Benitec Limited (ASX:BLT) Half Yearly Accounts

Melbourne, Feb 26, 2010 AEST (ABN Newswire) - Benitec Limited (ASX:BLT) (PINK:BNIKF) directors submit their report for the half-year ended 31 December 2009.

DIRECTORS

The following persons were directors of Benitec Limited ("Benitec") during the whole of the half-year and up to the date of this report:

Mr Peter Francis (Chairman)Mr Mel BridgesMs Sue MacLemanDr John Chiplin (appointed 1 February 2010)

REVIEW AND RESULTS OF OPERATIONS

Overview

Benitec is one of the pioneers of RNA interference (RNAi) technology, which can be used to precisely destroy RNA viruses and silence the expression of defective genes. Benitec's core patents and licenses provide key technologies to trigger RNAi in human cells and in live animals. Benitec holds exclusive worldwide rights for the development and commercialisation of all therapeutic human applications. The corporate goal of Benitec is to develop RNAi-based therapeutics for serious diseases such as infectious diseases, cancers and autoimmune disorders through co-investment and out-licensing. Benitec derives revenues from out-licensing its proprietary DNA-directed RNAi (ddRNAi) technology to life sciences companies in various fields.

Benitec continued its collaboration with the City of Hope Center in California where a HIV-based vector delivery of anti-HIV RNA (pHIV7-shI-TAR-CCR5RZ) ex vivo drug candidate has completed an inital pilot human trial.

This study was fully enrolled in October 2008 and 12 month interim results were presented at several conferences in 2009 showing that this is a potentially safe and feasible approach. Further analysis on gene marking and intergration is planned along with additional process development before the next human trial is commenced.

Benitec has an option to license this technology and pending further results in the next few months expects to trigger the license on this technology. During the period, Benitec also secured rights to a second collaboration with the City of Hope, a multi-project effort centered at City of Hope to investigate a T cell HIV-based vector delivery of anti-HIV RNA (pHIV7-shI-TAR-CCR5RZ) as a clinical modality. An Investigational New Drug application (IND) was filed in Q4 2009 and it is anticipated that the first patient will be enrolled in the inital pilot human trial in Q2 2010.

Benitec commenced a collaboration with Biomics Technologies Inc in China in September 2009. This project is focussed on Hepatitis B which is an area of significant unmet medical need in China and an area of interest to the Chinese government. This initial collaboration involves a 20 week project which is aimed at identifying appropriate target sequences on the Hepatitis B RNA-dependent-DNA polymerase gene which can be used to make ddRNAi constructs to silence the Hepatitis B virus. This project has progressed well and pending the raising of additional capital we expect that this project will move into the next phase with generation and testing of these constructs in animal models.

Benitec also commenced a collaboration with the Children's Cancer Institute Australia for Medical Research in September 2009. This project is initially focussed on Non Small Cell Lung Cancer (NSCLC) but has utility in other solid tumours. Up regulation of human beta III tubulin is associated with clinical resistance to conventional chemotherapy known as tubulin binding or DNA damaging drugs. By silencing this gene using our proprietary ddRNA technology we have the potential to restore the utility of these chemotherapy drugs which should lead to better patent outcomes with lung cancer.This initial 12 month project will focus on generating beta III Tubulin stable shRNA expressing cells and demonstrating both in vitro and in vivo efficacy in animal models.

The ongoing patent re-examination in the United States Patent Office ("USPTO") has progressed. Benitec was notified on 7 January 2010 that an Examiner's Answer to the Notice of Appeal filed on 22 May 2009 and the accompanying Appeal Brief filed on 27 July 2009 had been issued by the USPTO. Benitec received a copy of the Examiner's Answer on 11 January 2010. The Examiner's Answer finds that claims 25-28 of the patent are free of the prior art and allowable. This is the first indication from the USPTO of allowable claims in the re-examination.

These claims refer to synthetic DNA construct designs with longer "stuffer fragments". Benitec has now reviewed the Examiner's Answer and will now proceed with filing an Appeals Brief on 7 March 2010. It is expected that this will go to an Oral Hearing before the USPTO Board of Appeals in late 2010.

Benitec continues to expect that the key claims will be upheld and the Graham '099 patent reissued.

In early February 2010, Benitec announced that licensee company Tacere Therapeutics, Inc. had announced that Pfizer has exercised the option, granted in a collaboration and license agreement previously announced in January 2008, to further develop and commercialise Tacere's Hepatitis C Virus (HCV) compounds. The lead clinical candidate is a new class of agent containing three separate RNAi elements, simultaneously targeting three different sites of the Hepatitis C virus, and encapsidated in an adeno-associated virus (AAV) protein coat. In preclinical animal studies, Tacere have demonstrated that a single intravenous injection of the agent results in penetration of hepatocytes (the site of HCV replication) at sufficiently high levels to potentially eradicate HCV.

Tacere have been collaborating with Pfizer for two years to demonstrate that this agent has an excellent safety profile in both mice and non-human primates. The triggering of this option by Pfizer is a validation of the Benitec ddRNAi "expressed" approach to treating chronic diseases from the world's biggest pharmaceutical company.

The significance of this arrangement for Benitec is:

* Pfizer has triggered the option to license a drug candidate that relies of Benitec's intellectual property;

* Benitec has a 4.2% equity stake in Tacere Therapeutics; and

* Benitec receives milestone and royalty payments from Tacere Therapeutics under the agreement signed in 2006

During the period, a number of patents were issued. On 27 August 2009, the USPTO provided a Notice of Allowance on Benitec fully owned patent U.S. Patent Application No. 11/072,592. This patent is entitled Multiple Promoter Expression Cassettes for Simultaneous Delivery of RNAi Agents. This invention provides multiple-promoter expression cassettes for simultaneous delivery of RNAi, preferably to mammalian cells in vivo.

