SYNTHETIC BIOLOGICS (NYSE-MKT: SYN)

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UPDATE REPORT Biotechnology Industry August 19, 2013 SYNTHETIC BIOLOGICS (NYSE-MKT: SYN) PROGRESS ON ALL FRONTS KEITH A. MARKEY, PH.D., M.B.A. 212-514-7914 KMARKEY@GRIFFINSECURITIES.

A Phase 2 study, which is investigating estriol in combination with Teva s Copaxone for relapsing/remitting multiple sclerosis, will end in January and results should be available in the second

1 UPDATE REPORT Biotechnology Industry August 19, 2013 SYNTHETIC BIOLOGICS (NYSE-MKT: SYN) PROGRESS ON ALL FRONTS KEITH A. MARKEY, PH.D., M.B.A Two clinical trials of Trimesta will report out next year. A Phase 2 study, which is investigating estriol in combination with Teva s Copaxone for relapsing/remitting multiple sclerosis, will end in January and results should be available in the second quarter. The data will likely set the stage for licensing discussions with a large pharmaceutical company. The other trial, which is assessing Trimesta for a new indication, improving cognitive function in MS patients, should end next summer. Such a claim would add greatly to the value of the drug. A prophylactic agent for Clostridium difficile should enter clinical trials soon. The manufacturing process is being finalized and a pre-ind meeting with the FDA will be scheduled shortly. The product, which protects against the opportunistic infections by protecting microflora in the gut from common, systemically administered antibiotics, may be launched into the huge antibiotic market in Synthetic Biologics is making good progress with two monoclonal antibodies being developed via a exclusive channel collaboration with Intrexon Corporation. One, targeting B. pertussis, is scheduled to enter a pivotal, large-animal trial this year. For the other program, antibodies have been developed against Acinetobacter baumanii, which causes often-deadly hospital-acquired infections. Once a lead candidate is selected, it will enter IND-enabling studies, probably in the first half of Moreover, the Company is considering alternative opportunities for a third drug to add to its collaboration with Intrexon in the near future. The first half closed in line with expectations. Synthetic Biologics maintained good control over expenses, with much of the R&D work paid by external funds. In all, $3.8 million of cash was consumed. We estimate the cash burn rate will increase somewhat in the months ahead as the R&D programs involving anti-infectives advance. The balance sheet has $6.9 million of cash on hand, so an external financing seems likely. We reiterate our BUY recommendation and have raised our price target to $4.00. Share Price (8/16/2013) $ Week Price Low / High $ $2.55 Mkt. Capitalization (issued) $64.8 million Shares Outstanding (issued) 44.7 million 12-month Target Price $4.00 Average Daily Volume (3 mos.) 86,996 Website syntheticbiologics.com Est d 2013 Earn s (Loss)/shr ($0.22) Est d 2014 Earn s (Loss)/shr ($0.22) Synthetic Biologics (NYSE-MKT: SYN) is a clinical-stage biotechnology company specializing in anti-infective agents for serious illnesses not addressed adequately by current drugs. A collaboration with Intrexon Corporation is developing antibody-based therapeutics for lifethreatening Acinetobacter baumanii and Bortadella pertussis infections. Source: BigCharts.com Meanwhile, Synthetic Biologics has two programs in clinical development, a preventive medicine for severe diarrhea caused by Clostridium difficile and a legacy program investigating the orally available hormone estriol (Trimesta ) for multiple sclerosis. The corporate strategy is to become a leading specialist in biological anti-infective medicines. Griffin Securities, Inc., 17 State Street, New York, NY, Please Review Disclosures on Page 7 of this Research Report

