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PHYLOGICA-OPSONA DEAL PROGRESSES TO COMMERCIALISATION

Key Points
• Successfully delivers on major milestone with international partner, Opsona Therapeutics
• Opsona demonstrates that specific Phylomer hits have potential as new drugs for inflammatory diseases
• Discussions in progress with potential commercialisation partners
• Selection of the most promising Phylomer hits for commercialisation now underway
• The companies are in discussions to expand collaboration

Perth, Australia 7 May 2007: Phylogica Limited (ASX: PYC) announced today that it has delivered on a major milestone with International co-development partner, Opsona Therapeutics Ltd. This milestone highlights the independent validation of Phylomer technology and also provides a strong foundation to take the partnership into the next phase of commercialisation.

Phylogica’s collaborative agreement with Opsona was formed in March 2006 to test Phylogica’s Phylomer® peptides and identify which of them could be selected as drug candidates for inflammatory disease. More than half of the Phylomer hits tested have shown potential as drug candidates.

Phylogica’s Phylomer® drug candidates, identified in a rapid screening process over a three month period, were tested in human cell assays and actively blocked a pivotal pathway (a Toll Like Receptor or TLR pathway) underlying the inflammatory response in cells. The TLR pathway triggers inflammation (the underlying cause of diseases such as Rheumatoid Arthritis, Asthma, Psoriasis) and hence is being targeted with many different approaches by the pharmaceutical industry. The Phylogica-Opsona collaboration involves a novel approach in targeting the TLR pathway.
Phylogica has targeted a key protein in the TLR pathway that’s inside cells. Conventional classes of drugs, such as antibodies, can’t access this target as they are only effective on proteins on the cell surface. These Phylomer leads are unique because they are the first to be able to block this key protein in a pathway of significant interest to the Pharmaceutical Industry.

Further testing is now underway to select the most promising Phylomer® candidates for further drug development and commercialisation for inflammatory disease. Opsona and Phylogica will expand the collaborative project to other targets and are in discussions with major companies to commercialise Phylomer® candidates. Both companies will share in the
revenues arising from Phylomer® generated products.

“These results are very encouraging and beyond our initial expectations. We are very pleased with the number and quality of drug candidates identified and confident to now move to the next stage of our collaboration with Phylogica," said Dr Mark Heffernan CEO Opsona Therapeutics.

“This success with Opsona has put us at the cutting edge of TLR drug discovery, and has attracted the interest of major pharmaceutical companies that will lead to further deals in the near future, ” said Dr Stewart Washer CEO Phylogica.