AOLS Research Report

May 26, 2011
Aeolus Pharmaceuticals
Healthcare
OTC BB Biodefense and Cancer; A Unique Protective

AOLS.OB Platform Already Demonstrated
Buy Initiating coverage on Aeolus Pharmaceuticals with a buy rating and a $3.30 price target,
Rating
biotechnology company that is developing a platform of a new class of broad-spectrum
Current Price catalytic antioxidant compounds to treat across a number of indications
$0.48 Lead compound AEOL 10150 offers potential to treat against irradiation, mustard gas,
Target Price chlorine gas, cancer and Lou Gehrig's disease (ALS) due to unique mechanism of action,
$3.30 which could provide protection to healthy tissue and relieve oxidative stress
Market Capitalization AEOL 1050 has proven preclinical models effective against mustard gas and chlorine gas
28.70M exposure, irradiation in cancer treatment settings, expected to receive $140 million in non-
dilutive funding to advance the pipeline
Shares Outstanding
59.78M AEOL 10105 could revolutionize cancer therapy for potentially all cancers that require
Float radiation and chemotherapy therapy, AEOL 10150 is suggestive to reducing cancer
16.33M tumors, protecting healthy cells and catalyzing apoptosis of cancer cells
Institutional Holdings Price target of $3.30; Key catalyst initiation of phase I cancer trial second half 2011,
0.90% additional animal data for the treatment of acute radiation syndrome in lung and Gi tract
expected second half 2011
12-month Low/High
$0.00/$0.00
Average 90-day Volume Aeolus Pharmaceuticals is developing a new class of catalytic antioxidant compounds that
169,143 protects healthy tissue from the damaging effects of radiation. Its first compound, AEOL
10150, is being developed for oncology indications, where it is used in combination with
Fiscal Year End
Revenues ($ MIL) Sep 30 radiation therapy. It is also being developed, with up to $140 million in funding by the US
Government, as a medical countermeasure against chemical and radiological weapons,
Period 2010A 2011E 2012E
where its initial target indications are as a protective agent against the effects of acute
Q1 0A 337A N/A
radiation syndrome and delayed effects of acute radiation exposure. Aeolus' strategy is to
Q2 0A 785A N/A
Q3 0A 1,000E N/A
leverage the substantial investment in toxicology, manufacturing, and preclinical and clinical
Q4 0A 1,600E N/A studies made by US Government agencies in AEOL 10150 to efficiently develop the
0A 3,722E 8,000E compound for use in oncology.
EPS ($ MIL)
Equity Research
Period 2010A 2011E 2012E
Q1 (0.33)A (0.13)A N/A
Nathan Cali, Senior Research Analyst, Biotechnology and Specialty Pharmaceuticals
Q2 0.14A (0.06)A N/A (561) 994-5723 ncali@noblefcm.com
Q3 (0.10)A (0.02)E N/A
Q4 (0.47)A (0.01)E N/A Noble Financial Capital Markets
(0.46)A (0.10)E (0.04)E Trading: (561) 998-5489 Sales: (561) 998-5491
www.nobleresearch.com
Refer to the last two pages of this report for Disclosures

Page: 1 of 32
Aeolus Pharmaceuticals AOLS.OB | CURRENT/TARGET PRICE $0.48/$3.30 | Buy | 05/26/2011
Nathan Cali ncali@noblefcm.com (561) 994-5723
Innvestment Thesis
We are initiating coverage on Aeolus Pharmaceuticals with a buy rating and a $3.30 price target. Aeolus is a
biotechnology company that is developing a platform of a new class of broadspectrum catalytic antioxidant
compounds. The Technology was discovered out of Duke University and is intended to reduce oxidative stress
and protect people who have been exposed or are going to be exposed to high doses of radiation caused from
cancer therapy or a nuclear event. The government is currently committed to advancing therapeutics for
Medical Counter Measures (MCM) against potential radiation from nuclear events. The company has demonstrated
90% survival in animal models after irradiation of 15 Gray units (Gy) against ARS in lung, which would be
considered a lethal measure in humans. Any exposure at or above 10 Gy could produce mortality within two
days to two weeks. The firm is currently developing medical counter measure to treat against gastrointestinal
syndrome (GI) and lung syndrome from irradiation. Successful progression in animal models could result in
significant government procurement contract awards estimated between $500 million to $1 billion as early as
2013. Currently there are no other therapeutics in development to treat against ARS Lung irradiation a
significant cause of mortality in irradiation patients. Additionally AEOL 10150 has demonstrated statistical
significance against sulfur mustard gas and chlorine gas exposure and could receive a government
development contract award near $55 million in the second half of 2011. Currently there are no therapeutics to
treat against sulfur mustard gas and chlorine gas exposure. We believe that the US Governments commitment
to Project Biosheild supports significant procurement contracts to stockpile effective Medical Counter Measures
to protect against radiation and gas. Most recently Biomedical Advanced Research and Development Authority
(BARDA) awarded Siga Technologies (SIGA: Buy) a five year stockpiling contract. In May of 2011 BARDA
awarded Siga with a $2.8 billion option contract award based upon the companys technical readiness, animal
antiviral data and safety in humans. We believe that the recent award to Siga and the recent contract award
nearing $118 million to Aeolus, in our view, demonstrate the governments level of commitment towards
stockpiling medical counter measures and the potential for a significant stockpiling contract to treat against
radiation resulting from a nuclear event.
AEOL 10150 has already been tested in humans against Lou Gehrigs disease (ALS), AEOL 10150
demonstrated survival and importantly safety in patients. AEOL 10150 offers the potential to treat across a
number of indications, including cancer. AEO 10150's unique mechanism of action acts as therapeutic to
reduce chemical oxidation while protecting healthy cells. AEOL 1050 has proven in preclinical models to be
effective against mustard gas and chlorine gas exposure, irradiation (Gastrointestinal tissue damage, and Lung
tissue damage), in an animal cancer treatment settings to reduce cancer tumor. Importantly AEOL 10150 is
being developed as an adjunct therapy to radiation and chemotherapy against cancer and has show that AEOL
10150 does not interfere with tumor response in radiation therapy. AEOL 10150's profile offers the potential to
reduce radiation oxidative stress and damage to normal tissue, and act synergistically to increase tumor kill.
AEOL 10150 is suggestive to reducing cancer tumors, protecting healthy cells and catalyzing apoptosis of
cancer cells. By protecting healthy cells AEOL 10150 administered in combination with chemotherapy and
radiation could allow further administration of these therapies, which could allow further elimination of cancer
tumors. AEOL 10105 could revolutionize cancer therapy for potentially all cancers that require radiation and
chemotherapy therapy. We believe upon proof-of-concept that AEOL 10150 could offer treatment therapy in lung
cancer, head and neck cancer, prostate cancer and breast cancer. AEOL 10150's most adventagous in
our view would be to eliminate the dose limiting factors for radiotherapy. We believe that based upon AEOL
10150's unique profile to treat across a number of indication that cause oxidative stress, and tissue damage,
preclinical data presented thus far, already demonstrated safety in humans offers significant value to investors
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at this juncture. Aeolus expects to begin Phase I/II nonsmall cell lung cancer (NSCLC) with AEOL 10150 being
used in combination with radiation therapy during second half 2011 with data from this studied expected in the
first half of 2012. We view this study as a significant value driver for the firm based upon the trial design and
expected clinical outcomes. We expect the compound to be proven safe in Phase I safety trials based upon
already demonstrated safety data from this compound in 2006 and in 2008. Upon positive proof-of-concept data
in tumors and the ability to increase radiation and chemotherapy due to efficacious reductions in radiation
toxicity with the combination of AEOL 10150, AEOL 10150 could become validated with the potential to treat
other cancer tumors. This in our view could be significant value driver for the firm. The firm is expected to
initiate Phase I clinical trials to treat nonsmall cell lung cancer in the second half of 2011 with data expected in
early 2012. We believe that at the current levels that shares are significantly undervalued based upon
comparable companies and that investors should enter the stock.
Investment Positives
Significant NonDilutive Funding for Advancement to Potential Procurement

BARDA had awarded Aeolus a five year; $118 million contract to develop a treatment for Lung Acute Radiation
Syndrome (ARS). Aeolus will partner with HHSBARDA, Duke University, University of Maryland, Johnson
Matthey Pharma Services, Symbion Research International, and Albany Molecular to submit AEOL 10150 to
the FDA as a New Drug Application (NDA). The contract will help develop Aeoluss AEOL 10150 to FDA
approval and cover costs along with significant overhead, however the funding is for R&D only and not for
actual procurement. AEOL 10150 is a medical countermeasure (MCM) which defends against pulmonary
subsyndrome ARS caused from radiation. The company has submitted a technical white paper to protect
against chlorine gas to the government and is expected to receive a development contract award near $55
million for further development in the second half of 2011.
Compound Developed out of Duke University

At Duke, Dr. Fridovich identified the bodys natural antioxidant enzyme, superoxide dismutase or SOD, and his
lab began to develop a portfolio of compounds that would mimic the mechanism of action of SOD, but at more
powerful levels. This work was carried forward by Dr. Brian Day at National Jewish and resulted in the portfolio
of metalloporphyrins being developed by Aeolus.
Unique Mechanism of Action and Platform Technology Potential

AEOL 10150 offer the potential to treat across a number of indications, including cancer. AEO 10150s unique
mechanism of action acts as therapeutic to reduce chemical oxidation while protecting healthy cells. AEOL
1050 has proven in preclinical models to be effective against mustard gas and chlorine gas exposure, irradiation
(Gastrointestinal tissue damage, and Lung tissue damage), in cancer treatment settings. AEOL 10150 has
demonstrated in preclinical testing at Duke University to reduce TGFBeta1, oxidative stress, apoptosis, tissue
hypoxia, angiogenesis and inflammation, therefore reducing tissue damage after radiation exposure. AEOL
10150 mediates its protective effect by reducing a number of events in the inflammatory cascade induced by
radiation damage. AEOL 10150 has also demonstrated antitumor activity in preclinical testing through
modulating PI3/Akt signaling, a pro survival signaling pathway, often over expressed in cancer tumors.
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AEOL 10150 Advantageous Profiles Thus Far

