Summit Therapeutics Inc 10-Q for FY2023 Q2
Summit Therapeutics Inc. (SMMT)
10-Q
2023-08-09
For: 2023-06-30
View Original
Added on
April 09, 2026
About this 10-Q
Summit Therapeutics Inc filed this 10-Q on August 9, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $235K a year earlier
- Net loss
- $14.72M
- compared with a net loss of $16.77M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.12 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
_________________
(Mark One) | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2023
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ | |||||
Commission File Number: 001-36866
_______________________________
(Exact name of registrant as specified in its charter)
_____________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
(Zip Code)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address and former fiscal year, if changed since last report)
_________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 2, 2023, there were 697,685,365 shares of common stock, par value $0.01 per share, outstanding.
1
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| PART I | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5 | ||||||||
| Item 6. | ||||||||
2
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or this Report, contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Report, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this Report include, among other things, statements about:
•the ability to develop a successful product candidate under the License Agreement (as defined below);
•our ability to raise sufficient additional funds to make payments under the License Agreement (as defined below);
•the timing of and the ability to start and effectively execute clinical development of ivonescimab;
•the timing and conduct of clinical trials for any product candidates;
•our ability to advance and conduct, through partners, research and development of SMT-738, the Company's preclinical product candidate for combating multidrug resistant infections, specifically carbapenem-resistant Enterobacteriaceae (“CRE”) infections;
•our plans with respect to possible future collaborations and partnering arrangements;
•the potential benefits of possible future acquisitions or investments in other businesses, products or technologies;
•our plans to pursue research and development of other future product candidates;
•the rate and degree of market acceptance and clinical utility of our product candidates;
•our estimates regarding the potential market opportunity for our product candidates;
•our sales, marketing and distribution capabilities and strategy;
•our ability to establish and maintain arrangements for manufacture of our product candidates;
•our intellectual property position;
•our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
•the impact of government laws and regulations;
•our competitive position;
•the need to raise additional capital to fund ongoing operations and capital needs; and
•the impact of the novel coronavirus pandemic (“COVID-19”) and the response to it.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Report, particularly in the “Risk Factors” section in this Report, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Summit Therapeutics Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
| June 30, 2023 | December 31, 2022 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
| Short-term investments | ||||||||||||||
| Accounts receivable | ||||||||||||||
| Prepaid expenses | ||||||||||||||
| Other current assets | ||||||||||||||
| Research and development tax credit receivable | ||||||||||||||
| Total current assets | ||||||||||||||
| Non-current assets: | ||||||||||||||
| Research and development tax credit receivable | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Right-of-use assets | ||||||||||||||
| Goodwill | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and stockholders' equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued expenses | ||||||||||||||
| Accrued compensation | ||||||||||||||
| Lease liabilities | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-current liabilities: | ||||||||||||||
| Lease liabilities, net of current portion | ||||||||||||||
| Other non-current liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Commitments and contingencies (Note 17) | ||||||||||||||
| Stockholders' equity: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders' equity | ||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
Summit Therapeutics Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| In-process research and development | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Other operating (expense) income, net | ( | |||||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | ||||||||||||||||||||||
| Other income (expense), net | ( | ( | ( | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Net loss per share: | ||||||||||||||||||||||||||
| Basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average shares used to compute net loss per share: | ||||||||||||||||||||||||||
| Basic and diluted | ||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive (loss) income: | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | |||||||||||||||||||||||
| Reclassification of cumulative currency translation gain to other (expense) income, net | ( | |||||||||||||||||||||||||
| Net changes related to short-term investments | ( | |||||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
Summit Therapeutics Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(Unaudited)
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net changes related to short-term investments | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
Rights offering of common stock, net of offering costs of $ | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock under stock purchase plans and exercise of stock options | — | — | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of cash for Akeso upfront payment | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net changes related to short-term investments | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Reclassification of cumulative translation gain (Note 8) | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at March 31. 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Imputed interest on promissory note payable to a related party | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Issuance of common stock under stock purchase plans and exercise of stock options | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Imputed interest on promissory note payable to a related party | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
Summit Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows used in operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Non-cash interest expense | |||||||||||
| Amortization of discount on short-term investments | ( | ||||||||||
| Unrealized foreign exchange loss (gain) | ( | ||||||||||
| Reclassification of currency translation gain | ( | ||||||||||
| Impairment of fixed assets | |||||||||||
| Amortization of operating right-of-use assets | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangible assets | |||||||||||
| Gain on disposal of assets | ( | ||||||||||
| Stock-based compensation | |||||||||||
| In-process research and development expense | |||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses | ( | ||||||||||
| Other current and long-term assets | ( | ( | |||||||||
| Research and development tax credit receivable | ( | ||||||||||
| Deferred revenue and other income | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued liabilities | ( | ( | |||||||||
| Accrued compensation | ( | ( | |||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows used in investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of property. plant and equipment | |||||||||||
| Purchase of short-term investments | ( | ||||||||||
| Maturities and sales of short-term investments | |||||||||||
| Payments to Akeso for upfront milestone payments and associated direct transaction costs | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows provided by financing activities: | |||||||||||
| Proceeds from the issuance of common stock for rights offering | |||||||||||
| Transaction costs related to the issuance of common stock for rights offering | ( | ||||||||||
| Proceeds from related party promissory notes | |||||||||||
| Repayment of related party promissory notes | ( | ||||||||||
| Proceeds received related to employee stock awards | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash | ( | ||||||||||
| (Decrease) increase in cash and cash equivalents | ( | ( | |||||||||
| Cash at beginning of the period | |||||||||||
| Cash and cash equivalents at end of the period | $ | $ | |||||||||
| Supplemental Disclosure of Cash Flow Information: | |||||||||||
| Cash paid for interest on related party promissory notes | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | |||||||||||
Consideration for the issuance of common stock for rights offering used to satisfy a portion of a related party promissory note (Note 14) | $ | $ | |||||||||
Issuance of common stock pursuant to the Akeso License Agreement (Note 8) | $ | $ | |||||||||
| Lease assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
7
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
1. Nature of Business and Operations and Recent Events
Nature of Business and Operations
Summit Therapeutics, Inc. ("we", "Summit" or the "Company") is a biopharmaceutical company focused on the discovery, development, and commercialization of patient-, physician-, caregiver- and societal-friendly medicinal therapies intended to improve quality of life, increase potential duration of life, and resolve serious unmet medical needs. The Company's pipeline of product candidates is designed with the goal to become the patient-friendly, new-era standard-of-care medicines, in the therapeutic area of oncology.
The Company recently in-licensed from Akeso, Inc. ("Akeso") its breakthrough bispecific antibody, ivonescimab. Ivonescimab, known as AK112 in China and Australia, and also as SMT112 in the United States, Canada, Europe, and Japan, is a novel, potential first-in-class bispecific antibody intending to combine the benefits of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well-established oncology targeted mechanisms together. Through the License Agreement (as defined below), Summit obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan (the "Licensed Territory").
The entry into the License Agreement represents a significant change in the Company’s strategy. All business activities related to anti-infectives are being reviewed for partnership opportunities for potential further development. The Company's future operations will be focused on the development of ivonescimab and other future activities, as the Company determines.
The Company has announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer ("NSCLC"), specifically in the following indications:
a)ivonescimab combined with chemotherapy in patients with epidermal growth factor receptor ("EGFR")-mutated, locally advanced or metastatic non-squamous NSCLC who have progressed after treatment with a third-generation EGFR tyrosine kinase inhibitor ("TKI") (“HARMONi”); and
b)ivonescimab combined with chemotherapy in first-line metastatic squamous NSCLC patients (“HARMONi-3”)
Recent Events
On December 5, 2022, we entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which we are in-licensing breakthrough bispecific antibody, ivonescimab. Ivonescimab, is a novel, potential first-in-class bispecific antibody intending to combine the benefits of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Through the License Agreement, we obtained the rights to develop and commercialize Ivonescimab in the United States, Canada, Europe, and Japan (the “Licensed Territory”). The License Agreement and transaction closed in January 2023 following customary waiting periods. See Note 8 for further information.
On December 6, 2022, the Company announced a rights offering for its existing shareholders to participate in the purchase of additional shares of its common stock (the "2023 Rights Offering"). The 2023 Rights Offering commenced on February 7, 2023 and the associated subscription rights expired on March 1, 2023. Aggregate gross proceeds from the Rights Offering were $500,000 from the sale of 476,190,471 shares of the Company's common stock at a price of $1.05 per share, net of issuance costs of $619 .
On January 19, 2023, the Company filed Amendment No. 2 to the Restated Certificate of Incorporation (the “Amendment No. 2”) with the Secretary of State of the State of Delaware to increase the number of authorized shares of its common stock by 650,000,000 (from 350,000,000 to 1,000,000,000 ), which became effective on such date.
8
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
On February 15, 2023, the $20,000 Zanganeh Note, as defined in Note 14, matured and the Company repaid the outstanding principal balance. In connection with the closing of the 2023 Rights Offering, the $400,000 Duggan Promissory Note, as defined in Note 14, matured and became due, and the Company satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering.
