SUMM.L Regulatory News (SUMM)

30 Oct 2007 07:01

Summit Corporation PLC30 October 2007 Summit Corporation plc("Summit" or "the Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2007 Oxford, UK, 30 October 2007 - Summit Corporation plc (AIM: SUMM) announces itsinterim results for the six months ended 31 July 2007. A presentation to analysts will be held today at 09.30hrs at the offices ofCitigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London, EC2M 5SY.Please contact Mark Swallow or Yvonne Alexander on 020 7638 9571 for furtherinformation. Highlights Drug Pipeline Progress • Two clinical and three preclinical programmes targeting serious diseases• Phase I clinical trial commenced in Parkinson's disease and acne• Preclinical candidate in Duchenne muscular dystrophy programme selected Early stage Programme Deals • Multi-million programme collaboration deal signed with Evolva Biotech Profitable Technology Platforms • Gross margins over 60%• Increase in average deal size to £65,000 (H1 2006/07: £30,000) Corporate Highlights • Acquisitions of two UK biotechnology companies in all-paper deals• Re-branding of Company to Summit plc Financial Highlights • Trebling in half-year revenues to £1.4 million (H1 2006/07: £0.47m) as a result of organic growth and acquisitions• R&D investment up to £3.6 million (H1 2006/07: £1.3m)• Cash position of £14.2 million (H1 2006/07: £20.2m) Barry Price, PhD, Chairman of Summit plc, said "Summit has made a very strongstart to the year with excellent progress having been made in all areas of itsnewly enlarged business. The acquisitions we made early in the year have helpedtransform Summit and the coming months will be very exciting for the Company: weexpect to make significant progress in our two clinical and three preclinicaldrug programmes; we are working hard towards delivering a major licensing dealfor at least one of these programmes; and we anticipate continued growth in thetechnology platform service business." Summit also announced today that it has signed a $450,000 deal with one of theworld's top five pharmaceutical companies for use of its zebrafish technologyplatform to assess the safety of its proprietary compounds. Please see theseparate announcement for further details. - ENDS - For more information, please contact: Summit plcSteven Lee, PhD, Chief Executive Officer Tel: +44 (0)1235 443951Darren Millington, ACMA, Chief Financial OfficerRichard Pye, PhD, Investor Relations Citigate Dewe RogersonMark Swallow / David Dible / Yvonne Alexander Tel: +44 (0)207 638 9571 Evolution SecuritiesTim Worlledge / Bobbie Hilliam / Neil Elliot Tel: +44 (0)207 071 4300 About Summit plc Summit plc is a leading UK biotechnology company that discovers and developsproprietary new drugs. The Company's internal drug development programmes areunderpinned by its advanced carbohydrate chemistry and drug screening (chemicalgenomics) technology platforms, which it also provides on a collaborative orfee-for-service basis to the pharmaceutical industry. Summit plc has a broad range of drug discovery programmes in the clinical,pre-clinical and discovery stages of development, which target serious diseaseswith a high unmet medical need. These therapeutic areas include neuro-disorders(neurodegenerative and neuromuscular), anti-infectives, ophthalmic diseases,oncology and regenerative medicines. Summit plc's in-house drug development capabilities combine world-classexpertise in both carbohydrate chemistry with high-volume, high-contentscreening using its proprietary zebrafish and fruitfly technologies (chemicalgenomics). These whole organism screens have the potential to dramaticallydecrease the time and cost of drug discovery and development by delivering datathat are highly predictive of the efficacy and toxicity of potential drugcompounds in humans. The company listed on the AIM market of the London Stock Exchange in October2004 - symbol: SUMM Further information about the company is available at www.summitplc.com This document contains "forward-looking statements" within the meaning of theU.S. Private Securities Litigation Reform Act of 1995. Forward-lookingstatements can be identified by words such as "anticipates", "intends", "plans","seeks", "believes", "estimates", "expects" and similar references to futureperiods, or by the inclusion of forecasts or projections. Forward-looking statements are based on the Company's current expectations andassumptions regarding our business, the economy and other future conditions.Because forward-looking statements relate to the future, by their nature, theyare subject to inherent uncertainties, risks and changes in circumstances thatare difficult to predict. The Company's actual results may differ materiallyfrom those contemplated by the forward-looking statements. The Company cautionsyou therefore that you should not rely on any of these