AEOL 10150 has demonstrated survival increases, a reduction in lung tissue scarring, and an improvement in
lung tissue post irradiation treatment and has demonstrated a strong safety profile in preclinical animal
models and in humans. AEOL 10150 has the potential to effectively treat against sulfur mustard gas and
chlorine gas exposure as Medical Counter Measure treatment. Under Project Biosheild to protect against
bioterrorism threats, the government prefers to stockpile drugs under efficient methods in which dual use drugs
present themselves. We believe that further advancements in various indications as a Medical Counter
Measure to prevent and cure, that AEOL 10150 could increase in value and enhance the likelihood of a
procurement contract in the US and in other countries. In preclinical animal models the compound has also
demonstrated to be effective at reducing radiation toxicity and tumors in cancer. Proof-of-concept could be
demonstrated in cancer in early 2012. Significant upside to the platform could become recognized upon
positive data in the treatment of cancer. AEOL 10150 is intended to increase the duration of radiation therapy
in cancer patients by reducing oxidative toxicities from chemotherapy and radiation therapy.
Potential for AEOL 10150 as a Countermeasure against Multiple Terrorist Threats:

AEOL 10150 has shown significant protective effects against radiation, chlorine and mustard gas in animal
models. A compound with the potential to protect against multiple threats would be of significant benefit in both
the military and civilian efforts to protect citizens against potential threats. AEOL 10150 has demonstrated
protective effects against radiation and mustard and chlorine gas exposure, and within these indications has
shown the ability to treat multiple organ systems.
Phase I Safety Data Already Presented In Humans

AEOL 10150 has been previously tested in humans for safety, tolerability and pharmacokinetics. In several
phase I clinical trials, AEOL 10150 demonstrated to be safe with no serious or clinically significant adverse
effects reported.
Significant Nondilutive Funding Expected

Aeolus is in line to receive $140 million in nondilutive funding contracts and grants over the next five years. The
most significant award is with BARDA for a five year, $118 million contract to develop a treatment for Lung
Acute Radiation Syndrome (ARS).
Investment Risks
Business Risk
Biotechnology companies have high levels of developmental, clinical trial, marketing, and financial risks, and
should be purchased by investors with a high degree of risk tolerance. Aeolus attempts to develop treatment
for candidates with some of the most difficulttotreat medical conditions. Potential contract awards would be
adversely affected if competition was to offer products for the same or similar uses. Future uncertainties
regarding legislation that has been newly passed to fight bioterrorism are a risk to AOLS shares because the
immediate future revenues are contingent upon the grants and contracts from the U.S. government. Clinical
trial data is susceptible to varying interpretations and this could delay or prevent regulatory clearances and
failure to meet government funding milestones.
Patent Infringement
In the biotechnology space there is always a risk that other companies or universities may have filed or been
granted patents for technologies similar to that used by Aeolus.
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FDA Approval
The possibility that regulatory decisions by the FDA may require additional clinical evidence and delay NDA
filing of drug candidates.
Finance
Biotech companies typically incur significant expenses prior to receiving any revenues. If drug candidates fail to
show positive results in ongoing clinical trials, do not receive regulatory approval, or do not achieve market
acceptance, profitability would be at risk.
Failure in raising additional capital, achieving profit, and in clinical development can prevent the company from
continuing operations.
AEOL 10150 Mechanism of Action

The company has a class of small molecules that catalytically consume reactive oxygen and nitrogen species
(ROS/RNS) and act as protective agents against ROS/RNS induced cellular damage. The companys catayti c
antioxidant is designed to retain the catalytic mechanism and antioxidant efficacy of the bodys natural
superoxide dismutase (SOD) enzymes without their limitations, i.e. naturally occurring SOD enzymes are
specific to superoxide alone thus reducing their antioxidant capacity where as AEOL10150 can perform both
one and two electron reductions resulting in greater capacity to eliminate multiple types of ROS/RNS. The
companys class of compounds is a group of manganoporphyrins (antioxidants that contain manganese) which
retain the benefits of antioxidant enzymes. Manganese SOD is essential in detoxification of superoxide free
radicals. Manganese is contained in the center of mitochondrial SOD (SOD2). SODs play an important role in
regulating oxidative stress. Oxidative stress occurs when there is an imbalance between the production and
elimination of reactive oxygen and nitrogen species (ROS/RNS). ROS are produced as a byproduct of normal
cellular functions and participate in intra and extracellular signaling. Excessive amounts, however, can cause
damage to DNA and other cellular components thereby disrupting both cell integrity and the normal function of
cell machinery. In addition, ROS/RNS can participate in cell signaling leading to prolonged activation of
inflammatory and fibroproliferative pathways under chronic oxidative stress conditions. ROS can be generated
by exogenous sources such as radiation, which causes a transient increase in oxidative stress that is later
sustained through radiationinduced activation of ROS generating enzymes. Excessive ROS can cause DNA
damage and apoptosis (cell death). The firms manganoporphyrins modulate cellular protection by detoxifying
excessive ROS resulting in less DNA damage and cell death and reduced inflammation and tissue scarring
(fibrosis). AEOL 10150 is intended to mimic and amplify the bodys natural enzymatic system to eliminate
damaging ROS.
The molecular basis of radiation as demonstrated below shows the cascading events that occur from radiation
that enters the lung. From the work done at Duke University the mechanism of action and the effects of
oxidative stress were determined based upon the events that occur. As radiation enters the body, it interacts
with water to form hydroxyl radical. Hydroxyl radical rapidly interacts with nearby cellular components, including
DNA, causing DNA damage which, if severe, leads to either immediate or delayed cell death. In addition,
hydroxyl radical can activate the proinflammatory and profibrogenic cytokine, TGFbeta1. Activation of TGF
beta1 increases oxidative stress and inflammation leading to increased DNA damage and cell death between 1
day and 6 months after exposure. Oxidative stress also causes vascular damage and constriction of the
capillaries, restricting oxygen to the tissue. Low oxygen has been demonstrated to cause tissue damage and
stimulate inflammation within the lungs. Taken together, these events lead to excessive tissue inflammation
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and damage leading to respiratory failure or tissue scarring and retraction that greatly reduces pulmonary
function and decreases quality of life. AEOL 10150 has demonstrated in preclinical testing at Duke University
to reduce TGFBeta1, oxidative stress, apoptosis, tissue hypoxia, angiogenesis and inflammation, therefore
reducing tissue damage after radiation exposure. AEOL 10150 mediates its protective effect by reducing a
number of events in the inflammatory cascade induced by radiation damage.
AEOL 10150 has also demonstrated antitumor activity in preclinical testing through modulating PI3/Akt
signaling, a pro survival signaling pathway often over expressed in tumors. The effectiveness of radiation
therapy is limited by low tumor oxygenation and impaired prodeath signaling. AEOL10150 displays antitumor
activity when combined with radiation by decreasing PI3/Akt signaling and improving tumor oxygenation. In the
majority of tumors, the PTEN gene, which antagonizes PI3/Akt prosurvival signaling, is mutated leading to
persistent activation of PI3/Akt signaling and tumor cell survival. In tumor tissue, however, AEOL10150
decreases activation of Akt signaling independent of PTEN. AEOL 10150 has demonstrated in preclinical
nonsmall cell lung cancer to suppress PI3/Akt pathway resulting in increased apoptosis of cancer cells. In
contrast, in healthy tissue with normal functioning PTEN, AEOL10150 activates PI3/Akt by reducing PTEN
expression, thus modulating normal tissue radioprotection. The full mechanism of AEOL10150 antitumor
activity continues to be investigated.
FIGURE 1: Radiation in Lung
AEOL 10150 catalytic antioxidant (manganoporphyrin)

