For personal use only · auditors’ independence declaration 23 concise financial report 24 income statement 25 Balance sheet 26 statement of changes in equity 27 cash flow statement

annual concise report 2007

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chairman’s letter 3

ceo’s report 4

Directors’ report 7

auditors’ independence declaration 23

concise financial report 24

income statement 25

Balance sheet 26

statement of changes in equity 27

cash flow statement 28

notes to financial statements 29

Directors’ declaration 36

independent audit report to the members 37

shareholder information 39

corporate directory 43

Highlights

Profitaftertax$20.2million(F2006loss$11.3million)

Strongcashbalancesat$62million

US$102mHCVcollaborationagreementwithBoehringerIngelheim

Threeproductsintoclinic

lani (cs8958) phase i completed in Japan, commenced in uK

HrV (Bta798) phase i completed

rsV (Bta 9881) phase i commenced

AmendedStatementofClaimfiledinMarchandtheupdatedParticularsofLossandDamagefiledinJulyinlitigationcaseagainstGSK

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BIOTA ANNUAL CONCISE REPORT

i am particularly pleased to present this year’s chairman’s review, with Biota producing a substantial profit and making significant progress towards achieving long term sustainability as a clinical stage biotech company. this is a momentous achievement for our company, of which we are very proud.

i have consistently stated your Board’s desire to build a strong clinical stage biotech company as a means of creating enduring value for shareholders. i am delighted to report that we are on track. With three Biota programs in the clinic the market is beginning to recognise our achievements and positively re-rate your company.

FINANCIAL RESULTSthe Group profit before tax for the year was $17.8 million based on strongly growing revenues from royalties and collaborative partnerships and after significantly increased product development and litigation expenditures. profit after tax of $20.2 million benefited from the initial recognition of some of our unbooked tax losses. this result compared to a loss of $11.3 million in the previous year. cash reserves increased to $62 million at year end, up from $46.2 million last year.

SHAREHOLDER BENEFITSat balance date, Biota’s net worth increased by 57% in terms of market capitalisation on the prior year and is at $340 million, among australia’s top 300 listed companies.

our share register is consolidating with increased institutional investor interest during the year. our top 40 shareholders account for 34% of our issued shares, as opposed to 24% a year ago. institutional investors now hold over 16% of our shares. institutions are expected to provide continuing strong investment interest in Biota as one of the few profitable, listed australian biotechnology companies.

the Directors are very pleased about Biota’s profit and while being confident about the future have decided, in view of the company’s cash needs and substantial accumulated losses, not to declare an unfranked dividend at this stage.

Your Board continuously monitor capital management opportunities alongside the requirements of Biota’s business strategies. in our view, the current cash reserves and internal forecasts provide Biota with an exciting opportunity to achieve sustainability and share price appreciation. those twin targets should be achieved by carefully targeted investments in the existing programs and deepening our existing product pipeline.

SUSTAINABILITYBiota is now very well positioned. We have significant recurring revenues from relenza royalties, increasing new income streams from product development partners who are funding the development of future product opportunities, a growing clinical stage pipeline, a strong cash position and emerging institutional investor interest.

this is based on the company’s proven scientific, product development and project management capability, its intellectual property and our rounded, experienced corporate management. With our focus on producing products to meet large unmet medical needs, Biota is progressing well down the path of sustainability and generating substantial shareholder returns.

LAWSUIT AGAINST GSKBiota’s commitment to pursue a satisfactory outcome from the litigation against GlaxosmithKline (GsK) remains undiminished. the trial date is set for 1 april 2008 and we remain very focussed.

in May 2004, Biota filed a lawsuit against GsK in the Victorian supreme court, claiming damages for past and future losses, arising from GsK’s contractual failure to use its best endeavours in the development and marketing of relenza.

Biota’s formal statement of claim against GsK has been refined over time since the commencement of the lawsuit as our lawyers have obtained access to an increasing number of GsK documents. the statement of claim was the subject of a major revision in March of this year. GsK’s defence to that

amended claim was filed in mid July and our reply was filed in late august 2007.

the assessment of Biota’s loss and damage has also been updated recently. the claim arising from GsK’s failure to support relenza is now assessed in the range of $564 million to $704 million. the increase against the previous assessment is attributable to a number of factors including continued growth in the global stockpiling market for influenza antiviral treatments.

Biota’s financial investment in the litigation to date has been slightly in excess of $20 million. the company and its legal team are doing everything possible to progress the litigation as efficiently and economically as possible.

GOVERNANCEWe have a strong Board that works well together. the Board was enhanced with the election of two experienced independent directors at the last aGM: Grant latta, with a strong financial and strategic background in various corporate roles, and paul Bell, with a background in the international pharmaceutical industry. also last year, Ms Barbara Gibson was re-elected for a further term. ian Gust and i will stand for re-election at the 2007 annual General Meeting.

the Board’s committee structure continues to serve us well. Grant latta chaired the audit & risk committee, which met four times during the year to ensure that the company is managing risks that impact our business and that strong financial disciplines are in place. Barbara Gibson has continued to lead the remuneration committee in ensuring our remuneration practices are fair, market competitive and have the ability to retain our most important resource, our people.

OUTLOOKWe aim to capitalise on the company’s unique position and drive Biota further along the path towards being a sustainable, profitable australian based biotechnology company, with growing multiple revenue streams and a robust clinical stage product pipeline.

i wish to thank my fellow directors and the Biota management team and staff, which is capably led by peter cook, for their outstanding contributions. We are all looking forward to the coming year with a great deal of confidence as we deliver on our strategy.

JohnGrantChairman

chairman’s letter

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ceo’s report

INTRODUCTIONF2007 has been an exceptional and most successful year for Biota. the business has delivered new dimensions of scale, momentum and financial strength. Key milestones have been delivered with our drug discovery and development candidates, including a significant additional new licence agreement.

the major achievements this year have been:

profit after tax of $20.2 million;

us$ 102 million HcV licence and collaboration agreement;

three products into clinic;

lani (cs8958) phase i completed in Japan, commenced in uK

HrV (Bta798) phase i completed

rsV (Bta9881) phase i commenced

strong cash generation of $16 million; and

the lodgement of a Further amended statement of claim and a second Further particulars of loss and Damage, in the litigation with GsK.

these achievements have therefore delivered the critical early steps in Biota’s reinvigorated development. in so doing, Biota has demonstrated its potential to become a sustainable business and to deliver world class outcomes for its shareholders.

FINANCIAL REpORTthe overall financial results for the year have been particularly encouraging.

Revenue, profit & Cash

revenue and other income has increased to $57.3 million from $15.0 million in F2006 and the profit before tax of $17.8 million was a significant improvement on the operating loss of $11.3 million in F2006. this has been achieved against the background of an increased operating expenditure of $39.3 million significantly higher than the $26.3 million in F2006.

the increased expenditure for the year has been directed to core activities in our research and product development pipeline, $8.2 million; relenza sub-royalties, $4.9 million; and litigation expenses, $10.4 million. overhead expenses reduced to $3.8 million.

the most significant contributors to revenue have been increased royalties from relenza to $39.8 million and licensing and collaboration income of $13.0 million.

Capital Management

csiro/Vcp

the commonwealth scientific and industrial research organisation (csiro) and the Victorian college of pharmacy (Vcp), either through original research or under earlier contractual arrangements with Biota owned certain intellectual property in zanamivir and rights to a portion of Biota’s royalties. the continuing litigation against GsK provided Biota with a suitable opportunity to acquire those rights under terms and conditions that all parties found favourable. the resultant agreements provide that Biota will retain the full royalty on all future sales of relenza.

corporate entities

During the year, Biota has simplified its corporate structure by closing and de-registering fourteen dormant entities. those entities included Biota, inc., Biota usa limited, nuMaX pharmaceuticals, inc., in the us and Declan investments pty ltd and Declan Management pty ltd in australia. the closures will result in reduced administrative costs, particularly those associated with audit and tax filing expenses, without loss of flexibility.

MANAGEMENT AND CApABILITIESBiota continues to grow its scientific and management team. the value of our business is highly dependent on the skills of our staff and many of those skills are not readily replaced in australia. accordingly, the company has put considerable effort into providing adequate and effective policies to retain, motivate and deliver incentives for key

members of staff, through its remuneration practices.

staff numbers have increased from 41 to 48 over the year, with a number of senior people being recruited from overseas including the us and uK. the majority of the increases have been in Dr Jane ryan’s product Development group and Dr simon tucker’s Medicinal chemistry team within the research group.

to protect our good record in occupational Health and safety (oHs), Biota provides considerable emphasis on safety during the induction of new employees. our commitment is to a continuously improving safety culture with the definitive target of “no injuries to anyone ever”.

pROjECT pORTFOLIOBiota’s shareholders hold a unique asset through the company’s world class portfolio of products and programs.

STRATEGYBiota is a drug discovery and development company. the company creates value for its shareholders during the processes of discovery, product development and the early clinical phases of drug development. Biota’s focus is on anti-infectives and has developed drug candidates for the treatment of influenza, respiratory syncytial virus, rhinovirus and hepatitis c infections.

For its size, Biota has a remarkably strong and balanced portfolio of products and projects. it has two products in market generating royalties, two products already licensed for collaborative research and potential commercialisation and two being funded by shareholders. Where the programs are partnered they are being developed with strong, international pharmaceutical companies, recognised globally as leaders in their respective fields, including GsK, inverness Medical, Medimmune and Boehringer ingelheim.

over time, our intention is to increase the number of projects within the company’s portfolio and to extend selected products further into clinic. While this will require additional resources, the strategy will create a larger pipeline, improve the overall risk balance within the portfolio and build significant further value with the selected later stage programs.

A) Licensed & Marketed products

the products described in this section are either of Biota discovery or have been out-licensed. they are effectively owned and marketed by the licensees. the licensee is

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ceo’s report

fully responsible for all matters in relation to the product. in return, Biota receives royalties from the product’s sales, typically until the cessation of the product’s patent life.

relenza

Zanamivir (relenza) was licensed to Glaxo (now GlaxosmithKline, GsK) in 1990 and was commercially launched in 1999.

During F2007, there has been an improvement in sales of relenza by GsK. royalties from relenza have increased to $39.8 million in F2007, up from $5.2 million in F2006. For much of the year, demand exceeded supply as GsK continued with its declared intention of increasing capacity. GsK’s president J-p Garnier advised his shareholders in early 2006 that capacity for relenza may be increased from 15 million courses in 2006, to 30 million or perhaps 45 million courses, during 2007, subject to demand.

Based on the royalty figure paid in F2007, GsK produced approximately 22 million courses of relenza and may be assumed to have a current annual capacity of between 24 and 30 million courses. the global pandemic stockpiling market for neuraminidase inhibitors is now quite large and valued at us$5.6 billion. contrary to popular perception, the stockpiling of neuraminidase inhibitors is still incomplete, with a number of governments still actively building inventories. For example, the us will not complete its intended stockpile of 81 million courses until December 2008, the uK appears interested in increasing the proportion of relenza in its stockpile, subject to supply being available from GsK and that existing stockpiles should start to require replenishment within twenty four months. the stockpile replenishment market in steady state, is expected to be worth over us$1.0 billion per annum.

the relenza supply problems have also limited availability of the product for the influenza seasonal market, estimated at us$700 million in F2006. Hopefully, the supply issue is beginning to abate. For example, GsK advised australian pharmacy wholesalers in May 2007 that limited quantities of relenza were now available for retail customers, through their medical prescriber and dispensing pharmacy.

oia Flu range

our influenza diagnostic developments, marketed by inverness Medical under the Biostar oia Flu and Biostar oia Flu a/B brands, have continued to generate useful revenues of $0.5 million in F2007 despite their ageing profile in an increasingly more crowded diagnostic market.

these products are not seen as central to Biota’s strategy, but with the valuable relationship with inverness Medical established, other developmental diagnostic opportunities may be explored.

