Due Diligence and Valuation Report

Transcription

1 Arrowhead Code: Company: Medibio Ltd. Coverage initiated: 13 August 2015 Ticker: ASX: MEB This document: 10 February 2017 Headquarters: Sydney, Australia Fair share value bracket-dcf: A$ 1.54 and A$ 2.04 CEO Mr. Kris Knauer Share price (10 Feb. 17): A$ 0.38 i COO Sean Mathieson Analysts Parvati Rai Sumit Wadhwa CMO Dr. Matt Mesnik parvati.rai@arrowheadbid.com Sumit.wadhwa@arrowheadbid.com Website: medibio.com.au Market Data 52-Week Range: Average Daily Volume: Market Cap. (10 Feb. 17): A$ A$ 0.53 ii 332,594 iii A$ 56.4 MM Financial Forecast (in A$) (FY ending - Jun) A$ '17E '18E '19E 20E 21E 22E 23E High NI MM High EPS (Diluted) Low NI MM Low EPS (Diluted) Company Overview: Medibio Ltd. (herein referred to as Medibio or the Company ) is a Sydney-based medical technology company that develops first evidence-based quantitative assessment of various mental health disorders and plans to attain approval from the US Food and Drug Administration (FDA) for the same. It is currently focusing on the quantitative diagnosis and treatment monitoring for depression and stress. The Company was formerly known as BioProspect Ltd. It changed its name to Medibio Ltd. in November Established in 1998, it is a publicly held company, listed on the ASX Exchange under the symbol MEB. Medibio has developed an algorithm to analyze and identify deviations in circadian heart rate (CHR) from normal levels to diagnose whether a person is affected by any mental health disorder. The Company s technology can also be used to assess the effectiveness of administered treatment and change in the mental health position of the subject. In addition, Medibio also plans to utilize its technology in non-clinical stress markets as a corporate wellness product and personal health monitoring application, which can be used along with wearable devices. Arrowhead is updating coverage on Medibio Ltd. with a fair value bracket of A$ 1.54 (Low-Bracket estimate) and A$ 2.04 (High-Bracket estimate). Key Highlights: (1) Potential to be the first FDA approved quantitative diagnosis and treatment monitoring technique for depression and other mental illnesses; (2) Partnered with US and Australia based universities to validate the research. It will help in obtaining the regulatory approvals; (3) Successful pre-submission meeting for de novo 510k application with FDA, targeting approval by 2017; (4) Launched corporate product in August 2015, while consumer app and clinical market launch are expected by 2H FY 2017 and FY 2018 respectively; (5) Four leading US universities provided 10,000 new data sets of clinical relevance; (6) Successful integration of Apple Watch and Fitbit Surge in Medibio s Corporate Stress Product; (7) Potential to expand to other mental illness markets; (8) First validation of depression classification algorithm; (9) First validation of Corporate Stress Product; (10) Entered into an MOU with Medtronic; (11) Plan to launch initially in the US, Australia and Gulf region, and then expand to Canada, Europe; (12) Development and validation of a new sleep staging algorithm; (13) Consolidation of a new team; (14) A$ 13.5 million raised in capital, Company fully funded; (15) Medibio acquires key IP; (16) Excellent performance in the pilot phase of US Validation Study; (17) University of Ottawa Study (Stage 2) improved classification accuracy for diagnosing MDD in University of Ottawa Study; Key Risks: Key risks include the uncertainty related to medical reimbursements for mental illnesses and competition from new emerging technologies. Valuation and Assumptions: Based on due diligence and valuation estimates, Arrowhead believes that Medibio s fair share value lies in the A$ A$ 2.04 bracket using Discounted Cash Flow (DCF), which is our primary valuation methodology. iv We have assumed that Medibio will be able to generate revenue from consumer app and medical markets from FY 2017 and FY 2018 respectively. Medibio Arrowhead BID 1 ASX: MEB

2 Table of Contents 1. SUMMARY AND OUTLOOK BUSINESS OVERVIEW: HRV technology: First evidence based quantitative assessment of depressive illnesses Introduction to Depression Circadian Heart Rate Variability CHR-V Technology Analysis of heart rate Commercialization plan Business Model Company Premiums Company Risks Medibio s Shareholding Pattern Listing and Contact Details KEY VARIABLE ANALYSIS Variable 1 Revenue from medical segment Variable 2 Revenue from corporate segment Variable 3 Revenue from consumer App NEWS MANAGEMENT AND GOVERNANCE MARKETS AND COMPETITION Industry Overview Depression and stress Competition Regulation VALUATION Discounted Cash Flow Method APPENDIX Medibio s Balance Sheet Forecast ANALYST CERTIFICATIONS NOTES AND REFERENCES Medibio Arrowhead BID 2 ASX: MEB

3 1. Summary and Outlook We update coverage on Medibio Ltd., a medical technology company headquartered in Sydney, Australia, focused on developing a new diagnostic test offering quantifiable results for depression, stress, and other mental health disorders. The Company also has a few legacy drugs in the human health, personal care, animal health and nutrition and agriculture space. Key Highlights: (1) Medibio s circadian heart rate - variability (CHR-V) technology has the potential to be the first US FDA approved, evidence- based quantitative technique for diagnosing and monitoring depression and other mental ailments. (2) The clinical trials for CHR-V technology have shown favorable results that are repeatable and reliable, with a successful diagnosis rate of more than 80% in comparison to 70% concordance rate in clinician diagnoses. (3) The Company s patented algorithm analyzes the subject s CHR to identify certain biological markers, which are different from a healthy individual to diagnose mental illnesses. (4) Management has partnered with John Hopkins University (JHU), US, to research further and provide the required data for obtaining the regulatory approvals. The Company has also hired a regulatory advisory and clinical research organization (CRO), NAMAS, to help it complete regulatory requirements. (5) The Company had a successful pre-submission meeting for de novo 510k application with FDA. The Company s software is categorized as a class II product which signifies moderate risk and has a 120-day review cycle. Commercialization depends on US FDA regulatory approval, and the Company anticipates a clinical market launch in (6) Medibio plans to partner with several medical care delivery organizations and remote heart rate monitoring equipment manufacturers to launch its product for clinical (medical) and corporate category of consumers. The Company launched its CHR-V based product for corporate segment in August 2015 and recorded its first revenue during the quarter ending December (7) The Company signed a memorandum of understanding (MoU) with Medtronic, one of the largest medical technology and solutions provider operating in about 160 countries. Both companies intend to work on a proposed strategic agreement covering business opportunities and synergies. We believe following this agreement, Medibio will use Medtronic s medical devices and solutions to deliver its mental health diagnostic services to the subjects. (8) Medibio has also partnered with Vital Conversations, Bupa and Fortescue in Australia and WellNovation in the Gulf region. This provides the Company a large potential clientele for its corporate stress product. (9) Medibio received 10,000 new physiological data sets of clinical relevance from four leading US Institutions in March This repository of clinical and psychological data helped the company generate proxy-clinical trial outcomes and meta-data analyses of more than 15,000 patients retrospectively. (10) Successful integration of Apple watch and Fitbit Surge in Medibio s Corporate Stress Product paves the way for Medibio to add these wearables as part of its Corporate Stress offering. This will significantly expand the market opportunity for Medibio s stress analytics in the corporate and consumer space. (11) Depression classification algorithm was validated with a classification accuracy of 83% for distinguishing individuals with Major Depressive Disorder (MDD) from non-depressed individuals. This is a significant milestone in the Company s development of a proprietary objective test for the diagnosis of MDD. The next step is to expand and validate the diagnostic algorithm to identify the different grades of depression. (12) Medibio s Workplace Stress Test achieved 86% agreement with psychological measures and successfully identified at-risk cases not picked up by conventional psychological screening. (13) The Company completed development and validation of a new sleep staging algorithm that can distinguish between the five stages of sleep with diagnostic accuracy of 86-95% compared to current algorithms that perform in the 70% range. Therefore, there is potential opportunity for the company to commercialize this sleep staging algorithm as a stand-alone business. (14) Medibio plans to expand its CHR-V technology for the diagnosis and treatment monitoring of other mental illnesses such as anxiety disorder, post-traumatic stress disorder (PTSD), panic disorder and schizophrenia. MEB has partnered with The Royal s Institute of Mental Health Research (IMHR), affiliated with the University of Ottawa, to conduct a study to compare patients with anxiety, depression, bipolar and psychotic disorders in terms of variations in heart rate during transitions across wake and sleep states. Medibio Arrowhead BID 3 ASX: MEB

