Synairgen : Preliminary statement of results for the year ended 31 December 2016

Synairgen plc

• Positive in vitro results in March 2016 from collaboration with Pharmaxis to develop the LOXL2 inhibitor as a novel treatment for idiopathic pulmonary fibrosis (IPF)

• AstraZeneca stopped the Phase IIa trial of AZD9412, as colds were not causing as many severe exacerbations as expected in the trial population potentially compromising the trial's ability to assess any effect of the drug on this endpoint

  Financial highlights

• Loss from operations for the year ended 31 December 2016 was £3.44 million (2015: £2.61 million)

• Research and development expenditure for the year was £2.42 million (2015:

  £1.36 million)

• Cash, cash equivalents and deposit balances of £4.77 million at 31 December 2016 (2015: £7.71 million). The Group remains debt free

  Post period-end highlights

• Further positive data in March 2017 from two preclinical models of Synairgen's LOXL2 inhibitor programme against IPF

• AZD9412 INEXAS clinical trial update, announcing AstraZeneca's decision to return the rights of inhaled interferon beta to Synairgen

"As a result of the forthcoming return of the interferon beta programme to Synairgen, the Company will conduct a thorough analysis of all data arising from the study and will provide an update on the programme and our plans for future development. In particular, and based on recently published and

unpublished work, we will examine the potential for inhaled interferon beta in COPD."

- Ends - For further enquiries, please contact: Synairgen plc

Richard Marsden, Chief Executive Officer John Ward, Finance Director

Tel: + 44 (0) 23 8051 2800

Geoff Nash, James Thompson (Corporate Finance) Stephen Norcross, Simon Johnson (Corporate Broking) Tel: + 44 (0) 20 7220 0500

Mary-Jane Elliott / Sue Stuart / Jessica Hodgson / Laura Thornton synairgen@consilium-comms.com

Tel: +44 (0) 20 3709 5701

Synairgen is a respiratory drug discovery and development company founded by University of Southampton Professors Stephen Holgate, Donna Davies and Ratko Djukanovic. The business, focused primarily on asthma and COPD, uses its differentiating human biology BioBank platform and world-renowned international academic KOL network to discover and develop novel therapies for respiratory disease. Leveraging its scientific and clinical facilities at Southampton General Hospital, the Company uses in vitro and ex vivo models to progress opportunities into clinical development. The BioBank of human samples is used in these models to increase confidence in the likelihood of successful drug development. Core to Synairgen's business strategy is the realisation of value via licensing transactions. In August 2015 the Company entered into a collaboration with Pharmaxis to develop an oral LOXL2 inhibitor to reduce fibrosis in patients with idiopathic pulmonary fibrosis (IPF). Synairgen is quoted on AIM (LSE: SNG). For more information about Synairgen, please see www.synairgen.com

During 2016 we made excellent progress in collaboration with Pharmaxis to develop a LOXL2 inhibitor to treat or prevent fibrosis and are on schedule to progress a compound into the clinic in H2 2017. AstraZeneca progressed the INEXAS trial of AZD9412 (inhaled interferon beta or IFN-beta) through the midway point, but stopped the trial early due to a lower than expected number of exacerbation events across the trial population.

Post period-end, in April 2017, AstraZeneca decided to return the interferon beta programme to Synairgen. We are very encouraged to observe that in the INEXAS trial inhaled IFN-beta once again 'switched on' antiviral defences in the lung and improved lung function, confirming our earlier clinical trial findings. Furthermore, inhaled IFN-beta was well tolerated. All data are being returned to Synairgen from AstraZeneca for further scrutiny. Once an in-depth analysis of these data has been concluded, we will determine the future development plan for IFN-beta in respiratory indications and under Synairgen control. Based on encouraging and recently published and unpublished work (from emerging research at the University of Southampton) the opportunity for further clinical development for COPD patients will be actively investigated.