B) Licensed Collaborative projects

the projects described in this section have been licensed to pharmaceutical companies who intend to complete all aspects of product development and market the resultant product. once licensed, expenses incurred by Biota are generally met by the licensee. the projects are collaborative due to the significant use of Biota’s technical resources during early development and our formal participation in the Joint Development team. the projects are effectively the property of the licensee, subject to the maintenance of certain ongoing conditions.

rsV & Medimmune

Biota’s rsV program was licensed at the late discovery/pre-lead stage to Medimmune inc., in December 2005. Medimmune is the world leader in developing medicines for rsV prevention and currently markets synagis (palivizumab), a us$1.5 billion injectable antibody product for infants at high risk. Biota’s program potentially offered an additional product range to Medimmune with a lower cost, oral product, capable of clearing an infection or reducing the clinical impact of an rsV infection.

Biota and Medimmune announced on 17 July that Bta9881 had commenced phase ia clinical trial in healthy adult volunteers, to establish safety and tolerability. significantly, under the terms of the December 2005 licensing agreement, Biota received a us$3.0 million payment from the achievement of this milestone.

HcV & Boehringer ingelheim

in november 2006, the company announced that it entered into a worldwide research collaboration and licensing agreement with Boehringer ingelheim to develop and commercialise Biota’s nucleoside analogues designed to treat hepatitis c virus (HcV) infections and potentially other diseases.

under the terms of the agreement Biota is eligible to receive payments of up to us$102 million based on products achieving certain clinical, regulatory and commercialisation milestones, including an initial technology access fee and research support. in addition, Biota would receive royalties on future sales of licensed products marketed by Boehringer ingelheim. Biota is responsible for drug discovery research and Boehringer ingelheim is responsible for worldwide development of potential compounds and their

commercialisation. Biota and Boehringer ingelheim are equally represented on the Joint research committee to oversee and coordinate the activities of the program.

the Boehringer ingelheim group is one of the world’s 20 leading pharmaceutical companies, headquartered in Germany. the family owned company, founded in 1885, operates globally with 143 affiliates in 47 countries and approximately 37,500 employees. the company is committed to the research, development, manufacture and marketing of novel, high therapeutic value products for human and veterinary medicine.

in 2005, Boehringer ingelheim posted net sales of €9.5 billion and spent almost 20% of sales in its largest business unit, prescription Medicines, on research and development. Boehringer ingelheim is an acknowledged leader in hepatitis research and therapies.

C) Internal projects

the projects described in this section have not yet been licensed. they are wholly owned by Biota (or with our co-owner Daiichi-sankyo in the case of lani) and are fully funded from our own resources or government grants. they may be available for licensing at an appropriate stage in the future

lani

Biota has considerable experience in developing small molecule antivirals effective against influenza and has identified a second generation of anti-influenza compounds, or long acting neuraminidase inhibitors (lani). the lani compounds are expected to be used once weekly for prevention and once only for the treatment of influenza, compared to twice daily for five days for the current products. the lani compounds have a number of important advantages over oseltamivir and zanamivir due to their longer efficacy and higher potency and are likely to have particular use in the pandemic stockpiling market.

Biota and sankyo co. ltd (now Daiichi-sankyo co ltd) entered into an agreement in 2003 to jointly advance both companies’ lani compounds. Daiichi-sankyo co. ltd. is one of Japan’s largest pharmaceutical companies, with annual sales of us$8.2 billion. Daiichi-sankyo has a long history in new drug discovery, including the first-in-class statins, for the treatment of high cholesterol.

Daiichi-sankyo’s candidate, cs8958 completed phase i clinical evaluation in a new dry powder inhaler in Japan during april 2007 and is currently undergoing complementary phase i studies in western subjects in the uK. this additional clinical work has been supported by us national institutes of Health

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ceo’s report

(niH) funding of us$5.6 million, awarded to Biota in october 2004.

Daiichi-sankyo have also announced their intention to commence phase ii clinical studies in the northern hemisphere autumn of 2007.

Biota’s Flunet compounds are in the preclinical stage of development and are intended as backup compounds to cs8958 or perhaps, third generation anti-influenza products. While they target the same neuraminidase site as zanamivir and cs8958 to exert their antiviral effect, their high potency suggests novel, additional characteristics. the niH provided Biota with a grant of up to us $8.5 million over four years, to fund the major aspects of the preclinical development of Flunet.

HrV

Human rhinoviruses (HrV) are the group of viruses frequently associated with the common cold, both in adults and children. the infection is of little consequence in otherwise healthy individuals, causing minor, self limiting symptoms that are easily and cheaply treated.

However, a safe and effective treatment for HrV would be a major breakthrough for suffers of asthma, chronic obstructive pulmonary disease, cystic fibrosis and in patients with compromised immune systems for whom the infection can trigger complications leading to serious illness, hospitalisation and death.

our lead compound Bta798, successfully completed its phase i clinical trial in March 2007. Biota intends to initiate proof of efficacy studies (phase iia challenge study clinical trials), as soon as practical.

OUTLOOKBiota’s product pipeline is the key to its long term, sustainable value. the company currently has three products in early clinical trials; rsV, HrV and lani. the completion of key development milestones over the next three years should create appreciable value for shareholders. in general, the investment community attributes higher value to products as they move closer to market approval and re-rate companies accordingly.

Biota’s favourable cash flows from the royalty generating products in market, relenza and the oia Flu range, makes it one of the few australian biotechnology companies with the flexibility to consider the development or expansion of its product pipeline from retained earnings and without additional capital raisings. this funding approach is non-dilutive to existing shareholders and reduces the overall cost of capital to the company and should generate increased returns for shareholders.

Based on these fundamentals, i am confident that Biota is well positioned to continue to deliver strong performance over the ensuing years.

PCookManagingDirector

Abovefromlefttoright:Damian lismore (company secretary), Barbara Gibson, John Grant, paul Bell, peter cook, ian Gust and Grant latta.

Board of Directors

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Your directors present their report on the consolidated entity (the Group), consisting of Biota Holdings limited (the company) and the entities it controlled at the end of, or during, the year ended 30 June 2007.

DIRECTORSthe following persons were directors of Biota Holdings limited during the whole of the financial year and up to the date of this report:

MrJohnGrant(Chairman)MrPeterCookMsBarbaraGibsonProfessorIanGustMrGrantLatta

in addition, Mr paul Bell was appointed as a director effective 8 september 2006 and continues in office at the date of this report.

INFORMATION ON DIRECTORS AS AT 30 jUNE 2007

John R Grant CA, MBA (Chairman, non-executive director)

ExperienceandExpertise John Grant joined the Board on 30 august 2001 and was elected chairman. He is an experienced chairman and director in public, private and government entities. He has a depth of experience in investment and strategy development in technology based businesses gained through his career in venture capital, investment banking, management consulting and public accounting. in 2004 he chaired the commonwealth of australia investment review of Health and Medical research.

John was the joint founder in 1984 with Hambros Bank of Hambro-Grantham limited, a venture capital firm of which he was ceo and executive chairman until 2001. previously he was ceo and Managing Director of international pacific corporation limited, now rothschild australia limited.

OtherCurrentDirectorships Bioplatforms australia limited (chairman). research australia limited. John swire & sons pty limited.

FormerDirectorshipsinthelast3years aMBri limited (chairman). new Zealand Venture investment Fund limited (chairman). colonial First state private capital limited.

SpecialResponsibilities chairman of the Board. Member of the audit and risk committee. Member of the remuneration committee.

InterestinSharesandOptions 607,551 ordinary shares in Biota Holdings limited.

Peter C Cook M.Pharm. FRMIT, PhC., MPS, MRACI, C.Chem., MAICD (Chief Executive Officer and Managing Director)

ExperienceandExpertise peter cook was appointed Managing Director and chief executive officer on 9 December 2005. He has had extensive experience in restructures, mergers and acquisitions, innovation and innovation commercialization with technology-based companies and has a strong manufacturing background. He also has over ten years of international commercial experience in europe, usa and asia, where he has both lived and worked.

peter was formerly chief executive officer and Managing Director of orbital corporation limited. He previously held the positions of chief executive officer of Faulding pharmaceuticals, president of ansell’s protective products Division, Deputy Managing Director of invetech and Director of research and Development for nicholas Kiwi.

OtherCurrentDirectorships Quickstep Holdings limited.

FormerDirectorshipsinthelast3years orbital corporation limited.

SpecialResponsibilities chief executive officer and Managing Director. Member of the remuneration committee.

InterestinSharesandOptions 141,200 ordinary shares in Biota Holdings limited. 72,314 unlisted options over ordinary shares in Biota Holdings limited.

Barbara J Gibson BSc, FTSE, MAICD (Non-executive director)

ExperienceandExpertise Barbara Gibson was appointed a director in april 1996. she possesses a broad array of business management experience and an in depth knowledge of the scientific sector, particularly in the commercialisation of technologies.

Barbara was formerly the General Manager chemicals Group of orica limited and a member of the orica Group executive. prior to this role she was the General Manager of advanced sciences Group, which included the pharmaceuticals, Diagnostics and other Healthcare businesses of orica.

OtherCurrentDirectorships Warakirri asset Management pty ltd (chairman). penrice soda Holdings limited. st Barbara limited.

FormerDirectorshipsinthelast3years incitec pivot limited. incitec limited.

SpecialResponsibilities chairman of the remuneration committee.

InterestinSharesandOptions 90,820 ordinary shares in Biota Holdings limited. 75,050 unlisted options over ordinary shares in Biota Holdings limited.

Ian D Gust AO MD, BS, BSc, DipBact(Lond), FRCPA, FRACP, MASM, FTS (Non-executive director)

ExperienceandExpertise ian Gust was appointed a director in July 2001. He has had a long and distinguished career in medical research and has received wide international recognition for his contributions to the field of virology.

ian was the former Director of research and Development at csl limited, a position he held for ten years (1990-2000). During this period he was closely involved in csl’s successful expansion in australia and internationally. He is currently a professorial Fellow, Department of Microbiology and immunology, university of Melbourne, a consultant to the Bill and Melinda Gates Foundation, and a consultant to uniceF, the World Bank and the World Health organisation

OtherCurrentDirectorships opal therapeutics pty ltd. opal therapeutics inc. Board of australian international Health institute. Board of international aids Vaccine initiative.

FormerDirectorshipsinthelast3years promics pty ltd. Board of trustees international Vaccine institute.

SpecialResponsibilities Member of the remuneration committee.


Directors’ report

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Directors’ report

Grant F Latta AM B.Bus, MBA, CPA, FAICD, FAIM (Non-executive director)

ExperienceandExpertise Grant latta was appointed a director in February 2006. He is an experienced company director and senior business executive with strong financial management, marketing and strategic skills which he has gained through a depth of successful domestic and international business experience in large and emerging companies.

Grant is a member of the australian competition tribunal to the Federal court. He was formerly chairman of the Grains research and Development corporation, Deputy chairman of Food science australia, Deputy chairman of export Finance and insurance corporation and Director of austrade.

OtherCurrentDirectorships optiscan imaging limited (chairman). ricegrowers limited.

FormerDirectorshipsinthelast3years tp Health limited (chairman). Vision systems limited (Deputy chairman).

SpecialResponsibilities chairman of the audit and risk committee.


paul R Bell BA MA Hons (Non-executive director)

ExperienceandExpertise paul Bell was appointed a director on 8 september 2006. He has had an extensive executive career with the international pharmaceutical company Merck & co inc. paul is a former member of Merck’s Management committee and was president of their asia pacific Human Health Division between 1997 and 2002. prior to that he was Managing Director of Merck sharp & Dohme australia pty ltd.

OtherCurrentDirectorships cochlear limited. Bio-link partners limited.

FormerDirectorshipsinthelast3years Gropep limited.

SpecialResponsibilities Member of the audit and risk committee.


COMpANY SECRETARY

Damian T Lismore FCA, GAICD, BA (Hons) Accountancy

Damian lismore was appointed chief Financial officer and company secretary in august 2005. He has extensive experience throughout the healthcare industry, particularly in acquisitions and restructures, commercialisation of new technologies and dealing with the investment community.