The companys lead candidate AEOL 10150 is intended to treat across a number of indications. AEOL 10150
has demonstrated in to be effective in preclinical models to be effective and safe in the treatment of acute
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radiation syndrome in the lungs, acute radiation syndrome in the gastro intestinal tract, the effects of mustard
gas on the lungs and chlorine gas on the lungs. The company has recently received a five year, $118 million
contract from The Biomedical Advanced Research and Development Authority (BARDA) to develop a
treatment for Lung Acute Radiation Syndrome (ARS). In addition AEOL 10150 is suggestive to reducing cancer
tumors, protecting healthy cells and catalyzing apoptosis of cancer cells. By protecting healthy cells AEOL
10150 administered in combination with chemotherapy and radiation could allow further administration of these
therapies, which could allow further elimination of cancer tumors. AEOL 10105 could revolutionize cancer
therapy for potentially all cancers that require radiation and chemotherapy therapy. We believe upon
proof-of-concept that AEOL 10150 could offer treatment therapy in lung cancer, head and neck cancer, prostate
cancer, and breast cancer. AEOL 10150s best use in our view would be to eliminate the dose
limiting factors for radiotherapy. The ability to achieve local tumor control and improved overall survival with
radiation therapy has been demonstrated to be limited by the risk of unacceptable toxicity due radiation and
chemotherapy. The probability for normal tissue complications during or after radiotherapy has been
documented to limit the maximum effective dose that can be delivered to the tumor. The effects of radiation
begin with the transient increase in reactive oxygen species (ROS), such as superoxide (O2), hydrogen
peroxide (H2O2), and hydroxyl radical (HO.) at the time of irradiation. Previous studies against nonsmall cell
lung cancer have determined that the higher radiation exposure to the tumor site is dose respondent, which
show reductions in tumor survival as doses increase. We believe that the already demonstrated safety profile
and preclinical profile of AEOL 10150 in ARS and in cancer mitigate nearterm clinical trial risk. The company is
expected to initiate phase I/II clinical trials in nonsmall cell lung cancer patients whereas in our view
proof-of-concept could be demonstrated due to the uniqueness of the therapeutic indices to extend radiation
therapy and treat cancer tumors simultaneously. A phase I study will likely demonstrate tumor kill data since AEOL
10150 is expected to be administrated in a noninferior setting compared to radiation and chemotherapy. Based
upon the expected study design it will be required to assess images of the lung to determine whether AEOL
10150 is deleterious to healthy cells, therefore will also demonstrate potential tumor kill.
Company Overview
Aeolus Pharmaceuticals, Inc. was founded as Intercardia, Inc (later, Incara Pharmaceuticals Corp.) in 1994.
Until 2004, Incara was engaged in the development of nonantioxidant drug platforms. In 2003, the Company
was renamed Aeolus Pharmaceuticals, Inc. and a new board and management was brought in to focus on
developing a new class of metalloporphyrins for use as catalytic antioxidants to treat disease. These
compounds were the result of research at Duke University in the lab of Dr. Irwin Fridovich and at National
Jewish Medical Center in Colorado. At Duke, Dr. Fridovich identified the bodys natural antioxidant enzyme,
superoxide dismutase or SOD, and his lab began to develop a portfolio of compounds that would mimic the
mechanism of action of SOD, but at more powerful levels. This work was carried forward by Dr. Brian Day at
National Jewish and resulted in the portfolio of metalloporphyrins being developed by Aeolus.
In 2003, the Company filed an IND for AEOL10150 as a treatment for amyotrophic lateral sclerosis (ALS or Lou
Gehrigs disease) and completed two Phase I human safety trials. At the completion of the human safety trials,
the firm began to evaluate the use of AEOL10150 in combination with radiation therapy for cancer. Based on
an evaluation of the clinical path to approval, Aeolus elected to pursue oncology in lieu of ALS trials. The IND
for ALS is still open and the Company may elect to begin additional trials in this indication in the future. Aeolus
business plan, however, is focused on the development of AEOL10150 for use in oncology and irradiation.To date AEOL
10150 has produced animal safety studies and two human clinical trials in which it has demonstrated
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statistically significant survival efficacy in induced lung injury models induced from ARS. AEOLS 10150 is
currently only available in a selfinjectable form (subcutaneous), which is used as an adjunct to radiation
therapy, hematopoietic, Gi, and Pulmonary. The drug is currently in an active IND (IND67741) regulatory status
in Phase 1 with 2 studies with 50 patients where 37 are treated and 13 are placebo.
Based on promising data in mustard gas and chlorine gas from the laboratory of Dr. Carl White at National
Jewish, the National Institutes of Health (NIH), through its Countermeasures Against Chemical Threats
(CounterACT) program, began funding research into AEOL10150 as an emergency medical countermeasure
against chemical vesicants. After additional successful trials, Aeolus was invited by the Biomedical Advanced
Research and Development Authority (BARDA), a part of the Department of Health and Human Services, to
submit a proposal for a contract to develop AEOL10150 through FDA approval and commercial scale
manufacture as a medical countermeasure against chlorine gas exposure.
FIGURE 2: Product Pipeline
Acute Radiation Syndrome (ARS)

Acute Radiation Syndrome (ARS) is a sickness caused by high exposure (more than 0.7 Gy) to radiation,
which affects most or all of the body and is commonly called radiation sickness or radiation toxicity. Acute
radiation syndrome in the lung from radiation exposure above 2 Gr is usually a delayed affect of total body
irradiation. Lung injury is a major cause of death 2 to 6 months post exposure. There are three major r
syndromes following radiation exposure > 2Gy. 1.) Bone marrow/stem cell syndrome occurs within 1 or 2
weeks. Symptoms can last up to six weeks, is treatable with supportive care at up to 7.5 Gy exposures. 2.)
Gastrointestinal (GI) syndrome occurs within the first week and causes a destruction of the lining of the GI
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tract; there are no current treatments available to beyond supportive care. 3.) Lung syndrome causing
inflammation of lung tissue followed by scarring of lung tissue, there are no current treatments available
beyond support care (i.e. antibiotics). The firm is currently developing medical counter measure to treat agains
t
gastrointestinal syndrome (GI) and lung syndrome from irradiation. Successful progression in animal models
could result in significant procurement contract awards as early as 2014 in the US.
Approval under Animal Efficacy Rule

When acute conditions present themselves in the case of serious life threatening disease or Aeoluss case life
threating catastrophic event than cannot be tested in humans due to deadly deleterious affects, the animal rule
is permitted. Under approval and use of the animal a drug or indication must meet FDA standards. The antiviral
drug of therapeutic should meet the parameters of the Animal Efficacy Rule (Animal Rule). The Animal Rule
was designed to permit approval or licensing of drugs and biologics that are intended to reduce or prevent
serious lifethreatening conditions where human efficacy studies are not feasible. Under the FDAs regulation
concerning the approval of new drugs (Animal Rule) the criteria considered are: 1) sufficiently well
characterized animal model for predicting the response in humans; 2) effect is demonstrated in more than one
animal species expected to react with a response predictive for humans; 3) positive results demonstrated in
more than one animal species and enhancement of survival or prevention of death should be exhibited; 4)
allows selection of an effective dose in humans.
AEOL 10150 Acute Radiation Syndrome (ARS) in Lung

AEOL 10150 is being developed to treat lung inflammation and scarring resulting from acute radiation
syndrome (ARS) from irradiation in humans. Research has demonstrated that irradiation is an acute and in
most causes a delayed (delayed effect of acute radiation exposure (DEARE)) onset of inflammation of the lung
tissue followed by fibrosis. In order to effectively treat patients irradiated from a nuclear event, effective
treatment of lung pneumonitis is needed. Based upon previous irradiation events, 90% of patients with
exposure north of 11 Gray showed increased onset of pneumonitis. Currently there are no available
therapeutics and none in development. AEOL 10150 is currently in development to treat against the potential of
lung damage from irradiation and has demonstrated significant efficacy in nonhuman primates. Zeljko
Vujaskovic, M.D. Ph.D. at Duke University Medical Center, designed preclinical test to demonstrate potential
efficacy of AEOL 10150 as a treatment for damage to the lungs due to exposure to radiation.
AEOL 10150 Preclinical Studies in ARS in Lung

AEOL 10150 was tested in several animal safety and efficacy studies and safety human trials. In order to
evaluate AEOL 10150s ability to mitigate acute radiation induced lung injury, mice were exposed to 15 Gy of
irradiation and then treated with AEOL 10150 subcutaneously. Mice in the study were either treated with a low
dose of (10 mg/kg) of AEOL 10150, higher dose of AEOL 10150 (20 mg/kg) or placebo. The mice in the study
received three doses per week for four weeks. The results of the study demonstrated robust increased survival,
maintained body weight, protected lung tissue, and a reduction in oxidative stress, which is a major cause of
tissue damage resulting from irradiation. In the AEOL 10150 arms of the study 90% of the mice that received
15 Gy irradiation survived after a six week follow up period. In the control arm 45 % of animals died during the
six week follow up period. AEOL 10150 demonstrated statistically significant (P< 0.05) survival advantage,
statistically significant differences in body weights and wet lung weights over the first six weeks of the study. In
addition AEOL 10150 demonstrated a reduction in oxidative stress over the duration of the study. In our view a
significant measure since oxidative stress is a major cause of inflammation and damage to the lungs (fibrosis).
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The figure below depicts survival in days after the onset of radiation.
FIGURE 3: AEOL 10150 Mice Survival Rate Post Radiation Treatment
Duke University has performed a number of other preclinical studies which have demonstrated protection of
normal tissue after irradiation and therapeutic infusions of AEOL 10150 in a rat model. 344 rats were
administered across 4 cohorts of AEOL 10150 at 0 mg/kg/day, 1, 10 and 30 after receiving 28 Gy. After 20
weeks lung damage was shown to significantly decrease in fibrosis, oxidative stress, and hypoxia,
condition at which the body is deprived of oxygen. Based upon the data presented in the study,
AEOL 10150 treatment decreases the severity of damage and increases the percentage of lung tissue without
damage (protection of lung tissue). This is an important measure since irradiation of the lung causes lasting
quality of life affects from fibrosis not only nearterm but permanent damage to surviving patients. The Figure
below shows the protection of tissue damage from escalating doses of AEOL 10150.
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Nonhuman Primate Study against ARS in Lung

AEOL 10150 has demonstrated in nonhuman primate studies to test the efficacy of AEOL 10150 as a
treatment for Lung ARS under development towards an FDA approval utilizing Animal Rule guidelines. The
primary endpoint of the study was to determine if AEOL 10150 could mitigate irradiation lung injury and
increase survival. Two cohorts in the study received 11.5 Gy radiation, 6 macaques in the control group and 7
macaques in the AEOL 10150 treatment group. Monkey were administered AEOL 10150 for 28 days 5mg/kg
per day. After 180 day follow up 6 out of 6 in the control group (no treatment) did not survive and 2 out of 7
(28%) in the treatment group survived. Further data from this study is expected to be presented in 2011 which
will likely include a measure of fibrosis and oxidative damage from the study. In addition to the macaques
research the company will complete additional nonhuman primate studies to determine the best effective
dosing.
AEOL 10150 Treatment for Gastrointestinal Acute Radiation Syndrome (ARS)

