Announcement PDF I MAGI O N B IOSYST EM S L I MI T E D ANNUAL REPORT 2022 I BX ANNUA L REPORT 2 02 2 A N N UA L RE PORT CONTENTS IBX A NNUA L REPORT 2022 2022 H I GH L I G H TS 2 2022 Highlights RESEARCH & DEVELOPMENT 3 The future of molecular imaging • March 2022 - MagSense® HER2 Breast Cancer Phase I study interim results reported 5 Letter from the Chairman 7 Directors’ Report 17 Remuneration Report (audited) 26 Auditor’s Independence Declaration 27 Consolidated Statement of Profit and Loss and Other Comprehensive Income 28 Consolidated Statement of Financial Position 29 Consolidated Statement of Changes in Equity 30 Consolidated Statement of Cash Flows 31 Notes to the Consolidated Financial Statements 58 Directors’ Declaration 59 Independent Auditor’s Report 62 Shareholder Information 65 Corporate Directory 1 • April 2022 - Sponsored Research Agreement executed with researchers as Massachusetts General Hospital • July 2022 - Research collaboration with University of Sydney related to brain cancer project • September 2022 - Preclinical research for prostate cancer detection presented at World Molecular Imaging Conference • December 2022 - Clinical data for first cohort of MagSense® HER2 Breast Cancer Phase I Study reported at breast cancer meeting • Subsequent to year-end - Company announces shift to detection of MagSense® HER2 imaging agent by MRI to accelerate route to commercialization CORPORATE • Cash balance at 31 December 2022 $4.4M • Received $2.5M R&D tax incentive • Move to new facility completed, expanding IBX’s internal nanoparticle R&D capabilities and providing additional manufacturing capability to support clinical programs and can be leveraged to generate revenue 2 I BX ANNUA L REPORT 2 02 2 T H E FU TU RE OF MO LECU LAR IM AG I N G CHANGING THE WAY WE LOOK AT CANCER IBX A NNUA L REPORT 2022 Pre-dose 2 PRE-DOSE T2 POST-DOSE T2 CLINICAL AND PRECLINICAL RESEARCH OF MAGSENSE® IMAGING AGENTS In 2022, we were very pleased to be able to share our progress in the research and development of two of our MagSense® targeted nanoparticle imaging projects – clinical data for our breast cancer product and preclinical data for our prostate cancer initiative. The progress we have reported provides strong support for Imagion to continue the development of its pipeline of MagSense® imaging agents for different types of cancers. Over the last 50 years, there have been significant improvements in medical imaging technologies largely in the areas of improving sensitivity and image resolution. But there’s still much to be done around providing a noninvasive, non-radioactive, and targeted solution that can make diagnosing cancer better. PHASE I HER2 BREAST CANCER CLINICAL TRIAL Improving the way doctors are able to detect and diagnose cancer is no easy task, but that is Imagion’s main mission. Our MagSense® technology has been designed to be more targeted and sensitive than conventional imaging methods, resulting in more successful treatments and improved patient outcomes. A blinded review of the images by an independent panel of radiologists has corroborated our findings. The scans show that the contrast created by the MagSense® HER2 imaging agent in nodes highly suspicious for tumour is distinctly different from the contrast seen in non-involved nodes. The MagSense® bio-functional nanoparticles produce a detectable molecular signature that indicates the presence of tumour cells in a patient’s body, rather than simply identifying a “region of interest” or “suspicious lesion”. Our Phase I study of the MagSense® HER2 breast cancer imaging agent has indicated that our magnetic molecular imaging technology has the potential to change clinical practices because they would be safe and could be incorporated into existing clinical workflows with conventional MRI machines. 3 Data collected to-date in our HER2 Breast Cancer study has given us the confidence that our targeted nanoparticles are likely to be safe, well-tolerated and able to detect cancer cells in a patient’s lymph nodes. The MagSense® imaging agent creates a detectable change in image contrast when tumour cells are in lymph nodes The trial remains open for enrolment to provide additional data to inform future study design and evaluate diagnostic performance. PROSTATE CANCER PRECLINICAL RESEARCH The Imagion team also presented preclinical data at the World Molecular Imaging Conference related to a MagSense® imaging agent for the detection of like prostate cancer. The research demonstrated that MagSense® targeted particles accumulate preferentially in tissues expressing Prostate Specific Membrane Antigen (PSMA), similar to how PSMA-PET tracers work. A MagSense® imaging agent would be a bio-safe alternative and would eliminate the need to use radioactivity to diagnose prostate cancer. 