Summit Therapeutics (SMMT) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and management's analysis for the reporting period Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, detailing a significant net loss increase and strategic shift to oncology Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $70,969 | $348,607 | | Restricted cash | — | $300,000 | | Short-term investments | $170,963 | — | | Total current assets | $248,027 | $656,712 | | Total assets | $254,897 | $664,168 | | Total current liabilities | $17,443 | $38,782 | | Promissory note payable to a related party (non-current) | $100,000 | $494,540 | | Total liabilities | $121,415 | $537,514 | | Total stockholders' equity | $133,482 | $126,654 | Condensed Consolidated Statements of Comprehensive Loss Reports the company's financial performance, including net loss and other comprehensive income (loss) for the period Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $— | $250 | | Research and development | $9,883 | $20,556 | | In-process research and development | $520,915 | $— | | General and administrative | $6,940 | $6,659 | | Total operating expenses | $537,738 | $27,215 | | Other operating income | $584 | $4,807 | | Operating loss | $(537,154) | $(22,158) | | Other (expense) income, net | $(5,222) | $761 | | Net loss | $(542,376) | $(21,397) | | Net loss per share (Basic and diluted) | $(1.43) | $(0.15) | | Weighted-average shares (Basic and diluted) | 378,163,980 | 140,040,370 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in the company's equity accounts, reflecting stock transactions and net loss Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2022 | Rights offering of common stock | Issuance of common stock for Akeso upfront payment | Net loss | Balance at Mar 31, 2023 | | :-------------------------- | :---------------------- | :------------------------------ | :----------------------------------------- | :--------- | :---------------------- | | Common Stock (Shares) | 211,091,425 | 476,190,471 | 10,000,000 | — | 697,685,365 | | Common Stock (Amount) | $2,110 | $4,762 | $100 | — | $6,976 | | Additional Paid-In Capital | $504,767 | $494,619 | $45,800 | — | $1,048,608 | | Accumulated Deficit | $(378,330) | — | — | $(542,376) | $(920,706) | | Total Stockholders' Equity | $126,654 | $499,381 | $45,900 | $(542,376) | $133,482 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(13,131) | $(19,001) | | Net cash used in investing activities | $(645,063) | $(361) | | Net cash provided by financing activities | $80,112 | $25,187 | | (Decrease) increase in cash and cash equivalents | $(577,638) | $5,659 | | Cash and cash equivalents at end of the period | $70,969 | $77,450 | - 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: $395,314 thousand (Q1 2023)[24] - Issuance of common stock pursuant to the Akeso License Agreement: $45,900 thousand (Q1 2023)[24] Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Nature of Business and Operations and Recent Events Describes the company's strategic shift to oncology, recent corporate actions, and clinical development updates - Company's strategy significantly changed to focus on oncology, specifically the development of ivonescimab[29] - All prior development and marketing activities for ridinilazole (anti-infective) are being terminated, with anti-infectives business activities under review for partnership opportunities[27][29] - In-licensed ivonescimab, a bispecific antibody combining PD-1 blockade with anti-VEGF benefits, from Akeso, Inc. for development and commercialization in the US, Canada, Europe, and Japan[28] 2023 Rights Offering Details | Metric | Value | | :-------------------- | :---------- | | Gross Proceeds | $500,000 | | Shares Sold | 476,190,471 | | Price Per Share | $1.05 | | Issuance Costs | $619 | - Authorized common stock increased from 350,000,000 to 1,000,000,000 shares on January 19, 2023[31] - Repaid $20,000 thousand Zanganeh Note and satisfied $400,000 thousand Duggan Promissory Note in February 2023[32] - Announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer (NSCLC) in May 2023 (HARMONi and HARMONi-3)[34] - First US-based patient enrolled in Phase III HARMONi study in May 2023[36] Note 2. Basis of Presentation and Use of Estimates Explains the accounting principles, estimates, and assumptions used in preparing the financial statements - Unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP and SEC rules, with interim data including all necessary