Damian’s commercial background includes ten years with price Waterhouse (now pwc) in australia and six years with Deloitte Haskins & sells in the uK. More recently, he has served as Group Financial controller and General Manager Buying & Finance for the major australian pharmaceutical company, sigma; and as Managing Director of Mnt innovations, the commercial arm of the crc (co-operative research centre) for Microtechnology.

MEETINGS OF DIRECTORS the numbers of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2007, including the number of meetings held and attended by each director when qualifying as a director were:

Meetingsofcommittees

Director Boardofdirectors AuditandRisk Remuneration

Held Attended Held Attended Held Attended

John Grant 10 10 4 4 4 4

peter cook 10 10 4 4 4 4

Barbara Gibson 10 10 1 1 4 4

ian Gust 10 9 - - 4 3

Grant latta 10 10 4 4 2 2

paul Bell (appointed 8 sept 2006) 7 7 3 3 - -

INFORMATION ON DIRECTORS AS AT 30 jUNE 2007 (CONTINUED)

Retirement,electionandcontinuationinofficeofdirectors in accordance with the constitution, the following directors are eligible and seek re-election at the 2007 annual General Meeting;

(1) John Grant retires by rotation, and

(2) ian Gust retires by rotation.

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CORpORATE GOVERNANCE STATEMENT

ASX Corporate Governance Council guidelines

the company has adopted corporate governance practices which are consistent with the asX corporate Governance council best practice principles and recommendation guidelines, except in regard to specific elements of the recommendations for nomination committees as explained in this statement. the Board continues to review the framework and practices to ensure they meet the interests of all shareholders. Biota considers its practices achieve compliance in a manner appropriate for smaller listed entities such as Biota.

this statement will continue to be updated from time to time to reflect further changes and enhancements where necessary. a description of the company’s main corporate governance practices is set out below. all these practices, unless otherwise stated, were in place for the entire year.

Directors

the directors’ overriding objective is to increase shareholder value within an appropriate framework which protects the rights and enhances the interests of shareholders and ensures the company and its controlled entities are properly managed. the function of the board of directors is clearly defined and includes responsibility for:

approval of corporate strategies, the annual budget and financial plan;

monitoring financial performance including approval of the annual and half-year financial reports and liaison with the company’s auditors;

appointment of, and assessment of the performance of the chief executive officer;

monitoring managerial performance;

establishing policies on risk oversight and management and ensuring that the significant risks facing the company and its controlled entities have been identified; and appropriate and adequate control, monitoring and reporting mechanisms are in place; and

reporting to shareholders and regulatory authorities.

the directors are committed to the principles underpinning best practice in corporate governance, applied in a manner which is best suited to the company and its controlled entities and to best addressing the directors’ accountability to shareholders and other stakeholders.

Composition of the Board

the Board comprises a majority of independent directors. it has five non-executive directors, including an independent chairman, and one executive director. the Board considers a director to be independent if the director is independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement. Factors that the Board will take into account in making its assessment include consideration of whether the director:

is a substantial shareholder of the company, or otherwise associated directly or indirectly with a substantial shareholder of the company;

has been employed in an executive capacity by the company of another member of the Biota group within the last 3 years, and did not become a director with 3 years of being so employed;

within the last 3 years, has been a principal of a material professional adviser or material consultant to the company or another group member or an employee materially associated with the service provided;

is a partner in or controlling shareholder, or executive officer, or a material supplier or a material customer of the company or another member of the Biota group;

has a material contractual relationship with the company or another member of the Biota group other than as a director of the company;

has served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company; and

the director or any family member of the director has received compensation in excess of a$100,000 from the Group during the past year other than in direct connection with the director fulfilling their role as a director of the company.

the Board undertakes an annual review of the extent to which each non-executive director is independent or not, having regard to the criteria set out above and any other relevant relationship that non-executive director may have.

the skills, experience and expertise relevant to the position of director held by each director in office at the date of the last annual report are provided in the directors’ report under the heading of “information on directors as at 30 June 2007”.

From time to time, board members have been called on for special consultancy work. current procedures stipulate that approval is obtained from the Board prior to using the consultancy services of a director. the Board ensures that any payment is appropriate and in keeping for the nature of the services provided.

Director Termto30June2007 Independent Non-executive Boardroles

John Grant 6 years Board chair audit & risk committee member remuneration committee member

peter cook 1 year - - remuneration committee member

Barbara Gibson 11 years remuneration committee chair

ian Gust 6 years remuneration committee member

Grant latta 1 year audit & risk committee chair remuneration committee member

paul Bell (appointed 8 september 2006)

< 1 year audit & risk committee member

Directors’ report

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Director selection, appointment and succession

Directors are selected based upon the specific skills, knowledge and experience that they possess. candidates would be expected to have well established scientific, financial or business credentials, and suitable experience in biotech or pharmaceutical operations would normally be well regarded.

appointments are the responsibility of the full Board and are not made by a separate committee. a director appointed mid term by the company must seek re-election at the next annual general meeting.

a formal appointment letter setting out the key terms and conditions applicable to that appointment is provided to each new director. all current directors have formal appointment letters. upon commencement, an induction program is conducted involving meetings with other directors and senior management to facilitate the new director’s understanding of the affairs of the company.

each director normally serves for a period of three (3) years before re-election although the constitution requires that one-third (or the number nearest to but not less than one-third) of the directors must retire from office at each annual general meeting. a retiring director is eligible for re-election. prior to the election of any director, candidate information with appropriate detail to support an informed decision is provided to shareholders.

subject to satisfactory performance and re-election, a director may serve for two periods of three years, after which time, he or she, is subject to peer review prior to being considered for re-election.

Director performance evaluation

regular communication between directors and the chairman is encouraged and an annual review of the requirements and performance of all directors is conducted. the performance of the Board is formally reviewed annually by the full board.

the performance of a director is continually monitored by the chairman and peers and is reviewed with each director by the chairman. the performance of the chair is reviewed by other directors and the results discussed with the chair by the elected lead director.

Board operations

During the financial year, the Board met ten (10) times as well as an additional corporate strategy workshop. the Group performance is monitored by monthly analysis of financial statements and critical evaluation of research progress against key benchmarks. in addition, on a regular basis, the Board reviews Group progress against the long term goals set out in the strategic plan.

in addition, directors read and analyse board papers and reports submitted by management and engage in regular informal discussions with management. the views of the chairman and directors are canvassed regularly by the chief executive officer and the executive management team on a range of strategic and operational issues. senior executives routinely attend board and committee meetings to report on particular issues.

Where directors are associated with organisations with which the Group might have ongoing commercial relationships, the director involved will disclose where a potential conflict of interest may arise.

Access to information

any director may with the prior written approval of the chairman of the Board seek their own independent legal advice at the company’s expense, to assist them in the performance of their duties to the company and the shareholders.

each director has access to the company secretary. the company secretary has accountability to the Board, through the chairman, on all governance matters.

Audit & Risk Committee

the role of the audit and risk committee is to provide the Board with additional assurance regarding the quality and reliability of financial and risk information prepared for use by the Board. the committee will make recommendations to the Board. the committee has a documented charter approved by the Board. a summary of the charter is available on the company’s website. all members of the committee must be non-executive directors.

Members of the committee during the year were G latta (chair), p Bell, and J Grant. the external auditors, chief executive officer, chief Financial officer and company secretary and other financial and accounting staff are invited to the audit and risk committee at the discretion of the committee. the external auditor is invited to at least two meetings of the committee without executives in attendance. the chief executive and chief Financial officer declared in writing to the Board that the company’s financial reports for the year ended 30 June 2007 present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards. this statement is required annually.

the responsibilities of the audit and risk committee include, the selection, and appointment of the external auditors; liaising with the external auditors and ensuring that the annual and half-year statutory audits/reviews are conducted in an effective manner; reviewing and ensuring management implement appropriate and prompt remedial action for any deficiencies identified; monitoring compliance with australian and international taxation requirements, the australian and united states corporations laws and stock exchange listing rules; and reviewing and monitoring internal control systems, general risk management and compliance with the company’s code of conduct.

the audit and risk committee reviews the performance of the external auditors on an annual basis and meets with them to discuss audit planning matters, statutory reporting and as required for any special reviews or investigations deemed necessary by the Board. the audit and risk committee also assess whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence and provides advice to the Board whether the provision of such services by the external auditor is compatible with the general standard of independence of auditors imposed by the corporations act 2001.

the current external auditors, pricewaterhousecoopers (pwc), attend the annual General Meeting. pwc rotate their audit engagement partner, on listed companies, at least every five years.

the Board is of the view that the composition of the audit and risk committee and the skills and experience of its members are sufficient to enable the committee to discharge its responsibilities with the charter. all other non- executive directors are able to attend meetings at the discretion of the committee chair as observers.

Remuneration Committee

the role of the remuneration committee is to review and make recommendations to the Board on the remuneration packages and policies applicable to the chief executive officer, chief Financial officer/company secretary, senior executives/scientists and the directors themselves. it also serves a role in the advice to the Board on management recommendations for executive succession planning, share schemes, incentive performance packages, superannuation entitlements and fringe benefits policies.

remuneration policies are competitively set to attract and retain the most qualified and experienced directors and senior executives/scientists. the remuneration committee obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies both locally and internationally.

the remuneration committee meets at least twice a year and as and when required. the committee is chaired by a non-executive director, not being the chair of directors and comprises two other non-executive directors and the chief executive officer. the members of the remuneration committee during the year were B Gibson (chair), J Grant, i Gust, and p cook. in addition

Directors’ report

CORpORATE GOVERNANCE STATEMENT (CONTINUED)

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Mr latta was a member of the committee for two meetings at the start of the year. the chief executive officer does not participate in discussions which consider his personal remuneration. all other directors are able to attend meetings at the discretion of the committee chair as observers.

the remuneration committee has a documented charter, approved by the Board. a summary of the charter is available on the company’s website.

Remuneration report

the remuneration report is set out on pages 14 to 22 and forms part of the Directors’ report for the year ended 30 June 2007.

Risk management

the Board oversees the establishment, implementation and review of the company’s risk management systems, which have been established by management for assessing, monitoring and managing operational, financial reporting and compliance risks for the group. the responsibility for regular review of the risk management system has been delegated to the audit and risk committee, who conduct these reviews at least twice a year. the risk strategy is to identify and to establish appropriate measures or responses to assist in the pursuit of the company’s, and its controlled entities, approved goals and objectives.

responsibility for establishing and maintaining effective risk management strategies rests with senior management, accountable to the chief executive officer and the audit and risk committee of the Board. the annual business plan for the company considers key risks and the risk management strategies, which is prepared by management and approved by the board prior to the commencement of each financial year. a monthly review and assessment of performance against the plan is submitted to the board. the executive management group are also responsible for the reinforcement of a risk management culture throughout the company.

the chief executive officer and chief Financial officer have declared, in writing to the Board, that they have evaluated the effectiveness of the company’s financial disclosure, controls and procedures and have concluded that they are operating efficiently and effectively. operational and other compliance risk management has also been reviewed and found to be operating efficiently and effectively.

Where risks, such as natural disasters, cannot be adequately mitigated, using internal controls, those risks are transferred to third parties through insurance coverage to the extent considered appropriate.

Safety, health and environmental

the Board considers the successful management of safety, health and environmental issues as vital for business success. at each Board meeting, the directors receive a report on safety, health and environmental issues and performance in the Group. the audit and risk committee receives more detailed presentations on safety, health and environment.

the Group is subject to environmental regulation and other licences in respect of its research facilities, including regular inspections and audits from state and Federal authorities. the Group was not in breach of any of these regulations throughout the year and no related issues have arisen, since the end of the financial year.

Ethical standards

all directors, executives, scientists and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Group. the Board has approved a code of conduct and share trading policy.

Code of Conduct

the Board has approved a code of conduct, applicable to all directors and employees of the group, providing for the conduct of business in accordance with the highest ethical standards and sound corporate governance. this requires that personnel act with honesty and integrity and in compliance with the letter and spirit of the law and company policies.

Trading in company securities

the Board have adopted a share trading policy, which applies to all directors, employees and contractors of the company. the policy covers matters of insider trading, share trading blackout periods and the maintenance of confidentiality.