forward-lookingstatements as statements of historical fact or as guarantees or assurances offuture performance. Important factors that could cause actual results to differmaterially from those in the forward-looking statements and regional, national,global political, economic, business, competitive, market and regulatoryconditions. Chairman and Chief Executive Statement The first half of the year has seen your Company growing and maturing withexcellent progress being made in all areas of the business. The period has seenthe completion of significant corporate activity, notably the acquisition andintegration of two companies and a change of Company name. Following theacquisitions, our drug pipeline has been broadened and now includes high-qualityclinical, preclinical and discovery stage programmes. The Company has alsobecome the market-leader in its two technology platforms: zebrafish biology andcarbohydrate chemistry. Significantly during this period, we signed our firstmulti-million programme collaboration deal while several higher-value deals inour service business have led to a trebling of revenues. To reflect the progress the business has made, we have changed the Company'sname from VASTox plc to Summit Corporation plc, branded as Summit plc. The newidentity reflects the ambitions we have for the Company and it will provide amature, professional image that is suitable for the future needs of thebusiness. Operational Highlights Focussed Strategy to Deliver Value Summit's primary objective is to generate mid- to long-term value by developingand out-licensing multiple early stage drug programmes to pharmaceutical orbiotechnology company partners. We believe that by efficiently developing anumber of programmes up to Phase IIa clinical proof of concept stage, we canprovide a pipeline of high-quality early stage drug candidates, much in demandby the wider industry, while avoiding the cost and risk associated with PhaseIIb and Phase III clinical trials. Supporting the drug pipeline are our two innovative technology platforms:zebrafish biology and carbohydrate chemistry. Both technologies are playing acrucial role in developing our early stage programmes into attractive licensingopportunities and will also help replenish our pipeline in the future as well asgenerating increasingly significant revenues through our service business. We believe that this strategy has the potential to improve the current risk:reward ratio associated with the biotechnology industry by improving theefficiency and lowering the costs of developing multiple drug candidates to apoint at which the wider industry is attributing increasing value. Targeting Early Stage Deals Significantly, in July 2007 we signed our first multi-million dollar programmecollaboration deal with the Swiss biotechnology company Evolva Biotech SA. Thethree-year deal, worth a potential $10 million, is for the co-development of SMT14400 for the treatment of infectious diseases associated with bio-defence.Evolva has received over $55 million in funding from the Defense ThreatReduction Agency ('DTRA'), a US-government body specifically charged to developtherapeutics to deal with terrorism and unconventional weaponry. Both partiesretain equal ownership of the programme for infectious diseases, including anyvalue from future commercial deals. Meanwhile, Summit will continue to developSMT 14400 as an immunotherapy to help treat cancer and the Company retains theexclusive rights for this and any further indications identified for thisdevelopment candidate. Acquisitions and Integration In March 2007, Summit completed the acquisition of two UK biotechnologycompanies, DanioLabs Limited and Dextra Laboratories Limited, in transactionspaid for with the issue of new shares for a combined figure of £16.5 million.The companies were identified as having a synergistic fit with our existingoperations and have strengthened our research and development capabilities, drugdiscovery pipeline and our service business. The acquisition of DanioLabs significantly strengthened our drug discovery anddevelopment pipeline by providing a range of high-quality programmes at theclinical, preclinical and discovery stages of development, while both companieshave consolidated Summit's position as the world leaders in two innovativetechnology platforms. Dextra is now the brand name for Summit's carbohydratetechnology and service business. The two companies have been quickly integrated to allow the enlargedorganisation to capitalise on the increased capabilities and efficiencies. Theadditional depth and quality in our pipeline and technology platforms will helpus to fulfil our business strategy. Progress in Drug Discovery and Development Pipeline The first half of 2007 has seen significant progress in our drug discovery anddevelopment pipeline. In October 2007, Summit began its first Phase