normal recurring adjustments[37] - Marketable securities are classified as available-for-sale, recorded at fair value, with unrealized gains and losses in other comprehensive income (loss)[39] - Estimates for expected credit losses are made when fair value is below amortized cost[40] - Management makes estimates and assumptions for revenue recognition, accrued R&D expenses, stock-based compensation, intangible assets, goodwill, other long-lived assets, and income taxes[41][43] Note 3. Recently Issued or Adopted Accounting Pronouncements Discusses the impact of new accounting standards on the company's financial reporting - ASU 2021-04 clarifies issuer's accounting for modifications or exchanges of freestanding equity-classified written call options, effective for annual periods beginning after December 15, 2021, with no material impact on the Company's financial statements for 2023 or 2022[44] - Other recent authoritative guidance is not expected to have a material impact on the Company's consolidated financial statements[45] Note 4. Liquidity and Capital Resources Assesses the company's ability to meet its financial obligations and fund future operations Key Financial Metrics (in thousands) | Metric | As of March 31, 2023 | | :------------------------------------ | :------------------- | | Net loss (three months ended) | $(542,376) | | Cash flows used in operating activities (three months ended) | $(13,131) | | Accumulated deficit | $(920,706) | | Cash and cash equivalents | $70,969 | | Short-term investments (U.S. treasury securities) | $170,963 | | Current and long-term U.K. R&D tax credits receivable | $5,035 | - Existing cash, cash equivalents, and U.K. R&D tax credits are expected to fund operating costs and working capital for ivonescimab clinical trials for at least twelve months from the issuance date of the financial statements[47] - The Company expects to continue generating operating losses and will need to raise additional capital to fund ongoing operations and capital needs, including potential milestone payments[48] - Evaluating options such as equity and debt offerings, collaborations, strategic alliances, grants, and licensing arrangements, with no assurance that additional financing will be available on acceptable terms, which could lead to delays or termination of R&D programs[48] Note 5. Segment Reporting Identifies the company's operating segments and provides geographical information on long-lived assets - The Company operates as a single reportable operating segment, covering research and development activities, primarily oncology (ivonescimab) and anti-infectives programs[52] Long-Lived Assets by Geography (in thousands) | Geography | March 31, 2023 | December 31, 2022 | | :---------------- | :------------- | :---------------- | | United Kingdom | $1,983 | $2,517 | | United States | $2,358 | $2,564 | | Total | $4,341 | $5,081 | Note 6. Revenue Details the sources and recognition of the company's revenue, including changes from prior periods Revenue by Category (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------- | :-------------------------------- | :-------------------------------- | | Licensing agreements | $— | $250 | Revenue by Geography (in thousands) | Geography | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------- | :-------------------------------- | :-------------------------------- | | Latin America | $— | $250 | Deferred Revenue and Other Income (in thousands) | Metric | March 31, 2023 | March 31, 2022 | | :---------------------------------------------------------------- | :------------- | :------------- | | Ending deferred revenue and other income | $— | $5,097 | - No revenue recognized in Q1 2023[54] - Q1 2022 revenue related to the Eurofarma license and commercialization agreement for ridinilazole[54] - Cumulative income from Eurofarma since inception was $4.7 million as of December 31, 2022, fully recognized by 2022 due to the decision to seek partners or divest ridinilazole[60] Note 7. Other Operating Income Explains the components and changes in other operating income, such as tax credits and grant funding Other Operating Income by Category (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Funding income from BARDA | $— | $2,634 | | Research and development tax credits | $542 | $1,696 | | Grant income from CARB-X | $34 | $477 | | Other income | $8 | $— | | Total | $584 | $4,807 | - BARDA funding contract concluded in December 2022, resulting in