The treatment of Gastrointestinal Acute Radiation Syndrome (ARS) is major second line condition post
exposure of radiation. When humans are exposed to high levels of radiation after a catastrophic event the
intestinal epithelium, a layer of cells lining the gastrointestinal tract, vital functioning is affected. The reduction
of cells in the lining and loss or protection in the cell lining which is responsible for nutrient absorption,
maintaining fluid balance, and protection from bacteria. Production of epithelium cells from specialized stem
cells keep the intestinal layer functioning properly. High doses of radiation can result in lethal GI syndrome.
AEOL 10150 was administered 24 hours after radiation exposure to determine survival and crypt cell histology
in mice. Preliminary data presented demonstrated the regeneration of GI stem cells and a reduction of depth
and duration of diarrhea. To date there have been no other noted published studies accomplishing enhanced
stem cell regenerative effect while maintaining GI function and improving survival when administered post
irradiation. We note that the study is funded by the NIH, NIAIDs Radiation Nuclear Medical Countermeasures
development program.
Within the National Institutes of Health (NIH), the National Institute of Allergy and Infectious Diseases (NIAID)
has been tasked with developing a robust research program to identify and develop nuclear/radiation new
medical countermeasures. NIH/NIAID was assigned this role by the Secretary of the U.S. Department of Health
and Human Services (HHS) through the Project BioShield Act of 2004. The commitment by the US government
to fund and develop nuclear counter measure in our view, clearly drives value for Aeolus as the company
continues to develop nuclear counter measures and advancement to licensure for government stockpiling
under nondilutive government funding. Additional studies will examine the effects of radiation doses from 9 to
11 Gy on the GI tract and the efficacy of AEOL 10150 on mitigating radiation effects. Studies examining the
effects of 9 to 11 Gy of radiation on the GI tract in nonhuman primates are expected to begin during the second
quarter of fiscal year 2011 and funded NIH NIAID studies to determine optimize dose and duration of delivery,
and to evaluate the window of opportunity for treatment after exposure.
Competing Therapeutics
Currently there are few drugs approved to treat side effects of radiation therapy and none currently in
development to treat Lung ARS. Cleveland BioLabs, Inc. (CBLI: Not Rated) is a biotechnology company
developing compounds to treat against (GI) ARS. Clevelands pipeline includes products from two primary
families of compounds: Protectans and Curaxins. Protectans are being developed as drug candidates that
protect normal tissues from acute stresses, such as radiation and chemotherapy. Protectan CBLB502 is a
Page: 11 of 32
recombinant derivative of the bacterial protein, flagellin, which binds and activates the TLR5 cell surface
receptor. Flagellin potential offers signaling through TLR5 and is known to activate the antiapoptotic NFkappaB
pathway. CBLB502, TLR5, is active on the endothelial cells of the small heart disease. We dont believe that
Clevland Biolabs is a direct competitor of Aeolus since Cleveland intends to treat gastrointestinal (GI) acute
radiation syndrome (ARS), while AEOL 10150 has demonstrated effectiveness in both (GI) ARS and Lung
ARS. In our view, there is no other competitors of which has provided data to treat Lung ARS and therefore in
our view positions Aeolus as the leader to receive potential government procurement awards as early as 2013.
There are several other private and public companies developing counter measure to treat bone marrow
suppression from radiation and Gi ARS, however none of which are progressing towards treatments for ARS in
lung. Based upon previous contract awards the government intends to select the best effective therapeutic as a
Medical Counter Measure whether a prophylactic or a therapeutic. In the event that Aeolus is able to
demonstrate efficacy in both GI and Lung ARS, we believe that AEOL 10150 would receive the lion share of a
Medical Counter Measure stockpiling contract. The following below is a list of previous contract awards for
Biodefense counter measures.
Table 1: Previous Government Stockpiling Awards
We believe that based upon precedent awards and the selection process in order to receive award point
positive for a potential issuance of a Request for Proposal amounting in the ranges presented above. Most
recently BARDA awarded Siga Technologies (SIGA: Buy) a five year stockpiling contract. Siga submitted to an
RFP in 2009 for a potential award to protect against a smallpox outbreak. In May of 2011 BARDA awarded
Siga with a $2.8 billion option contract award based upon the companys technical readiness, animal antiviral
data and safety in humans. We note that FDA approval for the compound was not required for this award and
expect Aeolus to follow in a similar path by receiving an emergency use authorization award followed by further
clinical development towards an NDA filing.
Acute Radiation Syndrome

Acute Radiation Syndrome (ARS) is a sickness caused by high exposure (more than .7 Gy) to radiation, which
affects most or all of the body and is commonly called radiation sickness or radiation toxicity. The time of the
radiation can vary, but typically it is over a short period of time, as with Hiroshima in the 1940s (nuclear bomb),
Chernobyl in the 1980s (nuclear power plant explosion), and Fukushima on March 11, 2011 (nuclear power
plant fires). The United States Nuclear Regulatory Commission (U.S. NRC) reports there are 104 active
licensed to operate nuclear power reactors in the US alone. The U.S. Nuclear Regulatory Commission (NRC)
was created as an independent agency to enable safe use of radioactive materials.
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Hiroshima is the largest island in Japan and was destroyed by an Atomic Bomb from the US on August 6,
1945. The Bomb directly resulted in over 80,000 casualties and within the year the radiation resulted in an
additional 10,000 to 50,000 deaths. Radiation from the drop zone affected a two to three kilometer radius,
which resulted in contamination and casualties.
The Chernobyl disaster occurred on April 26, 1986 in the Chernobyl Nuclear Power Plant in Ukraine. The
accident is classified as a level 7 on the international Nuclear Event Scale and is only one of two accidents to
reach that level, the other being Fukushima. The disaster resulted in 237 people who suffered from ARS in
which 31 died within three months of the accident. The incident directly affected over 500,000 workers in which
Chernobyl concluded deaths caused from radiation contamination and cancer from 1986 to 2004 were in
excess of 985,000.
The recent Japanese, Fukushima Nuclear power plant is the latest accident due to a 9.0 earthquake, which
caused a tsunami, which disabled the Nuclear Power Plant Reactors. Since then it has been research and said
that an individual would most likely only get ARS if the radiation exposure was high, radiation exposure through
penetration reached internal organs, the individuals body was mostly or entirely exposed, and last, if high
radiation exposure was received in a time frame of minutes. However, patients who recover will most likely
suffer long term affects such as Leukemia, cancer and more diseases, which may or may not show up for two
to ten years or even more after the direct radiation contact, and affected fetuses and newborns through
stillborns, microcephaly, and mental retardation.
Radiation and Fallout

One of the primary outputs from a nuclear explosion is radiation. Radiation from a nuclear explosion is
categorized as initial nuclear radiation (prompt radiation and neutron activation), which occurs nearly
instantaneously with the flash, and residual radiation, which occurs after the initial explosion and is largely
associated with radioactive fallout. Initial radiation can be an important contributor to casualties, particularly in
the severe damage SD zone with very few surviving. The intensity of initial nuclear radiation, however,
decreases with distance from ground zero.
Fallout that is immediately hazardous to the public and emergency responders will descend to the ground
within about 24 hours. The most significant fallout hazard area will extend 10 to 20 miles (16 to 32 km) from
ground zero (for a 10 KT explosion), but this will vary with nuclear yield. Within a few miles of ground zero,
exposure rates in excess of 100 R/h, up to 22 miles, during the first four to six hours postdetonation may be
observed. In the unlikely event of a terrorist nuclear blast, most casualties would be caused by radiation,
especially the radioactive cloud carried by winds into surrounding areas. Below is an example of a hypothetical
fall out event from a 10kt Nuke (SOURCE: Homeland Security Council | THE WASHINGTON POST). As
demonstrated several hundred thousand people may be at risk of radiation exposure. According to the 2010
Planning Guidance for Response to a Nuclear Detonation people who are exposed to 2Gy are expected to be
administered drug treatment within 24 hours of injury coming from Medical countermeasures and other
supplies available from the Strategic National Stockpile. We note that there is no ARS drugs stockpile to date
and that AEOLS 10150 could become the first to protect against ARS of the lungs.
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FIGURE 4: Hypothetical fall out event from a 10kt Nuke
Three types of radiation syndromes associated with Acute Radiation

Bone marrow syndrome (Hematopoietic syndrome), causes a decrease in blood cells. This syndrome is
typically seen with radiation exposure in the 0.7 to 10 Gy range within one to two weeks. With a decrease or
destruction in bone marrow, the primary cause of death is usually associated with hemorrhage/bleeding (loss in
platelets), infections (loss in white blood cells), and anemia (loss in red blood cells). The Hematopoietic
syndrome may be treatable with supportive care and Neupogen up to 7.5 Gy exposures. Neupogen from
Amagen (AMGN: Not Rated) has been created for the Strategic National Stockpile (SNS). This syndrome is the
most survivable type of ARS, however the likely hood of survival decreases with any incremental increase in
radiation exposure. However, patients who do survive Hematopoietic syndrome can develop significant
respiratory failure, which is also known as a delayed effect of acute radiation exposure (DEARE).
Gastrointestinal syndrome (GI) can occur within one to two hours of radiation contact with radiation exposures
typically in the 6 to 10 Gy range. Gastrointestinal syndrome normally causes a deterioration of the GI tract
lining which causes vomiting, nausea, loss of appetite, dehydration, and gastric pain. To regenerate the GI
lining the crypt stem cells have to be protected. A person with gastrointestinal syndrome is extremely unlikely to
survive mortality, which occurs normally within two weeks of radiation exposure. However, most patients who
do survive Hematopoietic syndrome died from respiratory failure, which is also known as a delayed effect of
acute radiation exposure (DEARE).
Cardiovascular/Neurovascular Syndrome is the most severe of all three syndromes. This syndrome typically
causes headaches, burning sensation of skin, dizziness, and a decrease or complete loss in consciousness,
typically without vomit. Cardiovascular syndrome can be noticed within eight to ten weeks after radiation
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exposure. Neurovascular syndrome can be brought on by radiation exposure at or greater than 20 Gy. Mortality
can happen within 3 days from a failure in the circulatory system, which causes fluid to build up in the lungs
causing edema, meningitis, and vasculitis.
Four stages of ARS