4 I BX ANNUA L REPORT 2 02 2 IBX A NNUA L REPORT 2022 L ET TE R F ROM T H E CHAI RMAN DEAR SHAREHOLDERS, 2022 was a momentous year for our company. It has been especially gratifying to be able to end the year with demonstrable evidence that our clinical study has resulted in a positive outcome and clarity for our development pathway in 2023 and beyond. Throughout the year, we remained focused on delivering results from our first-of-its-kind investigative study of our novel MagSense® imaging technology. We initiated the Phase I study as the initial proof-of-principle that our targeted nanoparticle technology could non-invasively detect cancer. While enrolment in the HER2 breast cancer study remained challenging in 2022, we were pleased to be able to share the initial safety review in mid-year and by year-end have sufficient data to report that our study objectives were being met. This is a remarkable achievement for our company and has been instrumental in giving us the confidence to move forward. In 2022, we were also able to make significant progress with our research efforts to build a pipeline of products based on our proprietary nanoparticle technology. In April, we entered into a research agreement with Massachusetts General Hospital to explore the use of IBX’s iron oxide nanoparticles for vascular imaging as an aid in diagnosing and treating cardiovascular diseases. In September, our team presented encouraging data from our preclinical studies using targeted nanoparticles for prostate cancer and we expanded our partnership with Patrys Limited to include the University of Sydney to investigate the use of the MagSense® technology to detect brain cancers. We look forward to reporting our progress on these projects and others in 2023. Establishing and maintaining these partnerships with leading 5 companies and research institutions is vital in the development of a robust pipeline of products based on our nanoparticle technology, which can support our strategic goals and our mission of transforming how medical imaging can improve patient outcomes. At the beginning of 2022, we moved into our new R&D and manufacturing facility in San Diego. This move has helped us expand our internal R&D capabilities and provides the additional manufacturing capacity we will need to support our clinical product development and, ultimately, commercial production. Aided by an AU$2.5 million research and development tax incentive from the Australian Taxation Office (ATO) in respect of the 2021 year we managed our finances to achieve an important outcome for our shareholders without having to raise capital in 2022. The remarkable work our team and partners did in 2022 has led us to where we are now. We start 2023 with a clear direction for our company: focusing on clinical applications of our nanoparticle imaging agents in conjunction with the readily and widelyavailable MRI technology. This is an exciting step for our company, eliminating technical risks and bringing us one step closer to commercializing our technology. I started this letter indicating 2022 was a “momentous” year. It has been, in both the literal sense of being significant and consequential, but also in the sense of our company now having momentum. We believe we have demonstrated the path forward for Imagion and are hopeful you will support us as we look to execute this strategy in the new year, bringing value to our shareholders and realizing our technology’s potential to change the way we look at cancer. ROBERT PROULX Executive Chairman Imagion Biosystems Limited 6 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Directors' Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Imagion Biosystems Limited (referred to hereafter as the 'Company' or 'parent entity' or ‘Imagion’) and the entities it controlled at the end of, or during the year ended 31 December 2022. Directors The following persons were directors of Imagion Biosystems Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Robert Proulx Executive Chair / President Robert has been CEO and President of Imagion Biosystems since February 2015. Previous employment experience includes President / General Manager for Silicon Biosystems and a career in marketing and sales management with more than 25 years experience in the computer, life science and medical diagnostics industries. Some of Robert's other relevant experience include: Vice President Marketing and Sales for Nanogen Inc.; Senior Vice President of Marketing and Business Development at Gene Logic; and General Manager, Life Sciences at IGEN International Inc. Robert holds an M.A. and B.A. from The State University of New York at Albany and an Executive MBA from the Penn State Smeal College of Business. Mr Michael Harsh Non-Executive Director Michael is a co-founder and Chief Product Officer of Terapede