 20 November 2007Computershare Conference CentreYarra Falls452 Johnston StreetAbbotsford Victoria 3067Australia

Investor Relations

If you have any questions or issues regarding your shareholding or require hard copies of any information posted on Avexa’s website,please contact the Company’s Company Secretary, Mr Alan Boyd on 61 3 9208 4300.


Shareholder Information continued

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Designed and produced by MDM Design Associates

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Avexa Limited ABN 53 108 150 750

576 Swan Street Richmond Victoria 3121 Australia

Telephone 61 3 9208 4300Facsimile 61 3 9208 4004www.avexa.com.au

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for personal use only - asxthe company’s current strategies are focussed on moving apricitabine...

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