no income in Q1 2023 (vs. $2,634 thousand in Q1 2022)[63] - CARB-X grant income decreased due to the arrangement concluding in 2022 and the strategic shift away from anti-infectives[68] - Research and development tax credits decreased due to reduced clinical and manufacturing activity for ridinilazole and changes in U.K. tax legislation[65] - R&D tax credit receivable (current): $4,500 thousand (March 31, 2023) vs. $5,766 thousand (Dec 31, 2022)[67] Note 8. Akeso Collaboration and License Agreement Describes the terms and financial impact of the ivonescimab in-licensing agreement - Entered into a Collaboration and License Agreement with Akeso, Inc. on December 5, 2022, for in-licensing ivonescimab (SMT112)[69] - Agreement closed in January 2023, granting Summit rights to develop and commercialize SMT112 in the US, Canada, Europe, and Japan[70] - Upfront payment of $500,000 thousand to Akeso, paid as $274,900 thousand in cash initially, $200,000 thousand in cash on March 6, 2023, and 10 million shares of common stock in lieu of $25,100 thousand cash (fair value $45,900 thousand)[71] - Total in-process research and development expense for Q1 2023 was $520,915 thousand, including direct transaction costs[73] - Potential milestone payments up to $4,500,000 thousand ($1,050,000 thousand regulatory, $3,450,000 thousand commercial) and low double-digit royalties on net sales[74] Note 9. Other (Expense) Income, net Presents the breakdown of non-operating income and expenses, including interest and investment income Other (Expense) Income, net (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Foreign currency gains (losses) | $508 | $930 | | Interest expense on promissory notes payable to related parties | $(8,327) | $(152) | | Investment income | $1,761 | $— | | Reclassification of cumulative currency translation gain | $419 | $— | | Other income (expense) | $417 | $(17) | | Total | $(5,222) | $761 | - Shift from net income to net expense primarily due to a significant increase in interest expense on related party promissory notes ($8,327 thousand in Q1 2023 vs. $152 thousand in Q1 2022)[75] - Partially offset by new investment income ($1,761 thousand in Q1 2023) and reclassification of cumulative currency translation gain ($419 thousand) from dissolved dormant entities[75][76] Note 10. Loss per Share Provides the calculation of basic and diluted net loss per share and related share data Loss per Share Data | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss (in thousands) | $(542,376) | $(21,397) | | Basic weighted average shares outstanding | 378,163,980 | 140,040,370 | | Diluted weighted average shares outstanding | 378,163,980 | 140,040,370 | | Basic net loss per share | $(1.43) | $(0.15) | | Diluted net loss per share | $(1.43) | $(0.15) | - Potentially dilutive securities (options and warrants) were excluded from diluted EPS calculation as their effect would have been anti-dilutive due to the Company's loss position[76] - Total anti-dilutive securities: 26,207,731 (March 31, 2023) vs. 19,097,646 (March 31, 2022)[79] Note 11. Fair Value Measurements and Investments Details the fair value hierarchy and classification of financial assets and investments - Financial assets are measured at fair value using a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: observable inputs other than Level 1 prices; Level 3: unobservable inputs)[81][82][83] Fair Value Measurements as of March 31, 2023 (in thousands) | Asset Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :------ | :-------- | :------ | :------ | | Cash equivalents: Money market funds | $21,090 | $— | $— | $21,090 | | Short-term investments: U.S. Government treasury bills | $— | $170,963 | $— | $170,963 | | Total financial assets | $21,090 | $170,963 | $— | $192,053 | Investments by Contractual Maturity as of March 31, 2023 (in thousands) | Maturity | Amortized Cost | Fair Value | | :--------------- | :------------- | :--------- | | Due within one year | $169,995 | $170,963 | | Total | $169,995 | $170,963 | Note 12. Goodwill and Intangible Assets Reports the carrying amounts and changes in goodwill and other intangible assets Goodwill (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :------- | :------------- | :---------------- | | Goodwill | $1,839 | $1,798 | - Goodwill changes are due to foreign currency movements only; no cumulative goodwill impairments recognized[91] Intangible Assets (in thousands) | Asset Category | Gross Carrying