On March 17, 2023, the Company filed a registration statement on Form S-3 to register for resale the following shares of the Company's common stock at $0.01 par value: (i) 10,000,000 shares of Common Stock issued on January 17, 2023 in connection with the License Agreement with Akeso pursuant to which the Company issued Akeso such shares; and (ii) the 9,346,434 and 373,857 shares of Common Stock issued in December 2022 to the Company's Co-CEOs, Robert Duggan and Dr. Mahkam Zanganeh, respectively, as payment of prepaid interest in connection with the Note Purchase Agreement dated December 6, 2022 between Robert Duggan, Dr. Mahkam Zanganeh and the Company. On April 27, 2023, the SEC issued the Company a Notice of Effectiveness for the registration statement on Form S-3 filed with the SEC.
2. Basis of Presentation and Use of Estimates
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, certain information and disclosures required by U.S. GAAP for complete consolidated financial statements are not included herein. All intercompany accounts and transactions have been eliminated in consolidation. The interim financial data as of June 30, 2023 and for the three and six months ended June 30, 2023 are unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The condensed consolidated balance sheet presented as of December 31, 2022 has been derived from the consolidated audited financial statement as of that date. The results of the period are not necessarily indicative of full year results or any other interim period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Summit Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 9, 2023. The financial results of the Company's activities are reported in United States Dollars.
We will continue to actively monitor the evolving situation related to COVID-19 and may take actions that alter our operations or financial information, including those that may be required by federal, state, provincial, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.
Our accounting policies are consistent with the Notes to Consolidated Financial Statements in our 2022 Form 10-K, except as updated below:
Marketable securities
Marketable securities consist of investments with original maturities greater than ninety days from the date of acquisition. The Company classifies investments with maturities of greater than 90 days as short-term, based on the liquid nature of the securities and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments as available-for-sale. Accordingly, these investments are recorded at fair value, which is based on quoted market prices or other observable inputs. Unrealized gains and losses are recorded as a component of other comprehensive income (loss). Realized gains and losses are determined on a specific identification basis and are included in other (expense) income. Amortization and accretion of discounts and premiums is also recorded in other (expense) income.
When the fair value is below the amortized cost of the asset, an estimate of expected credit losses is made, this estimate is limited to the amount by which fair value is less than amortized cost. The credit-related impairment amount is recognized in the condensed consolidated statements of comprehensive loss and the remaining impairment amount and unrealized gains are reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Credit losses are recognized through the use of an allowance for credit losses account and subsequent improvements in expected credit losses are recognized as a reversal of the allowance account. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis the allowance for
9
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued research and development expenses, stock-based compensation, intangible assets, goodwill, other long-lived assets and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
3. Recently Issued or Adopted Accounting Pronouncements
In May 2021, the FASB issued AS No. 2021-04, "Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging Contracts in Entity's Own Equity (Subtopic 815-40) - Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options". This ASU provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This ASU is effective for annual periods, and interim periods within those fiscal years, beginning after December 15, 2021. The Company will apply this ASU on a prospective basis for any modifications or exchanges once this ASU is effective and at that time, will be able to determine the potential impact on its financial position, results of operations or cash flows. There have been no modifications or exchanges relating to this ASU during 2023 or 2022.
Other recent authoritative guidance issued by the FASB (including technical corrections to the FASB ASC), the American Institute of Certified Public Accountants, and the SEC did not or are not expected to have a material impact on the Company's consolidated financial statements.
4. Liquidity and Capital Resources
During the three and six months ended June 30, 2023, the Company incurred a net loss of $14,717 and $557,093 , and cash flows used in operating activities for the six months ended June 30, 2023 was $42,404 . As of June 30, 2023, the Company had an accumulated deficit of $935,423 , cash and cash equivalents of $42,116 , short-term investments in U.S. treasury securities of $172,898 and current and long-term U.K. research and development tax credits receivable of $5,120 . The Company expects to continue to generate operating losses for the foreseeable future.
Based on the Company's existing cash, cash equivalents and U.K. research and development tax credits, the Company has the ability to fund its operating costs and working capital needs, including its planned clinical trials for ivonescimab, for a period of at least twelve months from the date of filing this quarterly report. The Company has a $100 million promissory note payable to a related party (refer to Note 14 for further details) that matures on September 6, 2024. In order to repay this promissory note, the Company intends to raise additional capital or seek an extension of payment from the holder of the promissory note, or a combination of either of those options. As of the date of issuance of these condensed consolidated financial statements, additional capital has not yet been secured.
Until the Company can generate substantial revenue and achieve profitability, the Company will need to raise additional capital to fund its ongoing operations and capital needs. The Company continues to evaluate options to further finance its operating cash needs for its product candidates through a combination of some, or all, of the following: equity and debt offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations, and marketing, distribution or licensing arrangements. There is no assurance, however, that additional financing will be available when needed or that management of the Company will be able to obtain financing on terms acceptable to the Company. If the Company is unable to obtain funding when required in the future, the Company could be required to delay, reduce, or eliminate research and development programs, product portfolio expansion, or future commercialization efforts, which could adversely affect its business prospects.
10
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
5. Segment Reporting
The Company's chief operating decision makers (the "CODM function"), which are the Company's Co-CEOs, Mr. Duggan and Dr. Zanganeh, utilize consolidated financial information to make decisions about allocating resources and assessing performance for the entire Company. The CODM function approves of key operating and strategic decisions, including key decisions in clinical development and clinical operating activities, entering into significant contracts, such as revenue contracts and collaboration agreements and approves the Company's consolidated operating budget. The CODM function views the Company's operations and manages its business as a single reportable operating segment. The Company's single operating segment covers the Company’s research and development activities, primarily comprising of oncology product research activities (including ivonescimab), and anti-infectives program activities. As the Company operates in one operating segment, all required financial segment information can be found in these condensed consolidated financial statements.
The Company operates in two geographic regions: the U.K. and the U.S. The following table summarizes the Company's long-lived assets, which include the Company's property and equipment, net and right-of-use assets by geography:
| June 30, 2023 | December 31, 2022 | |||||||||||||
| United Kingdom | $ | $ | ||||||||||||
| United States | ||||||||||||||
| $ | $ | |||||||||||||
For details of revenue from external customers by geography refer to Note 6.
6. Revenue
The following table summarizes revenue by category:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| Revenue by category: | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Licensing agreements | $ | $ | $ | $ | ||||||||||||||||||||||
Revenue recognized for the three and six months ended June 30, 2022 consists only of amounts received from the Company's license and commercialization agreement with Eurofarma Laboratórios S.A. No revenue has been recognized in the fiscal year 2023.
The following table summarizes revenue by geography:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| Revenue by geography: | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Latin America | $ | $ | $ | $ | ||||||||||||||||||||||
The analysis of revenue by geography has been identified on the basis of the customer’s geographical location.
11
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The following table summarizes the deferred revenue relating to the Company's license and commercialization agreement with Eurofarma Laboratórios S.A. and deferred other income relating to BARDA (as defined in Note 7):
| 2023 | 2022 | |||||||||||||||||||
Beginning deferred revenue and other income, January 1 (1) | $ | $ | ||||||||||||||||||
| Additions | ||||||||||||||||||||
| Amount of deferred revenue and other income recognized in the statement of operations | ( | |||||||||||||||||||
| Foreign currency adjustments | ( | |||||||||||||||||||
Ending deferred revenue and other income, June 30 (2) | $ | $ | ||||||||||||||||||
____________
(1) Beginning deferred revenue and other income as of January 1, 2023 and 2022 included $0 of current and $0 of long-term deferred revenue and other income, and $7,939 of current and $0 of long-term deferred revenue and other income, respectively.
(2) Ending deferred revenue and other income as of June 30, 2023 and 2022 included $0 of current and $0 of long-term deferred revenue and other income, and $3,231 of current and $0 of long-term deferred revenue and other income, respectively.
Refer to Note 7 below for further details regarding other income recognized under the BARDA contract.
7. Other Operating (Expense) Income, net
The following table sets forth the components of other operating income by category:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| Other operating (expense) income, net by category: | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Funding income from BARDA (as defined below) | $ | $ | $ | $ | ||||||||||||||||||||||
| Research and development tax credits | ( | |||||||||||||||||||||||||
| Grant income from CARB-X (as defined below) | ||||||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||
| $ | ( | $ | $ | $ | ||||||||||||||||||||||
BARDA (as defined below)
In September 2017, the Company was awarded a funding contract from the Biomedical Advanced Research and Development Authority ("BARDA"), part of the Office of the Assistant Secretary for Preparedness and Response at the United States Department of Health and Human Services, in support of the Company's Ri-CoDIFy clinical trials and clinical development of ridinilazole. The awarded contract was originally worth up to $62,000 . In June 2019 and again in January 2020, BARDA increased the value of the contract such that it was worth up to $72,500 and brought the total amount of committed funding to $62,400 .
The contract ran through April 2022 and was extended through December 2022 as a no cost contract, solely to close out open activities. As of December 31, 2022, based on translation of historical foreign currency amounts in the period of recognition, the Company had recognized $59,203 of cumulative income since contract inception. As a result of the Company's decision, on September 28, 2022, to not pursue further internal clinical development of ridinilazole and seek partners or a divestiture related to ridinilazole as a path forward for the clinical development of the asset, the Company recorded expenses for the remaining clinical trial costs associated with the close out activities of ridinilazole and recognized the remainder of the deferred income that had been received from BARDA prior to the expenses being recognized during the third quarter of 2022.