1.) Prodromal stage - Patients early symptoms that occur within minutes to days, which consist of bowl stess,
vommitting, and nausea; 2.) Latent stage - Individual feels normal for a few hours to a few weeks; 3.) Manifest
illness stage - Patient begins to feel effects of occurring syndrome (above), which lasts a few hours to a several
months; 4.) Recovery or death - Patients will recover, which takes a few months to two years, or the patient will
pass away from ARS
Radiation exposures are typically in ranges of 12 Gy, 26 Gy, 68 Gy, 830 Gy, and greater than 30 Gy, with any
exposure at or above 10 Gy producing certain death within two days to two weeks. Symptoms that come with
each category vary, but normally radiation exposure of 12 Gy will cause vomiting, nausea, fatigue, and
weakness within two to six hours of exposure with almost no cause of death. A radiation exposure of 26 Gy will
typically cause vomiting, nausea, headache, fever, fatigue, and weakness within one to two hours of exposure
with the probability of avoidable death if the patient receives care. A radiation exposure of 68 Gy will typically
cause vomiting, nausea, headache, fever, fatigue, diarrhea, dizziness, disorientation, and weakness within ten
to sixty minutes of exposure with the a very low probability of avoidable death if the patient receives care. A
radiation exposure of 830 Gy will typically cause vomiting, nausea, headache, fever, fatigue, diarrhea,
dizziness, disorientation, incapacitation, weakness, and shock within less than ten minutes of exposure with
certain mortality within two weeks of radiation exposure. A radiation exposure greater than 30 Gy will typically
cause vomiting, nausea, headache, fever, fatigue, diarrhea, dizziness, disorientation, incapacitation, weakness,
seizures, tremors, and death within less than ten minutes of exposure with certain mortality within two days of
radiation exposure. However, patients who do receive care can be treatable and typically take anywhere from
two weeks to two years to recover depending upon exposure.
Additional Value Driving Profile to AEOL 10150 as a Medical Counter Measure

Currently AEOL 10150 is being studied in National Institutes of Healths (NIH) National Institute of Allergy and
Infectious Diseases (NIAID) for the possible MCM in the gastrointestinal tract from sulfur mustard gas and
chlorine gas exposure.
AEOL 10150 Treatment as a Countermeasure against Chlorine Gas

Currently AEOL 10150 is being developed as a countermeasure after exposure to Chlorine Gas, which has
performed well in animal. Chlorine is a common halogen with that causes injury through secondary
inflammation and oxidative stress. In gas form, chlorine has a yellowgreen tint and is 2.5 times heavier than air.
The gas is also known as Bertholite and is a lethal pulmonary irritant that is extremely soluble in water. The
chlorine vesicant was introduced by the German army in 1915 at the second Battle of Ypres and was there
after commonly used in World War I and is still used today, which make AEOL 10150 even more of a necessity.
Effects on the body are typically seen with a few hours to days. If Chlorine gas is Inhalation even at low
exposures can cause lower and upper respiratory systems along with the eyes, nose, and throat. Inhalation at
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high levels can lead to dyspnea, constriction of the chest, bronchospasms, and may even cause pulmonary
edema that would take place a few hours after contact with the gas. Ingesting chlorine gas will cause tissue
damage in the gastrointestinal tract. Direct contact with chlorine at low levels will lead to eye and skin irritation,
while higher exposures can lead to chemical burns and ulcers.
Currently there are no available beneficial therapies to guard again effects from Chlorine exposure. This year
the company hopes to deliver data from confirmatory chlorine gas studies in rats and confirm BARDAs decision
on the Chlorine Proposal from white paper, which is currently estimated at $55 million for the second half of
2011. During 2012, the company hopes the start a pilot study for NHP Chlorine. Recently, McGill university and
National Jewish Health finished preliminary studies, which showed AEOL 10150 protecting mice and rats
respiratory tissue from Chlorine gas exposure. In other Preclinical trials AEOL 10150 was injected into mice at
5 mg/kg at 1 hour after chlorine exposure and every 6 hours thereafter. Lung inflammation was tested after 24
hours of exposure and assessed by changed in the neutropil influx and BAL cellularity. AEOL 10150 showed a
large reduction (p<0.05, n=6/group) in lung inflammation, which was measured by BAL fluid cellularity by 40%,
which was most likely due to neutrophil influx limitation. Asthma was also reduced (p<0.05, n=6) by 40% after
using AEOL 10150. The positive results may provide a countermeasure in future lung injuries caused by
chlorine gas.
AEOL 10150 Treatment as a Countermeasure against Mustard Gas

AEOL 10150 is being developed as a countermeasure after exposure to Mustard Gas, which has shown
efficacy in animal studies. Recently the NIH gave the University of Colorado and National Jewish Health a
grant for the sum of $7.8 million to create a countermeasure against Mustard Gas exposure. Research in this
area has also shown statically evidence of lung tissue protection in animal studies that have been exposed to
CEES or half mustard. In PreClinical studies AEOL 10150 has shown statically positive protection of the upper
respiratory tissue in animals that were induced with partial mustard or CEES. AEOL 10150 was given to rats at
a 1 hour and 6 hour after being exposed to CEES. After 18 hours of exposure, the rats had developed changes
in their red blood cells and bronchoalveolar lavage proteins. The study showed that AEOL 10150 greatly
reduced (p<0.05) mustard gas that caused hemorrhaging or lung edema. The study and results shows some
significance in the ability to countermeasure mustard gas exposure. Studies produced by the University of
Colorado and National Jewish Health provided statistical evidence that after animals were dosed with AEOL
10150 at 5 to 30 mg/kg at one and eight hours after being exposed to Mustard Gas had the most significant
decrease in diseased tissue and cells.
Sulfur Mustard or Mustard gas is a cytotoxic chemical, which is colorless, odorless and has the ability to cause
overwhelming blisters on the skin and lungs (vesicant). The gas is a created by combining Sulfur dichloride
with ethylene, which is highly carcinogenic (cancerous) and mutagenic (DNA corruption) because of its
alkylating properties, which usually results in cancer, later in life. The gas was first used in 1917 during World
War I by Germany in Ypres against the British and was commonly used in wars up to the 1980s. During those
times the gas was used in an impure form which causes the chemical to smell much like garlic and yield a
yellowbrown tint. However, most deaths from Mustard Gas are due to secondary effects on the body that lead
to bronchopneumonia.
Effects on the body are typically seen within 4 to 24 hours, which can lead to intense skin irritation and large
blisters. If Mustard gas is inhaled even at low levels, it can cause irritation to lower and upper respiratory
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systems, bloody nose, sinus pain, and shortness of breath, which would be caused by blisters that developed
in less than a day and could even completely seal the airway. If the gas is Ingested, it will cause tissue damage
in the gastrointestinal tract, abdominal pain, fever, nausea, and vomiting. If the gas in direct contact even at low
levels will lead to eye and skin irritation, burns, inflammations, blisters, and possible blindness.
AEOL 10150 NonSmall Cell Lung Cancer

Aeolus expects to begin Phase I/II nonsmall cell lung cancer (NSCLC) with AEOL 10150 being used in
combination with radiation therapy during second half 2011 with data from this studied expected in the first half
of 2012. We view this study as a significant value driver for the firm based upon the trial design and expected
clinical outcomes. We expect the compound to be proven safe in Phase I safety trials based upon already
demonstrated safety data from this compound in 2006 and in 2008. Upon positive proofofconcept data in
tumors and the ability to increase radiation and chemotherapy due to efficacious reductions in radiation toxicity
with the combination of AEOL 10150, AEOL 10150 could become validated with the potential to treat other
cancer tumors. This in our view could be significant value driver for the firm. The company plans to initiate
additional clinical trials to treat head and neck cancer, prostate cancer, breast cancer, and mesothelioma.
AEOL 10150 Proven Safe in Humans

