Summit Therapeutics (SMMT) - 2025 Q2 - Quarterly Report

FORM 10-Q CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows, along with detailed notes on organization, accounting policies, segment reporting, key agreements, and financial performance Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $297,872 | $104,862 | | Short-term investments | — | $307,487 | | Total current assets | $309,240 | $423,750 | | Total assets | $324,037 | $435,560 | | Total current liabilities | $60,325 | $41,729 | | Total liabilities | $64,598 | $46,812 | | Total stockholders' equity | $259,439 | $388,748 | - Cash and cash equivalents increased significantly from $104.86 million to $297.87 million, while short-term investments were fully liquidated[16] - Total assets decreased by approximately 25.6% from $435.56 million to $324.04 million[16] - Total liabilities increased by approximately 37.9% from $46.81 million to $64.60 million[16] - Total stockholders' equity decreased by approximately 33.3% from $388.75 million to $259.44 million[16] Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $208,021 | $30,798 | $259,286 | $61,671 | | Acquired in-process R&D | — | $15,007 | — | $15,007 | | General and administrative | $360,416 | $13,812 | $376,002 | $25,328 | | Total operating expenses | $568,437 | $59,617 | $635,288 | $102,006 | | Net loss | $(565,708) | $(60,385) | $(628,621) | $(103,858) | | Basic and diluted EPS | $(0.76) | $(0.09) | $(0.85) | $(0.15) | - Net loss for the three months ended June 30, 2025, increased significantly to $565.71 million from $60.39 million in the prior year period[18] - Research and development expenses surged to $208.02 million in Q2 2025 from $30.80 million in Q2 2024, and general and administrative expenses increased to $360.42 million from $13.81 million[18] Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Common Stock (Amount) | $7,376 | $7,428 | | Additional Paid-In Capital | $1,598,230 | $2,097,957 | | Accumulated Deficit | $(1,214,573) | $(1,843,194) | | Total Stockholders' Equity | $388,748 | $259,439 | - Total stockholders' equity decreased by $129.31 million from $388.75 million at December 31, 2024, to $259.44 million at June 30, 2025[21] - The accumulated deficit increased by $628.62 million, reflecting the net loss incurred during the period[21] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(127,912) | $(63,136) | | Net cash provided by (used in) investing activities | $310,918 | $(180,208) | | Net cash provided by financing activities | $9,899 | $200,697 | | Increase (decrease) in cash, cash equivalents and restricted cash | $193,004 | $(42,671) | | Cash, cash equivalents and restricted cash at end of period | $298,191 | $28,754 | - Net cash used in operating activities increased by over 100% to $127.91 million in H1 2025 from $63.14 million in H1 2024[23] - Investing activities shifted from a net cash outflow of $180.21 million in H1 2024 to a net cash inflow of $310.92 million in H1 2025, primarily due to maturities of short-term investments[23] - Financing activities provided $9.90 million in H1 2025, a significant decrease from $200.70 million in H1 2024, which included proceeds from a private placement[23] Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization - Summit Therapeutics Inc. is a biopharmaceutical company focused on oncology, with ivonescimab as its lead development candidate, a novel bispecific antibody combining PD-1 blockade with anti-VEGF effects[25][26] - The company's cash and cash equivalents are insufficient to fund planned operations for at least one year, raising substantial doubt about its ability to continue as a going concern[31][33] 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements - No significant changes to the company's accounting policies for the six months ended June 30, 2025[35] - Adopted ASU 2023-09 (Improvements to Income Tax Disclosures) on January 1, 2025, with no material impact[36] - Currently evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) and the One Big Beautiful Bill Act (OBBBA) on financial statements[37][38] 3. Segment Reporting - The company operates as a single reportable operating segment, with key operating and strategic decisions made by the Co-Chief Executive Officers and Chief Operating Officer/Chief Financial Officer[41] Segment Expenses (in thousands) | Segment Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Oncology clinical trial related costs | $67,824 | $19,955 | $104,187 | $41,852 | | Acquired in-process R&D | — | $15,007 | — | $15,007 | | Stock-based compensation | $478,784 | $11,088 | $489,880 | $20,595 | 4. Akeso License and Collaboration Agreement - The company in-licensed ivonescimab from Akeso in December 