Research and development tax credits
Income from tax credits, consist of R&D tax credits received in the U.K. The Company benefits from the Small and Medium Enterprise Program ("SME Program") U.K. research and development tax credit cash rebate regime. Qualifying expenditures largely comprise of employment costs for research staff, consumables, a proportion of relevant, permitted sub-contract costs and certain internal overhead costs incurred as part of research projects for which the Company does not receive income. Tax credits related to the SME Program are recorded as other operating income in the consolidated statements of operations and
12
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
other comprehensive loss. Under this scheme, the Company receives cash payments that are not dependent on the Company’s pre-tax net income levels.
Based on criteria established by His Majesty’s Revenue and Customs ("HMRC"), a portion of expenditures being carried out in relation to the Company's pipeline research and development, clinical trials management and third-party manufacturing development activities are eligible for the SME regime and the Company expects such elements of research and development expenditure incurred in its UK entities will also continue to be eligible for the SME regime for future periods.
As of June 30, 2023, the current and non-current research and development tax credit receivable was $4,607 and $513 , respectively. As of December 31, 2022, the current and non-current research and development tax credit receivable was $5,766 and $0 , respectively.
CARB-X (as defined below)
In May 2021, the Company announced the selection of a new preclinical candidate, SMT-738, from the DDS-04 series for development in the fight against multi-drug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae ("CRE") infections. Simultaneously, the Company announced it had received an award from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program ("CARB-X") to progress this candidate through preclinical development and Phase Ia clinical trials. The award commits initial funding of up to $4,100 , with the possibility of up to another $3,700 based on the achievement of future milestones. As of June 30, 2023, based on translation of historical foreign currency amounts in the period, the Company has recognized $2,920 of cumulative income since contract inception. During the quarter ended September 30, 2022, CARB-X announced changes to its funding arrangements and terms and conditions, and as a result, the current arrangement concluded as of June 30, 2022.
8. Akeso Collaboration and License Agreement
On December 5, 2022, the Company entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which the Company is in-licensing its breakthrough bispecific antibody, ivonescimab. The License Agreement and transaction closed in January 2023 following customary waiting periods.
Ivonescimab, known as AK112 in China and Australia, and also known as SMT112 in the United States, Canada, Europe, and Japan, is a novel, potential first-in-class bispecific antibody intending to combine the benefits of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well established oncology targeted mechanisms together. Ivonescimab is currently in clinical development and, pursuant to the terms of the License Agreement, Summit will design and conduct the clinical trial activities to support regulatory filings in the Licensed Territory that Summit will submit. Pursuant to the terms of the License Agreement, Summit will have final decision making authority with respect to commercial strategy, pricing and reimbursement and other commercialization matters in the Licensed Territory. In connection with the License Agreement, the Company has also entered into a Supply Agreement with Akeso, pursuant to which Summit agrees to purchase a certain portion of drug substance for clinical and commercial supply. Summit is not assuming any liabilities (including contingent liabilities), acquiring any physical assets or trade names, or hiring or acquiring any employees from Akeso in connection with the License Agreement. Through the License Agreement, the Company obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan (the “Licensed Territory”). Over 825 patients have been dosed with ivonescimab in clinical studies in China and Australia.
In exchange for the rights obtained, an upfront payment of $500,000 was made to Akeso, of which $274,900 was paid in cash and, pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10 million shares of our common stock in lieu of $25,100 cash. The remaining $200,000 amount of the upfront payment was paid on March 6, 2023.
The Company has accounted for the License Agreement to acquire the rights to develop and commercialize SMT112 as the acquisition of an asset. All of the consideration relates to SMT112 and technological feasibility of the asset has not yet been established since SMT112 is in clinical development, as such the Company has expensed the consideration as in-process research and development upon closing of the transaction. In-process research and development expense for the six months ended June 30, 2023 was $520,915 , which is comprised of the $474,900 paid in cash, the fair value of the 10 million shares of common stock on the date of closing the transaction of $45,900 , and $115 of direct transactions costs incurred.
13
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
9. Other Income (Expense), net
The following table sets forth the components of other (expense) income:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Foreign currency gains (losses) | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Interest expense on promissory notes payable to related parties | ( | ( | ( | ( | ||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
Reclassification of cumulative currency translation gain(1) | ||||||||||||||||||||||||||
| Other expense | ( | ( | ( | ( | ||||||||||||||||||||||
| $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
For the three months ended June 30, 2023, other income, net primarily consisted of loan interest expense incurred related to the $100,000 promissory note, and for the six months ended June 30, 2023, other expense, net primarily consisted of loan interest expense incurred related to the $520,000 promissory notes, as described in Note 14. These amounts are partially offset in both the three and six months ended June 30, 2023 by interest income related to the Company's money market funds and the Company's short-term investments in U.S. treasury securities, and favorable changes in foreign currency.
10. Loss per Share
The following table sets forth the computation of basic and diluted net loss per share:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Basic weighted average number of shares of common stock outstanding | |||||||||||||||||||||||
| Diluted weighted average number of shares of common stock outstanding | |||||||||||||||||||||||
| Basic net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the diluted net loss by the weighted-average number of common shares outstanding for the period, including potentially dilutive common shares. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all potential common share equivalents outstanding would have been anti-dilutive. The 2023 Rights Offering exercise price of $1.05 per share was less than the closing price of $1.82 per share on March 1, 2023, the expiration of the 2023 Rights Offering. Furthermore, the 2022 Rights Offering exercise price of $0.97 per share was less than the closing price of $1.00 per share on August 8, 2022, the expiration of the 2022 Rights Offering. As such, the Company has retroactively
14
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
adjusted earnings per share and weighted average number of shares outstanding for the bonus elements for all periods presented.
The following potentially dilutive securities were excluded from the computation of the diluted net loss per share of common stock for the periods presented because their effect would have been anti-dilutive:
| June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Options to purchase common stock | ||||||||||||||
| Warrants | ||||||||||||||
| Shares expected to be purchased under employee stock purchase plan | ||||||||||||||
11. Fair Value Measurements and Investments
In accordance with the provisions of fair value accounting, a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability and defines fair value based upon an exit price model.
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company categorizes such assets and liabilities based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
During the six months ended June 30, 2023, cash consists of non-interest-bearing deposits denominated in the U.S. dollar and British pound, and the Company invested cash in money market funds and U.S. treasury securities. All highly liquid investments with a maturity date of 90 days or less at the date of purchase are considered to be cash equivalents. All investments with a maturity of greater than 90 days, but less than one year are considered to be short-term investments. The appropriate classification of investments in securities is determined by the Company at the time of purchase.
15
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The following tables sets forth the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:
Fair Value Measurements as of June 30, 2023 using: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| U.S. Government treasury bills | $ | $ | $ | $ | |||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
| Fair Value Measurements as of December 31, 2022 using: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Government treasury bills | $ | $ | $ | $ | |||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
The tables above do not include cash at June 30, 2023 and December 31, 2022 of $10,642 and $62,094 , respectively.
The Company believes that the carrying amounts of prepaid expenses, other current assets, accounts payable, and accrued expenses approximates their fair values due to the short-term nature of those instruments. The carrying value of the Company’s promissory note approximates its fair value due to the recent issuance of the notes in December 2022 and the current interest rate of the note outstanding when compared to market interest rates (which represents a Level 2 measurement). Refer to Note 14 for further details.
The following table summarizes the Company’s investments as of June 30, 2023:
| June 30, 2023 | ||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Credit Loss | Fair Value | ||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| U.S. Government treasury bills | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The following table summarizes the Company’s investments by contractual maturity as of June 30, 2023:
| June 30, 2023 | ||||||||||||||||||||
| Amortized Cost | Fair Value | |||||||||||||||||||
| Due within one year | $ | $ | ||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||
16
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
12. Goodwill and Intangible Assets
As of June 30, 2023 and December 31, 2022, goodwill was $1,883 and $1,798 , respectively. Changes in goodwill during the three and six months ended June 30, 2023 and 2022, respectively, are the result of foreign currency movements only. As of June 30, 2023, there have been no cumulative goodwill impairments recognized.
Components of the Company's acquired intangible assets are comprised of the following:
| June 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization and impairment | Net | Gross carrying amount | Accumulated amortization and impairment | Net | |||||||||||||||||||||||||||||||||
| Discuva platform acquired | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Utrophin program acquired | ( | |||||||||||||||||||||||||||||||||||||
| Option over non-financial asset | ( | ( | ||||||||||||||||||||||||||||||||||||
| Other patents and licenses | ( | ( | ||||||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
For the three and six months ended June 30, 2023, amortization expense was $0 232 and $480 , respectively. Changes in the gross carrying amount are the result of foreign currency movements.
During the three months ended June 30, 2023, the Company dissolved the wholly-owned subsidiary, Muox Limited, a dormant entity. The Utrophin program intangible assets, which arose from the Muox Limited acquisition, were fully impaired and have now been removed from the Company's accounting records.
13. Leases
The Company has operating leases for real estate. The Company does not have any finance leases.
During the three months ended June 30, 2023, the Company recorded $4,245 of additional right-of-use assets related to a new lease for office space that commenced during the period in its Menlo Park, California, U.S. location. The Company will make total lease payments of $4,701 over the 36 month term of the new lease, which expires in May 2026. In addition, during the three months ended June 30, 2023, the Company terminated the Company's Cambridge, U.K. laboratory and office space lease as a result of the Company re-prioritizing its investments and financial resources towards the development of ivonescimab, this resulted in disposing the carrying value of the right-of use asset of $788 and there were no penalties charged for early termination of this lease. There were no new right-of-use assets recorded during the six month periods ended June 30, 2022. The carrying value of the right-of-use assets as of June 30, 2023 and December 31, 2022 was $6,996 and $4,175 , respectively.
| Lease Cost: | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Fixed lease costs | $ | $ | $ | $ | ||||||||||||||||||||||
| Variable lease costs | ||||||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
Short-term lease costs for each of the three and month periods ended June 30, 2023 and 2022 were immaterial.