I clinicaltrial with the drug candidate SMT D002. This candidate drug is being developedto treat a skin condition called seborrhoea, which results from excess sebumproduction and is a symptom of Parkinson's disease. Seborrhoea is also theprimary cause of acne. Results from this Phase I clinical trial with SMT D002in healthy volunteers are anticipated in the first half of 2008, and anadditional Phase I trial is planned to start later the same year. Summit is also advancing a second programme into clinical trials during 2007.SMT D001 is being developed to treat a second distressing symptom associatedwith Parkinson's disease called sialorrhoea which is characterised by excessiveand uncontrollable drooling. A combined Phase I/II trial in Parkinson'spatients is planned to start in the final quarter of 2007 with data from thetrial expected during the first half of 2008. Exciting progress was also made in our Duchenne muscular dystrophy (DMD)programme, a fatal childhood disease for which there remains no cure. Thepreclinical candidate SMT C1100 was selected in May 2007 and work to progressthis into clinical trials is well advanced: SMT C1100 is expected to enter intoPhase I trials in the second half of 2008. Additional complementary therapiesare also being developed to support and enhance our DMD programme with ourefforts supported by the leading UK muscular dystrophy charity, Parent ProjectUK ('PPUK'), which donated £220,000 in September 2007. Beyond our advanced clinical and preclinical development programmes, Summit hasa number of discovery stage projects across a range of therapeutic areas thathave progressed well over the first half of the year. All our programmes utilise either or both technology platforms, and ourscientific and industrial expertise, as we seek to develop and add value to thestage where they become attractive partnering opportunities. In addition, theintegrated technology platforms will generate new drug programmes so that Summitcan continue to maintain a strong pipeline going forward. Growing Services Revenues During the first half of the year, revenues from the service business havetrebled to £1.4 million with gross margins in excess of 60%. This increase wasa result of organic growth and revenues earned by DanioLabs and Dextra followingtheir acquisition in March 2007. These acquisitions consolidated ourmarket-leading position in two innovative technology platforms, zebrafishbiology and carbohydrate chemistry, and this made an immediate impact on theservices business. In zebrafish biology, we have now worked with seven of thetop ten pharmaceutical companies in the world. The magnitude of the dealssigned during this period has increased with clients signing repeat contractsfollowing successful validation studies. Notable deals have included contractswith Johnson & Johnson, Merck and Rottapharm. Pleasingly, data generated by ourzebrafish platform was presented at leading industry conferences in 2007 byclients including AstraZeneca, Pfizer and Roche. In carbohydrate chemistry, Dextra signed its first royalty paying deal with a UShealthcare company for which the Company earned $450,000 in fees and willreceive a 5% royalty on all product sales; the product is expected to launch in2010. In July, a GMP ('Good Manufacturing Practice') synthetic chemistrylaboratory became operational, producing sufficient quantities of material tosupport clients' projects from early discovery through to Phase II clinicaltrials. This facility is of importance to Summit as it not only will furtherenhance our carbohydrate chemistry platform but also will serve to reduceinternal costs and development times by using the manufacturing capability toadvance our own drug programmes. Financial Review Revenue trebled during the first six months of the year to £1.4 million (H1 2006/07: £0.47m), reflecting higher value deals signed and the acquisition ofrevenue-generating businesses DanioLabs and Dextra. R&D investment rose in line with budget to £3.63 million (H1 2006/07: £1.30m) asour main drug programmes reached the late-stage preclinical and clinical stages.Notably, the increased revenues continue to cover our operational and overheadcosts, permitting us to make the necessary investment into R&D. Financial discipline remains central to the business and we continue to ensureall investors' funds have been used judiciously; our cash position at 31 July2007 remains strong at £14.2 million (H1 2006/07: £20.2 million). Additionalincome of £0.3m (H1 2006/07: £nil) was also recognised during the period fromcharities and grant agencies. International Financial Reporting Standards This is the first set of interim accounts to be produced under InternationalFinancial Reporting Standards ('IFRS') as adopted by the European Union.Comparative information for 2006/07 has been adjusted in accordance with IFRS.A reconciliation