2022, obtaining rights to develop and commercialize it in the United States, Canada, Europe, and Japan[43][45] - In June 2024, the License Agreement was amended to expand territories to include Latin America, Middle East, and Africa, for an upfront payment of $15 million[47][48] - Akeso is eligible for potential milestone payments up to $4.56 billion ($1.05 billion regulatory, $3.51 billion commercial) and low double-digit royalties on net sales[49] 5. Other Income, net Other Income, net (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Foreign currency losses | $(199) | $(244) | $(122) | $(36) | | Investment income | $2,981 | $2,578 | $6,842 | $4,407 | | Other income, net | $2,729 | $2,334 | $6,667 | $4,371 | - Other income, net, increased by $0.4 million (QoQ) and $2.3 million (YoY) primarily due to higher investment income from money market funds and short-term investments[51] 6. Net Loss per Share Net Loss per Share (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(565,708) | $(60,385) | $(628,621) | $(103,858) | | Basic and diluted net loss per share | $(0.76) | $(0.09) | $(0.85) | $(0.15) | - Basic and diluted net loss per share are identical for all periods presented because the company was in a loss position, making all potential common share equivalents anti-dilutive[52] 7. Fair Value Measurements and Short-Term Investments - Financial assets included in cash and cash equivalents, primarily money market funds, are classified as Level 1 in the fair value hierarchy[61] - As of June 30, 2025, the company held no short-term investments, compared to $307.49 million in U.S. Government treasury bills (Level 2) at December 31, 2024[61] - Realized gains on short-term investments were immaterial for all periods presented[64] 8. Research and Development Prepaid Expenses and Accrued Liabilities R&D Prepaid Expenses and Accrued Liabilities (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | R&D prepaid expenses | $8,155 | $8,338 | | Accrued R&D liabilities | $24,584 | $17,441 | - These amounts are determined based on estimated costs and the current stage of completion for ivonescimab clinical trials[66] 9. Promissory Note Payable to Related Parties - The December 2022 Promissory Notes, totaling $520 million, issued to Mr. Duggan and Dr. Zanganeh, were fully repaid by October 1, 2024[67][73][74] - The company had no debt as of June 30, 2025, and incurred no interest expense during the three and six months ended June 30, 2025, compared to $3.10 million and $6.22 million, respectively, in the prior year periods[74] 10. Stockholders' Equity - The company has 1,000,000,000 shares of Common Stock authorized and 20,000,000 shares of Preferred Stock authorized, with none issued[75][76] - In June 2024, the company sold 22,222,222 shares of Common Stock for approximately $200 million in a private placement[77] - In September 2024, the company sold 10,352,418 shares of Common Stock for approximately $235 million in a private placement, with significant participation from Section 16 officers[81][82] - As of June 30, 2025, the company sold 1,807,093 shares under its ATM Agreement for gross proceeds of $44.22 million, with $45.78 million remaining available[85] - During the six months ended June 30, 2025, 4,629,988 warrants were exercised at a weighted average exercise price of $1.58[86] 11. Stock-Based Compensation Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $128,577 | $3,513 | $132,636 | $5,927 | | General and administrative | $350,207 | $7,575 | $357,244 | $14,668 | | Total stock-based compensation expense | $478,784 | $11,088 | $489,880 | $20,595 | - Total stock-based compensation expense increased significantly to $478.78 million in Q2 2025 from $11.09 million in Q2 2024[93] - The increase was primarily due to a Type III modification in Q2 2025, converting 44,488,976 unvested performance-based stock options to time-based vesting, resulting in $466.64 million expense[92] - Unrecognized compensation cost associated with this modification was $454.61 million as of June 30, 2025, to be expensed over approximately 2.0 years[92] 12. Related Party Transactions - The company has sublease agreements with Maky Zanganeh and Associates, Inc. (MZA) and affiliates of Co-CEO Robert W. Duggan (Genius 24C Inc. and Investments Research LLC)[95][96][97][98] - Payments to Akeso for clinical services were $14.00 million in Q2 2025 and $18.74 million in H1 2025[102] - Section 16 officers, including Mr. Duggan and Dr. Zanganeh, participated in the September 2024 Private Placement, purchasing $78.50 million in shares[103][104] - Mr. Duggan exercised 3,985,055 warrants in March and April 2025 at an exercise price of $1.58 per share[106][107] - Incurred $0.4 million (Q2 2025) and $0.6 million (H1 2025) in legal expenses from Wilson Sonsini Goodrich & Rosati P.C., where a board member is a partner[108] 13. Commitments and Contingencies - The company has undiscounted operating lease commitments of $22.34 million for a new Palo Alto office space, expected to commence in Q1 2026[110] - Unable to estimate the amount, timing, or likelihood of achieving milestones or future product sales for contingent payment obligations under the Akeso agreements[112] - A derivative lawsuit was filed on March 17, 2025, concerning the December 2022 Notes, alleging breach of fiduciary duty and unjust enrichment[114] - An unknown third party filed a European Patent Opposition on June 18, 2025, against the ivonescimab patent EP3882275B1, asserting lack of inventive step[199] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, focusing on its lead oncology candidate ivonescimab, clinical trial progress, financial performance drivers, liquidity challenges, and going concern issues Company Overview - Summit Therapeutics is a biopharmaceutical company focused on oncology, with ivonescimab as its lead development candidate, a novel bispecific antibody combining PD-1 blockade with anti-VEGF effects[116][117] - The company is conducting Phase III clinical trials for ivonescimab in non-small cell lung cancer (NSCLC), including HARMONi, HARMONi-3, and HARMONi-7[118] - The HARMONi clinical trial completed enrollment in October 2024 and announced statistically significant and clinically meaningful improvement in progression-free survival (PFS) in May 2025 (HR 0.52)[118][140] - Based on HARMONi results, Summit intends to file a Biologics License Application (BLA) for ivonescimab plus chemotherapy[121][142] Akeso Collaboration and License Agreement - Summit holds rights to develop and commercialize ivonescimab in the Licensed Territory (US, Canada, Europe, Japan, Latin America, Middle East, and Africa)[123] - Upfront payments to Akeso included $474.9 million cash and 10 million shares in 2023, plus $15 million cash in Q3 2024 for expanded territories[123] - Akeso is eligible for up to $4.56 billion in regulatory and commercial milestones, plus low double-digit royalties on net sales[123] Ivonescimab - Ivonescimab is a novel, potential first-in-class PD-1 / VEGF bispecific antibody, engineered with Akeso's Tetrabody technology to enhance antitumor activity by cooperatively binding targets in the tumor micro-environment[125][127] - The design aims to improve efficacy and safety profiles by directing ivonescimab to tumor tissue versus healthy tissue[127] - Ivonescimab has been dosed in more than 2,800 patients globally across multiple Phase III and early-phase trials[128] Akeso-Sponsored Ivonescimab Trials - HARMONi-A (China-based Phase III) achieved its primary endpoint of PFS (HR: 0.46) in NSCLC patients who progressed after EGFR-TKI, leading to approval in China[130] - HARMONi-2 (China-based Phase III) demonstrated statistically significant PFS improvement (HR: 0.51) as monotherapy versus pembrolizumab in first-line PD-L1 positive NSCLC, approved in China in April 2025[132][134] - HARMONi-6 (China-based Phase III) showed statistically significant PFS improvement when ivonescimab combined with platinum-based chemotherapy in previously untreated advanced NSCLC[135] - Akeso is also conducting multiple other Phase III clinical trials for ivonescimab in various solid tumors[129] Product Pipeline (Summit Sponsored Ivonescimab Trials) - Summit is investigating ivonescimab in global Phase III clinical trials for NSCLC within its Licensed Territory[138] - The HARMONi study (2L+ EGFRm NSCLC) completed enrollment in North America and Europe in October 2024, with topline results in May 2025 showing statistically significant PFS (HR 0.52)[139][140] - The HARMONi-3 study (1L metastatic NSCLC) is actively enrolling patients in North America, China, and Europe, comparing ivonescimab plus chemotherapy to pembrolizumab plus chemotherapy[144][145] - The HARMONi-7 study is enrolling patients for first-line metastatic NSCLC with high PD-L1 expression, comparing ivonescimab monotherapy to pembrolizumab monotherapy[146] Results of Operations Results of Operations (in millions) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating expenses | $568.4 | $59.6 | $635.3 | $102.0 | | Other income, net | $2.7 | $2.3 | $6.7 | $4.3 | | Interest expense | — | $(3.1) | — | $(6.2) | | Net loss | $(565.7) | $(60.4) | $(628.6) | $(103.9) | - Net loss for Q2 2025 was $(565.7) million, a significant increase from $(60.4) million in Q2 2024, primarily due to higher operating expenses[151] Operating Expenses Operating Expense (in millions) | Operating Expense (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $208.0 | $30.8 | $259.3 | $61.7 | | General and administrative | $360.4 | $13.8 | $376.0 | $25.3 | - Research and development expenses increased by $162.2 million (QoQ) and $182.6 million (YoY) for the three and six months ended June 30, 2025, primarily due to a $123.7 million increase in stock-based compensation from option modification and increased oncology clinical trial costs[155] - General and administrative expenses increased by $346.6 million (QoQ) and $350.7 million (YoY) for the three and six months ended June 30, 2025, mainly driven by a $342.9 million increase in stock-based compensation from option modification, and higher compensation and legal fees[158][159] Other Income, net - Other income, net, increased by $0.4 million (QoQ) and $2.4 million (YoY) for the three and six months ended June 30, 2025, primarily due to higher investment income from increased short-term investment balances[161] Interest Expense - Interest expense decreased to zero for the three and six months ended June 30, 2025, compared to $3.1 million and $6.2 million, respectively, in the prior year periods, due to the full repayment of promissory notes in October 2024[162] Liquidity, Capital Resources and Going Concern - The company incurred a net loss of $565.7 million (Q2 2025) and $628.6 million (H1 2025), with cash used in operating activities of $127.9 million for H1 2025[163] - As of June 30, 2025, the company had an accumulated deficit of $1,843.2 million and cash and cash equivalents of $297.9 million[163] - The company's cash and cash equivalents are insufficient to fund planned operations for at least one year, raising substantial doubt about its ability to continue as a going concern[164][201] - The company plans to raise additional capital through equity and debt offerings, collaborations, strategic alliances, and licensing arrangements to fund ongoing operations and potential milestone payments of $4.56 billion to Akeso[165][169][171] Going Concern - The company's cash and cash equivalents are not sufficient to fund planned operations for at least one year from the financial statement issuance date, leading to substantial doubt about its ability to continue as a going concern[164][201] - Management is evaluating options to raise additional capital through various financing methods, but there is no assurance that funding will be available on acceptable terms[165] Sources of Liquidity - Operations have been financed primarily through common stock issuances, including a $235.0 million private placement in September 2024 and $44.2 million from an ATM Agreement in 2024[166] - The company has a shelf registration statement for up to $450 million, with $45.8 million remaining under its ATM program as of June 30, 2025[168] - Future capital requirements will depend on factors such as clinical development of ivonescimab, regulatory approvals, commercialization efforts, and potential milestone payments of $4.56 billion to Akeso[169][170] Cash Flows Cash Flow Activity (in millions) | Cash Flow Activity (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(127.9) | $(63.1) | | Net cash provided by (used in) investing activities | $310.9 | $(180.2) | | Net cash provided by financing activities | $9.9 | $200.7 | - Net cash used in operating activities increased to $127.9 million in H1 2025, primarily due to a net loss of $628.6 million and a $15.2 million net change in working capital, partially offset by $485.5 million in non-cash charges (mainly stock-based compensation)[174] - Net cash provided by investing activities was $310.9 million in H1 2025, mainly from $311.3 million received from maturities of short-term investments[178] - Net cash provided by financing activities was $9.9 million in H1 2025, from warrant exercises and employee stock awards, a decrease from $200.7 million in H1 2024 which included private placement proceeds[180][181] Critical Accounting Policies and Significant Judgments and Estimates - There have been no material changes to the company's critical accounting policies and estimates as disclosed in its Annual Report[183] - Management continues to evaluate estimates and judgments related to research and development expenses, stock-based compensation, and income taxes[182] Recently Issued Accounting Pronouncements - Refer to Note 2 for a discussion of recently issued accounting pronouncements, including the adoption of ASU 2023-09 and the evaluation of ASU 2024-03 and the OBBBA[186] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's primary exposures to market risk, including liquidity, foreign currency, interest rate, and credit risk, highlighting significant liquidity risk due to ongoing