4 (15) Medibio has raised A$ 13.5 million via the placement of 33,750,000 ordinary shares at a price of A$ 0.40, making the Company fully funded. (16) The Company received A$ 3,074,224 from the Australian Taxation Office under the Research and Development Tax Incentive Program. (17) Creation of a new team, with the appointment of a COO, Head of US/ Algorithm development, Clinical/Regulator Director and Head of wellness sales. (18) The Company has acquired patents that cover the use of 24-hour heart rate data and CHR technology for the diagnosis of psychiatric conditions and the determination of the effectiveness of treatment for A$1,200,000, by the issue of 4 million shares to Heartlink Limited. (19) The Company announced preliminary results from the pilot phase of its first study of its Depression Diagnostic in US which achieved diagnostic accuracy of 81% and sensitivity of 82% for delineating individuals with MDD from non-depressed individuals. (20) Medibio announced successful completion of Stage 2 of its University of Ottawa retrospective study, with diagnostic accuracy increasing to 86% from 83% previously for distinguishing individuals with MDD from nondepressed individuals. (21) Based on low variable cost business model, we expect the Company to be profitable from the first full year of operations in FY We have factored per test gross reimbursements of A$ 45 for medical segment in the US and A$ 10 for corporate customers. In addition, we expect the Company to receive A$ 5 A$ 6 per user from its consumer app as initial download and annual subscription charges from FY 2017; this is likely to increase to A$ 9 A$ 10 by Key Risks: Key risks include the uncertainty related to reimbursement of medical expenses on mental health disorder by insurance companies and possibility of new emergent technologies. Industry Overview: Medibio is developing an algorithm to analyze CHR data to diagnose and monitor effectiveness of treatment for depression and other mental illnesses. Per World Health Organization (WHO), approximately 350 MM v people are affected by depression worldwide and with one-year prevalence rate of about 10% and lifetime prevalence of 17% vi. Moreover, several companies are witnessing increased employee stress levels and have started to invest in employee health initiatives. It suggests a large market potential for the quantifiable monitoring of work place stress. However, the current diagnosis and treatments are guided by the diagnostic and statistical manual of mental disorders (DSM) published by the American Psychiatric Association (APA). It is primarily based on the personal interaction between the medical practitioner and the patient. Medibio s CHR-V based algorithm may result in the world s first FDA approved evidence based quantitative measure for diagnosing depression. 2. Business Overview vii : Headquartered in Sydney, Australia, Medibio Ltd. (formerly known as BioProspect Ltd.) was established in It is a medical technology and research company focused on developing diagnostic tests, which will offer quantifiable results to detect depression, anxiety and other mental disorders. Medibio also has a few legacy drugs in the human health, personal care, animal health and nutrition and agricultural space. However, the company has already divested most of the assets. The Company s ordinary shares are listed on the Australian Stock Exchange (Ticker: MEB). On December 5, 2013, the Company entered a definitive agreement with Invatec Health Pty Ltd. (Invatec), which provided Medibio an option to acquire up to 80% of the stake in Invatec in a two-stage transaction. Invatec had developed a quantifiable method for diagnosing mental health disorders including depression, generalized anxiety disorder, acute psychosis and panic disorder by monitoring a subject s heart rate data. On April 14, 2014, the Company completed this transaction. In addition, it also acquired the remaining 20% stake in Invatec on January 29, 2015 based on positive result from an independent assessment of technology. The Company also entered a separate agreement with Heartlink Ltd. (Heartlink), the patent holder of Invatec s CHR technology. The agreement provided Medibio an option to acquire an exclusive license to use its patents worldwide and allowed it to acquire Heartlink s complete patent portfolio. The HRV technology was developed based on over 15 years of research that was initiated by the University of Western Australia. The study involved the comparison of 24-hour heart rate data recording for the clinical diagnosis for over 5,000 test cases representing all major psychiatric disorders. The HRV Technology is the first objective and non-invasive, evidence based approach to diagnose depression and other affective disorders. Medibio conducted due diligence, which showed a successful diagnosis rate of more than 80% in comparison to clinician diagnoses in a blinded test of 98 Medibio Arrowhead BID 4 ASX: MEB

5 patients. Medibio has devised a comprehensive commercialization plan. Its first revenue accrued during the quarter ending December Going forward, the product has the potential to be used by 1) medical practitioners for objective diagnosis and assessing the effectiveness of treatment, 2) corporate and enterprises for assessing employee workplace stress and 3) individuals to monitor personal health through application installed on their smart phones, which will source heart rate data from a wearable device. As there are no quantitative diagnostic methods available for depression currently, it promises a large market potential for the Company s diagnostic algorithms. Medibio has partnered with JHU in the US to conduct further studies on its algorithm and to support the Company in obtaining regulatory approvals. Medibio has already launched its Corporate Stress product on limited basis. It has entered agreements with Vital Conversations (an Australia based psychological health and an employee assistance program provider) and WellNovation in Saudi Arabia and Gulf region. Vital Conversations signed a client for pilot testing and the response was positive, resulting in first validation of the commercial pilot study for Corporate Stress Product. Medibio s Workplace Stress Test achieved 86% agreement with psychological measures and successfully identified at-risk cases not picked up by conventional psychological screening. Medibio plans for a larger workplace rollout following the successful pilot, in partnership with Vital Conversations. The company has also undertaken a successful internal pilot with a second potential wellness partner. The aim of the trial is to gather feedback on any changes recommended prior to a commercial rollout of the product. Medibio is in active dialogue with a few potential wellness partners and customers in Australia and globally. Agreement with WellNovation enables Medibio to offer its solutions in the Gulf region and target WellNovation s existing relations with the state-owned enterprises and military in the region. The Company also signed binding MOU with Medtronic, which is among the world s largest medical technology, services, and solutions provider operating in over 160 countries. Both companies will seek to enter a strategic agreement, which will enable Medibio to leverage Medtronic s solutions to deliver its CHR based depression diagnostic services. Medtronic and Medibio also intend to explore joint opportunities related to Medibio's mental health solution with key clients. We are in line with Medibio s market entry strategy and believe these agreements provide a large potential client base and the required infrastructure to deliver its solutions. Exhibit 1: Market segments targeted by Medibio viii 2.1 HRV technology: First evidence based quantitative assessment of depressive illnesses Introduction to Depression ix The APA defines depression (a major depressive disorder) as a common and serious medical illness that negatively affects how some individual feels, the way he/she thinks, and how he/she acts. It is a mental condition characterized by feelings of severe despondency, dejection, irritability, indecisiveness, impaired concentration, inadequacy and guilt, and often accompanied with lack of energy and disturbance of appetite and sleep. The symptoms vary depending on the individual s personality and his/her illness. Stress is a natural human response to pressure when faced with Medibio Arrowhead BID 5 ASX: MEB