Systems, a digital X-ray startup that focuses on developing an ultra-high resolution medical flat panel X-ray detector. Prior to co-founding Terapede Systems in 2015, Mr. Harsh had a 36-year long career with General Electric, including serving as Global Technology Leader – Imaging Technologies at the GE Global Research Center and culminating with him serving as Vice President and Chief Technology of GE Healthcare. Additionally, he serves on the boards of directors of Endra Life Sciences (NASDAQ: NDRA), EmOpti and Compute Health Acquisition Corp (NYSE:CPUH) as well as being a member the Radiological Society of North America ("RSNA"), Research & Education Foundation Board of Trustees. He had previously served as a director for FloDesign Sonics until its acquisition by MilliporeSigma, a division of the Merck Group. Mr. Harsh is a graduate of Marquette University, where he earned a bachelor’s degree in Electrical Engineering. He holds numerous U.S. patents in the field of medical imaging and instrumentation. In 2008, Mr. Harsh was elected to the American Institute for Medical and Biological Engineering College of Fellows for his significant contributions to the medical and biological engineering field. Mr David Ludvigson Non-Executive Director David is currently a director (was formerly President & CEO) af Nanomix, a point-of-care diagnostic medical device company. David is a financial and operating executive with over 35 years of international experience in life sciences and technology companies including Biogen (formerly IDEC Pharmaceuticals), Matrix Pharmaceutical, Nanogen, and MIPS Computer Systems. His experience over 15 years in the diagnostics arena has led numerous new product efforts from concept to market launch. David has conducted many successful strategic transactions including multiple acquisitions, corporate partnerships, technology and intellectual property licensing agreements, and OEM relationships and his financing experience includes venture capital, corporate, mezzanine, lease, bank credit line, LBO, IPO and secondary public sources. 7 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Ms Jovanka Naumoska Non-Executive Director Jovanka is an Australian-qualified corporate lawyer with board-level experience in legal and regulatory issues pertaining to medical imaging technology. Jovanka is currently a nonexecutive director of Security Matters Limited (ASX:SMX) and serves Australian scientific development organisations in an expert capacity on matters relating to corporate law, business operations, intellectual property development and regulatory compliance. Mr Mark Van Asten Non-Executive Director Mark has over 30 years of experience in the medical diagnostics and life sciences industry. Much of this time has been in international business development, strategic planning and introduction of new technology. Through Diagnostic Technology, a company he founded, he has been responsible for the development and introduction of a number of innovative technology platforms and technologies into mainstream healthcare use, including HPV DNA testing for cervical cancer screening and the molecular monitoring for both viral infections and cancer treatments. He holds an Adjunct Senior Lectures position at the School of Biotechnology and Biomolecular Science, University of NSW where he has collaborated on a number of research projects related to biosynthetic pathways in bacteria. Ms Dianne Angus Non-Executive Director Dianne has worked as a senior executive within the biotechnology, medtech, agritech and healthcare sectors for over twenty years and currently serves as non-executive director with Neuren Pharmaceuticals Limited (ASX: NEU), Cyclopharm Limited (ASX:CYC) and Bionic Vision Technologies Limited as well as being a member of the Deakin University Council. She has built competitive and differentiated product portfolios, from investment in innovative research and product development to commercialisation and market entry. Dianne has created many global industry partnerships to accelerate asset development, financing and provide reputational validation & endorsement. With twenty years’ experience in ASX and NASDAQ listed companies, Dianne has expertise in corporate governance, capital raising and stakeholder engagement within the listed capital market sector. Dianne holds a B.Sc. (Ed), B.Sc. (Hons), M.(Biotechnology) and is a registered patent & trade mark attorney. Company Secretary Mr Geoff Hollis Company Secretary Prior to joining Imagion in December 2020 Geoff spent over 10 years in ASX listed companies as CFO and Company Secretary. Geoff commenced his career with almost 10 years at leading Melbourne based accounting and business advisory firm, Pitcher Partners. Geoff is experienced in capital and debt raisings along with ongoing investor relations function in addition to other CFO and Company Secretarial experience required for an ASX listed entity on a growth journey. Geoff is also a member of the Corporate Governance Institute and Chartered Accountants Australia and New Zealand. 