On 27 January 2010, the USPTO issued a Notice of Allowance on U.S. Patent Application no. 10/646,070. The application is directed towards a double-stranded synthetic gene comprising multiple copies of a structural gene region having a nucleotide sequence which is identical to a nucleotide sequence of a target gene in a eukaryotic cell. The multiple copies of structural gene region are separated by a sequence of nucleotides that is 50-100 or 100-500 nucleotides in length. This patent is part of the Graham family of patents.

On 4 January 2010, Benitec announced that it had signed a win-win agreement with Australia's Commonwealth Scientific and Industry Research Orgnaisation (CSIRO). In exchange for a 10% equity stake in Benitec Limited.

The Capital Growth Agreement and Commercial Agreement were terminated, allowing Benitec to be a more attractuve investment option moving forward. In 2007 the Board identified that the Capital Growth Agreement and onerous terms of the Commercial Agreement were negatively impacting investment, collaboration and potential merger/acquisition options. As a result Benitec approached CSIRO with an equity offer to be provided in exchange for removal of the Capital Growth Agreement and Commercial Agreement. The other objective was to provide clarity and simplification for both parties so they could maximise value from this portfolio.

Moving forward there will only be one substantive agreement, the Licence Agreement. As part of the transition from the current arrangements this is supported by a Transition Agreement, Subscription Agreement and Escrow Agreement. The Licence Agreement is the ongoing licence of the Technology in the Human Field and replaces the existing Licence Agreement and Commercial Agreement. Importantly, Benitec's involvement in patent management has been strengthened and its obligation to pay royalties has been removed. The Human Field has been further clarified, but not narrowed, and CSIRO has confirmed that Benitec's rights apply to the entire scope of the Patents and Patent Applications within this Human Field. The Transition Agreement deals with transitional matters, including the termination of the Capital Growth Agreement (CGA), transfer of Sigma-Aldrich royalties back to Benitec and deferred payment of past patent expenses.

The Subscription Agreement deals with the issue of 10% of Benitec shareholding to CSIRO and, if Benitec issues further shares, a top up amount at six and twelve months being capped at one-fifth of the initial number of shares issued (maximum of 12% as at date of initial issue). The equity is the consideration for termination of the CGA and removal of Benitec's future royalty obligations. Pursuant to the Escrow Agreement, 50% of CSIRO shares will be held in escrow for 6 months. The remaining 50% of CSIRO shares will be held in escrow for 12 months.

Benitec retains its exclusive worldwide licence to the Human Field while CSIRO retains Animal, Plant and other rights.

Of note, Benitec also retains its worldwide non revocable Human Field rights to the Graham patent. New and more precise definitions of Human Field and Technology will apply without limiting Benitec's rights. No royalties will be payable by Benitec to CSIRO in the future and Sigma-Aldrich and sub-licencee revenues for Research Use and reagents will revert to Benitec from 31 March 2010. This will improve Benitec's revenue line and cash flow. Moving forward there will be better aligned interests for patent prosecution and maintenance with the establishment of a Patent Management Committee. Patent costs will be paid by Benitec based upon a jointly agreed budget. CSIRO will have rights to Research Tools and Research Services, subject to the exclusive rights in the Sigma-Aldrich, but would pay Benitec 50% net revenues from commercialisation of these.

In July 2009, Benitec completed the placement of part of the shortfall from the rights issue in April 2009. This resulted in the allotment of a further 8,373,000 ordinary shares for a total of A$251,190. Benitec has just completed a placement of A$360,000 with its major shareholder as well as a Convertible Note agreement for A$640,000 which is expected to be drawn down by the end of the 2010 calendar year.

Benitec is currently actively exploring further capital raising avenues which will enable it to continue to fund the prosecution and maintenance of its significant patent portfolio and also progress its product development and commercialisation activities. Without shareholder and other investor support, Benitec runs the risk of not surviving until the next major value inflection point. The Board are meeting in late February 2010 to confirm the structure and pricing of this planned capital raising . The Board are hopeful that Bentec, in addition to investment by its current shareholders, will also see additional investment from sophisticated investors in the US, who recognise the potential of Benitec's proprietary ddRNAi intellectual property and projects.

Financial Update

Benitec's net loss for the half year to 31 December 2009 was A$885,734 compared to a net loss of A$1,132,094 for the previous corresponding period. Operating revenue showed a small change to A$239,357 from A$240,647 in the previous corresponding period. Operating expenses relating to operations were A$1,125,091 compared to A$1,372,741 for the previous corresponding period. Savings in legal costs, corporate overheads, travel and employment related costs were largely offset by an increase in spending in research and development expenditure, comprising patent costs and the projects with City of Hope, Biomics Technologies in China and Children's Cancer Institute Australia for Medical Research.

Benitec's current assets balance at 31 December 2009 was A$1,317,903 (June 2009: A$1,989,166), with current liabilities of A$495,644 (June 2009: A$501,429).

AUDITOR'S INDEPENDENCE DECLARATION

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 7 of this report.

Signed in accordance with a resolution of the directors.

Peter Francis
Director
Melbourne, 24 February 2010

For the complete Benitec Limited Half Yearly Accounts, please click the link below:

http://www.abnnewswire.net/media/en/docs/62366-ASX-BLT-584378.pdf

Contact

Sue MacLeman Chief Executive Officer Tel: +61-437-211-200