6 threatening or challenging situations. This is usually believed to be beneficial for an individual and generally subsides over a period as the stress inducing factors abate. However, this reversion to normal can be suppressed when an individual is faced with frequent or repetitive stressful situations. It may also adversely affect the individual s health leading to impairment of immune system and general quality of life. The diagnosis and treatment recommendation for depression is currently guided by DSM-5 issued by APA. Currently, the diagnosis is based on the personal interaction or interview with the patient and possibly a physical examination to make sure that the depression is not due to a medical condition. However, the US Institute of Mental Health has said they will no longer endorse DSM-5 as it has fundamental flaws and they are actively seeking a quantitative method for diagnosing depression Circadian Heart Rate Variability CHR-V Technology x Medibio s technology focuses on CHR-V analysis, which is an objective way to diagnose depression/anxiety and evaluate the treatment, compared to the current procedure of personal consultation. The Company s CHR-V analysis is based on the fact that the automatic nervous system (ANS) plays a key role in circadian sleep-wake regulation of physiological activity, including heart rate. Conventionally, mental illness is associated with disturbances in ANS/circadian regulation, with mental-linked ANS disturbance being observed via the cardiovascular system, particularly during sleep when external influences are absent. The Company s research shows the different forms of mental illnesses, such as anxiety and depression, are associated with distinctly different patterns of CHR, which helps in providing quantifiable measure of mental health. Also, CHR is state-dependent; therefore, a change in clinical status is associated with a change in CHR pattern, which helps in assessing the effectiveness of treatment being administered to the patient. The Company s CHR-V algorithms compare the 24-hour rate data recording of an individual/patient to the clinical diagnoses of thousands of patients representing all major psychiatric disorders. The Company s algorithm is based on 5,000 patients >12-hour ECG recordings with a corresponding psychiatric diagnosis. We believe this will be difficult for any other company to replicate and provides a competitive advantage to Medibio. The technology utilizes human heart rate characteristics, including certain tell-tale changes, as sensitive measures for depression. It will consist of a heart monitor that sends recordings wirelessly to internet server where a proprietary algorithm analyses and delivers a quantifiable score for depressive illness. Management believes that its technology provides an easy, non-intrusive and objective method of diagnosing and monitoring depression and other mental illnesses. (For more information, refer to Exhibits: 3-8) The Company s research is currently focused on identifying whether a person is depressed or not. 1. Medibio has partnered with JHU for a total consideration of about A$ 0.60 MM (U$ 0.45 MM) to validate the use of its CHR technology to differentiate between depressed and non-depressed individuals. The study is designed to offer clinical data to support FDA certification of the Company s proprietary depression test. As per the Company, the study population will comprise approximately 100 subjects, split between participants with MDD and participants without a mental health disorder. The IRB of JHU School of Medicine approved the Company s study in November 2015 and it commenced in December The US clinical trial was scheduled to be completed by the end of 2016 post the completion of the Pilot Phase in the JHU US validation study of the Company s depression test. 2. Medibio has appointed NAMAS, a US-based regulatory advisory and CRO, to assist with trial design and to ensure that the Company s depression validation study meets FDA regulatory requirements. NAMAS is working on protocol development and project implementation tasks, including pre-submission consultation with FDA. 3. Post the completion of depression diagnostic and monitoring test, Medibio plans to extend the CHR-V technology to general anxiety disorder (GAD), mixed depression/anxiety, panic disorder and psychosis. To pursue this objective, the Company entered a research agreement with IMHR (affiliated with the University of Ottawa) in October The aim of the study is to assess the validity and specificity of MEB s CHR technology to discriminate between individuals with mental disorders (with and without comorbid sleep disorders), individuals with sleep disorders (without psychiatric illnesses) and healthy controls. This study is the first step to expand its sphere beyond depression. It will compare patients with anxiety, depression, bipolar and psychotic disorders in terms of variations in heart rate during transitions across wake and sleep states. It will also evaluate the relative associations between heart rate variations, age, psychiatric symptoms severity, and psychotropic medications. Medibio Arrowhead BID 6 ASX: MEB

7 Exhibit 2: Timeline to Commercialization xi Analysis of heart rate Medibio s technology analyzes CHR, as mental-linked ANS disturbance can be observed via the cardiovascular system, particularly during sleep when external influences are absent. The Company s current focus is on diagnosing depressed individuals. It plans to commence trials for general anxiety disorder, mixed depression/anxiety disorder and panic disorder. We have presented below the major trends observed in individual with different mental condition. Normal Individual: For a normal individual, the CHR analysis has exhibited that sleep rates are visibly lower and less variable than awake rates and the onset of sleep and moment of waking show a clear change in the mean trend. Also, sleep and waking is usually brief and occurs quickly and body movement data clearly correlates with heart rate, with a cessation of movement during the sleep period. Depressed Individual: CHR analysis of a patient suffering from depression shows that the 24-hour heart rate mean is within the normal range, but the sleep mean is slightly elevated compared to a normal individual. In addition, the heart rates fall to their lowest level shortly after the onset of sleep, and then rises progressively to awake values. Due to the rising trend, the patient wakes up early, which is a common symptom of depression. Also, the correlation between heart rate and body movement is variable for a person suffering from depression. Medibio Arrowhead BID 7 ASX: MEB

8 Exhibit 3: Difference in heart rate of normal and depressed individual xii Normal Individual Depressed Individual Anxiety Disorder: An anxiety disorder patient s CHR analysis exhibits that both the 24 hour and sleep heart rate means are moderately elevated and heart rates are high at the onset of sleep due to sustained daytime physiological arousal. Also, the heart rate declines to its lowest value an hour or two before waking and morning rates are also elevated, accounting for acute morning anxiety that is often experienced by sufferers. Panic Disorder: The CHR analysis of a patient suffering from panic disorder highlights that the 24 hour and sleep means are within the normal range. Typically, the circadian pattern of panic disorder lacks a clearly defined sleep/wake variation but there are noticeable 'spikes of sudden rate elevation throughout the 24-hour period. These spikes can be as high as 150 bpm and last up to 10 minutes and occur both during the day and at night. The body movement data indicate that this subject was resting or inactive for most of the day. Medibio Arrowhead BID 8 ASX: MEB