17
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
| Other information: | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||
| Operating cash flows used for operating leases | $ | $ | |||||||||||||||||||||||||||
| Weighted average remaining lease term (years) | |||||||||||||||||||||||||||||
| Weighted average discount rate | % | % | |||||||||||||||||||||||||||
14. Promissory Notes Payable to Related Parties
| Current notes | Non-current notes | ||||||||||||||||||||||
| June 30, 2023 | December 31, 2022 | June 30, 2023 | December 31, 2022 | ||||||||||||||||||||
| Principal amounts | $ | $ | $ | $ | |||||||||||||||||||
| Debt discount | ( | ( | |||||||||||||||||||||
| Total promissory notes payable to related parties | $ | $ | $ | $ | |||||||||||||||||||
On December 6, 2022, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement"), with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $520,000 . Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the amount of $400,000 (the "Duggan February Note") and $20,000 (the "Zanganeh Note"), respectively, which would mature and become due on February 15, 2023 and an unsecured promissory note to Mr. Duggan in the amount of $100,000 (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which would mature and become due on September 15, 2023. The maturity dates of the December 2022 Notes could be extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company shall consummate a public offering, then upon the later to occur of (i) business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100 % of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such Notes.
On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $500,000 , or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) Duggan September Note following the completion of a capital raising transaction subsequent to the 2023 Rights Offering in an amount equal to the lesser of (i) the net proceeds of such capital raise or (ii) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes (the “Duggan Promissory Notes”), the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes (together with the Zanganeh Note, the "Notes").
On February 15, 2023, the $20,000 Zanganeh Note matured and the Company repaid the outstanding principal balance. In connection with the closing of the 2023 Rights Offering, the $400,000 Duggan Promissory Note matured and became due, and the Company satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering.
18
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The Notes accrue interest at an initial rate of 7.5 %. All interest on the Notes was paid on the date of signing for the period through February 15, 2023. Such prepaid interest was paid in a number of shares of the Company’s common stock, par value $0.01 (“Common Stock”) equal to the dollar amount of such prepaid interest, divided by $0.7913 (the consolidated closing bid price immediately preceding the time the Company entered into the Note Purchase Agreement, plus $0.01 ), which was 9,720,291 shares. For all applicable periods following the February 15, 2023, interest shall accrue on the outstanding principal balance of the Notes at the US prime interest rate, as reported in the Wall Street Journal, plus 50 basis points, as adjusted monthly, for three months immediately following February 15, 2023, and thereafter at the US prime rate plus 300 basis points, as adjusted monthly. Such accrued interest shall be paid in cash, quarterly in arrears, on each of March 31, June 30, September 30 and December 31.
Debt issuance costs associated with the Notes were $44 and were capitalized as part of the carrying value of the promissory notes payable to related parties. During the three and six months ended June 30, 2023, the Company incurred interest expense of $2,515 and $10,842 respectively. Interest expense incurred during the six months ended June 30, 2023 included amortized imputed interest of $761 . As of June 30, 2023 and as of December 31, 2022, there was no
Imputed interest is calculated as the difference between the expected interest payable and the deemed market rate of interest and is recorded as a debt discount at inception of the note payable with a credit to additional paid-in capital for notes payable to related parties. The debt discount is amortized to interest expense using an effective interest rate method. The effective interest rate of the Duggan February Note and Zanganeh Note was 8.9 9.2 %.
As of June 30, 2023, the estimated future principal payments due were as follows:
| As of June 30, 2023 | ||||||||
| 2023 | $ | |||||||
| 2024 | ||||||||
| $ | ||||||||
15. Stock-Based Compensation and Warrants
The Company currently grants stock options to employees and directors under the 2020 Stock Incentive Plan (the "2020 Plan") and formerly, the Company granted stock options under the 2016 Long Term Incentive Plan (the "2016 Plan"). The 2020 Plan is administered by the Compensation Committee of the Company's Board of Directors. The 2020 Plan is intended to attract and retain employees and directors and provide an incentive for these individuals to assist the Company to achieve long-range performance goals and to enable these individuals to participate in the long-term growth of the Company.
The following table presents the stock option activity for both the 2016 Plan and the 2020 Plan as of June 30, 2023:
| Six Months Ended June 30, 2023 | Weighted average exercise price | |||||||||||||
Outstanding at December 31, 2022 | $ | |||||||||||||
| Granted | $ | |||||||||||||
| Forfeited | ( | $ | ||||||||||||
| Exercised | ( | $ | ||||||||||||
Outstanding at June 30, 2023 | $ | |||||||||||||
Exercisable at June 30, 2023 | $ | |||||||||||||
The total intrinsic value of all outstanding and exercisable stock options at June 30, 2023 was $12,784 and $511 , respectively. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The total stock-based compensation expense included in the Company's condensed consolidated statements of comprehensive loss was as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Research and development | $ | $ | $ | $ | |||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Warrants
The Company had outstanding and exercisable warrants of 5,821,137 1.56
16. Related Party Transactions
July 25, 2022 First Amendment to Sublease Agreement with Maky Zanganeh and Associates, Inc.
On July 25, 2022 the Company entered into a first amendment, dated July 19, 2022, to its initial sublease agreement with Maky Zanganeh and Associates, Inc. ("MZA") consisting of 4,500 square feet of office space at 2882 Sand Hill Road, Menlo Park, California entered into on March 26, 2021. The sublease term, which was set to expire on September 30, 2022, was extended for a period of thirty-nine months from October 1, 2022 through December 31, 2025. The rent payable under the terms of the sublease is equivalent to the proportionate share of the net payable by MZA to the third-party landlord, based on the square footage of office space sublet by the Company, and no mark-up has been applied. During the three and six months ended June 30, 2023, payments of $189 and $378 , were made pursuant to the first amendment to the Sublease Agreement. During the three and six months ended June 30, 2022, payments of $179 and $358 , were made pursuant to the initial Sublease Agreement.
July 29, 2022 Second Amendment to Sublease Agreement with Maky Zanganeh and Associates, Inc.
On July 29, 2022, the Company entered into a second amendment, dated August 1, 2022, to its existing sublease agreement with MZA, described above. The second amendment was effective as of August 1, 2022 and expires on December 31, 2025. The second amendment includes an additional 1,277 square feet (the "Expansion Premises") of office space at 2882 Sand Hill Road, Menlo Park, California. The rent payable under the terms of the sublease is equivalent to the proportionate share of the net payable by MZA to the third-party landlord, based on the square footage of office space sublet by the Company, and no mark-up has been applied. During the three and six months ended June 30, 2023, payments of $54 and $107 respectively, were made pursuant to the second amendment to the Sublease Agreement.
March 10, 2022 Note Purchase Agreement
On March 10, 2022, the Company entered into a Note Purchase Agreement (the "March 2022 Note"), with Mr. Duggan, pursuant to which Mr. Duggan loaned the Company $25,000 in exchange for the issuance by the Company of an unsecured promissory note in the amount of $25,000 . The March 2022 Note accrued interest at a rate per annum equal to the prime rate as reported in the Wall Street Journal, which was 3.25 % as of the effective date and 4.75 % as of June 30, 2022. The March 2022 Note, including accrued interest, became due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $25,000 or (ii) 18 months from the date of issuance of the March 2022 Note, and was repaid on August 10, 2022.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
2022 Rights Offering ("2022 Rights Offering")
In August 2022, the Company announced the closing and final results of its previously announced rights offering. The 2022 Rights Offering commenced on July 18, 2022, and the associated subscription rights expired on August 8, 2022. Aggregate gross proceeds received from the rights offering were $100,000 from the sale of 103,092,783 shares of common stock. Mr. Robert W. Duggan and Dr. Maky Zanganeh fully subscribed to their respective basic subscription rights and oversubscribed, at a price of $0.97 per share. Issuance costs were $111 . In connection with the closing of the 2022 Rights Offering, the March 2022 Note matured and became due, and the Company repaid all principal and accrued interest thereunder using a portion of the proceeds from the 2022 Rights Offering on August 10, 2022.
December 6, 2022 Note Purchase Agreement
On December 6, 2022, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement"), with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $520,000 . Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the amount of $400,000 (the "Duggan February Note") and $20,000 (the "Zanganeh Note"), respectively, which would mature and become due on February 15, 2023 and an unsecured promissory note to Mr. Duggan in the amount of $100,000 (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which will mature and become due on September 15, 2023. The maturity dates of the December 2022 Notes could be extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company shall consummate a public offering, then upon the later to occur of (i) business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100 % of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such notes.
On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $500,000 , or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the 2023 Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) Duggan September Note following the completion of a capital raising transaction subsequent to the 2023 Rights Offering in an amount equal to the lesser of (i) the net proceeds of such capital raise or (ii) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes, the Duggan Promissory Notes, the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes.
On February 15, 2023, the $20,000 Zanganeh Note, matured and the Company repaid the outstanding principal balance. In connection with the closing of the 2023 Rights Offering, the $400,000 Duggan Promissory Note, matured and became due, and the Company satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering (as defined above).