8 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: Nanotechnology; Biotechnology; Cancer Diagnostics; and Medical Imaging using Magnetic Resonance and Superparamagnetic Relaxometry. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations Operating loss of $9,807,208 (2021: $6,024,706 loss) was materially in line with expectations and increased from 2021 due to increased expenses. Staffing and administrative expenditure, research and development expenditure and depreciation and finance expenditure all increased during 2022. Organisational capacity has continued to be expanded during 2022 leading to and increase in staffing and administrative expenditure. In relation to research and development, the consolidated entity incurred expenses in relation to its MagSense® HER2 Breast Cancer Phase I Study continuing in Australia during 2022. In addition to trial costs, research and development expenses were incurred in relation to other projects and initiatives during the year. Depreciation and finance expenses increased due to expenditure incurred in relation to its new leased premises (commenced in January 2022) including adoption of AASB 16 lease accounting provisions. Revenue Total revenue increased by $215,359 to $3,070,925 (2021: $2,855,566). Revenue and Other Income mainly comprised income generated through sales of nanoparticles manufactured by the consolidated entity to customers. Total receipts from sales of super-paramagnetic iron oxide nanoparticles during 2022 were $473,429 (2021: $232,865). These sales were undertaken directly through IBX and includes sales to New Phase, an Israeli-based company, for the exploratory use of their SaNP hyperthermia treatment as well as increased sales to other customers. During 2022 the consolidated entity received a research and development tax incentive of $2,500,966 (2021: $2,612,159) in relation to its research and development expenditure incurred in 2021 tax year. Operating expenses Total expenses increased by $3,997,861 to $12,878,133 (2021: $8,880,272). Research and development expenses Research and development expenses increased by $911,819 to $3,615,851 (2021: $2,704,032). Whilst expenses relating to the MagSense® HER2 Breast Cancer First-in-human Study reduced slightly year-on-year there were increases in other research and development initiatives including: increased animal studies and in-house R&D supporting other indications including prostate cancer, ovarian cancer and brain tumour imaging; outsourced support to increase CMC and GMP manufacturing capabilities to support further clinical and manufacturing requirements; and expenses in relation to investigating the use of a non-targeted nanoparticle to be used in conjunction with conventional Magnetic Resonance Imaging (MRI) including expenses associated with the Sponsored Research Agreement with Massachusetts General Hospital. 9 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Employment expenses Employment expenses increased by $1,601,772 to $4,863,506 (2021: $3,261,734). In addition to salary increases and promotions in the ordinary course of business (including operating in a high inflationary environment) the consolidated entity has increased its organisational capability with key hires including: Chief Development Officer and other clinical operations employees to increase clinical operations capabilities as we plan for the next phase of development; Director of Operations to improve manufacturing capabilities to supporting development plans and external sales; Director of Quality to support clinical operations and manufacturing; Medical Physicist to increase imaging capabilities; and a Marketing and Communications Manager to reduce reliance on outsourced providers. Depreciation and finance expenses Depreciation and finance costs increased by $870,253 to $1,282,510 (2021: $412,257). Expenses related to the consolidated entity's San Diego premises comprised $846,817 of the increase. These expenses arise due to adopting AASB 16 lease accounting provision. The consolidated entity took occupancy of new premises in January 2022. Other expenses All other expenses increased by $614,016 to $3,116,266 (2021: $2,502,250). Professional fees reduced by $148,597 due to a reduction in recruitment costs (due to timing) and a reduction in listing and filing fees. General expenses increased by $607,637 mainly due to increased in rent outgoings, utilities and travel related expenses (as a result of post-Covid travel recommencing). Liquidity The consolidated entity has a positive cash position with $4.4 