9 Exhibit 4: Heart rate profile of persons with anxiety disorders xiii Exhibit 5: Heart rate profile of persons with panic disorder xiv Acute Psychosis: The CHR analysis of a patient suffering from acute psychosis reflects a severe elevation of heart rate means in the 24-hour period, morning, and afternoon and sleep epochs. The normal circadian functioning and regulation of the patient is severely disrupted and the sleep period is grossly disturbed with patchy sleep interspersed with abrupt awakening. Schizoaffective Disorder: Exhibit 7 represents the heart rate data for a 27 years old male diagnosed with schizophrenia. The first data recording (in red) reflects severe elevation of 24 hour and sleep means and a reduction in total sleep time. The pulse rate variability is reduced, most likely due to medication. The medication at monitoring one was risperidone 1mg mané and 2mg nocte. The second heart rate analysis (in blue) shows lowering of 24 hour and sleep means; an improvement, although the pattern has not fully returned to normal. The medication at monitoring two was risperidone 2mg BD, valproate 500mg mané and 100mg nocté. Medibio Arrowhead BID 9 ASX: MEB

10 Exhibit 6: Heart rate profile of persons with acute psychosis xv Exhibit 7: Improvement in schizoaffective disorder xvi Commercialization plan Medibio has prepared a commercialization plan for its CHR technology related to depression, based on a study conducted by The Ametus Group (a US-based medically focused strategic consulting organization). The key takeaways from the commercialization study are: About U$ 2.3 BN revenue opportunity in the US, which is likely to be highly profitable Ready acceptance of the technology post FDA approval Existing reimbursement codes that may be leveraged for commercialization No competing FDA approved evidence based products to assist clinicians for depression Potential market share of 5% within 5 years, which would generate annual revenue of approximately U$100 MM Medibio plans to offer its diagnostic services under three different business lines as described below xvii : 1. Medical: The Company estimates that the medical segment has a market potential of about U$ 30 BN. The primary users would be primary care physicians (PCP), psychiatrists, psychologists, therapists, counselors and cardiologists. Medibio will need a FDA approval before it can offer services to this market. Based on the Company s timeline, we expect it to commercially launch its first product only in FY As per Medibio s June 2015 investor presentation, it expects to achieve annual revenue of U$ 60 MM from Medical (Depression diagnostic) market in next five years. Medibio Arrowhead BID 10 ASX: MEB

11 Exhibit 8 : Practical application of Medibio s CHR technology in medical segment 2. Corporate: Under this category, Medibio plans to market its CHR-V technology as a wellness product that will provide a stress score to corporate employees, evaluating the impact of stress on health and wellbeing in the workplace. It also includes a series of app based (or online) intervention (or treatment) modules tailored specifically to monitor the employee s stress level. Employees will be classified into one of three distinct categories based on their stress score: green - normal to mild (no immediate action needed); amber - moderate (the impact of stress on wellbeing is approaching unhealthy levels); and red - severe (stress may affect individual s well-being); recommend lifestyle changes based on results. The Company s internal validation testing assessed the subjects, placing them over 80% of the times under one of these categories. This compares favorably to the diagnostic accuracy of 40-60% of self-reported questionnaires for assessing stress levels. a. The Company aims to partner with various medical care delivery organizations to offer its stress level assessment services. The Company completed the development of its corporate stress product in August 2015 and launched its Corporate Wellness Partner Program in the following month. It signed agreements with two corporations: an undisclosed major Australian corporation with about 10,000 employees; and Vital Conversations, a large mental wellness provider in Western Australia. The Company recorded its first revenue from corporate segment in the quarter ending December Key clientele for the Company in corporate include people in high risk occupations such as defense, fire/emergency services, insurance companies, corporate wellness, professionals and elite sports. The Company is also looking to obtain independent validation of its corporate stress assessment product, so that it can go to market with external validation from a leading academic institution. b. Medibio has also entered an agreement with WellNovation. Under the MOU, both companies will collaborate to introduce Medibio s mental health diagnostics to WellNovation s existing network of clients in the Gulf region. The initial focus will be on introducing the Company s corporate stress product in the state-owned enterprises and for military clients. The MOU also provides for WellNovation to assist Medibio in receiving the required regulatory approvals in the Gulf region. Medibio Arrowhead BID 11 ASX: MEB

12 Exhibit 9: Corporate stress product in practice 1. Consumer: Medibio plans a soft launch of consumer application in test market in H2 2017, which can be installed on Android and ios based mobile phones and will source the heart rate data from wearable devices like Apple Watch, Fitbit Surge, Samsung Gear S2, and the Jawbone UP3. The Company partnered with Swinburne Software Innovation Lab (SSIL) to evaluate the mentioned wrist based wearable devices for their potential use with the Company s consumer app. Evaluation resulted in successful integration of Apple watch and Fitbit Surge in Medibio s Corporate Stress Product. Per the Company s estimate, the consumer stress market is valued at over U$ 26 BN. The management believes its app has edge over its competitors as it will be the first health sector endorsed app, certified by the studies conducted by JHU and other institutions. All currently available apps are digitized version of the DSM and focus on reducing tension via breathing, yoga and relaxing sounds Business Model xviii Medibio plans to be a cloud based data analytics firm. It intends to partner with medical care organizations for the required hardware equipment. This will allow it to focus on its core competency of algorithm development and differentiate its offering from others. For clinical segment of customers, such as PCP and psychiatrists, the Company expects to receive a medical reimbursement of A$ 45 per test for the computer generated clinical report from the insurance companies. However, currently the insurance companies are not reimbursing expenses on depression diagnostic test and the management intends to enter the market only after the insurance providers start reimbursing the same. In corporate segment, the Company may offer the test at a significantly lower price compared to the medical segment. We have assumed a wellness program where all the enrolled employees will undergo one test per phase and there will be two phases during the compete program. Phase 1 will involve an objective measurement of employee stress symptoms. Phase 2 will involve development of an online mental health training program/app and a stress assessment test, after the intervention program. The Company will generate revenue between A$ 5 to A$ 20 per participant from each phase of the program depending on negotiations between the Company and its partner. We have assumed an average revenue of A$ 10 per test per participant in our valuation model. For consumer app, Medibio plans to charge A$ 5 as initial download charge, which will allow for free usage for one month, and an annual subscription charge of A$10. Based on this, we expect the Company to realize an average revenue of A$ 5 A$ 6 per user per annum during FY 2017 and FY 2018, increasing to a peak of A$ 9 A$ 10 per user per annum by FY Being a cloud based service provider, Medibio s operating costs are expected to remain minimal. The Company is currently hosting and running its algorithms and database on Amazon Web Services (AWS), which are Health Insurance Portability and Accountability Act (HIPAA) compliant. Depending on scale of operations, the variable cost related to processing CHR data through its algorithm may fall to less than 1 cent per share and the cost of storing a complete ECG file on AWS will be less than 1.5 cents per year. These two costs will constitute the firm s cost of sales. For the corporate Medibio Arrowhead BID 12 ASX: MEB