Amount (Mar 31, 2023) | Accumulated Amortization and Impairment (Mar 31, 2023) | Net (Mar 31, 2023) | | :-------------------------- | :----------------------------------- | :--------------------------------------------------- | :----------------- | | Utrophin program acquired | $4,487 | $(4,487) | $— | | Discuva platform acquired | $13,196 | $(13,196) | $— | | Option over non-financial asset | $835 | $(835) | $— | | Other patents and licenses | $136 | $(136) | $— | | Total | $18,654 | $(18,654) | $— | - Amortization expense for Q1 2023 was $0, compared to $248 thousand in Q1 2022[92] Note 13. Leases Outlines the company's lease commitments, costs, and related financial information - The Company has operating leases for real estate, with no new right-of-use assets recorded in Q1 2023 or Q1 2022[93] - Carrying value of right-of-use assets: $3,928 thousand (March 31, 2023) vs. $4,175 thousand (Dec 31, 2022)[93] Lease Costs (in thousands) | Lease Cost Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------ | :-------------------------------- | :-------------------------------- | | Fixed lease costs | $346 | $212 | | Variable lease costs | $43 | $10 | | Total lease cost | $389 | $222 | Other Lease Information | Metric | March 31, 2023 | March 31, 2022 | | :---------------------------------- | :------------- | :------------- | | Operating cash flows used for operating leases | $367 | $297 | | Weighted average remaining lease term (years) | 3.1 | 4.1 | | Weighted average discount rate | 5.7% | 2.7% | Note 14. Promissory Notes Payable to Related Parties Details the terms, balances, and activity of promissory notes with related parties Promissory Notes Payable to Related Parties (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :------------------------------------ | :------------- | :---------------- | | Current notes (Principal amounts) | $— | $20,000 | | Non-current notes (Principal amounts) | $100,000 | $500,000 | | Total promissory notes payable to related parties | $100,000 | $514,310 | - In December 2022, issued $520,000 thousand in unsecured promissory notes to Mr. Duggan ($400,000 thousand Duggan February Note, $100,000 thousand Duggan September Note) and Dr. Zanganeh ($20,000 thousand Zanganeh Note)[97] - The $20,000 thousand Zanganeh Note matured and was repaid on February 15, 2023[99] - The $400,000 thousand Duggan Promissory Note matured and was satisfied in connection with the 2023 Rights Offering, using cash proceeds and extinguishment of debt via share subscription[104] - Only the $100,000 thousand Duggan September Note remains outstanding, maturing on September 6, 2024[104] - Interest expense on promissory notes was $8,327 thousand for Q1 2023, significantly up from $152 thousand in Q1 2022[100] - Initial interest rate was 7.5%; adjusted to US prime + 50 bps for three months post-February 15, 2023, then US prime + 300 bps[102] Note 15. Stock-Based Compensation and Warrants Provides information on stock option activity, compensation expense, and outstanding warrants Stock Option Activity (Shares) | Metric | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | | Outstanding at December 31, 2022 | 19,476,359 | | Granted | 918,950 | | Forfeited | (38,250) | | Exercised | (177,237) | | Outstanding at March 31, 2023 | 20,179,822 | | Exercisable at March 31, 2023 | 3,920,110 | Total Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,086 | $1,874 | | General and administrative | $1,689 | $2,122 | | Total | $2,775 | $3,996 | - Outstanding and exercisable warrants: 5,821,137 with a weighted average exercise price of $1.56 as of March 31, 2023[109] Note 16. Related Party Transactions Describes significant transactions and agreements with related parties - Extended sublease agreement with Maky Zanganeh and Associates, Inc. (MZA) for office space through December 31, 2025, adding an additional 1,277 square feet effective August 1, 2022[110][111] - Payments to MZA: $189 thousand (Q1 2023) and $54 thousand (Q1 2023) for the initial and second amendments, respectively[111] - December 2022 Note Purchase Agreement with Mr. Duggan and Dr. Zanganeh for $520,000 thousand in unsecured promissory notes[115] - Repaid $20,000 thousand Zanganeh Note and satisfied $400,000 thousand Duggan Promissory Note in Q1 2023[117] - Prepaid interest on notes paid in 9,720,291 shares of common stock[118] - Dr. Yu (Michelle) Xia, founder of Akeso, Inc., appointed to the Board of Directors, and entered into a Supply Agreement with