million in cash at the end of 2022 (2021: $13.4 million) with further potential liquidity in the form of an R&D tax incentive in respect of its 2022 R&D expenditure. The consolidated entity is cognisant of its liquidity requirements and will provide further updates as and when required. Clinical development MagSense® HER2 Breast Cancer Clinical Development The consolidated entity recently announced that its MagSense® HER2 breast cancer Phase 1 study has achieved promising results showing that the MagSense® HER2 imaging agent produces a change in image contrast and that the contrast in nodes highly suspicious for tumour is distinctly different from the MR image contrast seen in noninvolved nodes. These findings were corroborated by an independent panel of expert breast cancer radiologists and comprised the first cohort of six patients. The confirmation by the panel of the consolidated entity's assessment that cancer detection can be achieved when using the MagSense® imaging agent with MRI has significant implications for the consolidated entity. • MRI is already part of clinical workflow and clinical decision making with a large installed base of scanners and trained radiologists throughout the world, which will help drive faster clinical adoption. • It eliminates the near-term expense and risks associated with developing and introducing a new type of detection technology. • It demonstrates the clinical potential for the consolidated entity's pipeline of imaging agents targeting other cancers. 10 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Since all MagSense® targeted imaging agents use the same underlying magnetic nanoparticle technology, the consolidated entity now plans to prioritise the development of its MagSense® nanoparticle technology for use with mainstream clinical MRI scanners. The MagSense® HER2 Breast Cancer Phase 1 study is the first clinical investigation of the consolidated entity's proprietary MagSense® magnetic nanoparticle technology. The study was designed to be an initial proof-ofprinciple in human subject to assess whether targeted magnetic nanoparticles can provide molecular imaging without the use of radiation in humans. The study is investigating the potential for the MagSense® HER2 imaging agent to detect HER2 positive breast cancer cells that may have metastasized to the lymph nodes. A total of nine patients have been enrolled into the study with the study remaining open for enrolment to continue to accumulate valuable information that may inform future study considerations and gather a larger data set that may be used for training purposes. The study is currently recruiting through four sites in three states – Monash Health, Austin Health, Royal Brisbane Women’s Hospital and Lake Macquarie Private Hospital. All enrolled trial patients receive a dose of the MagSense® HER2 targeted imaging agent, followed by exploratory assessment by two forms of imaging modalities: • our proprietary magnetic relaxometry imaging method (MRX); and • a standard magnetic resonance imaging method (MRI). The consolidated entity's proprietary magnetic relaxometry imaging method (MRX) will continue to be developed with academic and industry partners, focusing on a new generation of small magnetic sensors that could enable the use of magnetic relaxometry in the doctor's office. The consolidated entity anticipates that this will be a longer-term project. The consolidated entity would like to acknowledge and thank the patients that have enrolled in the Phase 1 study to-date, without whom we would not be able to advance our idea of improving cancer detection. Additionally, the consolidated entity would like to acknowledge the consolidated entity's founder, Dr. Edward Flynn, for his foresight and for pioneering the idea that magnetic nanoparticles could be used in a targeted way to noninvasively detect cancers. Prostate cancer The consolidated entity continued to advance its preclinical prostate cancer research during 2022. In September 2022 the consolidated entity presented a poster at the World Molecular Imaging Congress noting that its MagSense® molecular imaging agent shows high specificity and selectivity with both Magnetic Resonance imaging method (MRI) and its proprietary Magnetic Relaxometry imaging method (MRX). The preclinical research provided strong evidence that the consolidated entity's magnetic nanoparticle technology has the potential to target prostate cancer tumours expressing the Prostate Specific Membrane Antigen (PSMA) with high specificity, accumulating preferentially in tissues expressing PSMA and not in other vital organs. The data presented follow from the initial work supported by a CSIRO Innovations Connections grant received in 2021. 