The Notes accrue interest at an initial rate of 7.5 %. All interest on the Notes was paid on the date of signing for the period through February 15, 2023. Such prepaid interest was paid in a number of shares of the Company’s Common Stock equal to the dollar amount of such prepaid interest, divided by $0.7913 (the consolidated closing bid price immediately preceding the time the Company entered into the Note Purchase Agreement, plus $0.01 ), which was 9,720,291 shares. For all applicable periods following the February 15, 2023, interest shall accrue on the outstanding principal balance of the Notes at the United States prime interest rate, as reported in the Wall Street Journal, plus 50 basis points, as adjusted monthly, for three months immediately following February 15, 2023, and thereafter at the United States prime rate plus 300 basis points, as adjusted monthly. During the three and six months ended June 30, 2023, the Company made payments for interest of $3,488 and $4,794 , respectively.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Akeso License Agreement
Upon the closing of the License Agreement, the Board of Directors (the “Board”) of the Company appointed Dr. Yu (Michelle) Xia to serve as a member of the Board pursuant to the terms of the License Agreement. Dr. Xia is the founder of Akeso, Inc., and has been the chairwoman, president and CEO of the Company since its inception in 2012. For details on the License Agreement, see Note 8. Furthermore, in connection with the License Agreement, the Company also entered into a Supply Agreement with Akeso, pursuant to which Summit agreed to purchase a certain portion of drug substance for clinical and commercial supply (the “Supply Agreement”). All transactions pursuant to the Supply Agreement, which occurred during 2023, were in the ordinary course of business.
2023 Rights Offering
On December 6, 2022, the Company announced a rights offering for its existing shareholders to participate in the purchase of additional shares of its Common Stock for $1.05 per share. The 2023 Rights Offering commenced on February 7, 2023 and the associated subscription rights expired on March 1, 2023. Aggregate gross proceeds from the 2023 Rights Offering were $500,000 from the sale of 476,190,471 shares of the Company's common stock and issuance costs were $619 . Mr. Duggan and Dr. Zanganeh fully subscribed to their respective basic subscription rights at a price of $1.05 per share. To satisfy the $395,314 subscription price for the shares subscribed by Mr. Duggan in the 2023 Rights Offering, Mr. Duggan agreed with the Company to extinguish a portion of the amount due and payable to him by the Company at the closing of the 2023 Rights Offering pursuant to the $400,000 Duggan Promissory Note in an amount equal to the subscription price.
Registration of Shares
On March 17, 2023, the Company filed a registration statement on Form S-3 to register for resale the following shares of the Company's common stock at $0.01 par value: (i) 10,000,000 shares of Common Stock issued on January 17, 2023 in connection with the License Agreement with Akeso pursuant to which the Company issued Akeso such shares; and (ii) the 9,346,434 and 373,857 shares of Common Stock issued in December 2022 to the Company's Co-CEOs, Robert Duggan and Dr. Mahkam Zanganeh, respectively, as payment of prepaid interest in connection with the Note Purchase Agreement dated December 6, 2022 between Robert Duggan, Dr. Mahkam Zanganeh and the Company. On April 27, 2023, the SEC issued the Company a Notice of Effectiveness for the registration statement on Form S-3.
17. Commitments and Contingencies
Fixed Asset Purchase Commitments
As of June 30, 2023 and December 31, 2022, the Company had no
Lease Commitments
The Company leases office space in Menlo Park, California, United States and in Oxfordshire, United Kingdom. There have been no material changes to the Company's lease commitments as of December 31, 2022 which were disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 9, 2023, other than the Company's new lease in its Menlo Park, California, U.S. location and the termination of the Company's Cambridge, U.K. laboratory and office space lease as a result of the Company re-prioritizing its investments and financial resources towards the development of ivonescimab, as described in Note 13.
Debt commitments
Refer to Note 14 for discussion of promissory notes payable to related parties.
22
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Other Commitments
The Company enters into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. Most contracts provide for termination upon notice, and therefore are cancellable contracts. There have been no material changes to the Company's other contractual commitments as of December 31, 2022 which were disclosed in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 9, 2023, other than approximately $6,921 of non-cancellable purchase commitments associated with our clinical trials as of June 30, 2023.
The Company has certain commitments under its agreements with the Akeso, Wellcome Trust, the University College London and certain employees, former employees and former directors of Discuva, pursuant to which it will be required to pay royalties or make milestone payments. The License Agreement with Akeso also contains certain manufacturing and purchase commitments. As of June 30, 2023, the Company is unable to estimate the amount, timing or likelihood of achieving the milestones, making future product sales or assessing estimated forecasts for manufacturing and supplied materials which these contingent payment obligations relate to.
Indemnifications
The Company's certificate of incorporation provides that it will indemnify the directors and officers to the fullest extent permitted by Delaware law. In addition, the Company has entered into indemnification agreements with all of the directors and executive officers. These indemnification agreements may require the Company, among other things, to indemnify each such director or executive officer for some expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by him or her in any action or proceeding arising out of his or her service as one of the Company's directors or executive officers. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of June 30, 2023 and December 31, 2022.
Legal Proceedings
The Company is not currently subject to any material legal proceedings.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein and our audited consolidated financial statements and related notes for the year ended December 31, 2022 included in our Form 10-K, filed on March 9, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this filing, including information with respect to our plans and strategy for our business, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we “believe,” “expect,” “anticipate,” “plan,” “target,” “intend” and similar expressions should be considered forward-looking statements. As a result of many factors, including those factors set forth in the risks identified the “Risk Factors’’ section of our other filings with the Securities and Exchange Commission, or the SEC, our actual results could differ materially from the results, performance or achievements expressed in or implied by these forward-looking statements.
Company Overview
We are a biopharmaceutical company focused on the discovery, development, and commercialization of patient-, physician-, caregiver- and societal-friendly medicinal therapies intended to improve quality of life, increase potential duration of life, and resolve serious unmet medical needs. Our pipeline of product candidates is designed with the goal to become the patient-friendly, new-era standard-of-care medicines, in the therapeutic area of oncology.
We recently in-licensed from Akeso, Inc. ("Akeso") its breakthrough bispecific antibody, ivonescimab. Ivonescimab, known as AK112 in China and Australia, and also as SMT112 in the United States, Canada, Europe, and Japan, is a novel, potential first-in-class bispecific antibody intending to combine the benefits of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well-established oncology targeted mechanisms together. Through the License Agreement (as defined below), we obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan (the "Licensed Territory").
The entry into the License Agreement represents a significant change in our strategy. All business activities related to anti-infectives are being reviewed for partnership opportunities for potential further development. Our future operations will be focused on the development of ivonescimab and other future activities, as we determine.
We have announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer ("NSCLC"), specifically in the following indications:
a)ivonescimab combined with chemotherapy in patients with epidermal growth factor receptor ("EGFR")-mutated, locally advanced or metastatic non-squamous NSCLC who have progressed after treatment with a third-generation EGFR tyrosine kinase inhibitor ("TKI") (“HARMONi”); and
b)ivonescimab combined with chemotherapy in first-line metastatic squamous NSCLC patients (“HARMONi-3”)
Recent Events
On December 5, 2022, we entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which we are partnering with Akeso to in-license its breakthrough bispecific antibody, ivonescimab. The License Agreement and transaction closed in January 2023 following customary waiting periods. Ivonescimab, known as AK112 in China and Australia, and also as SMT112 in the United States, Canada, Europe, and Japan, is a novel, potential first-in-class bispecific antibody intending to combine the benefits of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well established oncology targeted mechanisms together. Through the License Agreement, we obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan (the “Licensed Territory”).
On December 6, 2022, we announced a rights offering for its existing shareholders to participate in the purchase of additional shares of its common stock (the "2023 Rights Offering"). The 2023 Rights Offering commenced on February 7, 2023 and the associated subscription rights expired on March 1, 2023. Aggregate gross proceeds from the 2023 Rights Offering were $500,000 from the sale of 476,190,471 shares of our common stock at a price of $1.05 per share and issuance costs were $619.
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On January 19, 2023, we filed Amendment No. 2 to the Restated Certificate of Incorporation (the “Amendment No. 2”) with the Secretary of State of the State of Delaware to increase the number of authorized shares of its common stock by 650,000,000 (from 350,000,000 to 1,000,000,000), which became effective on such date.
On February 15, 2023, the $20,000 Zanganeh Note, as defined in note 14, matured and we repaid the outstanding principal balance. In connection with the closing of the 2023 Rights Offering, the $400,000 Duggan Promissory Note, as defined in note 14, matured and became due, and we satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering.
On March 17, 2023, we filed a registration statement on Form S-3 to register for resale the following shares of our common stock at $0.01 par value: (i) 10,000,000 shares of Common Stock issued on January 17, 2023 in connection with the License Agreement with Akeso pursuant to which we issued Akeso such shares; and (ii) the 9,346,434 and 373,857 shares of Common Stock issued in December 2022 to our Co-CEOs, Robert Duggan and Dr. Mahkam Zanganeh, respectively, as payment of prepaid interest in connection with the Note Purchase Agreement dated December 6, 2022 between Robert Duggan, Dr. Mahkam Zanganeh and the Company. On April 27, 2023, the SEC issued a Notice of Effectiveness for the registration statement on Form S-3 filed with the SEC.