Akeso for drug substance purchase[119] - Mr. Duggan and Dr. Zanganeh fully subscribed to their basic rights in the 2023 Rights Offering[121] - Mr. Duggan's $395,314 thousand subscription price was satisfied by extinguishing a portion of his $400,000 thousand Duggan Promissory Note[121] Note 17. Commitments and Contingencies Discloses the company's contractual obligations and potential contingent liabilities - No capital commitments as of March 31, 2023, with lease commitments for office and laboratory space remaining materially unchanged since Dec 31, 2022, and debt commitments detailed in Note 14[123][124][125] - Commitments under agreements with Akeso (milestones, royalties, manufacturing/purchase commitments), Wellcome Trust, University College London, and former Discuva personnel exist[127] - Unable to estimate the amount, timing, or likelihood of achieving milestones or making future product sales for these obligations[127] - The Company is not currently subject to any material legal proceedings[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on Summit Therapeutics Inc.'s financial condition and operational results for the three months ended March 31, 2023 Company Overview Provides a high-level summary of Summit Therapeutics Inc.'s business and strategic focus - Summit Therapeutics Inc. is a biopharmaceutical company focused on the discovery, development, and commercialization of medicinal therapies in oncology, aiming to improve quality of life and resolve unmet medical needs[133] Recent Events Highlights significant corporate and clinical developments impacting the company's operations and strategy - Entered into a Collaboration and License Agreement with Akeso, Inc. for ivonescimab, a bispecific antibody for oncology, in December 2022 (closed January 2023), representing a significant change in strategy[134] - Terminating prior ridinilazole development and reviewing anti-infectives for partnership opportunities, with future operations focusing on ivonescimab development and other oncology activities[135] - Completed a 2023 Rights Offering, generating $500,000 thousand in gross proceeds from 476,190,471 shares at $1.05 per share[136] - Increased authorized common stock to 1,000,000,000 shares[137] - Repaid $20,000 thousand Zanganeh Note and satisfied $400,000 thousand Duggan Promissory Note[138] - Announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer (NSCLC) in May 2023 (HARMONi and HARMONi-3), with the first US-based patient enrolled in the Phase III HARMONi study in May 2023[139] - Re-prioritizing investments and financial resources towards ivonescimab development, leading to reduced investment in infectious diseases programs and associated costs[140] Results of Operations Analyzes the company's financial performance, including revenue, expenses, and net loss, for the reporting period Consolidated Results of Operations (in millions) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change ($ millions) | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------ | :--------- | | Revenue | $— | $0.3 | $(0.3) | -100% | | Research and development | $9.9 | $20.6 | $(10.7) | -51.9% | | In-process research and development | $520.9 | $— | $520.9 | N/A | | General and administrative | $6.9 | $6.7 | $0.2 | 3.0% | | Total operating expenses | $537.7 | $27.3 | $510.4 | 1869.6% | | Other operating income | $0.6 | $4.8 | $(4.2) | -87.5% | | Operating loss | $(537.1) | $(22.2) | $(514.9) | 2319.4% | | Other (expense) income, net | $(5.2) | $0.8 | $(6.0) | -750% | | Net loss | $(542.3) | $(21.4) | $(520.9) | 2434.1% | - Revenue decreased to $0 in Q1 2023 from $0.3 million in Q1 2022, as all milestones from the Eurofarma license agreement were fully recognized by 2022, and the Company decided to seek partners or divest ridinilazole[142] Research and Development Expenses by Category (in millions) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Oncology | $2.4 | $— | | Anti-infectives | $0.4 | $12.5 | | Compensation related costs (excl. stock-based) | $4.8 | $5.0 | | Stock-based compensation | $1.1 | $1.9 | | Other R&D costs | $1.2 | $1.2 | | Total | $9.9 | $20.6 | - R&D Expenses decreased by $10.7 million, primarily due to a $12.1 million decrease from winding down anti-infective programs and a $0.8 million decrease in stock-based compensation, partially offset by a $2.4 million investment in oncology (ivonescimab)[145] - In-process R&D: $520.9 million expense in Q1 2023, mainly from the $500 million