13 segment, we have factored in cost of sales of A$ 0.5 per test. In addition, the physical monitoring of the patient will require additional expenses on ECG monitor, costing about A$ 300 per device and other disposables costing less than A$ 1 per test. These costs are expected to be borne by the testing labs in case of medical market and by the medical delivery organization in case of corporate clients. As a market entry strategy, Medibio has planned to partner with various cardiac monitoring equipment manufacturers and remote cardiac monitoring companies. As a first step, the Company has partnered with Preventice Solutions and is also in discussion with several other medical care delivery organizations in the US and Australia for medical and corporate markets. The Company has entered binding integration and value-added reseller agreement with Medtronic. We believe this will enable Medibio to leverage Medtronic s medical devices to deliver its CHR based diagnostic services to potential clients. Medtronic and Medibio also intend to explore joint opportunities related to Medibio's mental health solution with key clients. For the Corporate segment, the Company has entered an agreement with Vital Conversations, a large mental wellness provider in Western Australia, to offer stress assessment services to its clientele. Apart from this, the Company also entered GCC market through agreement with WellNovation. Under this agreement, WellNovation will first offer Medibio s diagnostic services to state owned enterprise and military organizations in the region. Under Medibio s new business model, its role will be limited to providing data analytics and reporting for the customers, and training and ongoing support to the partner. The acquisition of the ECG monitors, any other hardware, and the implementation of the test on its client base will be the responsibility of its corporate partner. Medibio will be paid on a per test basis for its data analytic services. Therefore, the net revenue for Medibio will be A$ 5 - A$20 per test even though the end customer may be paying A$ 50 - A$ 60 per test. At the same time, the costs for Medibio will be approximately A$ 0.50 per test, leading to gross margin of A$ 4.5 A$ 19.5 per test. In addition, this will enable Medibio to leverage the corporate partner s existing network of clients and sales teams. Subsequently, for medical segment, based on profitability and cash position, the Company plans to enter Canadian market 12 months after its launch in the US, and into European markets 24 months after launching its product in Canada. The Company has started exploring its options for CE Marking for the European market, including approval pathway, required validation studies, timeline, and budget for the process. The Company seeks to discover whether the validation studies on the total retrospective data set, which it aims to complete this year, suffices for scientific validation under European Medical Devices Directive (EMDD) regulation. It plans to have an expert opinion by this year s end on the same. In consumer market, the Company strategy is to leverage the existing and upcoming wearable devices owned by consumers to obtain the heart rate data, which will be transmitted over the mobile network to the Company s servers. Successful integration of Apple watch and Fitbit Surge in Medibio s Corporate Stress Product paves the way for Medibio to integrate these wearables into its Corporate Stress offering and significantly expand the market opportunity for Medibio s stress analytics in the corporate and consumer space. We are optimistic about Medibio s business model and market entry strategy due to low capital expenditure requirements and commercial launch costs, and capability to reach a wider market in a relatively short period. Medibio Arrowhead BID 13 ASX: MEB

14 Exhibit 10: Medibio s Key Milestones xix Exhibit 11: Medibio s business model xx Medibio Arrowhead BID 14 ASX: MEB

15 2.2 Company Premiums xxi - To be the first FDA approved technology for quantitative diagnosis of depression: Medibio s CHR-V technology has the potential to become the first FDA approved, evidence based depression diagnosis methodology in the market globally. Currently, all existing and under-development diagnostic tools for depression are at best intended to be used to support the medical practitioner in his/her diagnosis based on DSM standards. Several medical associations have also been calling for evidence based quantitative method for diagnosing depression, which offers a readily available market for the Company s products. - Large market potential: There are over 350 MM depression patients worldwide and 1 MM suicide cases annually, with the total cost of mental illness believed to be about U$ 2.5 TN in 2010 (estimated to increase to U$ 6 TN in 2030). The total prevalence rate is at about 10% globally, and only half of them receive treatment for the same. Per the Company, about 70% of corporates with 200 or more employees in the US spend an average of U$ 100- U$ 500 per employee per annum on corporate wellness programs, valuing the overall wellness market in the US at U$ 8.2 BN annually. Medibio s technology is expected to be the first in the market and therefore, isl not expected to have any directly competing products in the market. Moreover, based on our projections, a reimbursement of A$ 45 per computer generated test report by the insurance companies will offer revenue potential of U$ 30 BN for Medibio. - Limited regulatory requirements in corporate and consumer segments: In corporate and consumer segments, Medibio plans to position its offerings as corporate wellness product and personal health monitor respectively. These are categorized as non-clinical products, which just offer services to assess stress level of the subject and recommend a visit to PCP or some yoga exercises to deal with unfavorable results. The Company has already successfully launched its corporate wellness program and recorded its first revenue in the quarter ending December Low cost operating structure: Medibio hosts and processes its algorithm and CHR data on HIPAA compliant AWS. We believe this helps the Company maintain a lean structure with minimal operating costs. It also negates the requirement for large expenditure on establishing and running company-owned web servers, and instead allows Medibio to focus on its core competency of algorithmic research. Moreover, the Company has planned to partner with existing medical care delivery organizations to offer its services, which will enable it to leverage their existing client network and sales channels. Resultantly, based on Medibio s business plan, we expect it to start generating profits from the first year of operations in FY Potential of CHR-V technology to diagnosis other mental illnesses: Initially, Medibio s focus is solely on getting its technology approved for depression diagnostic and monitoring. Preliminary research shows that this can be further expanded to diagnose and monitor the effectiveness of treatment of other mental illnesses. Although we have not factored in the potential revenue from other mental illnesses, the Company has formally commenced trials and research for general anxiety disorder, panic disorder, mixed depression/anxiety disorders and schizophrenia. The Company has already started study in collaboration with University of Ottawa to evaluate the effectiveness of CHR-V technology on patients with anxiety, depression, bipolar and psychotic disorders. This we believe will provide Medibio a significant growth potential and an opportunity to capture even bigger share of mental illness market, which is expected to expand to U$ 6.0 trillion by Company Risks xxii - Uncertainty regarding reimbursements for mental health diagnostic: Medibio s business plans are largely dependent on medical expense reimbursement by insurance companies. However, currently the insurance companies do not provide mental health diagnostic specific reimbursements. This presents considerable risk toward our financial forecasts as insurance coverage or reimbursement was rated as the most significant factor influencing clinicians decision to use the device in the survey conducted by Ametus. - Threat of new evolving technologies: Although currently there are no direct competitors for the Company but few technologies in the under-development phase have the potential to be used for depression diagnostics. For instance, quantitative electroencephalography. This can present significant competitive pressure in future and adversely impact Medibio s financial projections. - Legal Risks: There are no legal risks associated with the Company, to the best of the author s knowledge. Medibio Arrowhead BID 15 ASX: MEB

