Ann: Annual Report to shareholders, page-4

Chairman's Letter:

In 2017 we made great progress towards our goal of making trofinetide available as a novel and potentially disease-modifying treatment for Rett syndrome.

These important steps were made with continuing strong support and assistance from Rettsyndrome.org, the leading Rett syndrome physicians in the United States and the families of the girls and young women who participated in our clinical trial.

Following the deeply encouraging results of the Phase 2 pediatric trial that were announced in March 2017, we requested an End of Phase 2 Meeting with the US Food and Drug Administration Division of Neurology Products (“DNP”) to discuss proposals for the remaining Phase 3 development. The meeting was held in October 2017 and we were encouraged by the constructive nature of the interaction with DNP. We reached agreement on all of the key aspects of the remaining development program, including the use of the Rett Syndrome Behaviour Questionnaire as a primary endpoint in a single Phase 3 clinical trial. It means that in the Phase 3 trial we will essentially need to replicate the results from the Phase 2 pediatric trial utilising a longer treatment period, an optimised dosing regimen and a larger sample size.

Execution of the Phase 3 development for Rett syndrome, as well as completion of Phase 2 development for Fragile X syndrome, requires significant additional funding. Since the FDA meeting, we have been evaluating options to secure that funding, including through partnering. I have consistently said that we are guided by two principles – speed to market for the families affected by these debilitating conditions and value for our shareholders. We are presently in advanced confidential discussions regarding those options.

In July 2017 we completed a very important financing transaction that was designed to enable us to continue critical manufacturing and non-clinical activities in preparation for Phase 3 and allow us to pursue Phase 3 funding options without financial pressure. We raised $10 million from Lanstead Capital, supported by $1.5 million from Rettsyndrome.org and Neuren’s leadership team. Under the terms of the Lanstead transaction, we received $1.5 million up-front and invested the remaining $8.5 million into a Sharing Agreement under which we would receive an amount over 18 months that could be more or less than $8.5 million depending on Neuren’s share price. We said at the time that the structure of the transaction was particularly suited to Neuren’s needs and future prospects, with the share price at that time possibly reflecting some uncertainty around the likely outcome of the FDA meeting. To date the structure has indeed been highly beneficial to Neuren, with the positive outcome of the FDA meeting and consequent share price rise resulting in Neuren receiving incremental funding of $2.1 million from Lanstead.

We have significantly enhanced our trofinetide patent portfolio in the last year, with new patents extending to 2032 granted in the United States, Europe and Japan covering trofinetide in Rett syndrome, Fragile X syndrome and other autism spectrum disorders. The patent in Japan is the first patent granted for trofinetide in that important market.After providing valuable support, insight and expertise for 5 years as a non-executive director, Bruce Hancox stepped down from the board at the end of 2017. We intend to appoint at least one additional non-executive director after we reach a conclusion on the funding options for Phase 3. Neuren’s leadership team directly supported the capital raising in July 2017, and agreed to some reductions in fees and salaries from late 2016 as we took steps to reduce cash outflows prior to the financing. I am very grateful for their unwavering commitment as we continue to work with great focus and determination to achieve the very best outcome for patients and shareholders.

Dr Richard Treagus
Chairman