During share trading blackout periods no director, employee, contractor or their immediate family members, may purchase or sell company securities other than as part of the company’s incentive schemes. Blackout periods are instated at least twenty trading days prior to the release of financial results.

the Board formally reviews the need for the declaration of any further blackout period at each formal board meeting and may impose additional blackout periods at any other time, when either specific individuals or directors or employees and contractors generally, should be precluded from trading in the company’s securities.

a summary of the share trading policy is available on the company’s website.

Continuous disclosure

the Board of Directors aims to ensure that shareholders are informed of all major developments affecting the group’s state of affairs. the Board has adopted a policy to identify matters that a reasonable person would expect to have a material affect on the price of the company’s securities.

the continuous Disclosure policy is overseen and co-ordinated by the company secretary, who carries responsibility for ensuring compliance with the continuous disclosure requirements of the australian securities exchange (asX) listing rules. proposed announcements are generally approved by the Managing Director and company secretary while others also require the approval of the chairman or on occasion specific Board approval prior to release to the asX and hence to shareholders, media, analysts, brokers and the public. the company secretary is responsible for all communication with the asX.

a summary of the company’s policy on continuous Disclosure is available on the company’s website.

Electronic communications

the company seeks to provide opportunities for shareholders to participate through electronic means. all information disclosed to the asX is posted on the company’s website www.biota.com.au as soon as it is disclosed to the asX. all recent company announcements, media briefings, details of company meetings, press releases and financial reports are also available on the company website.

shareholders are encouraged to register their email details with the company’s share registrar for direct updates of company matters and have available to them on-line access to facilitate their account maintenance, including viewing of balances, choosing method of delivery of annual report, price-volume charts for up to one year and download of forms to notify of change in particulars. in addition, registered shareholders are able to participate electronically in proxy voting for any matters brought before a meeting of shareholders.

a summary of the corporate governance documents available on the company website include:

corporate Governance statement;

audit and risk committee charter;

remuneration committee charter;

code of conduct;

share trading policy;

continuous Disclosure policy; and

Health & safety policy.

Shareholder participation

the Board encourages participation of shareholders at the annual General Meeting to ensure a high level of accountability and identification with the Group’s strategy and goals. important issues are presented to shareholders as single resolutions.

Directors’ report

CORpORATE GOVERNANCE STATEMENT (CONTINUED)

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pRINCIpAL ACTIVITIESthe principal continuing activity of the Group during the financial year was drug discovery and clinical development of antivirals, suitable for human use and its commercialisation.

REVIEW OF OpERATIONSthe Group delivered a very strong profit result for the year ended 30 June 2007, with a net profit after tax of $20.2 million (2006: loss $11.3m). profit before tax was $17.8 million.

revenues increased to $57.3 million (2006: $15.0m), from two main sources:

strong demand on GsK for relenza from governments around the world to assist pandemic stockpiles have resulted in royalties to Biota of $39.8 million (2006: $5.2m); and

collaboration income of $13 million (2006: $5.2m) is the result of upfront payments and fee for service work from recent partnering activities.

costs increased to $39.5 million (2006: $26.3m) reflecting:

the investment in research activities of $8.2 million (2006: $7.7m) required by the Medimmune and Boehringer ingelheim licence agreements, the costs of which were fully reimbursed;

the investment in product and clinical development programs of $10.3 million (2006: $8.4m), notably for respiratory syncytial virus (rsV) and human rhinovirus (HrV). the rsV costs were reimbursed by Medimmune;

the continued investment in the litigation against GsK of $10.4 million (2006: $4.4m) which reflects the increased discovery phase, the lodgement of the amended statement of claim and the preparation of witness statements; and

the sub-royalties of $4.9 million (2006: $0.7m) due on royalties receivable. sub-royalties rights associated with relenza have been acquired during the year for $13.7 million.

the Group has consolidated its operations in australia and closed dormant and entities no longer required.

SIGNIFICANT EVENTS SINCE THE pREVIOUS REpORT, INCLUDING CHANGES IN THE STATE OF AFFAIRS

a research collaboration and licensing agreement with Boehringer ingelheim was signed in november 2006 to develop and commercialise Biota’s novel nucleoside analogues designed to treat hepatitis c virus (HcV) infections and potentially other diseases. Biota has received an upfront payment and may receive payments of up to us$102 million based on the achievement of certain specified milestones and additionally, royalties on the sales of any resultant commercial products.

in Japan, the long acting neuraminidase inhibitor (lani) cs8958 completed phase i trials in Japan with comparable studies underway in the uK.

Biota was awarded up to us$8.5 million from the us national institute of allergy and infectious Diseases, an institute of the national institutes of Health (niH). the funding, over four years (subject to the availability of niH funds and satisfactory progress), is to meet the preclinical development costs of our back up lani program, called Flunet. the Flunet compounds are novel and have a dimeric structure derived from zanamivir.

Biota’s lead compound for the treatment of HrV infection in patients with compromised respiration/immune systems has completed phase i clinical studies. the company is now planning to conduct phase iia clinical trials.

DIVIDENDSno dividends were declared during the year and the directors do not recommend the payment of a dividend.

EARNINGS /(LOSS) pER SHARE

2007 2006Cents Cents

Basic earnings/(loss) per share 11.2 (6.9)

Diluted earnings/(loss) per share 11.0 (6.9)

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEARon 17 July 2007, the Group announced that its rsV program, that was licensed to Medimmune inc. in December 2005, had entered phase i clinical trials. under the licence agreement an amount of us$3 million is now receivable by the Group.

no other matter or circumstance has arisen since 30 June 2007 that has significantly affected, or may significantly affect:

(a) the Group’s operations in future financial years; or

(b) the results of those operations in future financial years; or

(c) the Group’s state of affairs in future financial years.

LIKELY DEVELOpMENTS AND EXpECTED RESULTS OF OpERATIONSthe Group will continue to undertake drug discovery and clinical development of antivirals suitable for human use and its commercialisation.

any further information on likely developments in the operations of the consolidated entity and the expected results of operations has not been included in this report because further disclosure would not be in the consolidated entity’s best interests.

INSURANCE OF OFFICERSDuring, or since the end of, the financial year the company has not indemnified, or made a relevant agreement for indemnifying, against a liability of any present or former officer or auditor of the company or any of its related bodies corporate as contemplated by subsections 309a(1) and (2) of the Corporations Act 2001.

During the financial year, the company paid a premium to insure all directors, secretaries and officers of the Group against liability incurred in that capacity. Disclosure of the nature of the liability and the amount of premium is prohibited by the confidentiality clause of the insurance contract.

the company has not provided any insurance for an auditor of the company or a related body corporate.

pROCEEDINGS ON BEHALF OF THE COMpANYno person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

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NON-AUDIT SERVICESthe company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important.

the auditor (pricewaterhousecoopers) has provided both audit and non-audit services during the year.

the board of directors has determined that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. the directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the audit and risk committee to ensure they do not impact the impartiality and objectivity of the auditor, and

none of the services undermine the general principles relating to auditor independence as set out in professional statement F1, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

Consolidated

2007$

2006$

Assuranceservice

1.Auditservices

pricewaterhousecoopers australian firm:

– audit and review of financial reports and other audit work under the corporations act 2001 125,750 103,500

Total remuneration for audit services 125,750 103,500

2.Otherassuranceservices

pricewaterhousecoopers australian firm:

– audit of grant returns 30,000 10,950

– iFrs accounting services - 20,000

Total remuneration for other assurance services 30,000 30,950

Total remuneration for assurance services 155,750 134,450

AUDITORS’ INDEpENDENCE DECLARATIONa copy of the auditors’ independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 23.

ROUNDING OF AMOUNTSthe company is of a kind referred to in class order 98/100, issued by the australian securities and investments commission, relating to the “rounding off” of amounts in the directors’ report. amounts in the directors’ report have been rounded off in accordance with that class order to the nearest thousand dollars, or in certain cases, the nearest dollar.

AUDITORpricewaterhousecoopers continues in office in accordance with section 327 of the Corporations Act 2001.

this report is made in accordance with a resolution of the directors.

john Grant Director

Melbourne 28 august 2007

peter Cook Director

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REMUNERATION REpORTthe remuneration report is set out under the following main headings:

A Principlesusedtodeterminethenatureandamountofremuneration

B DetailsofremunerationC ServiceagreementsD Share-basedcompensationE Additionalinformation

the information provided under sections a-D include remuneration disclosures that are required under accounting standard aasB 124 related party Disclosures. these disclosures have been transferred from the financial report and have been audited. the disclosures in section e are additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001 which may or may not have been audited.

A principles used to determine the nature and amount of remuneration - audited

the remuneration committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to directors and employees of the company. the broad remuneration policy is to ensure the remuneration package properly reflects the person’s duties and responsibilities, is consistent with current industry practice and aligns reward with the delivery of performance that is likely to create value for shareholders.

Data is obtained from independent surveys to ensure that remuneration is set at market rates having regard to experience and performance and the need to have effective retention strategies for key executives and scientific staff. in this regard, formal performance appraisals are conducted at least annually for all employees. the Board ensures that executive reward is in the interests of shareholders by satisfying the following key criteria:

competitiveness and reasonableness;

linkage of performance with compensation; and

transparency.

remuneration packages may include a mix of fixed remuneration, performance-based remuneration and equity-based remuneration.

Fixed remuneration

Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes FBt charges related to employee benefits including motor vehicles and computers), as well as employer contributions to superannuation funds.

remuneration levels are reviewed annually by the remuneration committee through a process that considers the individuals overall performance, the achievements of the employees’ section and the overall performance of the Group. in addition, data from independent surveys are reviewed to ensure the directors’, senior executives’ and scientists’ remuneration is competitive with the market place. remuneration is also reviewed on promotion.

performance-linked remuneration

performance-linked remuneration includes both short-term and long term incentives and is designed to reward executive directors, senior executives and scientific staff for meeting or exceeding their financial, project and personal objectives. the short-term incentive is an “at risk” bonus, provided in the form of cash, while an equity incentive is provided as ordinary shares in Biota Holdings limited, under the rules of the Biota employee option plan (Beop).

the directors believe that based on the distinctive nature of the work undertaken and the professional stature of Biota’s core scientific team, both performance-linked schemes be applied universally within the company.

short-term incentive

executive directors, senior executives, scientists and employees may receive bonuses based on the achievement of budgeted goals related to the performance of the group, including the value of licences secured, major project milestones delivered including the commencement of clinical trials, granting of patents, research milestones and financial performance including capital raisings, revenue, profit and cash. these measures are chosen as they are value creating outcomes. they also directly align the individual’s reward to the group’s strategy and performance.

the remuneration committee formally establishes each year the Key performance indicators (Kpi) for the group. the chief executive officer, chief Financial officer and other senior executives’ incentives are largely based on these corporate Kpis, while other executives and scientists’ incentives are based on a mixture of corporate Kpis, specific project targets and personal Kpis. all employees have a significant portion of their short-term incentive linked to the corporate targets. cash incentives are payable once approved by Board. the 2007 cash bonus was paid on the 9 august 2007.

as 2007 was a very successful year for the company, the corporate Kpis were predominantly met with strong financial performance, the achievement of clinical milestones and the continued licensing of programs.

equity incentive

executives, scientists and staff may also be offered shares through the Biota employee option plan (Beop), under which shares are granted, subject to the satisfaction of performance conditions, to continuity of employment over a two year period, and subject to board discretion. the performance conditions are the Kpis used for the determination of the short-term incentive, but on which more demanding performance hurdles are set.

the equity incentive requires a Kpi hurdle of 50% to be exceeded before any equity incentive is payable. at 100%, the incentive is twice the value of the sti, with the intermediate steps between 50% and 100% increasing logarithmically, from zero times the sti at 50% to twice the sti at 100%. the value of the equity incentive for each qualifying member of staff is calculated by the method described, reviewed by the remuneration committee and used to secure options over un-issued ordinary shares, at an issue price equal to the company’s share price on the grant date, normally on 30 June.

each option converts to an ordinary share, at no additional cost, of which 50% become exercisable on the first two anniversaries of the date of grant. the options lapse after five years. the equity incentive is reported in the income statement at its fair value, the issue price, over the vesting period.

in 2007, the senior executive group participated in the equity incentive scheme, however in 2008, the intention is that this group should transition to a long-term incentive plan.

no non-executive director has received as part of their remuneration, any option over un-issued shares of the company, during or since the end of the financial year.

long-term incentive

the company is implementing a long-term incentive plan for key executives. the key features of the plan are:

the plan applies from 1 July 2007.

the number of options granted is calculated as a market based percentage of an executive’s total Fixed remuneration (tFr) and is determined using a 15 day volume weighted average price. options have a five year exercise period, and vest after 3 years if preset performance measures are met.

performance measures are based on total shareholder return (tsr) and targets are set by the Board at the commencement of each 3 year period. Measures consist of two components:

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1. an absolute shareholder return measure (ie based on share price appreciation, adjusted for capital or dividend payments). the absolute tsr targets for the initial option allocation are set out in the table below based on a 15 day volume weighted average share price of $1.75 to 30 June 2007.