2 RECENT & NEAR-TERM MILESTONES Synthetic Biologics has achieved much in the short 12 months since it entered the field of anti-infective agents through an exclusive channel collaboration with Intrexon Corporation. These two antibody-based therapies, which target B. pertussis and Acinetobacter baumanii, have moved forward to where they are now approaching clinical trials, and another treatment was acquired to prevent hospital-acquired Clostridium difficile infections. A legacy program involving a hormone therapy, called Trimesta, for multiple sclerosis, gained additional patent protection for use in combination with Teva Pharmaceutical s Copaxone. As shown below, the Company will move these programs ahead over the next 12 months. A licensing deal, which we haven t included in the near-term milestones, is also possible, based on the outcome of the large Phase 2 trial for relapsing/remitting multiple sclerosis that is scheduled to conclude in early Aug, 12 Sep, 12 Oct, 12 Dec, 12 Dec, 12 Dec, 12 Exclusive channel collaboration formed with Intrexon Corporation for the development and commercialization of monoclonal antibody therapies for infectious diseases Development of monoclonal antibodies initiated via the collaboration with Intrexon to treat Acinetobacter infections, which pose a serious threat to hospitalized patients $10.8 million private placement financing completed through the issuance of 6.8 million common shares at a price of $1.60 each with no warrant coverage Clinical-stage C. difficile disease program acquired from Prev AbR for stock and cash Rights to therapeutic antibody technology for Bordetella pertussis infections (whooping cough) licensed from the University of Texas, Austin Development of monoclonal antibodies for B. pertussis initiated via Intrexon collaboration Dec, 12 Apr, 13 Jul, 13 H2, 13 H2, 13 Entered into licensing agreement with European company for veterinary use of C. difficile therapy U.S. Patent & Trademark Office issued Patent #8,372,826 for the use of estriol in combination with glatiramer acetate (sold as Copaxone by Teva Pharmaceuticals) for the treatment of multiple sclerosis Initiated selection of cell line for production of SYN-004 for C. difficile Identify lead antibody for Acinetobacter program Initiate trial of monoclonal antibody for B. pertussis in primate model 2013 Add another drug candidate to the R&D program 2013 Initiate IND-enabling studies of Acinetobacter monoclonal antibody Q1, 14 Q1, 14 Q2, 14 H1, 14 Mid, 14 H2, 14 File IND for SYN-004 for C. difficile Complete Phase 2 trial of Trimesta for relapsing-remitting MS Submit IND for Acinetobacter monoclonal antibody Initiate Phase 1/2 trial of SYN-004 treatment for C. difficile Complete Phase 2 trial of Trimesta for cognitive dysfunction in MS patients Complete Phase 1/2 trial of SYN-004 for C. difficile GRIFFIN SECURITIES EQUITIES RESEARCH 2

3 FINANCIAL FORECASTS & VALUATION Shown below are the latest quarterly results with our near-term estimates, along with the balance sheet as of June 30 th and our long-term projections on the subsequent pages. QUARTERLY INCOME STATEMENTS # (FISCAL YEAR ENDS DECEMBER 31 ST ) # Data are in thousands, except per-share figures Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total Revenues $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 2,500 $ - Operating expenses G&A expense $ 1,468 $ 1,176 $ 1,073 $ 1,295 $ 1,122 $ 1,258 $ 1,300 $ 1,320 $ 1,325 $ 1,350 $ 1,350 $ 1,350 R&D expense ,591 1,118 1,203 1,300 1,479 1,800 2,100 2,000 2,100 Total operating costs 1,854 1,723 1,836 2,886 2,240 2,461 2,600 2,799 3,125 3,450 3,350 3,450 Operating profit/(loss) $ (1,854) $ (1,723) $ (1,836) $ (2,886) $ (2,240) $ (2,461) $ (2,600) $ (2,799) $ (3,125) $ (3,450) $ (850) $ (3,450) Warrant-related (inc)/(exp) Other Income/expense (net) (2) 12 (36) Pretax profit/(loss) $ (1,849) $ (1,716) $ (1,826) $ (2,888) $ (2,228) $ (2,497) $ (2,587) $ (2,789) $ (3,118) $ (3,447) $ (840) $ (3,430) Income taxes Net profit/(loss) - contin ops $ (1,849) $ (1,716) $ (1,826) $ (2,888) $ (2,228) $ (2,497) $ (2,587) $ (2,789) $ (3,118) $ (3,447) $ (840) $ (3,430) Discontinued/nonrecurring $ 649 $ (156) $ (104) $ (9,173) $ - $ - $ - $ - $ - $ - $ - $ - Net profit/(loss) $ (1,200) $ (1,872) $ (1,930) $ (12,061) $ (2,228) $ (2,497) $ (2,587) $ (2,789) $ (3,118) $ (3,447) $ (840) $ (3,430) Earnings/(loss) per share $ (0.06) $ (0.05) $ (0.05) $ (0.07) $ (0.05) $ (0.06) $ (0.05) $ (0.06) $ (0.06) $ (0.07) $ (0.02) $ (0.07) Discontin'd/nonrecur per sh $ 0.02 $ (0.00) $ (0.00) $ (0.22) $ - $ - $ - $ - $ - $ - $ - $ - Shares outstanding 32,003 33,011 33,383 41,191 44,601 44,654 48,000 48,100 48,250 48,300 48,500 48,600 Review of the First Half: In the first six months, Synthetic Biologics invested $2.32 million in R&D, more than double the $933,000 of a year ago. The increase is attributable to the infectious disease program, which was initiated last summer. (Note that the Trimesta clinical studies are investigator-sponsored and are funded by grants, while the work being conducted at Intrexon was prepaid upon entering into the exclusive channel collaboration.) General and administrative costs totaled $2.38 million, which fell 10% from the $2.64 million incurred in the like year-ago period. Non-cash expenses included in these figures were $887,000 and $947,000 in 2013 and 2012, respectively. Accordingly, the Company s cash burn rate rose from $2.63 million in the first half of 2012 to $3.81 million recently. Near-Term Estimates Synthetic Biologics will probably see its R&D costs rise moderately in the closing months of this year, since the manufacturing process for the C. difficile project will be finalized while work on the B. pertussis and Acinetobacter programs proceeds. Investments in new product development should continue to rise next year, with commencement of the clinical development of the C. difficile prophylactic agent. We figure general & administrative costs will increase gradually in the near term. The Company recently hired a seasoned executive, Lewis Barrett, as its Vice President, Commercial Strategy. And partnering discussions will likely heat up next year once the Phase 2 trial investigating Trimesta for relapsing/remitting multiple sclerosis data is available. GRIFFIN SECURITIES EQUITIES RESEARCH 3