16 2.4 Medibio s Shareholding Pattern Medibio s total ordinary shares are MM, with the following shareholding pattern. Exhibit 12: Shareholding pattern xxiii Exhibit 13: Shareholding Pattern xxiv Shareholders No. of Shares % of total Addis Stephen R D % Solitario Claude % FIL Limited % Knauer Kris David % Metavone Limited % Others % Total % 2.5 Listing and Contact Details The ordinary shares of Medibio Ltd. are listed on ASX (Ticker: ASX: MEB, Date of Listing January 29, 2001) Contacts: Suite 605, Level 6 50 Clarence Street, Sydney, NSW ID: kris.knauer@medibio.com.au Phone: +61(0) Medibio Arrowhead BID 16 ASX: MEB

17 3. Key Variable Analysis xxv 3.1 Variable 1 Revenue from medical segment We expect revenue from the Company s medical customers to accrue from FY Initially the Company will launch its product in the US and Australian markets, followed by Canada in FY 2019 and Europe in FY We have assumed depression prevalence rate of 9% for the US, 8% for Europe and 5% for Australia and Canada, with each patient undergoing five tests during the treatment. Also, we expect the Company to charge A$ 45 per test in the US and A$ 30 in Australia, Canada and Europe. We have not factored in the revenue potential from ROW as it is largely dependent on the acceptance of the Company s products in other markets. Considering that Medibio will be able to successfully market its product, Arrowhead estimates that the Company will be able to capture a market share of about 5.0%-8.0% by 2025 across different regions. Based on our assumptions, the estimated revenue generated would be as follows: Exhibit 14: Risk-adjusted revenue from medical segment A$ MM FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Low estimate High estimate Variable 2 Revenue from corporate segment Medibio launched its product for corporate customers and entered its first service agreement in Australia and New Zealand region in August The Company has also partnered with WellNovation to launch its products in GCC region. Moreover, the Company is actively looking to partner with other wellness services providers and we expect it to launch its corporate program in other markets such as the US in next few quarters. We expect 1.02%-3.87% of the total workforce in various regions to avail the Company s stress monitoring services by As per the Company s business model for corporate customers, the Company will assess employees stress levels in two phases, with one test each in phase 1 and phase 2, with an intervention program to reduce stress level. We expect the net payout to Medibio to be A$ 10 per test per patient. Of all the corporate employees assessed in phase 1, we expect 20% to exhibit moderate to high stress levels. These employees will be further subjected to intervention program and another stress assessment test at the end of phase 2. Based on these assumptions, we forecast Medibio s revenue generated from corporate customers to be as follows: Exhibit 15: Risk-adjusted revenue from corporate segment A$ MM FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Low estimate High estimate Variable 3 Revenue from consumer App Medibio is expected to launch its consumer app for Android and ios based devices in the beginning of FY 2017 globally. We expect 10% of the smartphone users to buy wearable devices and monitor their health. Also, we expect the Company to capture market share of 1.35%-1.55% by Further, applying an annual subscription charge of A$ 5-6 during initial few years of launch, increasing to a peak of A$ 9 10 by FY 2021, the estimated revenue generated would be as follows: Exhibit 16: Risk-adjusted revenue from consumer application A$ MM FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Low estimate High estimate Medibio Arrowhead BID 17 ASX: MEB

18 4. News xxvi - Preliminary results announced for depression diagnostic s pilot phase of US Validation study: Pilot stage results from Johns Hopkins Study announced with diagnostic accuracy of 81% and sensitivity of 82% achieved for delineating individuals with MDD from non-depressed individuals. The study is intended to support FDA clearance of Medibio s depression algorithm which significantly outperformed existing standard-of-care diagnosis in the US primary care setting (33-50% accuracy) and among psychiatrists (70% concordance). The study analysis is based on full datasets from 26 subjects (11 with MDD, 15 healthy controls). - Medibio collaborates with Emory University on PTSD research: Medibio has entered an Agreement with Emory University to expand the use of its proprietary CHR technology beyond depression to classifying PTSD so as to test and develop its algorithms for the diagnosis of PTSD using data from an ongoing Emory study. - Issue of Shares: Medibio issued 1,500,000 options exercisable by the payment of $0.40 on or before 30 November 2018 and 3,500,000 options exercisable by the payment of $0.48 on or before 30 November 2019 to Brokers as part consideration for services. Additionally, (a) 13,622,275 fully paid ordinary shares were issued in the Company to professional and sophisticated investors as part of a capital raising, (b) 1,974,936 fully paid ordinary shares were issued in the Company to directors, employees, consultants and other service providers as part payment, (c) 1,000,000 fully paid ordinary shares were in the Company to consultants/contractors as payment for services - Capital raised amounting to $13.5 million to accelerate growth: Medibio has raised A$ 13.5 million via the placement of 33,750,000 ordinary shares at a price of A$ The additional funds will allow the Company to a) undertake studies to provide the clinical data to support FDA and CE Mark filings, and the associated regulatory work for these filings, treatment efficacy for depression, gradations of depression and general anxiety disorder; b) allocate a significant budget to its Workplace Mental Wellness product (for commercialization) as well as the potential Consumer Mental Wellness product; c) the flexibility to retire the US$ 2.5m Convertible Note early, which would leave the company debt free and simplify the capital structure. - Completion of Stage 2 of University of Ottawa retrospective study: Diagnostic accuracy for distinguishing individuals with MDD from non-depressed individuals increased to 86% in Stage 2 from 83% wherein classification algorithm leverages objective biomarkers computed from overnight heart rate recordings and sleep annotations to distinguish between the clinical groups. Ongoing work includes further identification of discriminating biomarkers to improve the diagnostic accuracy of the algorithm, incorporation of the new data for further algorithm training and validation of additional algorithms. The Company will expand and validate its diagnostic algorithm for depression to identify the different presentations of depression, increasing its clinical utility. - Receipt of A$ 3,074,224 R&D Tax Incentive Refund: The Company received A$ 3,074,224 from the Australian Taxation Office under the Research and Development Tax Incentive Program. The cash refund is related to expenditure on eligible Australian and Overseas R&D activities conducted during the 2015/16 financial year. The Company expects a A$ 2 MM- A$ 3 MM R&D cash rebate for the year ending 30 June 2017 to be received in about 11 months. - Medibio and Monash Institute partnered to explore innovative solutions for improving sleep and mental health outcomes: Medibio cemented a partnership with the Monash Institute of Cognitive and Clinical Neurosciences (MICCN) to explore a broad range of initiatives focused on further developing Medibio s early detection and monitoring solutions and Monash s advanced research and treatment approaches for sleep and circadian disorders for the clinical and work setting. - Medibio partners with HBF and Vital Conversations on Australia s biggest mental health check-in: The Company signed Vital Conversations as it s delivery partner in addition to being it s corporate wellness consultant, which will facilitate the campaign utilizing Medibio s supplied device and technology. Not-for-profit health insurer HBF will encourage its corporate clients to participate in the initiative which will result in a significant workplace trial of Medibio s diagnostic methodology. Medibio will have awareness created for its workplace stress product prior to commercial launch, along with the expected 3,000 new de-identified data files with corresponding stress assessments. This data will more than quadruple the size of Medibio's dedicated overnight CHR file database and corresponding stress assessments. Medibio Arrowhead BID 18 ASX: MEB