Perannumrequiredgrowth

Cumulativesharepricegrowthat

30June2010

Requiredsharepriceat

30June2010

threshold 8% 26% $2.20

target 10% 33% $2.33

stretch 16% 56% $2.73

2. a relative performance measure (ie relative measure against a peer group). the relative tsr performance for the initial allocation will focus on the intersuisse biotech index as a representation of a peer group, where each quarter Biota’s relative position determines a score. at the end of the 3 year period, the cumulative score is calculated to determine the overall performance.

the Board has determined that initially the tsr measure will be 80% absolute and 20% relative, although this will be revisited at each grant. under all tsr measures, vesting will only occur where performance exceeds the threshold.

the remuneration committee considered independent expert advice on appropriate long term incentive plans. the Board determined that tsr measure over a three year period was the most appropriate method for the long term incentive plan. other measures considered such as earnings per share growth or return on assets were also considered but regarded as inappropriate, in the view of the remuneration committee, at this time in the company’s development. tsr measures will continue to be reviewed as the company matures.

non-executive director remuneration

the structure of fees and payments for non-executive directors recognises the competitive pressures of the market place and the need to attract and retain appropriately experienced and qualified Board members. Fees also reflect the significantly increased workload and time commitment associated with the heightened regulatory environment.

non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically approved by shareholders. shareholders last approved a pool limit of $0.6 million in october 2006.

When reviewing non-executive directors’ fees, the remuneration committee seeks independent advice or information to ensure market alignment. all fees were reviewed during the year within the overall pool limit. each director receives a base fee and may receive an additional fee as chair, or as a member, of a sub-committee.

non-executive directors no longer participate in any incentive plans or receive any separate retirement benefits.

Full details of all payments to non-executive directors are included in section B.

B Details of remuneration - audited

amounts of remuneration

Details of the nature and amount of each element of the emoluments of each director of Biota Holdings limited and each of the key management personnel of the company and the consolidated entity receiving the highest emoluments for the year ended 30 June 2007, are set out in the following table.

the key management personnel of Biota Holdings limited includes the directors and two key management personnel. these personnel are the only executives of Biota Holdings limited. these executives are:

peter cook – Chief Executive Officer

Damian lismore – Chief Financial Officer

the key management personnel of the Biota Group include all of the personnel listed above for Biota Holdings limited and those executives who are members of the executive management committee. these are all of the executives of the Group. the additional executives are:

simon tucker – Vice President, Research

Jane ryan – Vice President, Product Development

leigh Farrell – Vice President, Business Development

John lambert – Executive Director, Drug Discovery

REMUNERATION REpORT (CONTINUED)

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Directors’ report

Short-termbenefits Post-employmentbenefits Long-termbenefits

Share-basedpayment

NameCashsalary

andfees$

Cashbonus$

Super-annuation

$

Termination$

Longserviceleave

$

Options$

Total$

Non-executive directors

John Grant, chairman2007 117,667 - - - - - 117,667

2006 104,587 - 9,413 - - - 114,000

Barbara Gibson 2007 61,333 - - - - - 61,333

2006 81,833 - - - - - 81,833

ian Gust2007 52,667 - - - - - 52,667

2006 42,049 - 3,784 - - 45,833

Grant latta 2007 60,000 - - - - - 60,000

2006 24,500 - - - - - 24,500

paul Bell2007 43,361 - - - - - 43,361

2006 - - - - - - -

andrew tyndale2007 - - - - - - -

2006 39,533 - - - - - 39,533

sub-total 2007 335,028 - - - - - 335,028

2006 292,502 - 13,197 - - - 305,699

Executive directors

peter cook 2007 324,335 117,180 95,665 - - 65,625 602,805

2006 211,244 52,500 19,012 - - - 282,756

peter Molloy2007 - - - - - - -

2006 179,776 58,884 - 229,684 - - 468,344

Other key management personnel

Damian lismore 2007 185,015 62,354 34,985 - - 83,973 366,327

2006 150,082 48,900 13,507 - - 41,052 253,541

sub-total of director & key management of parent entity

2007 844,378 179,534 130,650 - - 149,598 1,304,160

2006 833,604 160,284 45,716 229,684 - 41,052 1,310,339

Other key management personnel of the Group

simon tucker2007 170,041 59,283 39,959 - 7,628 74,567 351,478

2006 165,462 41,945 18,123 - 6,072 67,250 298,852

Jane ryan2007 164,422 54,054 45,578 - 7,401 78,162 349,617

2006 161,331 43,434 17,608 - 8,490 63,486 294,349

leigh Farrell 2007 192,661 56,763 17,339 - - 12,556 279,319

2006 35,815 9,493 3,223 - - - 48,531

John lambert2007 143,530 32,270 31,470 - - 32,621 239,891

2006 148,624 18,169 14,830 - - 30,291 211,914

Total2007 1,515,033 381,904 264,995 - 15,029 347,504 2,524,465

2006 1,344,836 273,325 99,500 229,684 14,562 202,079 2,163,986

Notes: (a) Mr paul Bell was appointed as a director during the year. (b) Mr tyndale and Mr Molloy resigned as directors in 2006. (c) the cash bonus and options are “at risk” components of remuneration. (d) share based payments are the value of the shares at the grant date, amortised over the vesting period. the amount shown in the table is expensed in the income statement. section e of the remuneration report sets out the share option grants to key management personnel in respect of performance in 2007.

Key management personnel of Biota Holdings limited and the Group

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C Service agreements - audited

remuneration and other terms of employment for the Managing Director, chief Financial officer and the other key management personnel are formalised in service agreements. these agreements provide for the provision of performance related cash bonuses, and participation where eligible, in the Biota employee option plan. other major provisions of the agreements relating to remuneration are set out below.

peter cook, chief executive officer and Managing Director

no fixed term of agreement. annual base salary at 30 June 2007, inclusive of superannuation is

$420,000, and is reviewed annually by the remuneration committee. payment of termination benefit on termination by the employer, other

than for gross misconduct, equal to six month’s base salary. in the event of termination as a consequence of an acquisition or merger, the termination benefit is twelve months.

Damian lismore, chief Financial officer and company secretary



than for gross misconduct, equal to six month’s base salary.

simon tucker, Vice president, research

no fixed term of agreement. annual base salary, inclusive of superannuation for the year ended 30

June 2007 of $210,000, and is reviewed annually by the remuneration committee.

payment of termination benefit on termination by the employer, other than for gross misconduct, equal to six month’s base salary.

Jane ryan, Vice president, product Development




leigh Farrell, Vice president, Business Development



than for gross misconduct, equal to six month’s base salary

John lambert, executive Director, Drug Discovery




D Share based compensation - audited

current option plan

the current share based incentive plan is described in section a.

Former option plans

the company has three former plans, with eligible options current at the date of this report. all options under these plans were granted prior to 7 november 2002. it is intended that there will be no further issues under these plans.

NonExecutiveDirector’sShareandOptionPlan(NEDSOP)

in 2001, shareholders approved the introduction of the neDsop, whereby directors could acquire shares and options in the company by salary-sacrificing their remuneration for the subsequent three years. these shares and options are not accessible to directors for a period of three years from the date of issue. the options, which are exercisable at a price of $4.44, will lapse eight years after the issue date. it is intended that there will be no further shares or options issued to directors under the neDsop.

BiotaEmployeeShareOptionPlanNo2(ESOPNo2)

the esop no2 is a long-term incentive plan applicable to all employees, which began in november 2001, with the last issue in september 2002. the options are non-transferable, may not be exercised within three years of issue, except at the directors’ discretion and lapse after five years. the exercise price was established by taking the average market price over the previous 60 trading days prior to the date of grant of the option. options were granted for no consideration, and the amount received on the exercise of options is recognised as issued capital at the date of issue of the shares.

ExecutiveShareOptionPlan(Non-ESOP)

non-esop options were granted to peter Molloy upon commencement of employment with the company as chief executive officer in July 2002, and are generally subject to the terms of the esop no2, with certain additional criteria. the options are based upon specific performance hurdles.


Directors’ report

amounts of remuneration (continued)

the relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

Name Fixedremuneration Atrisk–STI Atrisk-Equity

2007 2006 2007 2006 2007 2006

Executive directors of Biota Holdings Limited

peter cook 53% 53% 16% 16% 31% 31%

Other key management personnel of Group

Damian lismore 53% 53% 16% 16% 31% 31%

simon tucker 53% 55% 16% 15% 31% 30%

Jane ryan 53% 55% 16% 15% 31% 30%

leigh Farrell 53% 53% 16% 16% 31% 31%

John lambert 63% 71% 12% 10% 25% 19%

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option grants affecting remuneration for current employees

the terms and conditions of each grant of options from past, current or future reporting periods that impact remuneration of current employees, are as follows:

Grantdate Expirydate Exerciseprice Valueperoptionatgrantdate

Dateexercisable

3 september 2002 3 september 2007 $0.58 $0.323 september 2005 to

3 september 2007

1 July 2004 30 June 2009 nil $0.5650% after 30 June 2005; 50% after 30 June 2006


9 December 2005 9 December 2010 nil $1.4450% after 30 June 2006; 50% after 30 June 2007

2 March 2006 2 March 2011 nil $1.7150% after 30 June 2006; 50% after 30 June 2007


8 august 2007 30 June 2012 nil $1.8650% after 30 June 2008; 50% after 30 June 2009

options provided to directors and key management personnel for remuneration

Details of options over ordinary shares in the company provided as remuneration to each director of Biota Holdings limited and each of the key management personnel of the Group are set out below. When exercisable, each option is convertible into one ordinary share of Biota Holdings limited. Further information on the options is set out in note 31 to the full financial statements.

Name Numberofoptionsgrantedduringtheyear Numberofoptionsvestedduringtheyear

2007 2006 2007 2006

Directors of Biota Holdings Limited

peter cook 72,314 - 36,157 -

peter Molloy - - - 1,166,667


Damian lismore 71,653 41,667 56,660 20,834

simon tucker 62,971 165,916 114,444 127,787

Jane ryan 66,664 168,236 117,450 121,589

leigh Farrell 13,836 - 6,918 -

John lambert 26,624 75,053 50,838 58,734


Directors’ report

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shares issued on exercise of options included in remuneration

Details of ordinary shares in the company issued as a result of the exercise of options included in remuneration to each director of Biota Holdings limited and other key management personnel of the Group are set out below.

Name Dateofexerciseofoptions

Amountpaidpershareonexerciseofoption

Numberofordinarysharesissuedonexerciseofoptionsduringtheyear

2007 2006

Directors of Biota Holdings Limited

peter Molloy 15 December 2005 $0.58 - 333,333

peter Molloy 14 February 2006 $0.58 - 500,000


Damian lismore 9 august 2006 $nil 20,834 -

simon tucker 14 october 2005 $0.58 - 49,800

simon tucker 21 July 2005 $nil - 44,829

simon tucker 9 august 2006 $nil 127,786 -

simon tucker 28 March 2007 $0.58 200,200 -

Jane ryan 8 november 2005 $0.58 - 100,000

Jane ryan 14 october 2005 $0.58 - 100,000

Jane ryan 21 July 2005 $nil - 37,471

Jane ryan 9 august 2006 $nil 121,589 -

Jane ryan 28 March 2007 $0.58 50,000 -

John lambert 14 october 2005 $0.58 - 18,000

John lambert 25 october 2005 $0.58 - 50,000

John lambert 21 July 2005 $nil - 21,207

John lambert 29 november 2006 $0.58 32,000 -

John lambert 9 august 2006 $nil 58,734 -

John lambert 28 March 2007 $0.58 50,000 -

no amounts are unpaid on any share issued on the exercise of options.