4 ANNUAL INCOME STATEMENTS # (FISCAL YEAR ENDS DECEMBER 31 ST ) # Data are in thousands, except per-share figures Total Revenues $ - $ - $ - $ 2,500 $ 2,500 $ 47,454 $ 108,376 Operating expenses G&A expense 2,588 5,012 5,000 5,375 6,000 8,000 8,670 R&D expense 3,340 3,287 5,100 8,000 10,000 14,000 13,005 Total operating costs 5,928 8,299 10,100 13,375 16,000 22,000 21,675 Operating profit/(loss) $ (5,928) $ (8,299) $ (10,100) $ (10,875) $ (13,500) $ 25,454 $ 86,701 Warrant-related (inc)/(exp) (1,734) Other Income/expense (net) (1) Pretax profit/(loss) $ (7,626) $ (8,284) $ (10,101) $ (10,835) $ (13,400) $ 25,554 $ 86,826 Income taxes ,711 32,994 Net profit/(loss) - contin ops $ (7,626) $ (8,284) $ (10,101) $ (10,835) $ (13,400) $ 15,844 $ 53,832 Disc'd/nonrecur $ (523) $ (8,784) $ - $ - $ - $ - $ - Net profit/(loss) $ (8,149) $ (17,068) $ (10,101) $ (10,835) $ (13,400) $ 15,844 $ 53,832 Earnings/(loss) per share $ (0.28) $ (0.24) $ (0.22) $ (0.22) $ (0.28) $ 0.29 $ 0.98 Shares outstanding 27,710 34,897 46,339 48,413 48,700 54,200 54,700 Assumptions: Revenue sources include: (i) Trimesta: an upfront licensing fee of $10 million in 2014, a milestone payment upon submission of the NDA in 2017, and a royalties at 10% of sales. (ii) C. difficile prophylactic: launches by a licensee(s) in 2017 and generates royalties at a 10% rate. (iii) B. pertussis: launches in 2016 by a licensee(s), generating royalties at a 12% rate. Operating expenses: We project general & administrative expenses increase with an expansion of the corporate infrastructure until they stabilize at 8% of revenues in R&D costs rise as the anti-infective programs advance into clinical trials, gradually reaching 12% of revenues in Tax liability: In the out-years, we have included tax liabilities at a 38% effective rate, although Synthetic Biologics had $39.7 million of net operating loss carryforwards as of December 31, 2012 to offset these liabilities. Number of shares outstanding: Per-share calculations are based on the average number of basic shares outstanding in 2012 through 2015 and fully diluted thereafter. We have assumed that Synthetic Biologics raises additional capital in 2013 to support operations through 2014, and we have made adjustments based on stock-based compensation awards. GRIFFIN SECURITIES EQUITIES RESEARCH 4