capital needs, while foreign currency and interest rate risks are currently deemed immaterial, and credit risk is considered low Liquidity Risk - The company faces significant liquidity risk due to its reliance on equity and debt securities for funding and the potential unavailability of adequate additional financing on acceptable terms[188] Foreign Currency Exchange Rate Risk - The company is exposed to foreign currency exchange rate risk from operating transactions denominated in pound sterling, U.S. dollar, Japanese Yen, and euro, but currently manages exposures through natural hedging, with no material impact[189] Interest Rate Risk - The company has minimal exposure to changes in the fair value of its investment portfolio due to the short-term nature of its cash, cash equivalents, and short-term investments[190] Credit Risk - The company considers its material counterparties creditworthy and has a low concentration of credit risk, with a high likelihood of collecting $1.4 million in research and development tax credits[191] Item 4. Controls and Procedures This section confirms that management, including the Co-Chief Executive Officers and Chief Operating Officer/Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter Disclosure Controls and Procedures - Management concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance as of June 30, 2025[193] Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[194] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section details two significant legal proceedings: a derivative lawsuit filed in March 2025 concerning the December 2022 Promissory Notes, alleging breach of fiduciary duty, and a European Patent Opposition filed in June 2025 against the ivonescimab patent Litigation Relating to the December 2022 Notes Entered into in Connection with the License Agreement - A derivative lawsuit was filed on March 17, 2025, alleging breach of fiduciary duty and unjust enrichment concerning the December 2022 Promissory Notes issued to Mr. Duggan and Dr. Zanganeh[197][198] - The suit seeks unspecified damages and rescission of shares received as prepaid interest payments under the notes[197] - A motion to dismiss the complaint was filed, and briefing is stayed pending a Delaware Supreme Court decision on similar constitutional questions[198] European Patent Opposition - On June 18, 2025, an unknown third party filed a notice of opposition against the company's in-licensed EP3882275B1 patent for ivonescimab in the European Patent Office, asserting lack of inventive step[199] - The company contests these assertions and intends to work with Akeso to file a timely response[199] Item 1A. Risk Factors This section refers to the Annual Report for a detailed discussion of risk factors, emphasizing the substantial doubt about the company's ability to continue as a going concern due to insufficient working capital and the uncertainty of raising additional funds - There is substantial doubt about the company's ability to continue as a going concern due to insufficient cash and cash equivalents to fund planned operations for the next twelve months[201] - Inability to raise additional capital could force delays or reductions in research and development programs, product portfolio expansion, or future commercialization efforts, potentially leading to a curtailment or cessation of operations[201] - No material changes to the risk factors disclosed in the Annual Report other than those explicitly mentioned in this Quarterly Report[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities during the reporting period that had not been previously disclosed in a Current Report on Form 8-K - No unregistered sales of equity securities occurred during the period covered by this Quarterly Report on Form 10-Q that were not previously included in a Current Report on Form 8-K[203] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - None[204] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - None[206] Item 5. Other Information This section indicates that there are no 10b5-1 trading plans to disclose - No 10b5-1 trading plans are reported[208] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including corporate governance documents, certifications from executive officers, and XBRL taxonomy files - Exhibits include the Restated Certificate of Incorporation and Amended and Restated Bylaws, along with their amendments[211] - Certifications from the Chairman and CEO, Executive Director, CEO, President, and Principal Financial Officer are included, pursuant to the Sarbanes-Oxley Act[211] - XBRL Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents, as well as the Cover Page Interactive Data File, are furnished[211] SIGNATURES