On May 3, 2023 we announced plans to initiate Phase III clinical studies for Ivonescimab in non-small cell lung cancer (NSCLC), specifically in the following indications:
a)Ivonescimab combined with chemotherapy in patients with epidermal growth factor receptor (EGFR)-mutated, locally advanced or metastatic non-squamous NSCLC who have progressed after treatment with a third-generation EGFR tyrosine kinase inhibitor (TKI) (“HARMONi”)
b)Ivonescimab combined with chemotherapy in first-line metastatic squamous NSCLC patients (“HARMONi-3”)
On May 9, 2023, we announced that the first United States-based patient had been enrolled in the Phase III HARMONi study. HARMONi is a Phase III multiregional, randomized, double-blinded study. The study, designed with registration intent, has two primary endpoints: overall survival and progression-free survival.
On June 4, 2023, at the 2023 American Society of Clinical Oncology ("ASCO") Annual Meeting, updated clinical data was presented in poster-form from AK112-201 (NCT04736823), an open-label Phase II study evaluating ivonescimab plus chemotherapy for 174 patients across three cohorts of patients. The poster features data from 135 patients in Cohort 1: those patients with advanced or metastatic NSCLC who are treatment-naïve and whose tumors do not have actionable genomic alterations. Included in this data set were summarized results to date from 63 patients in Cohort 1 with tumors of squamous histology. These patients experienced a median progression-free survival (PFS) of 11.0 months (95% CI: 9.5 to 16.8 months) and an overall response rate (ORR) of 67% (95% CI: 53% to 78%). After a median follow-up time of 13.3 months, median overall survival (OS) was not reached; although, estimated 9-month OS was 93.2%. The frequency of Grade ≥3 treatment-related adverse events (TRAEs) was 41%. The most frequent treatment-emergent adverse events were anemia, decreased neutrophil counts, and alopecia. In addition, brief updates were provided for the other two cohorts of this Phase II clinical trial: (a) Cohort 2, which contained 19 patients with advanced or metastatic non-squamous EGFR-mutated NSCLC whose tumor has progressed following treatment with an EGFR-TKI, and (b) Cohort 3 which contained 20 patients with advanced or metastatic NSCLC patients whose tumor has progressed following PD-(L)1 therapy combined with doublet-platinum chemotherapy.
In conjunction with the significant change in our strategy and shift in focus to the therapeutic area of oncology, we are re-prioritizing our investments and financial resources towards the development of ivonescimab. This will result in reduced investment in our infectious diseases programs, including reducing research and development employee compensation-related costs and facility-related costs incurred with respect to our laboratory and office space.
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Results of Operations
Amounts reported in millions within this Quarterly Report are computed based on the amounts in thousands, and therefore, the sum of components may not equal the total amount reported in millions due to rounding.
The following table sets forth our results of operations for the three and six month periods ended June 30, 2023 and 2022:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Revenue | $ | — | $ | 0.2 | $ | — | $ | 0.5 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | 9.5 | 9.0 | 19.3 | 29.6 | ||||||||||||||||||||||
| In-process research and development | — | — | 520.9 | — | ||||||||||||||||||||||
| General and administrative | 6.3 | 6.9 | 13.3 | 13.6 | ||||||||||||||||||||||
| Total operating expenses | 15.8 | 15.9 | 553.5 | 43.2 | ||||||||||||||||||||||
| Other operating income | — | 3.0 | 0.6 | 7.8 | ||||||||||||||||||||||
| Operating loss | (15.8) | (12.7) | (552.9) | (34.9) | ||||||||||||||||||||||
| Other (expense) income, net | 1.1 | (4.1) | (4.1) | (3.3) | ||||||||||||||||||||||
| Net loss | $ | (14.7) | $ | (16.8) | $ | (557.0) | $ | (38.2) | ||||||||||||||||||
Revenue
Revenue for the three and six months ended June 30, 2022 relates to revenue from our license and commercialization agreement with Eurofarma Laboratórios S.A. for ridinilazole, the Company's product candidate for treating patients suffering from Clostridioides difficile infection, also known as C. difficile infection. This revenue was recognized ratably over the determined performance period that the research and development services were provided. The decrease for the three and six month period ended June 30, 2023 compared to the same period in the prior year is attributed to the total milestones received of $4.8 million being fully recognized ratably over the determined performance period, which ended during 2022. We are not currently anticipating receipt of additional milestone payments under this agreement given in September 2022, the Company determined that it would seek partners or a divestiture of ridinilazole as the path forward for the clinical development of the asset.
Operating Expenses
Research and Development Expenses
The table below summarizes our research and development expenses by category for the three and six month periods ended June 30, 2023 and 2022, respectively.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Oncology | $ | 4.8 | $ | — | $ | 7.2 | $ | — | ||||||||||||||||||
| Anti-infectives | (2.0) | 3.7 | (1.6) | 16.2 | ||||||||||||||||||||||
| Compensation related costs, excluding stock-based compensation | 5.0 | 4.1 | 9.9 | 9.1 | ||||||||||||||||||||||
| Stock-based compensation | 0.7 | 0.3 | 1.8 | 2.1 | ||||||||||||||||||||||
| Other research and development costs | 1.0 | 0.9 | 2.0 | 2.2 | ||||||||||||||||||||||
| Total | $ | 9.5 | $ | 9.0 | $ | 19.3 | $ | 29.6 | ||||||||||||||||||
The entry into the License Agreement with Akeso, Inc., effective in January 2023, represents a significant change in our strategy from anti-infectives to the therapeutic area of oncology. We have invested our resources in the clinical development of ivonescimab during the three and six months ended June 30, 2023.
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Oncology expenses represent our investment in the clinical development of ivonescimab, known as SMT112 in the United States, Canada, Europe, and Japan. On May 3, 2023 we announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer ("NSCLC") and on May 9, 2023, we announced that the first United States-based patient had been enrolled in the Phase III HARMONi study. We are continuing to focus our efforts on patient enrollment in the Phase III HARMONi study, as well as clinical development activities for our anticipated Phase III HARMONi-3 study.
With this shift in focus from anti-infectives to oncology, research and development expenses decreased by $10.3 million during the six months ended June 30, 2023, compared to the same period in the prior year, primarily due to a decrease of $17.8 million related to concluding the development activities of our anti-infectives programs for ridinilazole and SMT-738, partially offset by our investment in oncology expenses of $7.2 million and an increase in compensation related expenses of $0.8 million to support the clinical development of ivonescimab. The Company recorded a net benefit related to its anti-infectives programs during the three and six months ended June 30, 2023 due to completing financial close-out activities with the lead contract research organization for our ridinilazole clinical trials, thus resulting in a true-up of the estimated anti-infectives research and development expenses during the second quarter of 2023.
In-process research and development
The table below summarizes our in-process research and development expenses by category for the three and six month periods ended June 30, 2023 and 2022, respectively.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Upfront milestone payments | $ | — | $ | — | $ | 520.8 | $ | — | ||||||||||||||||||
| Direct transaction costs | — | — | 0.1 | — | ||||||||||||||||||||||
| Total | $ | — | $ | — | $ | 520.9 | $ | — | ||||||||||||||||||
Our investment in ivonescimab totaled $520.9 million for the six months ended June 30, 2023 and primarily relates to our upfront milestone payments pursuant to the License Agreement with Akeso. The License Agreement closed in January 2023, and both Akeso and Summit entered into the Common Stock Issuance Agreement (“Issuance Agreement”). Pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10 million shares of our common stock in lieu of $25.1 million cash and was paid $274.9 million in cash as the initial upfront payment. The remaining $200.0 million upfront payment was paid on March 6, 2023. In-process research and development expense comprised of the $474.9 million paid in cash, the fair value of the 10 million shares of common stock on the date of closing the transaction of $45.9 million, and $0.1 million of direct transactions costs incurred.
General and Administrative Expenses
The table below summarizes our general and administrative expenses by category for the three and six month periods ended June 30, 2023 and 2022, respectively.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Compensation related costs, excluding stock-based compensation | $ | 2.5 | $ | 2.2 | $ | 5.1 | $ | 4.2 | ||||||||||||||||||
| Stock-based compensation | 1.1 | 2.3 | 2.8 | 4.3 | ||||||||||||||||||||||
Legal fees and professional services(1) | 1.9 | 1.5 | 3.6 | 3.0 | ||||||||||||||||||||||
| Other general and administrative expenses | 0.8 | 0.9 | 1.8 | 2.1 | ||||||||||||||||||||||
| Total | $ | 6.3 | $ | 6.9 | $ | 13.3 | $ | 13.6 | ||||||||||||||||||
General and administrative expenses decreased by $0.6 million for the three months ended June 30, 2023, compared to the same period in the prior year, primarily due to a decrease of $1.2 million in stock-based compensation due to awards becoming fully amortized during the period, awards expensed at lower fair values as compared to awards expensed in the prior period, and reversal of stock-based compensation expenses due to forfeitures of awards from terminations, partially offset by an increase of $0.3 million in compensation related expenses as the Company is focused on building our executive
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management team to support the growth of the Company and an increase of $0.4 million in legal fees and professional services due to an increase in corporate projects to create long-term efficiencies.
General and administrative expenses decreased by $0.3 million for the six months ended June 30, 2023, compared to the same period in the prior year, primarily due to a decrease of $1.5 million in stock-based compensation due to awards becoming fully amortized during the period and awards expensed at lower fair values as compared to awards expensed in the prior period, and reversal of expenses due to terminations, partially offset by an increase of $0.9 million in compensation related expenses as the Company is focused on building our executive management team to support the growth of the Company and an increase of $0.6 million in legal fees and professional services due to an increase in corporate projects to create long-term efficiencies.