between IFRS and UK GAAP is given in Note 5 of this report. Outlook This is an exciting period for the business with several of our programmesentering and advancing through clinical trials. It is our intention to signattractive licensing and partnering deals from within our drug pipeline andadditionally we will look to sign significant collaboration deals in ourtechnology platforms in order to realise the value of our business strategy. Weare confident that significant commercial progress will be made on both thesefronts. We take this opportunity to thank all staff, including those who have joinedSummit following the acquisitions, for their commitment and hard work during theperiod and we look forward to an exciting future together. Barry Price, PhD Steven Lee, PhDChairman Chief Executive Officer 30 October 2007 Consolidated Income Statement (unaudited)for the six months ended 31 July 2007 Six months Six months Year ended ended ended 31 July 31 July 31 January 2007 2006 (Restated) 2007 (Restated) Note £000s £000s £000s Revenue 1,378 469 1,034 Cost of sales (531) (155) (304) Gross profit 847 314 730 Other operating income 3 298 - 80 Operating expensesResearch and development (3,637) (1,300) (2,952)General and administration (750) (402) (950)Sales and Marketing (411) (88) (510)Depreciation and amortisation (782) (113) (376)Share based payment (257) (155) (404) (5,837) (2,058) (5,192) Operating loss (4,692) (1,744) (4,382) Finance income 406 412 873 Loss before taxation (4,286) (1,332) (3,509) Taxation 590 167 489 Loss for the period attributable to (3,696) (1,165) (3,020)equity shareholders Basic and diluted loss per ordinary 4 (8.02p) (3.21p) (8.25p)share Consolidated balance sheet (unaudited)At 31 July 2007 Six months Six months Year ended ended ended 31 July 31 July 31 January 2007 2006 (Restated) 2007 (Restated) £000s £000s £000sASSETSNon-current assetsGoodwill 10,467 - 115Other intangible assets 8,517 58 263Property, plant and equipment 3,426 1,848 2,624 22,410 1,906 3,002Current assetsInventories 274 29 188Trade and other receivables 1,846 689 645Current tax 1,111 167 472Cash and cash equivalents 14,208 20,213 18,289 17,439 21,098 19,594 Total assets 39,849 23,004 22,596 LIABILITIESCurrent liabilitiesTrade and other payables (1,910) (271) (1,382)Borrowings (66) (66) (66)Total current liabilities (1,976) (337) (1,448) Non-current liabilitiesProvisions (2,665) - (100)Borrowings (564) (611) (598)Deferred tax (2,314) -Total non-current liabilities (5,543) (611) (698) Total liabilities (7,519) (948) (2,146) Net assets 32,330 22,056 20,450 EQUITYShare capital 4,963 3,722 3,722Share premium account 22,722 22,327 22,327Share based payment reserve 735 229 478Merger reserve 11,740 (1,943) (1,943)Retained earnings (7,830) (2,279) (4,134)Total Equity attributable to the 32,330 22,056 20,450shareholders of the Company Consolidated cash flow statement (unaudited)for the six months ended 31 July 2007 Six months Six months Year ended ended ended 31 July 31 July 31 January 2007 2006 (Restated) 2007 (Restated) Note £000s £000s £000s Cash flows from operating activitiesOperating loss before tax (4,692) (1,744) (4,382) Adjusted for:Depreciation 379 109 340Amortisation of intangible fixed assets 403 4 36Share based payment 257 155 404Adjusted loss from operations before changes in (3,653) (1,476) (3,602)working capital and provisions Increase in trade and other receivables (528) (30) (171)Increase in inventories (16) (2) (160)Increase/(decrease) in trade and other payables 63 (444) 727Cash used by operations (4,134) (1,952) (3,206) Taxation Received - - 168Net cash used in operating activities (4,134) (1,952) (3,038) Investing activitiesAcquisition of businesses net of cash acquired 2 493 - (255)Purchase of property, plant and equipment (836) (653) (1,648)Purchase of intangible assets (1) - (71)Interest received 415 294 790Net cash used in investing activities 71 (359) (1,184) Financing activitiesProceeds from issue of share capital 16 9,971 9,971Repayment of debt during the period (34) (80) (93)Net cash used in financing activities (18) 9,891 9,878 Net (decrease)/increase in cash and cash equivalents (4,081) 7,580 5,656 Cash and cash equivalents at beginning of period 18,289 12,633 12,633 Cash and cash equivalents at end of period 14,208 20,213 18,289 Consolidated statement of changes in equity (unaudited)Six months ended 31 July 2007 Group Share capital Share premium Share based Merger Retained Total £000s account payment reserve reserve earnings £000s £000s £000s £000s £000s At 1 February 2007 3,722 22,327 478 (1,943) (4,134) 20,450New share capital issued 1,241 395 - - - 1,636Share based payment - - 257 - - 257Share issue eligible for - - - 13,683 - 13,683merger reliefLoss for the period - - - - (3,696) (3,696)At 31 July 2007 4,963 22,722 735 11,740 (7,830) 32,330 Six months ended 31 July 2006 Group Share