5 BALANCE SHEET # (FISCAL YEAR ENDS DECEMBER 31 ST ) # Data are in thousands. ASSETS 6/30/ /31/2012 Current Assets Cash & equivalents $ 6,877 $ 9,954 Prepaid expenses & other 1,880 2,509 Note receivable Total Current Assets $ 9,457 $ 12,463 Long-Term Assets Property & equipment Other Total Assets $ 9,627 $ 13,423 LIABILITIES Current Liabilities Accounts payable $ 213 $ 395 Debt due $ - $ - Accrued expenses 16 - Total Current Liabilities $ 229 $ 395 Long-term obligations - - Shareholders Equity Common Stock, par value $ 45 $ 44 Additional Paid-In Capital 83,019 81,925 Accumulated Deficit (73,666) (68,941) Total Shareholders Equity $ 9,398 $ 13,028 Total liabilities & equity $ 9,627 $ 13,423 VALUATION We calculated our 12-month price target by applying a price-earnings multiple of 27 to the projected share earnings of $0.29 in 2016 to arrive at a future value of $7.85 and then discounted that figure back two years at an annual rate of 40%. That calculation yielded a price of $3.99. Accordingly, our 12-month price target is $4.00. GRIFFIN SECURITIES EQUITIES RESEARCH 5

6 INVESTMENT CONCERNS AND RISKS For a complete description of risks and uncertainties related to Synthetic Biologics business, see the Risk Factors section in Synthetic s SEC filings, which can be accessed directly from the SEC Edgar filings at Potential risks include: Stock risk and market risk: Trading of the Company s common stock varies widely on a daily basis. There can be no assurance that an active and liquid trading market will be sustained, which could limit one s ability to buy or sell the Company s common stock at a desired price. Investors should also consider technical risks common to many small-cap or micro-cap stock investments, such as float, risk of dilution, dependence upon key personnel, and the strength of competitors that may be larger and better capitalized. Competitive risk: The markets for multiple sclerosis drugs and anti-infective agents are highly competitive, based on individual product characteristics, pricing, and marketing support. Other companies are actively engaged in the development/commercialization of products to directly or indirectly address the uses being pursued by Synthetic Biologics. These companies may have substantially greater research and development capabilities, as well as significantly greater marketing, financial, and human resources than Synthetic. Products still in development phases: The Company s drugs may appear to be promising, but may not reach commercialization for various reasons, including a lack of efficacy in clinical trials, failure to achieve regulatory approvals, safety concerns, and/or the inability to be manufactured at a reasonable cost. And even if the products are commercialized, there can be no assurance that they will be accepted, which may prevent the Company from becoming profitable. Funding requirements: It is difficult to predict Synthetic s future capital requirements. The Company may need additional financing to continue to fund operations and expand its business. There is no guarantee that it can secure the desired future capital or, if sufficient capital is secured, that current shareholders will not suffer significant dilution. Regulatory risk: There is no guarantee that the Company s products under development will be approved by the Food and Drug Administration (FDA) or international regulatory bodies for marketing in the U.S. or abroad. In addition, regulations pertaining to drug development may undergo further changes, which may affect the Company s ability to gain regulatory approvals and/or labeling that supports its marketing strategies. Reimbursement risk: Healthcare reimbursement decisions have undergone significant changes and may continue to do so. There is no guarantee that the Company s drugs will receive adequate insurance coverage for them to be commercially viable. Patent risk: The field of pharmaceutical and biotechnology drugs is very competitive, and although Synthetic Biologics has licensed and/or filed for numerous patents to secure its right to commercialize its technology, these patents may not protect the Company s rights adequately in the marketplace. GRIFFIN SECURITIES EQUITIES RESEARCH 6