Details on the remuneration policies and practices are set out in section a of the remuneration report, under the headings of Fixed remuneration and performance-based remuneration.

in both cases, the policies are structured to reward performance that could reasonably be expected to increase shareholder value. these Kpis were set at the commencement of the year by the Board. in setting corporate Kpis, the Board conducts a rigorous process to set outcomes that are likely to result in an increase in shareholder value. the Board conducts a thorough assessment of performance against these Kpis at the end of the year to determine all performance based remuneration.

the relationships between remuneration and company performance is summarised as follows:

a) Fixed remuneration

an individual’s contribution to the achievements of their section targets and the performance of the group is considered in conjunction with remuneration surveys and external advice, where appropriate. Fixed remuneration tends to be set at the market Median of the appropriate benchmark pay band.

b) performance based remuneration

performance based remuneration considers the achievement of budgeted goals related to the performance of the group including the value of the licences secured, major project milestones delivered including the commencement of clinical trials, granting of patents, scientific milestones and financial performance including capital raisings, revenue, profit and cash. normally, corporate Kpis and individual Kpis are the only determinant

E Additional Information / remuneration and company performance– unaudited

Directors’ report

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$50m

$100m

$150m

$200m

$250m

$300m

$350m

market cap

$0.00

$0.50

$1.00

$1.50

$2.00

share price

'07'06'05'04

remuneration: cash bonuses and options

the following table provides the percentage of the available bonus or grant that was paid, or that vested, in the financial year and the percentage that was forfeited because the person did not meet the service and performance criteria. no part of the bonuses are payable in future years.

Cashbonus Options

NamePaid

%Forfeited

%Year

grantedVested

%Forfeited

%

Financialyearsinwhichoptions

mayvest*

Minimumtotalvalueofgrantyet

tovest$

Totalvalueofgrantyettovestatdateofgrant

$

peter cook 93 7 2007 - - 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 43,749

Damian lismore 95 5 2007 - -- 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 43,350

2005 100 - - nil -

simon tucker 94 6 2007 - - 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 38,097

2005 100 - - nil -

Jane ryan 86 14 2007 - - 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 40,332

2005 100 - - nil -

leigh Farrell 90 10 2007 - - 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 8,371

John lambert 92 8 2007 - - 2009 nil -

- - 2008 nil -

2006 50 - 2008 nil 16,108

2005 100 - - - -

* all options vest on the 30 June of the relevant year.


Directors’ report

of performance based remuneration. all staff have a component of corporate Kpis as part of their remuneration. senior executives have 70% of their performance based remuneration linked to corporate Kpis, while other staff have at least 30% of their performance based remuneration linked to corporate Kpis.

specific examples of Kpis over the recent period include commercial contracts with Boehringer ingelheim (november 2006), Medimmune inc (December 2005), Daiichi-sankyo (september 2003), Biostar, now inverness Medical (since 1997) and capital raisings totalling $63.4m over the last 5 years. preclinical and clinical milestones of Biota owned and partnered programs are further examples of Kpis.

the key management personnel have changed significantly over the last 5 years, so individual comparisons are difficult. However on an aggregate basis, total remuneration payable to key management personnel totalled $2.52m in 2007, as opposed to $2.16m in 2006 and $2.51m in 2005. the share price at 30 June has increased from $0.42 to $1.21 to $1.86 in the same period. Market capitalisation has increased by 493% to $340m over the three years.

in 2007, Biota was a top quartile performer in the intersuisse Biotech index.

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Directors’ report

options – as a proportion of remuneration and value of options ascribed at grant date and exercise date

A B C D E

NameRemuneration

consistingofoptions

Valueascribedatgrantdate

$

Valueatexercisedate

$

Valueatlapsedate

$

TotalofcolumnsB-D

peter cook 11% 65,625 - - 65,625

Damian lismore 23% 65,025 26,147 - 91,172

simon tucker 21% 57,146 365,576 - 422,722

Jane ryan 22% 60,497 203,844 - 264,341

leigh Farrell 4% 12,556 12,556

John lambert 14% 24,161 155,360 - 179,521

a = the percentage of the value of remuneration consisting of options, based on the value at the grant date set out in column B. B = the value at grant date calculated in accordance with aasB 2 share-based payment of options granted during the year as part of remuneration. c = the value at exercise date of options that were granted as part of remuneration and were exercised during the year. D = the value at lapse date of options that were granted as part of remuneration and that lapsed during the year.

share options granted to directors and the most highly remunerated officers

options over unissued ordinary shares of Biota Holdings limited granted during or since the end of the financial year in respect of performance in 2007 to all of the officers of the company, as part of their remuneration, are set out below:

Optionsgranted Grantdate

Executives of Biota Holdings Limited group

peter cook – chief executive officer 121,258 24 october 2007

Damian lismore – chief Financial officer 65,086 8 august 2007

simon tucker – Vice president, research 61,747 8 august 2007

Jane ryan - Vice president, product Development 53,313 8 august 2007

leigh Farrell – Vice president, Business Development 57,682 8 august 2007

John lambert – executive Director, Drug Discovery 33,231 8 august 2007

Mr cook’s options are approved by the Board under the Biota employee option plan and are subject to approval by shareholders as a new share issue at the annual General Meeting. other options were granted under the Biota employee option plan on 8 august 2007.

Due to the nature of the vesting rules, the options granted on 8 august 2007 and proposed to be issued to Mr cook on 24 october 2007 are not reflected in the remuneration or disclosures elsewhere in the remuneration report.

Details of options granted to the directors and the five most highly remunerated officers of the Group can be found in section D of the remuneration report.

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Directors’ report

shares under option plans

unissued ordinary shares of Biota Holdings limited under the various option plans are detailed in note 31 of the full financial statements. at the date of this report options issued are as follows:

Optionsissuedunderformeroptionplans(NEDSOP,Non-ESOPandESOPNo2)

Optionplan Dateoptionsgranted Expirydate Fairvalueofoptions Priceofsharesonexercise Numberunderoption

neDsop 6 December 2000 6 December 2008 $0.80 $4.44 75,050

esop no2 3 september 2002 3 september 2007 $0.32 $0.58 10,000

sub total 85,050

Optionsissuedundercurrentoptionplan(BEOP)

Dateoptionsgranted ExpiryDate Issuepriceofsharesunderoptions Priceofsharesonexercise Numberunderoption

21 July 2006 30 June 2011 $1.21 nil 275,561

8 august 2007 30 June 2012 $1.86 nil 544,055

sub total 819,616

Totalsharesunderoptionplans 904,666

no option holder has any right under the options to participate in any other share issue of the company or any other entity.

shares issued on the exercise of options

the following ordinary shares of Biota Holdings limited were issued during the year ended 30 June 2007 and up to the date of this report on the exercise of options granted under the Biota employee option plan. no further shares have been issued since that date. no amounts are unpaid on any of the shares.

Optionsissuedunderformeroptionsplans(NEDSOP,Non-ESOPandESOPNo2)

Dateoptionsgranted Fairvalueofoption Priceofsharesonexercise Numberofsharesissued

27 november 2001 $0.48 $0.58 36,000

28 March 2002 $0.39 $0.58 462,800

15 July 2002 $0.29 $0.58 1,166,667

3 september 2002 $0.32 $0.58 -

1,665,467

Optionsissuedundercurrentoptionplan(BEOP)

Dateoptionsgranted Issuepriceofsharesunderoption Priceofsharesonexercise Numberofsharesissued

30 June 2004 $0.56 $ nil 175,823

30 June 2005 $0.42 $ nil 770,656

9 December 2005 $1.44 $ nil 41,667

2 March 2006 $1.71 $ nil 14,000

30 June 2006 $1.21 $ nil 203,258

1,205,404

Totalsharesissuedonexerciseofoption 2,870,871

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Liability limited by a scheme approved under Professional Standards Legislation

PricewaterhouseCoopersABN 52 780 433 757

Freshwater Place� Southbank BoulevardSOUTHBANK VIC �00�GPO Box 1��1LMELBOURNE VIC �001DX ��Website:www.pwc.com/auTelephone �1 � ��0� 1000Facsimile �1 � ��0� 1��Auditor’s Independence Declaration

As lead auditor for the audit of Biota Holdings Limited for the year ended �0 June 0�, I declare thatto the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act �001 inrelation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit;.

This declaration is in respect of Biota Holdings Limited and the entities it controlled during theperiod.

Anton LinschotenPartner

PricewaterhouseCoopers �� August �00�

��

BIOTA ANNUAL CONCISE REPORTF

or p

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concise Financial report 2007

RELATIONSHIp OF THE CONCISE FINANCIAL REpORT TO THE FULL FINANCIAL REpORTthe concise financial report is an extract from the full financial report for the year ended 30 June 2007. the financial statements and specific disclosures included in the concise financial report have been derived from the full financial report.

the concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of Biota Holdings limited and its subsidiaries as the full financial report. Further financial information can be obtained from the full financial report.

the full financial report and auditor’s report will be sent to shareholders on request, free of charge. please call 03 9915 3700 or email [email protected] and a copy will be forwarded to you. alternatively, you can access both the full financial report and the concise report on our website: www.biota.com.au.

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income statement for the year ended 30 June 2007

the above income statement should be read in conjunction with the accompanying notes.

Notes Consolidated

2007$’000

2006$’000

revenues from continuing operations 4 55,830 13,872

other income 5 1,470 1,095

research and development (8,198) (7,685)

product development (10,299) (8,400)

Business development (1,197) (644)

sub royalty (4,864) (741)

corporate - Head office (3,867) (4,265)

corporate - litigation (10,426) (4,397)

Finance cost (618) (141)

Profit/(Loss)frombeforeincometax 17,831 (11,306)

income tax credit 6 2,349 -

Profit/(Loss)fortheyear 20,180 (11,306)

Profit/(Loss)attributabletomembersofBiotaHoldingsLimited 20,180 (11,306)

Earnings/(loss)persharefromcontinuingoperationsattributabletotheordinaryequityholdersofthecompany:

Cents Cents

Basic earnings/(loss) per share 14 11.2 (6.9)

Diluted earnings/(loss) per share 14 11.0 (6.9)

Earnings/(loss)pershareattributabletotheordinaryequityholdersofthecompany:

Cents Cents

Basic earnings/(loss) per share 14 11.2 (6.9)

Diluted earnings/(loss) per share 14 11.0 (6.9)

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Balance sheet as at 30 June 2007

the above balance sheet should be read in conjunction with the accompanying notes.

Notes Consolidated

2007$’000

2006$’000

ASSETS

Currentassets

cash and cash equivalents 62,156 46,183

trade and other receivables 9,350 5,864

total current assets 71,506 52,047

Non-currentassets

receivables - -

property, plant and equipment 5,152 5,512

Deferred tax assets 7 2,349 -

intangible assets 8 13,447 -

total non-current assets 20,948 5,512

Totalassets 92,454 57,559

LIABILITIES

Currentliabilities

trade and other payables 6,004 4,034

Deferred revenue 6,457 6,011

provisions 1,097 516

total current liabilities 13,558 10,561

Non-currentliabilities

Deferred revenue 1,022 -

provisions 10 6,339 100

total non-current liabilities 7,361 100

Totalliabilities 20,919 10,661

Netassets 71,535 46,898

EQUITY

contributed equity 161,671 157,974

reserves 636 (124)

accumulated losses (90,772) (110,952)

Totalequity 71,535 46,898For

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statement of changes in equity for the year ended 30 June 2007

the above statement of changes in equity should be read in conjunction with the accompanying notes.