(1) Note management has updated this category to include general and administrative consulting expenses and has reclassified these expenses in the prior period for consistency. These expenses of $0.5 million and $1.1 million for the three and six months ended June 30, 2022, respectively, were previously recorded in Compensation related costs.
Other Operating Income
The table below summarizes our other operating income by category for the three and six month periods ended June 30, 2023 and 2022, respectively.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Research and development tax credits | $ | — | $ | 0.8 | $ | 0.5 | $ | 2.5 | ||||||||||||||||||
| Funding income from BARDA | — | 1.2 | — | 3.9 | ||||||||||||||||||||||
| Grant income from CARB-X | — | 1.0 | — | 1.4 | ||||||||||||||||||||||
| $ | — | $ | 3.0 | $ | 0.5 | $ | 7.8 | |||||||||||||||||||
U.K. research and development tax credits decreased by $0.8 million for the three month period ended June 30, 2023, and $2.0 million for the six month period ended June 30, 2023 compared to the same periods in the prior year, respectively, due to a decrease in clinical and manufacturing activity spend associated with the ridinilazole Phase III clinical program, which resulted in a decrease in tax credits claimed, coupled with a decrease in eligible expenses claimed due to recent changes in U.K. tax legislation.
Funding income from BARDA decreased by $1.2 million for the three months ended June 30, 2023, and $3.9 million for the six month period ended June 30, 2023 compared to the same periods in the prior year, respectively, due to management's decision to seek partners or a divestiture of ridinilazole as the path forward for the clinical development of the asset as of September 2022, coupled with our significant change in our strategy to the therapeutic area of oncology. The BARDA contract ended in 2022 and thus, we do not expect further income under this arrangement.
Grant income received from CARB-X decreased by $1.0 million for the three months ended June 30, 2023, and $1.4 million for the six months ended June 30, 2023, compared to the same periods in the prior year, respectively, due to the CARB-X arrangement for our preclinical candidate SMT-738 concluding in 2022, coupled with the decision that all business activities related to anti-infectives are being reviewed for partnership opportunities for potential further development in light of our significant change in our strategy to the therapeutic area of oncology. We do not expect further income under this arrangement.
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Other Income (Expense), net
The table below summarizes our other income (expense), net by category for the three and six month periods ended June 30, 2023 and 2022, respectively.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Foreign currency gains (losses) | $ | 0.3 | $ | (3.4) | $ | 0.8 | $ | (2.5) | ||||||||||||||||||
| Interest expense on promissory notes payable to related parties | (2.5) | (0.7) | (10.8) | (0.8) | ||||||||||||||||||||||
| Interest income | 3.3 | — | 5.5 | — | ||||||||||||||||||||||
| Reclassification of cumulative currency translation gain | — | — | 0.4 | — | ||||||||||||||||||||||
| Other expense | — | — | (0.1) | — | ||||||||||||||||||||||
| $ | 1.1 | $ | (4.1) | $ | (4.1) | $ | (3.3) | |||||||||||||||||||
Other income (expense), net increased by $5.2 million for the three months ended June 30, 2023, compared to the same period in the prior year, primarily due to an increase of $3.7 million in favorable changes in foreign currency gains, an increase of $3.3 million in interest income related to our money market funds and our short-term investments in U.S. government securities, offset by an increase of $1.8 million in interest expense on an outstanding promissory note to a related party, where amounts recognized in 2023 relate to the $100 million promissory note issued to our Co-CEO, Mr. Robert Duggan, in December 2022.
Other (expense) income, net increased by $0.8 million for the six months ended June 30, 2023, compared to the same period in the prior year, primarily due to an increase of $10.0 million in interest expense on promissory notes to related parties, where amounts recognized in 2023 relate to the $520 million promissory notes issued to our Co-CEOs in December 2022, offset by an increase in favorable changes in foreign currency gains of $3.3 million, an increase of $5.5 million in interest income related to our investments in money market funds and our short-term investments in U.S. government securities, and an increase of $0.4 million related to the reclassification of cumulative foreign currency translation gains from accumulated other comprehensive loss. Effective January 17, 2023, we dissolved the following dormant entities; Summit (Cambridge) Limited, Summit (Wales) Limited, Summit Corporation Employee Benefit Trust Company Limited, Summit Corporation Limited, Summit Discovery 1 Limited and Summit Infectious Diseases Limited. As a result, we reclassified $0.4 million of cumulative foreign currency translation gains from accumulated other comprehensive loss relating to these entities.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through issuances of our common stock, payments to us under license, collaboration, and commercialization arrangements, for example, our license and commercialization agreement with Eurofarma Laboratórios SA, or Eurofarma, and development funding and other assistance from government entities, philanthropic, non-government and not-for-profit organizations for our product candidates and promissory notes from related parties. In particular, we have received funding from BARDA, CARB-X, Innovate UK, Wellcome Trust and a number of not-for-profit organizations.
On March 10, 2022, we received net proceeds of $25.0 million from the issuance of an unsecured promissory notes (the "March 2022 Note"). On August 8, 2022, we received net proceeds of $99.9 million from the sale of 103,092,783 share of Common Stock at a price of $0.97 per share from our 2022 Rights Offering, the proceeds of which were used in part to repay amounts outstanding on the March 2022 Note.
On December 6, 2022, the Company entered into a Note Purchase Agreement, with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $520 million. Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh the unsecured Duggan February Note and Zanganeh Note in the amounts of $400 million and $20 million, respectively, which would mature and become due on February 15, 2023 and an unsecured Duggan September Note to Mr. Duggan in the amount of $100 million, which will mature and become due on September 15, 2023. The maturity dates of the December 2022 Notes
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could be extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company shall consummate a public offering, then upon the later to occur of (i) five business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100% of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such Notes. On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $500 million, or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the 2023 Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) Duggan September Note following the completion of a capital raising transaction subsequent to the 2023 Rights Offering in an amount equal to the lesser of (i) the net proceeds of such capital raise or (ii) the full amount outstanding of the Duggan September Note. Following the issuance of the Duggan Promissory Notes, the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Notes. The Notes accrue interest at an initial rate of 7.5%. All interest on the Notes was paid on the date of signing for the period through February 15, 2023. Such prepaid interest was paid in a number of shares of the Company’s common stock, par value $0.01 (“Common Stock”) equal to the dollar amount of such prepaid interest, divided by $0.7913 (the consolidated closing bid price immediately preceding the time the Company entered into the Note Purchase Agreement, plus $0.01), which was 9,720,291 shares. For all applicable periods following the February 15, 2023, interest shall accrue on the outstanding principal balance of the Notes at the US prime interest rate, as reported in the Wall Street Journal, plus 50 basis points, as adjusted monthly, for three months immediately following February 15, 2023, and thereafter at the US prime rate plus 300 basis points, as adjusted monthly. On February 15, 2023, the $20 million Zanganeh Note matured and the Company repaid the outstanding principal balance. In connection with the closing of the 2023 Rights Offering, the $400 million Duggan Promissory Note matured and became due, and the Company satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering. Following the repayment of this note, only the $100 million Duggan September Note remains outstanding.
We have devoted substantially all of our efforts to research and development, including clinical trials. We have not completed the development of any drugs. We expect to continue to incur significant expenses and increasing operating losses for at least the next few years. The net losses we incur may fluctuate significantly from quarter to quarter and year to year, due to the nature and timing of our research and development activities. We expect that our research and development and general and administrative expenses will continue to be significant in connection with our ongoing research and development efforts. In addition, if we obtain marketing approval for any of our product candidates in the United States or other jurisdictions where we retain commercial rights, and if we choose to retain those rights, we would expect to incur significant sales, marketing, distribution and outsourced manufacturing expenses, as well as ongoing research and development expenses. In addition, our expenses will increase if and as we:
•Invest in clinical development of ivonescimab in our Licensed Territory;
•conduct research and continue development of additional product candidates;
•maintain and augment our intellectual property portfolio and opportunistically acquire complimentary intellectual property;
•seek further regulatory advancement for ivonescimab;
•invest in our manufacturing capabilities for ivonescimab and any other products for which we may obtain regulatory approval;
•seek marketing approvals for any product candidates that successfully complete clinical development;
•ultimately establish a sales, marketing and distribution infrastructure in jurisdictions where we have retained commercialization rights and scale up external manufacturing capabilities to commercialize any product candidates for which we receive marketing approval;
•perform our obligations under our collaboration agreements;
•pursue business development opportunities, including investing in other businesses, products and technologies;
•experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges
•hire additional clinical, regulatory, scientific and administrative personnel;
•expand our physical presence;
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•add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
•borrow capital to fund our resources and have to pay interest expenses on such borrowings.
During the three and six months ended June 30, 2023, we incurred a net loss of $14.7 million and $557.1 million respectively, and cash flows used in operating activities for the six months ended June 30, 2023 was $42.4 million. As of June 30, 2023, we had an accumulated deficit of $935.4 million, cash and cash equivalents of $42.1 million, short-term investments in U.S. treasury securities of $172,898 and current and current and long-term U.K. research and development tax credits receivable of $5.1 million. These losses could continue for the next several years as we invest in clinical development of ivonescimab.
We believe that our financial resources as of June 30, 2023 will fund our operating costs and working capital needs, including our planned clinical trials for ivonescimab, for a period of at least twelve months from the date of filing this quarterly report. We have a $100 million promissory note payable to a related party (refer to Note 14 for further details) that matures on September 6, 2024. In order to repay this promissory note, we intend to raise additional capital or seek an extension of payment from the holder of the promissory note, or a combination of either of those options. As of the date of issuance of these condensed consolidated financial statements, additional capital has not yet been secured.