upfront payment for the ivonescimab License Agreement, including cash and common stock components[148] General and Administrative Expenses by Category (in millions) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Compensation related costs (excl. stock-based) | $2.5 | $2.0 | | Stock-based compensation | $1.7 | $2.0 | | Legal fees and professional services | $1.7 | $1.6 | | Other G&A expenses | $1.0 | $1.1 | | Total | $6.9 | $6.7 | - G&A Expenses increased by $0.2 million, driven by a $0.5 million increase in compensation-related expenses for building the executive management team, partially offset by a $0.3 million decrease in stock-based compensation[150] Other Operating Income by Category (in millions) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development tax credits | $0.6 | $1.7 | | Funding income from BARDA | $— | $2.6 | | Grant income from CARB-X | $— | $0.5 | | Total | $0.6 | $4.8 | - Other Operating Income decreased by $4.2 million, primarily due to the cessation of BARDA funding ($2.6 million decrease) and CARB-X grant income ($0.5 million decrease) as anti-infective programs wound down, and a $1.1 million decrease in U.K. R&D tax credits[152][153][154] Other (Expense) Income, net (in millions) | Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Foreign currency gains (losses) | $0.5 | $0.9 | | Interest expense on promissory notes payable to related parties | $(8.3) | $(0.1) | | Investment income | $1.8 | $— | | Reclassification of cumulative currency translation gain | $0.4 | $— | | Other income (expense) | $0.4 | $— | | Total | $(5.2) | $0.8 | - Other (Expense) Income, net decreased by $6.0 million, mainly due to an $8.2 million increase in interest expense on related party promissory notes, partially offset by $1.8 million in investment income and a $0.4 million reclassification of cumulative foreign currency translation gains from dissolved dormant entities[156] Liquidity and Capital Resources Assesses the company's ability to meet its financial obligations and fund future operations - Operations financed through common stock issuances, license/collaboration agreements, government funding (BARDA, CARB-X, Innovate UK, Wellcome Trust), and related party promissory notes[157] Key Liquidity Metrics (in millions) | Metric | As of March 31, 2023 | | :------------------------------------ | :------------------- | | Net loss (three months ended) | $(542.4) | | Cash flows used in operating activities (three months ended) | $(13.1) | | Accumulated deficit | $(920.7) | | Cash and cash equivalents | $71.0 | | Short-term investments (U.S. treasury securities) | $170.963 | | Current and long-term U.K. R&D tax credits receivable | $5.0 | - Current financial resources are expected to fund operating costs and working capital for ivonescimab clinical trials into the second half of 2024[164] - Significant additional capital will be required for ongoing operations and potential milestone payments to Akeso (up to $4.5 billion)[165] - The Company is exploring various financing options (equity, debt, collaborations) but there is no assurance of availability or acceptable terms, which could impact development and commercialization efforts[165] Cash Flows Analyzes the company's cash inflows and outflows from operating, investing, and financing activities Summary of Cash Flows (in millions) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(13.1) | $(19.0) | | Net cash used in investing activities | $(645.1) | $(0.4) | | Net cash provided by financing activities | $80.1 | $25.2 | - Net cash used in operating activities decreased to $13.1 million (Q1 2023) from $19.0 million (Q1 2022), despite a higher net loss, due to adjustments for non-cash charges and cash payments reclassified to investing activities for the Akeso upfront payment[168][169] - Net cash used in investing activities significantly increased to $645.1 million (Q1 2023) from $0.4 million (Q1 2022), primarily due to $475.0 million cash payment to Akeso for the License Agreement and $170.0 million for short-term investments[170] - Net cash provided by financing activities was $80.1 million (Q1 2023), mainly from $104.1 million net proceeds from the 2023 Rights Offering (net of $395.3 million debt extinguishment) and $0.7 million from employee stock awards, offset by $24.7 million repayment of related party promissory notes[171] Critical Accounting Policies and Significant Judgments and Estimates Discusses the key accounting policies and