11 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Brain cancer The consolidated entity is collaborating with Patrys Limited to investigate the use of a Patrys’ PAT-DX1 deoxymabs antibody with the consolidated entity’s MagSense® nanoparticles to improve brain tumour imaging and diagnosis. This collaboration further explores the utility of the consolidated entity’s nanoparticles in other complex indications. Should this collaborative work progress positively, the consolidated entity will have an exclusive option to a future license agreement. Use of non-targeted nanoparticles with conventional Magnetic Resonance Imaging (MRI) During the year the consolidated entity entered into a Sponsored Research Agreement with researchers at Massachusetts General Hospital to investigate the potential for the consolidated entity's iron oxide nanoparticle technology to be used in conjunction with conventional MRI. Gadolinium-based Contrast Agents (GBCAs) are the primary contrast media products approved for use with MRI for cardiovascular applications. Certain patient populations such as patients with chronic kidney disease, pregnant women and paediatric patients often avoid use of GBCAs due to the potential side effects. An iron oxide nanoparticle-based agent would be a safe alternative for vascular imaging applications where contrast media are required. The consolidated entity's research program aims to leverage our underlying know-how with iron oxide nanoparticle technology to investigate their possible use for vascular imaging. This would be a non-targeted nanoparticle with properties providing for it to remain in circulation to enhance the visualization of arterial and venous blood flow which is important in diagnosing and treating certain cardiovascular diseases. The consolidated entity expects these ongoing projects to continue to progress throughout 2023, effectively positioning the Company’s imaging and nanoparticle technology for future commercial and clinical growth in the coming years. New facility The fit-out of a new San Diego R&D facility was largely completed by the end of 2021 with the consolidated entity taking occupancy early in 2022. This new facility significantly expands the consolidated entity’s internal nanoparticle research & development capabilities, provides additional manufacturing capacity to support clinical programs and can be leveraged to generate revenue through third party commercial relationships. Outlook As the planning for the consolidated entity’s MagSense® HER2 breast cancer clinical program progresses and the consolidated entity advances its development pipeline, the consolidated entity is budgeting for research and development expenditures and staffing costs to increase in 2023, particularly in the second-half of the year. The consolidated entity has initiated the regulatory process with the US Food and Drug Administration (FDA) regarding bringing the HER2 Breast Cancer clinical studies to the United States where there will be access to a larger number of sites and a more substantial patient population. The consolidated entity is well positioned to continue the progression of its MagSense® HER2 Breast Cancer program as well as other indications and collaborations. 12 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2022 Significant changes in state of affairs There were no significant changes in the state of affairs of the consolidated entity. Matters subsequent to the end of the financial year No matters or circumstances have arisen since the end of the financial period that has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. Likely developments and expected results of operations Management expects spending to increase in 2023 and future periods as it progresses the clinical development of the consolidated entity's MagSense® HER2 Breast Cancer imaging agent. The consolidated entity also expects to carry out other research and development projects throughout 2023. Environmental regulation The Consolidated Entity is not subject to any significant environment regulation under Australian Commonwealth or State Law. Information on Directors Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Mr Robert Proulx (Executive Chair / President) - Master of Arts and Bachelor of Arts, The State University of New York at Albany; - Executive Master of Business Administration, Penn State Smeal College of Business. Robert has over 25 years’ experience bringing life science and medical device products through development and commercialisation and joined the predecessor company, Senior Scientific as President and Chief Operating Officer. None None None 6,163,250 shares 6,282,000 options 5,000,000 performance rights 5,000,000 performance rights are issued under the company's longterm incentive plan and will vest into one ordinary share each subject to achievement of prescribed performance conditions. 13 Imagion B