We have based the foregoing estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. This estimate assumes, among other things, that we do not obtain any additional funding through grants and clinical trial support or through new collaboration arrangements. Our future capital requirements will depend on many factors, including:
•the costs, timing and outcome of clinical trials required for clinical development of ivonescimab;
•the number and development requirements of other future product candidates that we pursue;
•the costs, timing and outcome of regulatory review of ivonescimab and/or our other product candidates we develop;
•the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval;
•the extent to which we become liable for milestone payments under our Licensing Agreement for ivonescimab;
•subject to receipt of marketing approval, revenue received from commercial sales of any product candidates;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims;
•our ability to establish and maintain collaborations, licensing or other arrangements and the financial terms of such arrangements;
•the extent to which we acquire or invest in other businesses, products and technologies;
•the rate of the expansion of our physical presence; and
•the extent to which we change our physical presence.
Until we can generate substantial revenue and achieve profitability, we will need to raise additional capital to fund ongoing operations and capital needs, including the payment of the milestone payments referenced above. We continue to evaluate options to further finance its operating cash needs for its product candidates through a combination of some, or all, of the following: equity and debt offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations, and marketing, distribution or licensing arrangements. There is no assurance, however, that additional financing will be available when needed or that we will be able to obtain financing on acceptable terms. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce, or terminate our product development, product portfolio expansion, future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which could adversely affect its business prospects.
We will need to seek additional funding in the future to fund operations. Additional capital, when needed, may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends or other distributions. If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
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Cash Flows
The following table summarizes the results of our cash flows for the six months ended June 30, 2023 and 2022:
| Six Months Ended June 30, | |||||||||||||||||
| (in millions) | 2023 | 2022 | |||||||||||||||
| Net cash used in operating activities | $ | (42.4) | $ | (38.2) | |||||||||||||
| Net cash used in investing activities | $ | (644.9) | $ | (0.7) | |||||||||||||
| Net cash provided by financing activities | $ | 80.0 | $ | 25.2 | |||||||||||||
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2023 was $42.4 million and resulted from a net loss of $557.1 million, which included an adjustment of $475.0 million cash payments to investing activities for the purchase of in-process research and development from Akeso under the terms of the License Agreement and the associated direct transaction costs, non-cash charges of $53.8 million and a net decrease in working capital of $14.1 million. The non-cash charges primarily comprised of $45.9 million issuance of shares in lieu of cash for Akeso upfront payment, $6.2 million of non-cash interest expense, $4.7 million of non-cash charges related to stock-based compensation, partially offset by $2.9 million for amortization of discount on short-term investments. The net decrease in working capital was primarily due to a decrease of $9.7 million in accrued liabilities and accrued compensation, an increase of $4.6 million in prepaid expenses and an increase of $1.3 million in other current assets, partially offset by a decrease of $0.9 million in the research and development tax credit receivable.
Net cash used in operating activities for the six months ended June 30, 2022 was $38.2 million and resulted from a net loss of $38.2 million, which included non-cash charges of $11.0 million, which is primarily comprised of $6.5 million of non-cash charges related to stock-based compensation, and a net increase in working capital of $11.1 million. The net increase in working capital was primarily due to a decrease of $1.1 million in accrued liabilities, a decrease of $4.1 million in deferred revenue and other income, a decrease of $3.1 million in accrued compensation, an increase of $2.4 million in the research and development tax credit receivable, an increase of $1.4 million in other current assets and a decrease of $0.7 million in accounts payable, partially offset by a decrease of $1.2 million in prepaid expenses and a decrease of $1.2 million in accounts receivable.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2023 primarily comprised of $475.0 million cash payments made to Akeso for the upfront payment pursuant to the License Agreement, $208.2 million for the purchase of short-term investments in U.S. treasury securities, partially offset by $38.2 million received from the maturity and sale of short-term investments in U.S. treasury securities.
Net cash used in investing activities for the six months ended June 30, 2022 was for the purchase of property and equipment only.
Financing Activities
Net cash provided by financing activities was $80.0 million for the six months ended June 30, 2023 and was due to net proceeds received of $104.1 million (net of paid issuance costs) related to the issuance of common stock from the 2023 Rights Offering and net of the extinguishment of $395.3 million of principal and accrued interest due and payable by us under the $400 million Duggan Promissory Note in satisfaction of the subscription price for the shares subscribed by Mr. Duggan in the 2023 Rights Offering, proceeds received of $0.7 million related to employee stock awards, offset by the repayment of $24.7 million related to promissory notes from related parties.
Net cash provided by financing activities was $25.2 million for the six months ended June 30, 2022 and was primarily due to $25.0 million of proceeds received from a promissory note from a related party and $0.2 million of proceeds received related to employee stock awards.
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Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, research and development costs, intangible assets, stock-based compensation and income taxes. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and in Critical Accounting Policies and Significant Judgments and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 9, 2023. There have been no material changes to our critical accounting policies and estimates that were disclosed in the Annual Report on Form 10-K.
Contractual obligations and commitments
We lease office space in Menlo Park, California, United States and in Oxfordshire, United Kingdom. There have been no material changes to our lease commitments as of December 31, 2022 which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 9, 2023, other than the termination of our Cambridge, U.K. laboratory and office space lease as a result of re-prioritizing our investments and financial resources towards the development of ivonescimab and a new lease for office space in our Menlo Park, California, U.S. location. We will make total lease payments of $4.7 million over the 36 month term of the new lease, which expires in May 2026.
We also have contingent payment obligations which primarily consist of commitments under our agreements with Akeso, the Wellcome Trust, the University College London and certain employees, former employees and former directors of Discuva, pursuant to which we will be required to pay royalties or make milestone payments. The License Agreement with Akeso also contains certain manufacturing and purchase commitments. As of June 30, 2023, we were unable to estimate the amount, timing or likelihood of achieving the milestones or making future product sales or purchases that these contingent payment obligations relate to. For additional information regarding these agreements, see “Business - Our Collaborations and Funding Arrangements” in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 9, 2023.
Additionally, we enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. Most contracts provide for termination upon notice, and therefore are cancellable contracts. There have been no material changes to our other contractual commitments as of December 31, 2022 which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 9, 2023, other than approximately $6.9 million of non-cancellable purchase commitments associated with our clinical trials as of June 30, 2023.
Off-Balance Sheet Arrangements
Other than the contractual obligations and commitments described above, we did not have during the periods presented, and we do not currently have, any off‑balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, refer to Note 3, Recently Issued or Adopted Accounting Pronouncements, to our condensed consolidated financial statements included in this report.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures.
We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the Company’s management, which is responsible for the management of the internal controls, and which includes our Co-Chief Executive Officers and our Chief Financial Officer. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation of our disclosure controls and procedures as of June 30, 2023, our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings.
Item 1A. Risk Factors.
Information regarding risk factors affecting the Company's business are discussed in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report") filed with the Securities and Exchange Commission on March 9, 2023. There have been no material changes to the risk factors as previously disclosed in our Annual Report. The risks referenced above are not the only risks facing our Company. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
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Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit Index
| Exhibit No. | Description | ||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
* | Filed herewith. | |||||||
| ** | Furnished herewith. | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 9, 2023 | SUMMIT THERAPEUTICS INC. | ||||||||||
| By: | /s/ Ankur Dhingra | ||||||||||
| Name: | Ankur Dhingra | ||||||||||
| Title | Chief Financial Officer | ||||||||||
| (Principal Financial Officer) | |||||||||||
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EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Robert W. Duggan, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Summit Therapeutics Inc. (the "Registrant");
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 9, 2023
| By: | /s/ Robert W. Duggan | |||||||
| Name: | Robert W. Duggan | |||||||
| Title: | Chairman and Co-Chief Executive Officer | |||||||
| (Principal Executive Officer) | ||||||||
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Dr. Maky Zanganeh, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Summit Therapeutics Inc.(the "Registrant");
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 9, 2023
| By: | /s/ Maky Zanganeh | |||||||
| Name: | Dr. Maky Zanganeh | |||||||
| Title: | Executive Director, Co-Chief Executive Officer, and President | |||||||
| (Principal Executive Officer) | ||||||||
EXHIBIT 31.3
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Ankur Dhingra, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Summit Therapeutics Inc. (the "Registrant");
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: August 9, 2023
| By: | /s/ Ankur Dhingra | |||||||
| Name: | Ankur Dhingra | |||||||
| Title: | Chief Financial Officer | |||||||
| (Principal Financial Officer) | ||||||||
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Summit Therapeutics Inc. (the “Company”) for the quarter ended June 30, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 9, 2023 | ||||||||
| By: | /s/ Robert W. Duggan | |||||||
| Name: | Robert W. Duggan | |||||||
| Title: | Chairman and Co-Chief Executive Officer | |||||||
| (Principal Executive Officer) | ||||||||
| Date: August 9, 2023 | ||||||||
| By: | /s/ Maky Zanganeh | |||||||
| Name: | Dr. Maky Zanganeh | |||||||
| Title: | Executive Director, Co-Chief Executive Officer, and President | |||||||
| (Principal Executive Officer) | ||||||||
| Date: August 9, 2023 | ||||||||
| By: | /s/ Ankur Dhingra | |||||||
| Name: | Ankur Dhingra | |||||||
| Title: | Chief Financial Officer | |||||||
| (Principal Financial Officer) | ||||||||