capital Share premium Share based Merger Retained Total £000s account payment reserve reserve earnings £000s £000s £000s £000s £000s At 1 February 2006 3,131 12,947 74 (1,943) (1,114) 13,095New share capital issued 591 9,380 - - - 9,971Share based payment - - 155 - - 155Loss for the period - - - - (1,165) (1,165)At 31 July 2006 3,722 22,327 229 (1,943) (2,279) 22,056 Year ended 31 January 2007 Group Share capital Share premium Share based Merger Retained Total £000s account payment reserve reserve earnings £000s £000s £000s £000s £000s At 1 February 2006 3,131 12,947 74 (1,943) (1,114) 13,095New share capital issued 591 9,380 - - - 9,971Share based payment - - 404 - - 404Loss for the period - - - - (3,020) (3,020)At 31 July 2006 3,722 22,327 478 (1,943) (4,134) 22,450 Notes to the interim results 1. Basis of accounting The interim accounts, which are unaudited, have been prepared on the basis ofthe accounting policies expected to apply for the financial year to 31 January2008. As from 1 February 2007, the Group is required under European Unionregulation to prepare its annual financial statements in accordance withInternational Financial Reporting Standards (IFRSs) as endorsed by the EuropeanUnion and implemented in the UK. Accordingly, this is the first year when thefinancial statements will be prepared under IFRS and the comparatives for 2007will be restated from UK Generally Accepted Accounting Practice (UK GAAP) tocomply with IFRS. The IFRSs that will be effective or available for voluntary early adoption inthe financial statements for the period ended 31 January 2008 are still subjectto change and to the issue of additional interpretation(s) and therefore cannotbe determined with certainty. Accordingly, the accounting policies for thatannual period that are relevant to this interim financial information will bedetermined only when the first IFRS financial statements are prepared at 31January 2008. The interim financial statements do not include all of the information requiredfor full annual financial statements and do not comply with all the disclosuresin IAS 34 'Interim Financial Reporting'. Accordingly, whilst the interimstatements have been prepared in accordance with the transitional rulesgoverning the move from UK GAAP to IFRS they cannot be construed as being infull compliance with IFRS. Reconciliations between previously reported financial statements prepared underUK GAAP and on the basis as stated above are presented in note 5 to this InterimStatement in respect of the Consolidated Income Statement for the year ended 31January 2007 and the six months ended 31 July 2006 and for the ConsolidatedBalance Sheet as at 1 February 2006, 31 July 2006 and 31 January 2007. Noadjustments have been made for any changes in estimates made at the time ofapproval of the UK GAAP financial statements for the year ended 31 January 2007or the interim statements for the period ended 31 July 2006 on which the IFRSfinancial information is based, as required by IFRS 1. In addition, restatedfigures in note 5 are based on current interpretations of IFRSs and these may besubject to change as industry practice develops. The comparative figures for the twelve months ended 31 January 2007 do notconstitute statutory accounts for the purposes of Section 240 of the CompaniesAct 1985. The results for the year ended 31 January 2007 and the balance sheetas at that date are abridged from the Company's Annual Report and FinancialStatements 2007 (after adjustment for IFRS conversion), which have beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified, did not include references to any matters to which the auditorsdrew attention by way of emphasis without qualifying their report and did notcontain a statement under section 237(2) or 237(3) of the Companies Act 1985.The 31 July 2007 statements were approved by a duly appointed and authorisedcommittee of the Board of Directors on 30 October 2007 and are unaudited. A summary of the principal accounting policies is set out below: Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Group and entities controlled by the Group made up to the reporting date.Control is achieved where the Company has the power to govern the financial andoperating policies of an investee entity so as to obtain benefits from itsactivities. The results of subsidiary undertakings acquired or disposed of in the year areincluded in the consolidated income statement from the effective date ofacquisition or up to the effective date of disposal, as appropriate. Wherenecessary, adjustments are made to the financial statements of subsidiaries tobring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Business Combinations The cost of an acquisition is measured as the fair value of the assetsexchanged, equity instruments issued and liabilities incurred or assumed at thedate of exchange, plus costs directly