AEOL 10150 has been previously tested in humans for safety, tolerability and pharmacokinetics. In several
phase I clinical trials, AEOL 10150 demonstrated to be safe with no serious or clinically significant adverse
effects reported. In September 2005, the firm completed a multicenter, doubleblind, randomized,
placebocontrolled, Phase I clinical trial. This escalatingdose study was conducted to evaluate the safety,
tolerability and pharmacokinetics of AEOL 10150 administered by twice daily subcutaneous injections in
patients with Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrigs disease. In the phase Ia study
25 ALS patients received AEOL 10150 at doses ranging from 3 mg to 75 mg. AEOL 10150 was demonstrated
to be safe and well tolerated with no serious adverse events reported in the study. There were no related
cardiovascular abnormalities. The most common adverse events in the trial were injection site reaction,
dizziness and headache. In October of 2006 the firm completed a second phase I study (phase Ib) in ALS
patients over seven days at twice daily doses up to 60 mg with just one 60 mg does on the seventh day. The
safety data presented from this trial was similar to the data presented in 2005. AEOL 10150 continued to
demonstrate positive safety data.
Preclinical Prostate Tumor Data Proves Positive Guides for Potential Success
In a mice study with prostate tumor implants, tumors were grown to substantial size prior to administration of
radiation of 5 Gy daily, over three days. AEOL 10150) was administered subcutaneously at (7.5 mg/kg/bid
(twice daily) starting on the first day of irradiation. Mice were administered AEOL10150 for a total of 20 days. In
other groups of mice received either no irradiation, irradiation only or AEOL 10150 without irradiation. The mice
in the study showed a decrease in tumor size compared from AEOL 10150 monotherapy when compared mice
not receiving radiation treatment. In addition tumor kill at 20 days in the radiation plus AEOL 10150 treatment
group was consistent with mice just receiving radiation, importantly indicating that AEOL 10150 does not
interfere with tumor kill, an important measure to advance AEOL 101050 as an adjunct radioprotectant and the
potential offer tumor reduction.
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Results from the study further demonstrate the potential for AEOL 10150 to become and adjunct treatment for
cancer. Studies have also shown that AEOL 10150 does not adversely affect tumor response to radiation
therapy. Treatment with AEOL 10150 does not significantly protect tumors from the cell killing effects of
radiation therapy. This combined with other studies that have shown that AEOL 10150 significantly prevents
radiation induced normal tissue injury suggests that AEOL 10150 could demonstrate successful normal tissue
protection without protection of tumor tissue.
FIGURE 5: Tumor Reduction after AEOL 10150
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AEOL 10150 Synergistic With Radiation and Chemotherapy
In order for AEOL 10150 to advance as an effective adjunct therapy to extend radiation and chemotherapy to
more effectively reduce tumors in cancer patients, AEOL 10150 would need to be synergistic with tumor
eliminating treatments. In preclinical testing AEOL 10150
NonSmall Cell Lung Cancer is a disease in which cancer cells form in the tissues of the lung and represents
80% of all lung cancers with an estimated 1.2 million new cases per year worldwide and results in more than 1
million deaths per year. There are two main types of lung cancer, nonsmall cell lung cancer and small cell lung
cancer. There are several types of lung cancer with each type conferring different type of cancer cells. Each
cell type grows and spreads in different ways. The different cell types are named after the appearance under a
microscope; squamous cell carcinoma (flat cells, appearance like fish scales), large cell carcinoma (several
types of large cells), adenocarcinoma, (cells that line the alveoli (anatomical structure that forms a cavity, small
balloon like structures) and make mucus like substances).
The American Cancer Society states that cancer is the second leading cause of death by disease in the US,
which equates to about one out of every four deaths or approximately 569,000 deaths due to cancer in 2010.
New cancer patients were predicted to be 1.5 million in 2010 and of those, 5060% will be treated with radiation
during treatment. The national Institute of Health (NIH) estimates that US cancer costs are $228 billion, while
direct medical costs are $93.2 billion, indirect mortality costs (lost productivity due to death) are $116.1 billion,
and indirect morbidity costs (lost productivity due to illness) are $18.8 billion.
Causes, Diagnosis Lung Cancer

Smoking is the main cause of lung cancer, being exposed to second hand smoke, radiation therapy related to
breast or chest cancer, exposition of damaging chemicals and gases with likes of radon, asbestos, arsenic,
soot and tar. Lung cancer is detectable and test includes; lab tests, physical exam, and xrays. There are
currently no effective cure treatments for lung cancer available and is a leading cause of mortality. In order to
determine the best treatment method available diagnostics are needed to determine the stage of cancer
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developed. There are several treatment options available to patients, however not effective in providing a cure.
Wedge resection surgery to remove tumors and some of the normal tissue around the tumor site. Radiation
therapy uses highenergy xrays to other types of radiation to kill cancer cells or keep them from growing.
External and internal radiation methods are used to deliver targeted radiation toward the cancer tumor. Internal
radiation methods use radioactive substance and with the use of needles, wires, or catheters.
Currently Approved Therapies after Cancer Treatment

Amifostine (Ethyol) is cyprotective agent approved by the FDA and marketed by MedImmune, Inc. to reduce
kidney toxicity induced by chemotherapy associated with cisplatin administration in patients who have
advanced ovarian cancer and treat head and neck cancer to post operative patients who have radiation
induced xerostomia (dry mouth). Amifostine is intended to therapeutically reduce the incidence of neutropeni a
(low white blood cells, serving as defense against infection bacteria) after chemotherapeutic agents are used in
cancer patients. Amifostine is mainly considered a quality of life drug, with significant side affects that dont
allow enough administration into patients limiting efficacy. Kepivance (palifermin) is a drug used in the
treatment of severe oral mucositis in patients who have hematologic cancers and are in high dose
chemotherapy shortly followed by a bone transplant, which is marketed by Amgen, Inc (AMGN: Not Rated).
Amgen is also currently doing research on Kepivance, which is a antimucositis agent for patients with neck,
head, colon, and nonsmall lung cancer. Salagen Tablets (pilocarpine hydrochloride) is a drug marketed by
Eisai Pharmaceuticals for the cure of xerostomia caused by radiation therapy in patients with neck and head
cancer.
AEOL 10150 Treatment for Amyotrophic Lateral Sclerosis

In 2003 the FDA granted Aeolus a orphan drug status for ALS and in 2008 the company completed a Phase I
multidose study of AEOL 10150, and this year ALS filed a Investigational New Drug Application (IND) with the
FDA. In Preclinical studies the University of Arkansas College of Medicine, Dr. Crow conducted trails to treat
mice only after and on the same day they showed signs of hindlimb muscle degeneration or weakness. The
first AEOL 10150 dose was comprised of 5 mg/kg and ongoing doses of 2.5 mg/kg once time a day until near
death or mortality. The study showed that treatment resulted in a 2.5 time greater survival rate of the rate.
Currently the company is not developing AEOL 10150 to treat ALS until further funding could be provided
through either grants or partnerships.
ALS is commonly caused from slow degeneration of the lower and upper motor neurons. Motor Neuron
Disease (MND) is a common term to describe all the subtypes directly related to motor neuron illnesses and is
the more commonly used term in Europe. The subtypes of MND consist of the following: Primary Lateral
Sclerosis (PLS), Progressive Muscular Atrophy (PMA), ALS (common US term), and Progressive Bulbar Palsy
(PBP). The ALS Association (ALSA) has published reports that ALS effects 2 out of every 100,000 people. The
typical age in which ALS starts to set in is between 40 and 70 years of age, while men have a higher chance
being affected by ALS. The lifespan for people diagnosed with ALS typically ranges from 1 to 10 years with
80% of patients dying within 5 years and less than 10% living more than 10 years. ALS usually results in both
or either muscle or respiratory failure, which is the main cause of death. In the United States alone, more than
5,600 new patients are diagnosed with ALS, according to ALSA. ALS is broken down to being either sporadic,
which is unknown genes in 90% ALS patients or familial, which is a mutated superoxide dismutase gene in
510% ALS patients. There are over 90 identified point mutations, which result in MND in mice; however the
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dysfunction in Familial ALS genes is still unclear. In both familial and sporadic mutations, ALSs pathological
manifestations are not distinguishable, which would suggest closely related pathways.
Awarded Contracts and Grants

Aeolus is in line to receive $140 million in nondilutive funding contracts and grants over the next five years. The
most significant award is with BARDA for a five year, $118 million contract to develop a treatment for Lung
Acute Radiation Syndrome (ARS). The contract in detail calls for an upfront first year funding of $10.4 million
for R&D in AEOL 10150 and an additional $107.5 million based on performance and milestones met of AEOL
10150. The contract is a cost plus contract, which pays for the costs and overhead to develop the drug, and in
return BARDA gets future revenues from the drug. The contract also calls for a possible Emergency Use
Authorization (the government can buy the drug) in July 2013 with a FDA hopeful approval in 2016. The
contract will allow Aeolus to receive an upfront first year funding of $10.4 million for R&D in AEOL 10150 and a
possible additional $107.5 million based on performance of AEOL 10150. The development of AEOL 10150
could result in a FDA approval within five years and a possible EUA approval by 2013, which will be targeted
within two and half years.
Additional non dilutive funding is expected from The Infectious Diseases (NIAID) and District Assistance and
Intervention Team (DAIT) contract/grant should amount to the sum of $2 million to help treat both
gastrointestinal subsyndrome of acute radiation syndrome (GIARS) in mice and nonhuman primate studies
(NHP). The National Institutes of Health (NIH) CounerACT grant should amount to the sum of $1 million to help
protect lungs in the event of Chlorine gas exposure. The National Institutes of Health (NIH) CounerACT grant
should amount to the sum of $1 million to help protect against Mustard gas, phosgene, and cyanide in the
possible event of exposure. The National Institutes of Health (NIH)/NIAID grant contract/grant should amount to
the sum of $20 million to help the body defend against radiation exposure. The Michael J. Fox Foundation
grant should amount to the sum of $0.5 million the contract to help treat Parkinsons disease. The Citizens
United for Research in Epilepsy (CURE) grant should amount to the sum of $0.25 million to help treat Epilepsy.
Project BioShield
Project BioShield streamlines the process for procurement and awarding of research grants to bioterrorism
related projects. The project may further expedite the process with the authorization of the Secretary of HHS,
rather than the normal peer review process. The Secretary of HHS, with the concurrence of the Secretary of
DHS, and upon approval from the President are able to purchase unapproved bioterrorism countermeasures.
Within the National Institutes of Health (NIH), the National Institute of Allergy and Infectious Diseases (NIAID)
has been tasked with developing a robust research program to identify and develop new medical
countermeasures for use in case of a radiological or nuclear incident. NIH/NIAID was assigned this role by the
Secretary of the U.S. Department of Health and Human Services (HHS) through the Project BioShield Act of
2004. The commitment by the US government to fund and develop nuclear counter measure in our view,
clearly drives value for Aeolus as the company continues to develop nuclear counter measures under
nondilutive government funding. The research priorities of the program are to develop drugs to treat or mitigate
radiation injury and to develop drugs to remove radioactive materials from the body. For the purchase to qualify
the Secretary of HHS must determine from preclinical and clinical trials that approval or licensing will be met
within eight years. Further, the Secretary of HHS may authorize emergency use of medical products that have
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not yet FDA approved. The following conditions must be met in order to circumvent the FDA approval process:
1) the agent for which the countermeasure is designed can cause serious or lifethreatening disease; 2) the
product may reasonably be believed to be effective in detecting, diagnosing, treating or preventing the disease;
3) the known and potential benefits of the product outweigh its known and potential risks; 4) there is no
adequate alternative to the product that is approved and available.
Market Overview
The biodefense industry is comprised of three segments including: U.S. Civilian, U.S. Military, and NonU.S.
Markets. The U.S. Civilian market is funded primarily by project BioShield (Project BioShield Act of 2004), the
largest biodefense initiative with $5.6 billion of funds for the period of 2004 through 2013. An estimated $2.3
billion remain in the fund after rescissions and transfers of $1.5 billion with up to an additional $0.78 billion
scheduled to be transferred by 2012, for a total of $2.23 billion to be removed from the original amount. The
U.S. Military market is funded by Department of Defense (DoD) and is responsible for protecting military
personnel and civilians on active duty. An estimated budget for 2011 is $776 million. This compares to actual
funding of $717.6 million in 2009 and $679.5 in 2010. NonU.S. Markets will likely procure biodefense products
as they are developed and validated in U.S. Markets. This market is extremely vast covering all military and
nonmilitary personnel of foreign governments and therefore is not estimated.
Table 2: Aeolus Capital Structure
Currently Aeolus has a number of warrants outstanding as is the case in most biotechnology firms with drugs in
development. Currently there are 67.4 million warrants outstanding with Xmark Opportunity Partners, LLC
holding 59.1 million of those warrants. Xmark posses not only the majority of warrants outstanding but also
65% of the firms total outstanding common shares of 60.4 million. Xmarks interest in warrant conversion
compared to that of other holders may be viewed as a different strategy when considering warrant conversion.
The warrants outstanding have exercise prices ranging from $0.28 to $2.00. We note that 7. 0 million warrants
at an exercise price of $0.75 will expire on June 5, 2011. We note that Xmark does not hold any of nearterm
expiring warrants, which leaves only 1.2 million warrants exercisable from other parties. Based upon discussion
with Xmark, there is no intention of the form to sell stock or exercise warrants. Xmark intends to participate and
fully develop on the prospects at Aeolus.
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Milestones and Catalysts