In 2015 we signed a collaboration agreement with Pharmaxis to co-develop their orally bioavailable LOXL2 inhibitors for the treatment and/or prevention of fibrosis. Fibrosis or scarring is part of the normal wound-healing process. However, when excessive fibrosis occurs in an organ, the build-up of scar tissue can change its structure and stop it from functioning properly and cause disease. For example, in the fatal lung disease idiopathic pulmonary fibrosis (IPF) the accumulation of scar tissue affects the uptake of oxygen into the blood and stiffens the lungs, making it harder to breathe. Scar tissue is formed largely of collagen. LOXL2 is a member of a family of enzymes that stiffen scar tissue by forming cross-links between the collagen molecules. It is believed that treatment with a LOXL2 inhibitor will reduce the stiffness of fibrotic tissue and thus alter the course of disease. Supporting this approach, levels of LOXL2 have been found to be elevated in fibrotic disease and inhibition of LOXL2 has been shown to be protective in preclinical models of fibrosis in different organs.

In the collaboration, Synairgen is investigating the effects of the LOXL2 inhibitors for IPF, whilst in parallel, Pharmaxis is generating data to support the rationale for using these inhibitors in liver fibrosis (NASH), kidney fibrosis and heart fibrosis. Individually these diseases represent areas of high unmet medical need and consequently significant market opportunities. Together they represent a substantial opportunity for a novel approach, as reflected in the number and commercial value of recent licensing/acquisition transactions occurring in this area.

In vitro models, which use tissue from patients with IPF, have been developed in collaboration with University of Southampton scientists to test the LOXL2

inhibitors. During the year we have shown that we can reduce collagen cross- link formation in these models in a dose-dependent manner. Post period-end, as announced in March 2017, we have shown that this leads to a reduction in the stiffness of the tissue. We subsequently went on to show that the compounds reduced fibrosis and improved lung function in an in vivo model of lung fibrosis run by McMaster University, Canada. These data support the rationale and the development of these particular compounds for treatment of fibrotic disease. We are currently progressing these compounds towards the clinic and, subject to satisfactory completion of preclinical testing, a Phase I clinical trial is scheduled to start in H2 2017.

We are very pleased with the progress that has been made in this programme; this is an exciting area scientifically. We are encouraged by the significant level of interest in this programme from potential licensees, who will be following the Phase I trial developments closely.

The majority of asthma exacerbations are caused by respiratory viruses (common cold viruses), and the rationale to use inhaled interferon beta in asthma patients came from an observation made at the University of Southampton that levels of IFN-beta were lower in cell cultures from asthmatic patients than non-asthmatics during viral infection experiments. Furthermore, by normalising the IFN-beta levels there was less cell death, lower inflammatory markers, and lower virus levels; IFN-beta was protective. We went on to show that the drug was well tolerated in a Phase I trial and that antiviral defences were 'switched on'. In our SG005 Phase II trial asthma patients were treated with inhaled IFN-beta at the start of a suspected cold infection, and again we demonstrated that the drug had 'switched on' antiviral defences in the lungs. We also showed that inhaled IFN-beta provided an overall improvement in morning peak expiratory flow (an important measure of lung function), and in a subgroup from the trial (the 'difficult to treat' patients), who represented about 40% of the trial population, inhaled IFN-beta prevented a worsening of asthma control. Furthermore, patients on inhaled IFN-beta used fewer puffs of their rescue medication, reaching statistical significance on some days.

The findings by AstraZeneca in its Phase II INEXAS study were unexpected and contrary to the literature reporting a link between viruses and exacerbations of asthma. We are however very encouraged to observe that the lungs' antiviral defences had been switched on - as demonstrated by significant changes in an accepted biomarker of the interferon pathway. Indeed this is the third trial where this activation has been shown. Furthermore on an objective measure we saw that treatment with inhaled IFN-beta resulted in an improved morning peak expiratory flow of 19.7L/min (p=0.01). The day-by-day changes in this parameter closely mirror the changes we observed in our Phase II study. Once again inhaled IFN-beta was well tolerated. All data from the INEXAS trial will be provided to Synairgen and we will study each parameter in detail to guide future development.

We are particularly interested in using inhaled IFN-beta in COPD. Two new publications1,2 in 2017 have shown that cold viruses are highly likely to cause exacerbations in COPD, which contrasts with the findings in asthma from the INEXAS trial, where only around 10% of patients exacerbated during cold