19 - Depression classification algorithm validated: Study on independent clinical data sourced from research partner, The University of Ottawa showed a classification accuracy of 83% for distinguishing individuals with MDD from non-depressed individuals. The results compare favorably with the clinical gold standard diagnostic accuracy of 33-50% at the primary care level and only 70% concordance among experienced psychiatrists. This is a significant milestone in the Company s development of a proprietary objective test for the diagnosis of MDD. Following this, Medibio will expand and validate its diagnostic algorithm for depression to identify the different grades of depression and improve the diagnostic accuracy of its offering. - Partnership established with the Sydney University Brain Mind Centre: The Mental Wellness solution, Medibio s proprietary objective stress assessment test and intervention program, is being subjected to a commercial trial for a Workplace Stress Assessment clinical research study. The study aims to investigate the potential relationship between an individual s mood and stress levels and CHR patterns. Phase 1 of the study has been completed, with Phase 2 and 3 scheduled to be completed by year end. Results from the study will help to target markets such as the public service, health insurance providers, the military, aviation and the public health system, wherein the Company believes independent validation is a pre-requisite for widespread take-up of its Mental Wellness solution. - Completed development and validation of a new sleep staging algorithm: The Company completed development and validation of a new sleep staging algorithm, using ECG data only, in partnership with JHU. The algorithm can distinguish between the five stages of sleep with diagnostic accuracies of 86-95% compared to current algorithms that perform in the 70% range for all stages of sleep. The project is part of the Company s collaborative research and development effort with four leading US universities. Medibio s sleep staging breakthrough, which is in a prospective study, will open the opportunity for the company to commercialize this sleep staging algorithm as a stand-alone business opportunity in home sleep monitoring and sleep clinics. - Commercial pilot study for Corporate Stress Product validated: Medibio s Workplace Stress Test achieved 86% agreement with psychological measures and successfully identified at-risk cases not picked up by conventional psychological screening. Medibio plans for a larger workplace rollout following the successful pilot, along with Vital Conversations. The company has also undertaken a successful internal pilot with a second potential wellness partner. The aim of the trial was to gather feedback on any changes recommended prior to a commercial rollout of the product. Medibio is in active dialogue with a few potential wellness partners and customers both in Australia and globally. - First Commercial Agreement Signed with major Australian Corporation: The first agreement for corporate stress evaluation product was signed with a major Australian corporation, with more than 10,000 employees. The service agreement covers the application of two Phases and will initially be conducted on a pilot population of employees. Phase 1 will cover measurement of employee stress symptoms using Medibio s CHR patented technology. Phase 2 will involve the development of an online mental health training program/app. Medibio will generate revenue of A$ 100 per participant from each Phase of the program. - Medibio Acquires Key IP: The Company has acquired from Heartlink Limited the Australian, New Zealand and Israeli patents that cover the use of 24-hour heart rate data and CHR technology for the diagnosis of psychiatric conditions and the determination of the effectiveness of treatment. These Patents were acquired for A$1,200,000 by the issue of 4 million shares to Heartlink Limited. The company has also lodged PCT applications for its provisional patents during the year. The applications, once granted, will provide 20 years of exclusivity for the diagnosis of mental health disorders using CHR technology and ensure the company s monopolistic rights in the US. - Apple watch and Fitbit Surge integrated in Medibio s Corporate Stress Product: Medibio partnered with Swinburne Software Innovation Lab (SSIL) to evaluate the market-leading wrist-based wearable devices as an alternative to ECG monitors in Medibio s Corporate Stress Product. The trial s success with SSIL paves the way for Medibio to integrate these wearables into its Corporate Stress offering and significantly expand the market opportunity for Medibio s stress analytics in the corporate and consumer space. Medibio Arrowhead BID 19 ASX: MEB

20 - Successful pre-submission meeting with the US FDA: The Company had a positive pre-submission meeting, which confirmed the proposed regulatory pathway for Medibio s depression test. The FDA confirmed that a) The Medibio Depression Algorithm is eligible for the de novo regulatory pathway; b) The FDA expressed no significant concerns with the proposed indications for use; c) Medibio s proposed Level of Concern for its Depression Algorithm is acceptable to the FDA. The de novo process leads to a Class II classification in Medibio s case and has a 120- day review cycle compared with a 90-day review period for a 510(k). - Completed development and testing of its cloud based Digital Mental Health Platform for Corporate Stress product: The Company successfully tested end-to-end automation of the platform, which includes realtime ECG Data Streaming, Algorithm Processing and Data Analytics. - US clinical trial was scheduled to be completed by the end of 2016: In the US, Medibio s depression test will be required to show its efficacy and safety in a clinical trial sanctioned by the FDA before being granted marketing approval, once Pilot Phase from the JHU validation study of the Company s depression test is completed successfully. Medibio s Depression Algorithm is eligible for the de novo regulatory pathway and has a 120- day review cycle compared with a 90-day review period for a 510(k). Commercialization depends on US FDA regulatory approval, which the Company anticipates for While psychiatrists may be slow adopters of Medibio s depression diagnostic once it gains regulatory approval, the Company sees the front line general practitioners as its multiples-larger target market. - Company plans to pursue medical markets other than the US: Medibio s technology for assessing mental health states is not a physical device but mathematical algorithms that analyze biological data collected by other approved heart rate monitors. The Company has started exploring its options for CE Marking for the European market including approval pathway, required validation studies, timeline and budget for the process. The Company seeks to discover whether the validation studies on the total retrospective data set, which it aims to complete this year, suffices for scientific validation under EMDD regulation. The Company anticipates to have an expert opinion by the year s end. - New Data provided by leading US institutions more than trebled the size of database: 10,000 new physiological data sets provided by Johns Hopkins School of Medicine, Emory University, Washington University and The Royal s Institute of Mental Health Research (which is affiliated with the University of Ottawa) will help Medibio leverage more advanced machine learning techniques and expand potential commercial offerings for its Digital Mental health platform. The repository of data could help Medibio to generate proxy-clinical trial outcomes and meta-analyses from more than 15,000 patients retrospectively. - Additional Grant Funding potential of A$ 4 million: Medibio has lodged an Accelerating Commercialization EOI for a A$ 1 million grant to help fast-track the commercialization of the company's diagnostic technology. Medibio is also finalizing an application for a A$ 3 million CRC-P grant. The Company will update the market as these applications progress. It expects to know the outcome of both applications by early The Company anticipates receiving a A$ 2-3 million R&D rebate for the year ending June in months. - Creation of a new team with the appointment of a COO, Head of US/ Algorithm development, Clinical/Regulator Director, and Head of wellness sales: The newly appointed COO Sean Mathieson is a Business Technology Executive with 25 years of Global Business Software experience. Yashar Behzadi, who is appointed as Head of US Operations/Algorithm development is a Digital Health expert with 10 years of experience building disruptive technology platforms and business models. Greg Moon, a Digital Health expert with 15 years of experience in managing Clinical Affairs is appointed as Clinical/Regulator Director, and Head of wellness sales. Dr. James Campbell has resigned as a non-executive director. The highly-distinguished US medical expert and Eli Lilly Director Franklyn Prendergast (M.D., PhD) joined the Medibio Board in January Entered binding MOU with Medtronic: Medibio Ltd. entered a binding agreement with Medtronic. Medtronic is a Dublin, Ireland, based medical technology, services, and solutions provider. It serves physicians, hospitals and patients in approximately 160 countries. The MOU provides a framework under which Medibio and Medtronic can discuss a proposed strategic agreement covering business opportunities and synergies across both companies. Medtronic and Medibio also intend to explore joint opportunities related to Medibio's mental health solution, with key clients. Medibio Arrowhead BID 20 ASX: MEB