estimates that require significant management judgment - Financial statements require estimates and judgments for revenue recognition, R&D costs, intangible assets, stock-based compensation, and income taxes[173] - No material changes to critical accounting policies and estimates were reported since the Annual Report on Form 10-K for the year ended December 31, 2022[175] Contractual obligations and commitments Outlines the company's contractual obligations and future financial commitments - Lease commitments for office and laboratory space remain materially unchanged since December 31, 2022[176] - Contingent payment obligations include commitments under agreements with Akeso (milestones, royalties, manufacturing/purchase), Wellcome Trust, University College London, and former Discuva personnel[177] - The amount, timing, or likelihood of these contingent payments cannot be estimated as of March 31, 2023[177] - Most contracts for clinical trials, preclinical research, manufacturing, and other services are cancellable upon notice[178] Off-Balance Sheet Arrangements Discloses any off-balance sheet transactions or arrangements that could have a material effect on the financial condition - The Company did not have any off-balance sheet arrangements during the periods presented[179] Recently Issued Accounting Pronouncements Refers to the discussion of new accounting standards and their potential impact - Refer to Note 3 for a discussion of recently issued or adopted accounting pronouncements[180] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company" under SEC regulations, Summit Therapeutics Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a "smaller reporting company"[181] Item 4. Controls and Procedures Details the evaluation of Summit Therapeutics Inc.'s disclosure controls and procedures and reports on changes in internal control over financial reporting Disclosure Controls and Procedures Reports on the effectiveness of the company's disclosure controls and procedures - Management, including Co-Chief Executive Officers and Chief Financial Officer, concluded that disclosure controls and procedures were effective at a reasonable level of assurance as of March 31, 2023[183] Changes in Internal Control over Financial Reporting Describes any material changes in the company's internal control over financial reporting - A new Enterprise Resource Planning (ERP) system was implemented during Q1 2023, leading to necessary updates in internal control over financial reporting processes[184] - No other material changes to internal control over financial reporting occurred during the period[184] PART II - OTHER INFORMATION Contains supplementary disclosures including legal proceedings, risk factors, and exhibit listings Item 1. Legal Proceedings Summit Therapeutics Inc. is not currently involved in any material legal proceedings - The Company is not currently subject to any material legal proceedings[186] Item 1A. Risk Factors This section refers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K, noting that no material changes to these risks have occurred since that filing - Information regarding risk factors is discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2023[187] - No material changes to the previously disclosed risk factors have occurred[187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There are no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[188] Item 3. Defaults Upon Senior Securities The Company has not experienced any defaults upon senior securities during the reporting period - No defaults upon senior securities to report[189] Item 4. Mine Safety Disclosures There are no mine safety disclosures applicable to Summit Therapeutics Inc - No mine safety disclosures to report[191] Item 5. Other Information No other information is required to be reported in this section - No other information to report[192] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications, and XBRL data files - Key exhibits include: - Amendment No. 2 to Restated Certificate of Incorporation[194] - Certifications of Chairman and CEO, Co-CEO, and Principal Financial Officer (pursuant to Sarbanes-Oxley Act)[194] - XBRL Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[194] - Cover Page Interactive Data File[194] Signatures The report is duly signed on behalf of Summit Therapeutics Inc. by its Chief Financial Officer - The report was signed by Ankur Dhingra, Chief Financial Officer, on May 11, 2023[197]