Summit Corporation - Initiation of dose-escalation study and achievement of milestone payment. Speculative buy with an 11p targe

13th June 2012 Analyst: Emanuil Manos Halicioglu Email: emanuil.halicioglu@gecr.co.uk Tel: 0207 562 3368 Summit Corporation - Initiation of dose-escalation study and achievement of milestone payment. Speculative buy with an 11p target price.

Key Data EPIC SUMM Share Price 2.625p NMS 25,000 Spread 2.5p - 2.75p Total no of Shares 354.09 million Market Cap £9.29 million 12 Month Range 2.375p - 13.375p Market AIM Website www.summitplc.com Sector Biopharma Contact Richard Pye Corporate Development 01235 443939 Summit Corporation is making good progress with its drug discovery programme for the treatment of the fatal genetic disease Duchene Muscular Dystrophy (DMD), with the firm reporting that its SMT C1100 Phase 1 dose-escalation study in healthy volunteers was initiated in May 2012 and that it will now progress to the stage where participants receive multiple doses. This achieves a milestone as part of the $1.5 million agreement signed with a group of US-based DMD organisations and, accordingly, Summit will receive the final payment of $250,000. We reiterate our speculative buy stance with an 11p target price. The company added that the funding will enable the completion of Phase 1 of SMT C1100, after which it will seek an appropriate partner to advance its drug candidate to a stage where it will be able to evaluate its effectiveness on DMD patients (Phase 2). With the DMD market estimated to be worth in excess of $1 billion per annum in sales (source: company), we are pleased to see its drug discovery programme making real progress. We expect results from this trial to be announced by the end of this year. Valuation In light of the milestone payment, we continue to forecast a pre-tax loss of £4.74 million for the current financial year, as the group ramps up research and development for Phase I testing (£3.90 million), on revenue of £1.04 million.  For the following year, we are anticipating lowered R&D expenses (£2.2 million) - with no Phase I studies expected to be conducted - and a deal to be made with one of its key assets, in which an up-front payment is likely to be made as a result. Accordingly, we have pencilled in a pre-tax profit of £2.43 million on revenue of £6.5 million for financial year 2013/14. Valuing the shares on a two-year historic average EV/sales of 4.44 times, we have derived a target price of 11p. There is significant upside here, with SMT C1100 having sales potential in excess of $1 billion per annum and CDI having a market potential in excess of $2.5 million per annum (source: Company), and the potential utility of its Seglin™ Technology encompassing a broad range of different therapy areas and multiple drug targets. Speculative buy. Financial records & forecast table Year ended: 31st January Sales (£000) PBT (£000) EPS (p) PE Ratio (x) Dividend (p) Yield (%) 2010A 189 (5,819) (8.13) NA 0.00 0.00 2011A 763 (5,916) (2.82) NA 0.00 0.00 2012A 1,765 (2,998) (1.51) NA 0.00 0.00 2013E 1,040 (4,744) (1.41) NA 0.00 0.00 2014E 6,500 2,430 0.88 2.98 0.00 0.00

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