Notes Consolidated

2007$’000

2006$’000

Totalequityatthebeginningofthefinancialyear 46,898 26,036

Netincomerecogniseddirectlyinequity

repurchase of subsidiary options - (19)

realisation of Foreign currency translation reserve on closure of us subsidiaries 523 -

profit/(loss) for the year 20,180 (11,306)

Totalrecognisedincomeandexpensefortheyear 20,703 (11,325)

total recognised income and expense for the year is attributable to:

Members of Biota Holdings limited 20,703 (11,325)

contributions of equity 3,393 31,949

transaction costs - (112)

employee share options 541 350

Totalequityattheendofthefinancialyear 71,535 46,898

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cash flow statement for the year ended 30 June 2007

the above cash flow statement should be read in conjunction with the accompanying notes.

Notes Consolidated

2007$’000

2006$’000

Inflows/(outflows)

Cashflowsfromoperatingactivities

receipts from customers (inclusive of goods and services tax) 47,301 6,972

payments to suppliers and employees (inclusive of goods and services tax) (34,037) (23,487)

other revenue (upfront payment on collaborations) 5,053 6,728

interest received 2,666 2,109

Netcash(outflow)inflowfromoperatingactivities 20,983 (7,677)

Cashflowsfrominvestingactivities

loans to related parties - -

payments for intangible assets 8 (5,510) -

proceeds from sale of plant and equipment - 63

payments for plant and equipment (893) (1,985)

Netcash(outflow)frominvestingactivities (6,403) (1,922)

Cashflowsfromfinancingactivities

repayments of interest bearing liabilities - (789)

proceeds from issue of shares 1,393 31,949

issue costs - (112)

repurchase of subsidiary’s options - (19)

Netcashinflowfromfinancingactivities 1,393 31,029

Netincreaseincashandcashequivalents 15,973 21,430

Cashandcashequivalentsatthebeginningoftheyear 46,183 24,753

Cashandcashequivalentsattheendoftheyear 62,156 46,183

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1 SUMMARY OF SIGNIFICANT ACCOUNTING pOLICIES

(a) Concise financial report

this concise financial report relates to the consolidated entity consisting of Biota Holdings limited and the entities it controlled at the end of, or during, the year ended 30 June 2007. the accounting polices adopted have been consistently applied to all years presented, unless otherwise stated in note 1(b).

(b) Change in accounting policy

(i) Financial guarantee contract

in the year ended 30 June 2007 the Group changed its accounting policy for financial guarantee contracts. these contracts are now recognised as a financial liability at the time the guarantee is issued. the liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with aasB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate.

in previous reporting periods, a liability for financial guarantee contracts was only recognised if it was probable that the debtor would default and a payment would be required under the contract.

the change in policy was necessary following the change to aasB 139Financial instruments: Recognition and Measurement made by aasB 2005-9 Amendments to Australian Accounting Standards in september 2005. the new policy has been applied retrospectively and comparative information in relation to the 2006 financial year has been restated accordingly. there was no impact on the consolidated financial statements of the Group.

(ii) Financial instruments – adoption of aasB 132/aasB 139

the Group took the exemption available under aasB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards to apply aasB 132 Financial Instruments: Disclosure and Presentation and aasB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. this change was recognised in the previous financial year and appropriate disclosures have been made in the financial report for the year ending 30 June 2006.

(c) Rounding of amounts

the company is of a kind referred to in class order 98/100, issued by the australian securities and investments commission, relating to the “rounding off” of amounts in the financial report. amounts in the concise financial report have been rounded off in accordance with that class order to the nearest thousand dollars, or in certain cases, the nearest dollar.

2 CRITICAL ACCOUNT ESTIMATES AND jUDGEMENTSestimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

the Group makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, vary from the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) carrying value of intangible assets

in accordance with accounting policies, the group predominantly expenses all research and development costs. the nature of the pharmaceutical industry in regard to drug development and subsequent licensing

often means that when a program is licensed there are significant upfront payments with the potential of significant milestone and royalty entitlements. the recoverability of intellectual property carrying values in the balance sheet does not take account of potential licensing or sale transactions, as these cash flows cannot be estimated with sufficient reliability nor can the probability of their occurrence.

as disclosed in notes 8 and 10, the Group entered into arrangements with csiro and Victorian college of pharmacy during the year. the carrying values of these assets are supported by anticipated future revenues arising from relenza royalties. the transaction offers the third parties the opportunity of earning additional payments should relenza sales exceed specified amounts. Given the improved performance of relenza sales, it is probable that these amounts will be payable in future years and provision has been made on a present value basis consistent with the Group accounting policy at note 1(s) to the full financial statements.

(ii) carrying value of property, plant and equipment

the assets in question represent scientific equipment and facilities used by Biota in the pursuit of their research activities. For accounting purposes these assets are property plant and equipment and subject to the impairment test. aasB 136 impairment of assets defines the recoverable amount of an asset or group of assets as the higher of its fair value less costs to sell or value in use. Value in use is calculated using the present value of associated future cash flows. there are inherent issues about assessing the recoverability of Biota’s assets because:

(a) Biota is engaged in research activities and therefore future cash flows directly related to the current projects are difficult to predict; and

(b) there is not an active secondary market for such assets and therefore their individual sales/fair value is limited and probably below carrying amount.

the nature of Biota’s activities is such that the assets are classified as corporate assets as defined in aasB 136, being those assets which do not generate cash flows independently of other assets. aasB 136 requires that corporate assets be allocated to other groups of assets and tested for impairment on that basis. Where a reasonable allocation cannot be made to asset groups the standard permits corporate assets to be tested for impairment against entity wide value. applying this principle our view is that their recoverable amount can therefore be determined as the higher of entity wide cash flows or in this case, Biota’s market value based on average share price over the past three months.

(iii) recoverability of Deferred tax assets

as disclosed in notes 7 and 9, the Group has brought to account $3,600,000 in relation to previously unrecognised available tax losses. Management have estimated the amount for which there are sufficient taxable temporary differences ($1,251,352) and where there is convincing evidence that sufficient taxable profit will be available. Given the industry the Group operates in and the volatility of revenue, management have concluded that in meeting the “convincing evidence” requirements of the standard, it is only appropriate to consider the next 12 months.

(b) Critical judgements in applying the entity’s accounting policies

the Group entered into a research & collaboration licence with the Glaxo Group in 1990 and subsequent variations in relation to the commercialisation of zanamivir, subsequently marketed by GsK as relenza. the Group has issued a writ in the Victorian supreme court claiming breaches of contract and fiduciary duties for failing to promote and support relenza. no provision has been made for potential amounts payable or receivable.

3 SEGMENT INFORMATIONthe Group has one business segment, being drug discovery and clinical development of antivirals. the Group operates predominantly in one geographical segment being australia.

notes to the financial statements 30 June 2007

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4 REVENUE

Consolidated

2007$’000

2006$’000

Fromcontinuingoperations

royalty income 39,789 5,189

Diagnostic profit share 538 1,251

partnering revenue 5,726 2,243

research revenues 7,270 2,926

interest revenue 2,507 2,256

other revenue - 7

Revenuefromcontinuingoperations 55,830 13,872

5 OTHER INCOME

Grants-Government (note a) 58 368

Grants-other Governments (note a) 1,412 727

Foreign exchange gains - -

TotalOtherIncome 1,470 1,095

(a) Grants-Government

ausindustry research grants of $58,000 (2006:$368,000) are recognised as other income by the Group. there are no unfulfilled conditions or other contingencies attaching to these grants. the Group did not benefit directly from any other forms of government assistance.

the national institutes of Health has awarded the Group us$14.1m to complete research on the development of the lani programs, including three phase i studies. amounts of $1,412,000 (2006:$727,000) have been recognised as other income by the Group during the financial year. there are no unfulfilled conditions or other contingencies related to this portion of the grant.

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6 INCOME TAX CREDITthe income tax credit for the financial year differs from the amount calculated on the result. the differences are reconciled as follows:

Consolidated

2007$’000

2006$’000

(a)Incometaxcredit

current tax - -

Deferred tax 2,349 -

2,349 -

income tax expense is attributable to:

profit from continuing operations 2,349 -

profit from discontinued operations - -

aggregate income tax credit 2,349 -

Deferred income tax (expense) revenue included in income tax comprises:

increase in deferred tax assets (note 7) 2,349 -

2,349 -

(b)Numericalreconciliationofincometaxcredittoprimafacietaxpayable

profit/(loss) from continuing operations before income tax expense 17,831 (11,306)

tax at the australian tax rate of 30% (5,349) 3,392

tax effect of amounts which are not deductible (taxable) in calculating taxable income:

share-based payments (162) (105)

non-taxable amortisation (21) -

non-taxable income 474 -

research and Development claim 1,274 995

capital losses on loan forgiveness - -

sundry items 11 (84)

(3,773) 4,198

Difference in overseas tax rates - 151

initial recognition of deferred tax assets and deferred tax liabilities 2,522 -

tax losses not recognised - (4,349)

previously unrecognised tax losses now assessed as recoverable 3,600 -

income tax credit 2,349 -

(c)Unrecognisedtemporarydifferencesandtaxlosses

unrecognised temporary differences and tax losses for which no deferred tax asset has been recognised

57,961 82,217

tax effect of unrecognised temporary differences and tax losses for which no deferred tax asset has been recognised

17,388 27,469

at 30 June 2007, all of the amounts not brought to account arise from tax losses incurred in previous years.

potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June 2007 to the extent that the directors do not believe that it is appropriate to regard realisation of the future income tax benefit as probable.

note 2(a)(iii) sets out the estimation of the amount of tax losses brought to account.

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7 NON-CURRENT ASSETS – DEFERRED TAX ASSETS

Consolidated

2007$’000

2006$’000

Thebalancecomprisestemporarydifferencesattributableto:

tax losses 3,600 -

employee benefits 341 -

property plant & equipment 561 -

accruals 354 -

Deferred revenue 262 -

total deferred tax assets 5,118 -

set-off of deferred tax liabilities pursuant to set-off provisions (note 9) 2,769 -

net deferred tax assets 2,349 -

8 NON-CURRENT ASSETS – INTANGIBLE ASSETS

Consolidated

2007$,000

At1July2005

cost -

accumulated amortisation and impairment -

net book amount -

Yearended30June2006

opening net book amount -

additions - acquisition -

amortisation charge -

closing net book amount -

Asat30June2006

cost -

accumulated amortisation -

net book amount -

Yearended30June2007

opening net book amount -

additions 13,764

amortisation charge (317)

closing net book amount 13,447

At30June2007

cost 13,764

accumulated amortisation (317)

net book amount 13,447

royalty prepayments represent expenditure to csiro and Victorian college of pharmacy where the parties agreed to exchange variable royalty payments in relation to intellectual property, for a fixed amount. they have a finite useful life, usually being the period to the patent or contract expiry and are carried at the present value of costs at acquisition date less accumulated amortisation. amortisation is based on the anticipated sales of the related product over the contract or product life, which is currently 7 years.

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8 NON-CURRENT ASSETS – INTANGIBLE ASSETS (CONTINUED)

Reconciliation of payments for intangible assets

Consolidated

Note 2007$’000

amount capitalised 13,764

shares issued (2,000)

provision – amounts payable at present value 10(b) (6,254)

net cash outflow in cash flow statement 5,510

Gross payments made 10,374

sub royalties expensed, no longer required to be paid (4,864)

net cash outflow in cash flow statement 5,510

9 NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES

Consolidated

2007$’000

2006$’000

Thebalancecomprisestemporarydifferencesattributableto:

receivables 2,769 -

set-off of deferred tax assets pursuant to set-off provisions (note 7) (2,769) -

net deferred tax liability - -

10 NON-CURRENT LIABILITIES – pROVISIONS

Consolidated

2007$’000

2006$’000

employee benefits – long service leave 38 100

contingent consideration 6,301 -

6,339 100

(a)ContingentConsideration

the Group entered into arrangements during the year where the parties agreed to exchange variable royalty payments for use of intellectual property, for a fixed fee. the transaction also offers the third parties the opportunity of earning additional payments should relenza sales exceed specified amounts. provision has been made for these payments on a present value basis consistent with the Group accounting policy at note 1(e).