attributable to the acquisition.Identifiable assets acquired together with liabilities and contingentliabilities assumed in a business combination are measured initially at theirfair values at the acquisition date. The excess of the cost of acquisition overthe fair value of the identifiable net assets is recorded as goodwill. Goodwill Goodwill representing the excess of the cost of acquisition over the fair valueof the Group's share of the identifiable net assets acquired is capitalised andreviewed annually for impairment. Goodwill is carried at cost less accumulatedimpairment losses. Negative goodwill arising on acquisition is recognised directly in the IncomeStatement. Intangible Assets In-process research and development that is separately acquired as part of aCompany acquisition or in-licensing agreement is required by IAS38 to becapitalised even if they have not yet demonstrated technical feasibility, whichis usually signified by regulatory approval. Intangible assets relating tobusiness combinations are amortised as described in note 2. Other intangible assets, comprising patents and licenses are amortised in equalinstalments over their useful estimated lives as follows: Patents (once awarded): 10 yearsDrug programmes: Over the period of the relevant patentsLicenses: Over the period of the licence agreement Impairment of assets For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash generating unit level. Goodwill, other individual assets orcash-generating units that include goodwill and other intangible assets with anindefinite useful life are tested for impairment at least annually. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell, and value in use based on an internal discounted cash flowevaluation. Impairment losses recognised for cash-generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. Costcomprises the purchase price plus any incidental costs of acquisition andcommissioning. Depreciation is calculated to write off the cost, less residualvalue, in equal annual instalments over their estimated useful lives as follows: Leasehold improvements Over the period of the remaining leaseComputer equipment 3-5 yearsLaboratory equipment 3-10 yearsFixtures and fittings 3-5 years The residual value, if not insignificant, is reassessed annually. Provisions Provisions are recognised when the Company has a present obligation (legal orconstructive) as a result of a past event, where it is probable that an outflowof resources will be required to settle the obligation, and where a reliableestimate can be made of the amount of the obligation. If the effect of the timevalue of money is material, the expected future cash flows will be discountedusing a pre-tax discount rate, adjusted for risk where it is inherent in aspecific liability. Revenue recognition i) Goods sold and services rendered Group revenue comprises the value of sales from products and income (excludingVAT and taxes, trade discounts and intra-Group transactions) derived fromcontracts for services. Revenue from product sales is recognised when the risks and rewards of ownershiphave been transferred to the customer. Where the Group is to undertake R&D activities and the fee is creditable againstservices provided by the Group, that revenue is recognised across the periodover which the services are performed. Contract research fees are recognised in the accounting period in which therelated work is carried out. Revenue is recognised according to the percentage of the overall contract thathas been completed. ii) Grant income Grant related income is shown in the income statement as other income, so as tomatch it against the expenditure to which it compensates. Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are translated at the rate of exchange ruling at the balance sheetdate. All differences are taken to the income statement. Inventories Inventories are stated at the lower of cost and net realisable value. Netrealisable value is based on estimated selling price, less further costsexpected to be incurred on completion and disposal. Provision is made forobsolete, slow-moving or defective items where appropriate. Employee benefits All employee benefit costs, notably holiday pay, bonuses and contributions toCompany or Personal defined contribution pension schemes are charged to theIncome Statement on an accruals basis. Leased assets Costs in respect of operating leases are charged to the income statement on astraight line basis over the lease term. Research and development All ongoing research expenditure is currently expensed in the period in which itis incurred. Due to the regulatory and other incentives inherent in thedevelopment of the Group's products, the criteria for development costs to berecognised as an asset, as set out in IAS38 'Intangible Assets', are not metuntil a product has been submitted for regulatory approval and it is probablethat future economic benefit will flow to the Group. The Group currently has noqualifying expenditure. Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held on call withthe bank. For the purposes of the Cash Flow Statement, cash and cashequivalents are as defined above, net of outstanding bank overdrafts. Share based payments In accordance with IFRS 2 - 'Share based payment', share options are measured atfair value at their grant date. The fair value is calculated using theBlack-Scholes formula and charged to the income statement on a straight-linebasis over the expected vesting period. At each balance sheet date, the Grouprevises its estimate of the number of options that are expected to becomeexercisable. The share-based payment charge is recorded separately in theincome statement. 2. Acquisition of subsidiaries and businesses On 21 March 2007 the Group acquired 100% ownership of DanioLabs Limited andDextra Laboratories Limited. DanioLabs Limited DanioLabs is a biotechnology company based in Cambridge that has clinical drugprogrammes in neurodegeneration, commercial services and complementary zebrafishexpertise. 100% ownership was acquired for consideration of £15.1m, of which14.2m was in the form of shares. The transaction incurred legal and professionalfees of £170k. Dextra Laboratories Limited Dextra Laboratories based in Reading has world-leading expertise in industrialcarbohydrate chemistry. 100% ownership was acquired for consideration of £1.5min the form of shares. The transaction incurred legal and professional fees of£196k. MNL Pharma On 14 December 2006, Summit Corporation plc acquired the trade and certainassets from MNL Pharma Limited. Provisional values were reported in the 2007Annual report, with the valuation and classification revised in the period to 31July 2007. DanioLabs Limited Dextra MNL Pharma Recognised value and Laboratories Recognised value carrying amount Limited and carrying Recognised value amount and carrying amount £000s £000s £000sCash 983 48 -Inventories - 70 -Accounts receivable 150 246 -Property, plant and equipment 209 37 55Trade payables (342) (125) - 1,000 276 55Intangible assets established on 7,460 - 1,381acquisitionTangible assets established on 100 - -acquisitionGoodwill on acquisition 8,712 1,420 335Deferred tax on Intangible assets (2,089) - (335) 15,183 1,696 1,436 Satisfied in cash 343 196 255Deferred cash consideration - - 1,181Satisfied in shares 13,356 1,500 -Deferred share consideration 1,484 - -Consideration paid 15,183 1,696 1,436 In-process Research and Development costs were capitalised on acquisition, andrelate to various ongoing drug programmes. The fair value of these programmes isestimated by discounting the expected future cash flows of the programme,adjusted for outcome probability at each potential stage of the programme. Theseassets are amortised on a straight line basis over a period equal to theresidual life of the relevant patents held. 3. Other Operating Income Other operating income consists entirely of grant income. 4. Loss per share calculation The loss per share has been calculated by dividing the loss for the period of£3,696k (for the period ended 31 July 2006: £1,165k, and for the year ended 31January 2007: restated loss of £3,020k) by the weighted average number of sharesin issue during the six month period to 31 July 2007: 46,111,292 (for the sixmonth period ended 31 July 2006: 35,577,079; for the year ended 31 January 2007:36,420,113). Since the Group has reported a net loss, diluted loss per share is equal tobasic loss per share. 5. Reconciliation of UK GAAP to IFRS The tables on the following pages show the reconciliations of the ConsolidatedIncome Statement for the six months ended 31 July 2006 and the financial yearended 31 January 2007, the Consolidated Balance Sheet as at 31 July 2006, 31January 2007 and at 1 February 2006 (Opening balances at the date oftransition). Consolidated Income Statement (unaudited) UK GAAP IFRS UK GAAP IFRS Six months Six months Year Year ended ended ended ended 31 July 31 July 31 January 31 January 2006 Adj. 2006 2007 Adj. 2007 Ref £000s £000s £000s £000s £000s £000s Revenue 469 - 469 1,034 - 1,034 Cost of sales (155) - (155) (304) - (304) Gross profit 314 - 314 730 - 730 Other operating Income - - - 80 - 80 Administrative expenses Research and development 1.1 (1,284) (16) (1,300) (2,937) (15) (2,952) General and administration 1.2 (734) 332 (402) (1,830) 880 (950) Sales and marketing 1.3 - (88) (88) - (510) (510) Depreciation and amortisation 1.4 - (113) (113) - (376) (376) Share based payment 1.5 - (155) (155) (404) - (404) Total Administrative expenses (2,018) (2,058) (5,171) (5,192) Operating loss (1,704) (40) (1,744) (4,361) (21) (4,382) Finance income 414 - 414 873 - 873Finance costs 1.6 (20) 18 (2) - - - Loss on ordinary activities (1,310) (22) (1,332) (3,488) (21) (3,509)before taxation Taxation 167 - 167 489 - 489 Loss on ordinary activities (1,143) (22) (1,165) (2,999) (21) (3,020)after taxation Explanation of IFRS adjustments: Six months ended Year ended 31 July 2006 31 January 2007 Adj. Adj. £000s £000s Ref 1.1 Research & DevelopmentHoliday pay accrual (Research & development related) (16) (15) Ref 1.2 - General & AdministrationReclassification as below 354 883Holiday pay accrual (General and administration related) (4) (3)Reclassification of rental payment and finance costs (18) - 332 880 Ref 1.3 - Sales and MarketingReclassification from General and administration expenses (86) (507)Holiday pay accrual (Sales and marketing related) (2) (3) (88) (510) Ref 1.4 - Depreciation and amortisationReclassification from General and administration expenses (113) (376) Ref 1.5 - Share based paymentsReclassification from General and administration expenses (155) - Ref 1.6 - Finance income and costsReclassification of rental payment and finance costs 18 - Consolidated Balance Sheet (unaudited) UKGAAP IFRS UKGAAP IFRS UKGAAP IFRS Six Six Year Year Year months months ended 31 Year ended 1 ended ended 31 ended 31 January ended 31 February 1 July 2006 Adj. July 2006 2007 Adj. January 2006 Adj. February 2007 2006 Ref £000s £000s £000s £000s £000s £000s £000s £000s £000sASSETSNon-current assetsGoodwill - - - 115 - 115 - - -Other intangible 58 - 58 263 - 263 28 - 28assetsProperty, plant and 1,848 - 1,848 2,624 - 2,624 1,261 - 1,261equipment 1,906 - 1,906 3,002 - 3,002 1,289 - 1,289Current assetsInventories 29 - 29 188 - 188 27 - 27Trade and other 689 - 689 645 - 645 542 - 542receivablesCurrent tax 167 - 167 472 - 472 - - -Cash and cash 20,213 - 20,213 18,289 - 18,289 12,633 - 12,633equivalents 21,098 - 21,098 19,594 - 19,594 13,202 - 13,202 Total assets 23,004 - 23,004 22,596 - 22,596 14,491 - 14,491 LIABILITIESCurrent liabilitiesTrade and other 2.1 (249) (22) (271) (1,361) (21) (1,382) (639) - (639)payablesBorrowings (66) - (66) (66) - (66) (66) - (66)Total current (315) (22) (337) (1,427) (21) (1,448) (705) - (705)liabilities Non-currentliabilitiesProvisions - - - (100) - (100) - - -Borrowings (611) - (611) (598) - (598) (691) - (691)Total non-current (611) - (611) (698) - (698) (691) - (691)liabilities Total liabilities (926) (22) (948) (2,125) (21) (2,146) (1,396) - (1,396) Net assets 22,078 (22) 22,056 20,471 (21) 20,450 13,095 - 13,095 EquityShare capital 3,722 - 3,722 3,722 - 3,722 3,131 - 3,131Share premium 22,327 - 22,327 22,327 - 22,327 12,947 - 12,947reserveShare based payment 2.2 - 229 229 478 - 478 - 74 74reserveMerger reserve (1,943) - (1,943) (1,943) - (1,943) (1,943) - (1,943)Retained earnings 2.3 (2,028) (251) (2,279) (4,113) (21) (4,134) (1,040) (74) (1,114)Total Equity 22,078 (22) 22,056 20,471 (21) 20,450 13,095 - 13,095 Explanation of IFRS adjustments: Six months Year ended Year ended 1 ended 31 January February 2006 31 July 2007 Adj. 2006 Adj. Adj. £000s £000s £000s Ref 2.1 - Trade and other payablesHoliday accrual established under IAS19 (22) (21) - Ref 2.2 - Share based payment reservePresentation of Share based payment as a separate class of 229 - 74equity reserve Ref 2.3 - Retained earningsPresentation of Share based payment as a separate class of (229) - (74)equity reserveHoliday accrual established under IAS19 (22) (21) - (251) (21) (74) Independent review report to Summit Corporation plc (formerly VASTox plc) We have been instructed by the company to review the financial information forthe six months ended 31 July 2007 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity and the related notes. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the London Stock Exchange forcompanies trading securities on the Alternative Investment Market and for noother purpose. No person is entitled to rely on this report unless such aperson is a person entitled to rely upon this report by virtue of and for thepurpose of our terms of engagement or has been expressly authorised to do so byour prior written consent. Save as above, we do not accept responsibility forthis report to any other person or for any other purpose and we hereby expresslydisclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directorsare responsible for preparing the interim report, in accordance with the rulesof the London Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the company'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom by auditorsof fully listed companies. A review consists principally of making enquiries ofCompany management and applying analytical procedures to the financialinformation and underlying financial data and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 July 2007. BDO STOY HAYWARD LLP Chartered Accountants Southampton 30 October 2007 This information is provided by RNS The company news service from the London Stock Exchange