Aeolus has upcoming milestones that could boost the companys clinical data and filings for current drugs in
research. This year the largest contract will be for BARDA and making sure that Aeolus stays on track to meet
their delivery contract for advancement in AEOL 10150. Currently the company has a list of already completed,
future 2011, and future 2012 milestones for AEOL 10150, which are listed below and would provide as
catalysts to shareholders and to advance the companys technology towards approval, additional nondilutive
funding, potential procurement and commercialization.
2011 Upcoming Milestones
Complete mouse radiation dose study to developed an effective dose curve in June 2011, (leading
to increased
escalation, dose duration study) for ARS in lung
Data from non human primate study for radiation dose escalation in ARS lung expected 2011
Radiation dose evaluation in nonhuman primates for ARS in Gi tract expected 2011
Publish Mechanism of Action Data for AOEL 10150 for radiation and cancer expected nearterm
Begin NSCLC cancer clinical studies, second half 2011
Initial NonGMP batch production in June 2011, sample of clinical batches to BARDA
File for Orphan Drug Designation in July 2011, could be awarded in late 2011
File IND for Lung ARS Indication and Fast Track with FDA in August 2011, could be awarded late 2011
BARDA Decision on Chlorine Proposal from white paper, estimated at $55 million expected second half 2011
Data from confirmatory mice Lung ARS study expected 2011
Data from confirmatory chlorine gas study in rats expected in 2011
NSCLC cancer clinical studies proofofconcept and efficacy data expected early 2012
Complete NHP radiation dose study and mice 10150 dose escalation Study expected 2012
Valuation
We value Aeolus based on an analysis of comparable developmentalstage companies currently in clinical
development with medical counter measure therapeutics, biodefense candidates and cancer therapeutics. Our
price objective of $3.30 is based on an ascribed enterprise value of $284 million, which is at the peer groups
current mean of $284 million, and within the peer groups enterprise value range of $108 million to $664 million.
Based upon the companys shares outstanding and estimated exercisable warrants we have arrived at a
blended price target to account for the availability of potential dilutive warrant execution. We arrive at our price
objected based upon a blended comparable price evaluation of $3.30 to mitigate warrant execution risk. On a
fully diluted basis we arrive at a price target of $2.30 based upon our estimated fully diluted shares outstanding
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of 127 million at the end of the second calendar quarter 2012 and a $4.30 price target based upon estimated
67 million common shares outstanding at the end of the second calendar quarter 2012. We believe that based
upon nature of warrant holdings with roughly an estimated 98% of warrants estimated to be held by Xmark
Holdings at the end of June 2011 that none of the exercisable warrants will be exercised over the next several
years. Xmark Holdings owns roughly 65% percent of the firms common shares outstanding and plans to fully
develop the prospects of the Aeolus pipeline. We believe that our price target is conservatively risk adjusted for
potential warrants execution upon share appreciation. In addition the firm is slated to receive up to $140 million
in nondilutive development funding over the next several years upon milestone execution and pipeline
advancements. We view the company to be significantly undervalued in comparison to other firms in the
biodefense industry will similar pipeline candidates. Risks include; failure to raise additional capital to extend
the operational runway, failure to achieve successful pipeline advancement, available government funding,
increased competitive landscape.
Table 3: Comparison Table
Management
Board of Directors
David Cavalier: Chairman and Director since 2004 and COO of Xmark Opportunity Partners. Mr. Cavalier also
serves as the President of Goodnow. He is also Chairman and Director of Incara Pharmaceuticals Corp. since
early 2004. Mr. Cavalier attended Yale University and Oxford University where he completed his B.A. and a
Masters in Philosophy.
John Farah Jr., Ph.D.: Director since 2005 and an Independent Director of Genspera from 2008 to 2010.
Currently, Mr. Farah works at Cephalon in the position of Vice President of Intercontinental Operations where
has been since 1992. He was brought into the company to manage research development organization and
technology requirements. Over his career at Cephalon, he held the position of managing biotech research
partnerships, scientific affairs, academic collaborations, and product licensing. While at GD, he worked for six
years as a research scientist. While at the Uniformed Services University in Bethesda, Dr. Farah received his
Doctorate in physiology. Prior to his Doctorate, he attended the University of Maryland where he received a
Bachelor of Science in Zoology and attended New College of California where he received a Bachelor of
Humanities degree.
Page: 24 of 32
Joseph Krivulka: Director and CoFounder of Triax Pharmaceuticals, LLC since 2004. Mr. Krivulka served as
President for Triax Pharmaceuticals where he led many acquisitions and brand products to market from 1999
to 2004. While working for Mylan Laboratories as Corporate VicePresident, Mr. Krivulka added $2 billion in
market, which created Bertek Pharmaceutical, where he also served as President. He has also had prior
experience at Johnson & Johnson working for the Janssen Pharmaceutical division. He currently also serves
as Akrimax Pharmaceuticals Chairman and as a Director of Nektar since 2005 and Director of Ambrilia
Biopharma since 2006. Mr. Krivulka attended West Virginia Wesleyan College and Temple University in
Physiology where he received his Bachelors of Science and Physiology, respectively.
Amit Kumar, Ph.D.: Director since 2004 and served as Chief Executive Officer and Advisor for CombiMatrix
Corporation, which is a Operating group of Acacia Research Corp. from 2001 to 2010. He founded Tacere
Therapeutics in 2006 and Signature Biosciences in 1999. From 1998 to 1999 Dr. Kumar served as Vice
President of Life Sciences of Acacia, in which he also served in Residence at Oak Investment Partners as an
Entrepreneur. He also served as Senior Manager of IDEXX Laboratories Inc. from 1996 to 1998 and served at
Idetek Corp. as Head Research & Development from 1993 to 1996. Dr. Kumar studied semiconductor solar
cells at Stanford University and the California Institute of Technology. During his time at Harvard University
under the direction of Professor George Whitesides, Dr. Kumar worked on, pioneered patens, and coinvented
nanotechnology, which is now known as MicroContact Printing and Soft Lithography. He received his Ph.D. in
1991 from Caltech, while contributing to joint studies at Stanford University and the California Institute of
Technology. He also attended Harvard University where he completed his PostDoctoral.
Michael Lewis, Ph.D.: Director since 2004 and Cofounder of Cara Therapeutics, Inc. He worked at BioDiligence
Partners, Inc. as resident since 1994. Dr. Lewis served as Chief Scientific Advisor for Arena Pharmaceuticals,
Inc. from 1997 to 2003, which he also cofounded. Prior to Arena, he worked as Chief Scientific Advisor from
1994 to 1997 at Adolor Corporation, which he also cofounded. He has coinvented 15 issued U.S. patents while
also authoring and coauthoring more than 40 opioid publications. He attended George Washington University
where he received a B.A. with Special Honors in Psychology and attended Clark University in 1977 where he
received a Ph.D. in Psychology. After receiving his Ph.D., Dr. Lewis attended University of Michigan, National
Institutes of Health, and University of Cambridge, where he did his postdoctoral training.
Chris Rallis: Director since 2004 and worked at Triangle Pharmaceuticals, Inc. as President and Chief
Operating Officer, which is now part of Gilead Sciences. While at Triangle Pharmaceuticals, he worked as
Executive Vice President from 1999 to 2000. Prior, Mr. Rallis was employed at Burroughs Wellcome Co, where
he held several positions. He was responsible for working with Vertex Pharmaceuticals Incorporated, Emory
University, and WarnerLambert Company finalizing licensing agreements. In addition, he also had the luxury of
overlooking business development with Abbott laboratories with inlicensing in more than 10 compounds. Mr.
Rallis attended Harvard College where he received his B.A. degree and attended Duke University where he
received his J.D.
Page: 25 of 32
Peter Suzdak, Ph.D: Director since 2004 and founder of Cardioxyl Pharmaceuticals and Artesian Therapeutics
Inc. as Chief Executive Officer. Dr. Suzdak worked at Guilford Pharmaceuticals as the Vice President of
Research and Development from the years of 1995 to 2002 where he integrated Drug Discovery and was
responsible for Preclinical Development and Clinical Development activities and Drug Discovery. During his
time at Guilford, Dr. Suzdak created an accelerated Drug Discovery process (BSB1000) and the Lead Product
Selection (LPS). Before coming onto Guilford, he worked at NovoNordisk A/S in Copenhagen, Demark from
1988 to 1995 where he acted as Director of Neurobiology Research. He was one of the major contributors in
the discovery of novel antiepileptic Gabatril(R). Dr. Suzdak attended the University of Connecticut and St.
Johns University where he received his Ph.D. in Pharmacology and B.S. in Pharmacy.
Key Management
John McManus: President and Chief Executive Officer of Aeolus since June 20, 2005 and March 2007 and
serves as the Officer of Accounting, Treasurer, and Secretary. Mr. McManus has also successfully owned and
operated McManus Financial Consultants, Inc. since 1989. He also was in the position of Chief Financial
Officer for Aeolus from January 2010 to February 2011, while previously holding the position of Chief Operating
Officer from July 2006 to March 2007. Prior to joining Aeolus, Mr. McManus was the Vice President of Strategic
Planning and Finance for Spectrum Pharmaceuticals Inc. along with the Vice President of Finance and Investor
Relations from the time of August 2002 to November 2003 and November 2000 to June 2003, respectfully.
From late August 2002 to late November 2003, Mr. McManus enhanced Spectrums focus and strategy on
financial plans which were later successful. Prior to working at Spectrum, Mr. McManus was employed at Price
Waterhouse where he spent six years as a Audit Manager in financial services and health care. He received a
B.S. from the University of Southern California in 1986 in International Finance and Business Economics,
which later led him to obtain his CPA.
Russell Skibsted: Chief Financial Officer and Senior Vice President of Aeolus Pharmaceuticals Inc. in February
2011, where he holds over 25 years of experience in operations, marketing, partnering, finance, and
acquisitions. From those 25 years, Mr. Skibsted provided expertise to startup companies all the way up to
Fortune 500 companies. Before working at Aeolus, he worked for Talon Therapeutics, Inc as the Chief
Financial Officer and Vice President from mid November 2004 to January 2006. Mr. Skibsted generated over
$62 million for Spectrum in 2008 from nondilutive funding, which came from a completed successful
partnership. Prior, he worked at Asset Management Company as the Chief Financial Officer. Mr. Skibsted was
previously employed at GE Capital Services. When Mr. Skibsted was a member of the Development team at
Pinkertons Inc. he created a corporate partnering and acquisitions department. Mr. Skibsted received a BA in
Economics while at Claremont McKenna College and while at Stanford Graduate School of Business he
received a MBA.
Page: 26 of 32
Brian Day, Ph.D: Founder and Chief Scientific Officer since November 2004. Dr. Day has experience in
toxicology and pharmacology for over 14 years, which he also played a vital role in the development and
discovery of antioxidant mimetics, which is the current and primary drug platform at Aeolus. Dr. Day also
currently works at the Department of National Jewish Medical and Research Center as an Associate Professor.
He has over 70 scientific publications, he also brings over 10 years of consulting experience to biotechnology
companies and is an active member of a number of scientific.
Page: 27 of 32
Valuation
We value Aeolus based on an analysis of comparable developmentalstage companies currently in clinical
development with medical counter measure therapeutics, biodefense candidates and cancer therapeutics. Our
price objective of $3.30 is based on an ascribed enterprise value of $284 million, which is at the peer groups
current mean of $284 million, and within the peer groups enterprise value range of $108 million to $664 million.
Based upon the companys shares outstanding and estimated exercisable warrants we have arrived at a
blended price target to account for the availability of potential dilutive warrant execution. We arrive at our price
objected based upon a blended comparable price evaluation of $3.30 to mitigate warrant execution risk. On a
fully diluted basis we arrive at a price target of $2.30 based upon our estimated fully diluted shares outstanding
of 127 million at the end of the second calendar quarter 2012 and a $4.30 price target based upon estimated
67 million common shares outstanding at the end of the second calendar quarter 2012. We believe that based
upon nature of warrant holdings with roughly an estimated 98% of warrants estimated to be held by Xmark
Holdings at the end of June 2011 that none of the exercisable warrants will be exercised over the next several
years. Xmark Holdings owns roughly 65% percent of the firms common shares outstanding and plans to fully
develop the prospects of the Aeolus pipeline. We believe that our price target is conservatively risk adjusted for
potential warrants execution upon share appreciation. In addition the firm is slated to receive up to $140 million
in nondilutive development funding over the next several years upon milestone execution and pipeline
advancements. We view the company to be significantly undervalued in comparison to other firms in the
biodefense industry will similar pipeline candidates. Risks include; failure to raise additional capital to extend
the operational runway, failure to achieve successful pipeline advancement, available government funding,
increased competitive landscape.
Page: 28 of 32
Page: 29 of 32
Page: 30 of 32
DISCLAIMER
All statements or opinions contained herein that include the words "we", "us", or "our" are solely the responsibility of Noble Financial and do not necessarily
reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject
to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not
necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for
any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by
each reader of this publication based on its own appraisal of the implications and risks of such decision.
This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any security
mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state or domicile. This publication and all information, comments, statements or opinions
contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice. Past performance is not indicative
of future results.
IMPORTANT DISCLOSURES
Within the past 30 days, a Noble Financial Company Research employee and/or their immediate supervisors have not effected a transaction for their own
account(s) in the investment(s) referred to in this report, nor will such a transaction take place within 5 days of its publication.
A Noble Financial Company intends to seek investment banking business with this company in the next three months.
A Noble Financial Company is a market maker in the subject company.
Page: 31 of 32
WARNING
This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate for
any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision, recipients should assess, or seek
advice from their advisors, on whether any relevant part of this report is appropriate to their individual circumstances. If a recipient was referred to a Noble
Financial Company by an investment advisor, that advisor may receive a benefit in respect of transactions effected on the recipients behalf, details of which will
be available on request in regard to a transaction that involves a personalized securities recommendation. Additional risks associated with the security
mentioned in this report that might impede achievement of the target can be found in its initial report issued by a Noble Financial Company. This report may not
be reproduced, distributed or published for any purpose unless authorized by a Noble Financial Company.
U.S. CLIENTS
For purposes of distribution in the United States, this report is prepared for persons who can be defined as "Institutional Investors" under U.S. regulations. Any
U.S. person receiving this report and wishing to effect a transaction in any security discussed herein, must do so through a U.S. registered broker or dealer.
Noble International Investments, Inc. is a U.S. registered broker dealer.
RESEARCH ANALYST CERTIFICATION

Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.
Receipt of Compensation
All or part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views in the research report.
Ownership and Material Conflicts of Interest

Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.
Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the disclosure
information mentioned herein, should contact Noble Financial by mail or phone.
Noble International Investments, Inc., dba Noble Financial Capital Markets is a FINRA registered broker/dealer.
Member - SPIC (Securities Investor Protection Corporation)
NFCM RATING DEFINITIONS % OF STOCKS COVERED % OF IB CLIENTS

BUY: potential return is >15% above the current price 64% 12%
HOLD: potential return is -15% to 15% of the current price 33% 2%
SELL: potential return is >15% below the current price 3% 0%
Report ID: 4047
Page: 32 of 32

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May 26, 2011

OTC BB Biodefense and Cancer; A Unique Protective

Refer to the last two pages of this report for Disclosures

Significant NonDilutive Funding for Advancement to Potential Procurement

Compound Developed out of Duke University

Unique Mechanism of Action and Platform Technology Potential

AEOL 10150 Advantageous Profiles Thus Far

Potential for AEOL 10150 as a Countermeasure against Multiple Terrorist Threats:

Phase I Safety Data Already Presented In Humans

Significant Nondilutive Funding Expected

AEOL 10150 Mechanism of Action

FIGURE 1: Radiation in Lung

AEOL 10150 catalytic antioxidant (manganoporphyrin)

FIGURE 2: Product Pipeline

Acute Radiation Syndrome (ARS)

Approval under Animal Efficacy Rule

AEOL 10150 Acute Radiation Syndrome (ARS) in Lung

AEOL 10150 Preclinical Studies in ARS in Lung

FIGURE 3: AEOL 10150 Mice Survival Rate Post Radiation Treatment

Nonhuman Primate Study against ARS in Lung

AEOL 10150 Treatment for Gastrointestinal Acute Radiation Syndrome (ARS)

Table 1: Previous Government Stockpiling Awards

Acute Radiation Syndrome

Radiation and Fallout

FIGURE 4: Hypothetical fall out event from a 10kt Nuke

Three types of radiation syndromes associated with Acute Radiation

Four stages of ARS

Additional Value Driving Profile to AEOL 10150 as a Medical Counter Measure

AEOL 10150 Treatment as a Countermeasure against Chlorine Gas

AEOL 10150 Treatment as a Countermeasure against Mustard Gas

AEOL 10150 NonSmall Cell Lung Cancer

AEOL 10150 Proven Safe in Humans

FIGURE 5: Tumor Reduction after AEOL 10150

AEOL 10150 Synergistic With Radiation and Chemotherapy

Causes, Diagnosis Lung Cancer

Currently Approved Therapies after Cancer Treatment

AEOL 10150 Treatment for Amyotrophic Lateral Sclerosis

Awarded Contracts and Grants

Table 2: Aeolus Capital Structure

Milestones and Catalysts

2011 Upcoming Milestones

Begin NSCLC cancer clinical studies, second half 2011

Data from confirmatory mice Lung ARS study expected 2011

Data from confirmatory chlorine gas study in rats expected in 2011

Table 3: Comparison Table

RESEARCH ANALYST CERTIFICATION

Ownership and Material Conflicts of Interest

NFCM RATING DEFINITIONS % OF STOCKS COVERED % OF IB CLIENTS

Report ID: 4047

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