PYC THERAPEUTICS LIMITED — Capital/Financing Update 2012

Sep 12, 2012

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Market Announcements Platform Australian Securities Exchange Sydney NSW 2000

PHYLOGICA $1.9M R&D TAX INCENTIVE TO SUPPORT PHYLOMER[®] DEVELOPMENT

PERTH, AUSTRALIA: 13 September 2012 – Leading Australian peptide drug discovery company Phylogica Ltd (ASX: PYC, XETRA: PH7) expects to receive a cash payment of approximately $1.9 million this calendar year to support the development of its Phylomer technology. Innovation Australia, which is an independent statutory body established to assist with the administration of the Australian Government's innovation and venture capital programmes, has approved the registration of Phylogica’s research and development (R&D) application for the 2012 financial year R&D Tax Incentive.

The new R&D tax legislation took effect from 1 July 2011 for financial years ending on or after 30 June 2012. Its objective is to boost small innovative, research-orientated companies such as Phylogica. Under the legislation Phylogica can claim a tax credit and receive a refund from the government for up to 45 per cent of its eligible R&D spend.

For the 2012 financial year Phylogica claimed $4.2 million of eligible R&D expenditure, which entitles the Company to apply for a cash rebate of $1.9 million from the Australian Taxation Office.

Phylogica’s R&D activities during the financial year comprised investment in scaling and improving the Phylomer discovery capabilities and achieving the goals of its Pharma alliances while also progressing in-house programmes. The improvements to its Phylomer platform included technically valuable upgrades to the Phylomer libraries and screening capabilities. Phylogica also expanded the platform to access new markets through the collaboration with Cambridge University to use the libraries as a tool to discover and validate novel therapeutic targets.

The Company’s in-house R&D during the year was focused on the discovery of high-value drug candidates or ‘transporter’ peptides. The programmes are in areas where Phylomers have advantages over other approaches and the disease targets are of known interest to prospective Pharma partners. The three main areas of in-house development were:

• Identification of novel cell-penetrating Phylomers to carry therapeutic cargoes across the cell membrane against intractable intracellular disease targets

• Advancement of anti-cancer Phylomers targeting the high-value cancer pathway known as ‘Sonic Hedgehog’

• Optimisation of anti-inflammatory Phylomers targeting ‘CD40 ligand’, which activates pro-inflammatory pathways in rheumatoid arthritis, lupus and autoimmune diseases.

Phylogica’s Chief Executive Officer, Dr Paul Watt, commented on the R&D registration: “The new R&D Tax Incentive legislation offers a tangible near-term benefit to Phylogica. The confirmation from AusIndustry that our R&D activities have been correctly lodged and registered is a key step towards receiving our estimated rebate, which will provide a valuable influx of cash as we strive to achieve our development and commercial goals for this year.”

PO Box 8207, Subiaco East, Western Australia 6008 Tel: +61 8 9384 3284 Fax: +61 8 9284 3801 www.phylogica.com ABN 48 098 391 961

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Phylogica worked with R&D tax specialists at PwC to assess its eligible expenditure and to lodge its application to AusIndustry.

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For further information, please contact:

Nick Woolf CFO & VP, Corporate Development Tel: +61 417 986 005 nwoolf@phylogica.com

Rudi Michelson Monsoon Communications Tel + 61 3 9620 3333 rudim@monsoon.com.au

About Phylogica

Phylogica Limited (ASX: PYC) is a biotechnology company based in Perth, Australia, and Oxford, UK, with a world-class drug discovery platform harnessing the rich biodiversity of nature to discover novel peptide therapeutics. The Company was incorporated in 2001 as a spin out from the Telethon Institute for Child Health Research (Perth, Australia) and the Fox Chase Cancer Centre (Philadelphia, USA). The Company’s drug discovery platform is based on its proprietary Phylomer[®] libraries of natural peptides, which have been optimised by evolutionary selection to have stable drug-like structures. Phylogica offers fully integrated drug discovery services to the pharmaceutical industry utilising its Phylomer[®] libraries and proprietary screening technologies. Its current partners include Roche, MedImmune (the worldwide biologics arm of AstraZeneca), Pfizer and Janssen (the pharmaceutical arm of Johnson & Johnson).

PO Box 8207, Subiaco East, Western Australia 6008 Tel: +61 8 9384 3284 Fax: +61 8 9284 3801 www.phylogica.com ABN 48 098 391 961