7 DISCLOSURES ANALYST(s) CERTIFICATION: The analyst(s) responsible for covering the securities in this report certify that the views expressed in this research report accurately reflect their personal views about Synthetic Biologics (the Company ) and its securities. The analyst(s) responsible for covering the securities in this report certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or view contained in this research report. MEANINGS OF RATINGS: Our rating system is based upon 12 to 36 month price targets. BUY describes stocks that we expect to appreciate by more than 20%. HOLD/NEUTRAL describes stocks that we expect to change plus or minus 20%. SELL describes stocks that we expect to decline by more than 20%. SC describes stocks that Griffin Securities has Suspended Coverage of this Company and price target, if any, for this stock, because it does not currently have a sufficient basis for determining a rating or target and/or Griffin Securities is redirecting its research resources. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NR describes stocks that are Not Rated, indicating that Griffin Securities does not cover or rate this Company. DISTRIBUTION OF RATINGS: Currently Griffin Securities has assigned BUY ratings on 82% of companies it covers, HOLD/NEUTRAL ratings on 18%, and SELL ratings on 0%. Griffin Securities has provided investment banking services for 16% of companies in which it has had BUY ratings in the past 12 months and 0% for companies in which it has had HOLD/NEUTRAL, NR, or no coverage in the past 12 months or has suspended coverage (SC) in the past 12 months. COMPENSATION OR SECURITIES OWNERSHIP: The analyst(s) responsible for covering the securities in this report receive compensation based upon, among other factors, the overall profitability of Griffin Securities, including profits derived from investment banking revenue. The analyst(s) that prepared the research report did not receive any compensation from the Company or any other companies mentioned in this report in connection with the preparation of this report. The analyst responsible for covering the securities in this report currently does not own common stock in the Company, but in the future may from time to time engage in transactions with respect to the Company or other companies mentioned in the report. Griffin Securities from time to time in the future may request expenses to be paid for copying, printing, mailing and distribution of the report by the Company and other companies mentioned in this report. The Company is currently a client of Griffin Securities, Inc. Griffin Securities' services for the Company consist of non-investment banking securities-related services and non-securities services. Griffin Securities has received compensation from the Company in the past 12 months for investment banking services and non-investment banking services. Griffin Securities expects to receive, or intends to seek, compensation for investment banking and non-investment banking services from the Company in the next three months. FORWARD-LOOKING STATEMENTS: This Report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the Risk Factors section in the SEC filings available in electronic format through SEC Edgar filings at on the Internet. DISCLOSURES FOR OTHER COMPANIES MENTIONED IN THIS REPORT: To obtain applicable current disclosures in electronic format for the subject companies in this report, please refer to SEC Edgar filings at In particular, for a description of risks and uncertainties related to subject companies businesses in this report, see the Risk Factors section in the SEC filings. GRIFFIN SECURITIES EQUITIES RESEARCH 7

PRICE CHART 2 Year BUY BUY BUY Source: BigCharts.com Initiation report: 2/5/2013; share price, $1.82; rating, BUY; 12-month price target, $4.00. Update reports: 6/26/2013: share price, $1.

8 PRICE CHART 2 Year BUY BUY BUY Source: BigCharts.com Initiation report: 2/5/2013; share price, $1.82; rating, BUY; 12-month price target, $4.00. Update reports: 6/26/2013: share price, $1.70; rating, BUY; 12-month price target, $4.00; 8/19/2013: share price, $1.45; rating, BUY; 12-month price target, $4.00. GENERAL: Griffin Securities, Inc. ( Griffin Securities ) a FINRA (formerly known as the NASD) member firm with its principal office in New York, New York, USA is an investment banking firm providing corporate finance, merger and acquisitions, brokerage, and investment opportunities for institutional, corporate, and private clients. The analyst(s) are employed by Griffin Securities. Our research professionals provide important input into our investment banking and other business selection processes. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Griffin Securities may from time to time perform corporate finance or other services for some companies described herein and may occasionally possess material, nonpublic information regarding such companies. This information is not used in preparation of the opinions and estimates herein. While the information contained in this report and the opinions contained herein are based on sources believed to be reliable, Griffin Securities has not independently verified the facts, assumptions and estimates contained in this report. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. The information contained herein is not a complete analysis of every material fact in respect to any company, industry or security. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Griffin Securities. It does not take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Certain transactions - including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information contained in this report is subject to change without notice and Griffin Securities assumes no responsibility to update the report. In addition, regulatory, compliance, or other reasons may prevent us from providing updates. GRIFFIN SECURITIES EQUITIES RESEARCH 8

Synthetic Biologics (SYN) Rating: Buy

Synthetic Biologics (SYN) Rating: Buy Earnings Update Healthcare August 15, 2013 h (SYN) Rating: Buy Andrew S. Fein 212-356-0546 afein@hcwco.com Continue to View Trimesta Deal in Multiple Sclerosis as NT Value Driver: Reiterate BUY and $4