21 - Additional Grant Funding potential of $4 million: On 23 September 2016, Medibio lodged an Accelerating Commercialization EOI for A$ 1 million grant to help fast-track the commercialization of the company's diagnostic technology. Medibio also is currently finalizing an application for a A$ 3 million CRC-P grant. Medibio will update the market as these applications progress. It expects to know the outcome of both applications by early Study on melancholic depression discontinued due to minimal commercial value: A study with University of New South Wales (UNSW) was aimed at identifying a CHR biomarker to distinguish between melancholic and non-melancholic depression. As melancholic depression is not recognized in the DSM (Diagnostic and Statistical Manual of Mental Disorders), the study has minimal commercial value. As less than 25% of the planned number of participants have completed the study and the commercial upside is limited, Medibio does not intend to extend the study agreement that expires in October UNSW and Medibio are in the process of finalizing an arrangement that will see Medibio refunded A$ 60,000 of unexpended study funds. - Announced the receipt of first revenue from corporate stress product during quarter ending December 2015: On January 31, 2016, Medibio Ltd. reported its financial results for period ending December During the quarter, the Company recorded its first revenue of A$ 20,000 from its corporate stress product. - Signs an MOU with WellNovation and enters Saudi Arabia and Gulf region markets: On December 23, 2015, Medibio Ltd. entered a non-binding MOU with WellNovation Co. Ltd. WellNovation is a healthcare development company focused on bringing healthcare technologies to Saudi Arabia and Gulf Cooperation Council (GCC). Both companies will collaborate to introduce Medibio s mental health diagnostics to WellNovation s existing network of clients in the Gulf region. The initial focus will be on offering corporate stress product to state owned enterprises and military. WellNovation will also assist Medibio in receiving the required regulatory approvals in the Gulf region. Medibio Arrowhead BID 21 ASX: MEB

22 5. Management and Governance xxvii The management team includes experienced professionals, who have held positions of responsibility across various firms. Exhibit 17: Management and Governance Name Position Past Experience Qualifications Chris Indermaur Chairman of the Board of Directors He is currently Chairman of Poseidon Nickel Ltd. and Non- Executive Director of Aerison Pty Ltd. Earlier, he was a Non-Executive Director of the Prime Health Group He has also held the role of General Manager of Strategy and Development at Alinta Ltd. He has over 30 years of experience in large Australian companies in engineering, business development and commercial roles B.E. (Mechanical) and a Graduate Diploma of Engineering (Chemical) from Curtin University LLB and LLM from the Queensland University of Technology Kris Knauer CEO and Executive Director He has 20 years of experience in Finance and Corporate Advisory Earlier, he was a CEO in a group owning GP Centers and Radiology practices He founded and grew ASX Listed company from sub $3 million valuation to $300 million valuation, prior to a $1bn takeover B. Sc. (Honors) in Geology Sean Mathieson COO He is a Business Technology Executive with 25 years of Global Business Software experience His roles include Global Leadership Team of Siebel Systems, Founding Member of SAP Asia/Pacific, Founding Member of Ariba Asia/Pacific He has experience in start-up through multi-billion valuations NA Yashar Behzadi Head of US Operations He is a digital health expert with 10 years of experience building disruptive technology platforms and business models He was previously head of product, applications and data sciences at Proteus Digital Health, a health-tech unicorn He has 20 issued patents across medical device, wearables, software & algorithms PhD Greg Moon Head of Clinical Affairs He is a digital health expert with 15 years of experience in managing Clinical Affairs He led the commercial launch of Proteus Digital Health s first digital medicine solution in the US market He helped to gain Proteus first FDA clearance (Proteus Personal Monitor), represented Proteus on the World Economic Forum s Workplace Wellness Alliance (WWA) leadership board MD MBA Dr. Franklyn Prendergast Board Member He is current Director of Eli Lilly and Company and Past Chair of the Board of Governors of the Mayo Foundation He previously held position as Chair, Department of Biochemistry and Molecular Biology, Mayo Foundation He previously held position as Past Director, Mayo Clinic Centre for Individualized Medicine and Mayo Clinic Comprehensive Cancer Centre NA Medibio Arrowhead BID 22 ASX: MEB

23 6. Markets and Competition 6.1 Industry Overview xxviii Depression and stress According to WHO, there are more than 350 MM people of all ages who are suffering from depression across the world. It is estimated that women are two to three times more likely to suffer from depression than men. Prevalence rate for depression is 10%, while as per the WHO less than half of them receive treatment for the same. By 2020, depression is expected to be the second leading cause of world disability and expected to be the largest contributor to disease burden by Depression also leads to an estimated one million suicides every year, with about 20 times more unsuccessful suicide attempts. However, less than 10% of the people affected by depression receive treatment for the same due to factors such as inadequate knowledge and social stigma. Moreover, per US census, in a 3-month period, patients with depression miss an average of 4.8 workdays and suffer 11.5 days of reduced productivity. Workplace stress is estimated to cause 19% of absenteeism, which has been estimated to cost a typical major enterprise U$3.5 MN annually. Per a study by Workplace Health Association, Australia, 65% of employees reported moderate to high stress levels and 41% had psychological stress levels considered to be at risk. Per the Company, workplace stress alone costs Australian employers an estimated A$ 10.1 BN annually. In the US, about 70% of corporate with 200 or more employees offer corporate wellness programs. Corporate spend between U$ 100- U$ 500 per employee per annum on corporate wellness programs, valuing the overall wellness market in the US at U$ 8.2 BN annually. Cumulatively, the total cost of stress to US employers is estimated to be between U$ 200 BN to U$ 300 BN annually. This provides a significantly large market potential for depression diagnostics and monitoring globally. DSM-5 guides the current diagnosis and treatment recommendation for depression. The current standards for diagnosis and treatment are primarily based on personal interaction of the patient with the medical practitioner. The doctor may also get the patient tested for other diseases to eliminate other possible physical reasons for depression. This creates a lot of ambiguity. The Institute of Mental Health has also said that it is seeking a quantitative method for diagnosing depression. However, currently no reliable FDA approved quantitative, evidence-based test for mental illnesses exist. Exhibit 18: Worldwide depression market Medibio Arrowhead BID 23 ASX: MEB