(b)MovementsinprovisionsConsolidated

2007$’000

Contingent Consideration

carrying amount at start of year -

provision raised on acquisition of assets 6,254

interest expense on unwinding of discount 47

carrying amount at end of year 6,301

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11 DIVIDENDSneither the company nor any of its controlled entities paid any dividends during the current or previous year and there is no dividend proposed to be paid in relation to the year ended 30 June 2007 (2006 dividends proposed: nil). Franking credits available at the 30% tax rate after allowing for tax payable in respect of the current year’s taxable income, for the year ended 30 June 2007, are $494,366 (2006: $494,366).

12 CONTINGENT ASSETS AND CONTINGENT LIABILITIESthe parent entity and consolidated entity had contingent assets and contingent liabilities at 30 June 2007 in respect of the legal process underway with the GlaxosmithKline Group.

a writ has been issued in the Victorian supreme court claiming breaches of contract and fiduciary duties by the GlaxosmithKline Group for failing to promote and support relenza. the writ seeks unspecified damages for lost royalties to date, as well as future losses through the life of the product’s patents. the claim has not been recognised as a receivable at 30 June 2007 as the damages arising from a successful action cannot be reliably measured at this stage. in the event that this legal action is unsuccessful, costs may be awarded against the company. the likelihood and extent of these costs cannot be reliably measured at this stage.

the company has entered into commercially sensitive contractual arrangements with external parties in regard to the provision of legal and consulting services associated with this litigation. these arrangements could potentially give rise to a future liability under certain circumstances. as at 30 June 2007, this potential liability is $17.4m and should be regarded as a risk sharing arrangement by the company’s advisers. this potential liability will increase as the legal process evolves but would only become due and payable where a resolution, or a court award, is in excess of the total amount payable. Directors are of the opinion that no significant liability will arise from these arrangements should the legal action be unsuccessful.

13 EVENTS OCCURRING AFTER REpORTING DATEon 17 July 2007, the Group announced that its rsV program, that was licensed to Medimmune inc. in December 2005, had entered phase i clinical trials. under the licence agreement an amount of us$3 million is now receivable by the Group. apart from this matter, no other matter or circumstance has arisen since 30 June 2007 that has significantly affected, or may significantly affect:

the Group’s operations in future financial years;

the results of those operations in future financial years; or

the Group’s state of affairs in future financial years.

14 EARNINGS pER SHARE

Consolidated

2007Cents

2006Cents

(a)Basicearningspershare

profit/(loss) from continuing operations attributable to the ordinary equity holders of company 11.2 (6.9)

profit/(loss) from discontinued operations - -

profit/(loss) attributable to the ordinary equity holders of the company 11.2 (6.9)

(b)Dilutedearningspershare

profit/(loss) from continuing operations attributable to the ordinary equity holders of the company 11.0 (6.9)

profit/(loss) from discontinued operations - -

profit/(loss) attributable to the ordinary equity holders of the company 11.0 (6.9)For

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Consolidated

2007$’000

2006$’000

(c)Reconciliationsofearningsusedincalculatingearningspershare

net profit/(loss) used in calculating basic earnings per share 20,180 (11,306)

net profit/(loss) used in calculating diluted earnings per share 20,180 (11,306)

Consolidated

2007Number

2006Number

(d)Weightedaveragenumberofsharesusedasthedenominator

Weighted average number of ordinary shares on issue used in calculation of basic profit/(loss) per share 180,216,862 164,354,911

Weighted average number of ordinary shares on issue used in calculation of diluted profit/(loss) per share 181,791,158 164,354,911

(e)Informationconcerningtheclassificationofsecurities

(i) options

options granted to directors and employees under the Biota Holdings limited esop no2, Beop, neDsop and executive share option plans are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. the options have not been included in the determination of basic earnings per share.

14 EARNINGS pER SHARE (CONTINUED)

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the directors declare that in their opinion, the concise financial report of the consolidated entity for year ended 30 June 2007 as set out on pages 24 to 35 complies with accounting standards aasB 1039: Concise Financial Reports.

the concise financial report is an extract from the full financial report for the year ended 30 June 2007. the financial statements and specific disclosures included in the concise financial report have been derived from the full financial report.

the concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report, which is available on request.

this declaration is made in accordance with a resolution of the directors.

john Grant Director

Melbourne 28 august 2007

peter Cook Director

Directors’ declaration 30 June 2007

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Liability limited by a scheme approved under Professional Standards Legislation

PricewaterhouseCoopersABN 52 780 433 757

Freshwater Place� Southbank BoulevardSOUTHBANK VIC �00�GPO Box 1��1LMELBOURNE VIC �001DX ��Website:www.pwc.com/auTelephone �1 � ��0� 1000Facsimile �1 � ��0� 1��

Independent audit report to the members ofBiota Holdings Limited

Report on the Concise Financial ReportThe accompanying concise financial report of Biota Holdings Limited comprises the balance sheetas at 30 June 2007, the income statement, statement of changes in equity and cash flow statementfor the year then ended and related notes, derived from the audited financial report of BiotaHoldings Limited for the year ended 30 June 2007. The concise financial report does not contain allthe disclosures required by the Australian Accounting Standards.

Directors’ Responsibility for the Concise Financial Report

The Directors are responsible for the preparation and presentation of the concise financial report inaccordance with Accounting Standard AASB 1039 Concise Financial Reports, and theCorporations Act 2001. This responsibility includes establishing and maintaining internal controlsrelevant to the preparation of the concise financial report; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the concise financial report based on our auditprocedures. We have conducted an independent audit, in accordance with Australian AuditingStandards, of the financial report of Biota Holdings Limited for the year ended 30 June 2007. Ouraudit report on the financial report for the year was signed on 28 August 2007 and was not subjectto any modification. The Australian Auditing Standards require that we comply with relevantethical requirements relating to audit engagements and plan and perform the audit to obtainreasonable assurance whether the financial report for the year is free from material misstatement.

Our procedures in respect of the concise financial report included testing that the information in theconcise financial report is derived from, and is consistent with, the financial report for the year, andexamination on a test basis, of evidence supporting the amounts and other disclosures which werenot directly derived from the financial report for the year. These procedures have been undertakento form an opinion whether, in all material respects, the concise financial report complies withAccounting Standard AASB 1039 Concise Financial Reports.

Our procedures include reading the other information in the Annual Report to determine whether itcontains any material inconsistencies with the financial report.

For further explanation of an audit, visit our websitehttp://www.pwc.com/au/financialstatementaudit.

Our audit did not involve an analysis of the prudence of business decisions made by directors ormanagement.F

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Matters relating to the electronic presentation of the audited financial reportThis audit report relates to the concise financial report of Biota Holdings Limited (the company)for the financial year ended 30 June 2007 included on the Biota Holdings Limited web site. Thecompany’s directors are responsible for the integrity of the Biota Holdings Limited web site. Wehave not been engaged to report on the integrity of this web site. The audit report refers only to theconcise financial report identified above. It does not provide an opinion on any other informationwhich may have been hyperlinked to/from the concise financial report. If users of this report areconcerned with the inherent risks arising from electronic data communications they are advised torefer to the hard copy of the audited concise financial report to confirm the information included inthe audited concise financial report presented on this web site.

Independence

In conducting our audit, we have complied with the independence requirements of the CorporationsAct 2001. We confirm that the independence declaration required by the Corporations Act 2001,provided to the directors of Biota Holdings Limited on 28 August 2007, would be in the sameterms if provided to the directors as at the date of this auditor’s report.

Auditor’s opinion

In our opinion, the concise financial report of Biota Holdings Limited for the year ended 30 June2007 complies with Australian Accounting Standard AASB 1039: Concise Financial Reports.

PricewaterhouseCoopers

Anton Linschoten MelbournePartner 28 August 2007

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shareholder information 30 June 2007

the shareholder information set out below was applicable as at 16 august 2007.

A UNQUOTED EQUITY SECURITIES

Unquotedequitysecurities Numberonissue Numberofholders

options issued under the Biota employee share option plan no 2 (esop no2) 10,000 1

options issued under the non-executive directors share and option plan (neDsop) 75,050 1

options issued under the Biota employee share option plan (Bepo) 819,616 42

B DISTRIBUTION OF EQUITY SECURITIES

Holders Ordinaryshares %

1-1,000 4,820 2,819,214 1.54

1,001-5,000 4,291 12,190,886 6.65

5,001-10,000 2,486 19,147,420 10.44

10,001-100,000 2,826 63,019,150 34.38

100,001 - and over 109 86,148,028 46.99

totals 14,532 183,324,698 100.00

less than marketable parcel of 302 securities 1,542 313,512

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shareholder information 30 June 2007

C TWENTY LARGEST EQUITY SECURITY HOLDERSthe names of the twenty largest holders of equity securities as at 16 august 2007 are set out below.

Ordinaryshares

Name NumberheldPercentageofissuedshares

HsBc custody nominees (australia) limited 10,250,250 5.59

anZ nominees limited (cash income a/c) 9,908,918 5.41

niako investments pty ltd 7,377,298 4.02

national nominees limited 7,360,777 4.02

citicorp nominees pty limited 7,334,301 4.00

Jp Morgan nominees australia limited 4,512,532 2.46

aMp life limited 3,500,000 1.91

arora constructions pty ltd 3,450,000 1.88

cogent nominees pty limited 2,314,918 1.26

HsBc custody nominees (australia) limited-Gsi ecsa 1,606,269 0.88

Bellevue investments pty ltd 1,590,961 0.87

Bond street custodians limited 1,384,000 0.75

csiro 1,173,021 0.64

lJ thomson pty ltd 993,580 0.54

irrewarra investments pty ltd (strategic 1 a/c) 990,594 0.54

uBs nominees pty ltd 882,274 0.48

HsBc custody nominees (australia) limited –a/c2 872,044 0.48

sandhurst trustees ltd 741,500 0.40

Dr Kevin anthony Glucina 688,000 0.38

Grantham equities pty ltd 607,551 0.33

67,538,788 36.84

D SUBSTANTIAL HOLDERSsubstantial holders in the company are set out below:

Ordinaryshares

Name NumberheldPercentageofissuedshares

niako investments pty ltd 13,717,980 7.48

E VOTING RIGHTSon a show of hands each person as a member, proxy, attorney or representative has one vote, and on poll, each member present or by proxy, attorney or representative has one vote for each share held.

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notes

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notes

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Directors

John Grant (chairman) paul Bell peter cook (chief executive officer) Barbara Gibson ian Gust Grant latta

CompanySecretary

Damian lismore (chief Financial officer)

Registered&CorporateOffice

10/585 Blackburn road notting Hill Vic 3168 australia t: +61 3 9915 3700 F: +61 3 9915 3702

e: [email protected] W: www.biota.com.au

ShareRegistry

link Market services limited locked Bag a14 sydney nsW 1235 t: 1300 554 474 (within australia) t: +61 2 8280 7111 (outside australia) F: +61 2 9287 0303

e: [email protected] W: www.linkmarketservices.com.au

StockExchange

Australia

Biota Holdings limited is a public company listed on the australian securities exchange.

asX: Bta

USA

Biota shares are traded in the us via american Depositary receipts (aDr).

aDr: BtaHY

ReceiveyourAnnualReportelectronically

the Biota Holdings limited annual reports (concise report and combined Financial statements) are also posted on the internet. shareholders are encouraged to visit www.biota.com.au to inspect the electronic version of the annual report.

™relenza is a registered trademark of the GlaxosmithKline group of companies.

oia® Flu is a registered trademark of inverness Medical-Biostar inc.

™Flunet is a registered trademark of Biota scientific Management pty ltd.

annual report design by HobartDesign (www.hobartdesign.com).

corporate directory

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Documents

For personal use only · auditors’ independence declaration 23 concise financial report 24 income statement 25 Balance sheet 26 statement of changes in equity 27 cash flow statement