Ann: Response to ASX Appendix 4C Query, page-2

Excellent!

Just what the market will want to hear.

1. It is possible to conclude on the basis of the information provided in the Appendix 4C that if the Company were to continue to expend cash at the rate for the quarter indicated by the Appendix 4C, the Company may not have sufficient cash to continue funding its operations. Does the Company expect that it will continue to have negative operating cash flows for the time being and, if not, why not?

The Company does not believe that the operating cash flows for the June 2015 quarter are indicative of expected levels of operating cashflow for the September or December quarters. The period January to June 2015 has, as forecast, been intensive in direct R&D spend related to the completion of two phase II clinical trials, and feasibility works for Invion’s inhaled respiratory drug. The significant costs for these programs have now been incurred with only minimal forecast expense still to be incurred. As R&D accounts for the main operating cash outflow for the Company, it is expected that overall operating cashflows will decrease significantly in the current and next quarter.