Summit Therapeutics (SMMT) - 2023 Q3 - Quarterly Report

Information Regarding Forward-Looking Statements This section cautions that forward-looking statements in the Form 10-Q involve substantial risks, and actual results may differ materially - The report contains forward-looking statements regarding strategy, future operations, financial position, revenues, costs, prospects, plans, and objectives[10] - Key forward-looking statements encompass the ability to develop successful product candidates like ivonescimab, raise additional funds, manage clinical trial timing, achieve market acceptance, and secure intellectual property[13] - Readers are cautioned against undue reliance on these statements, as actual results could materially differ due to factors outlined in the 'Risk Factors' section[11] 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 cash flows, with detailed explanatory notes Condensed Consolidated Balance Sheets Total assets and cash significantly decreased from December 2022 to September 2023, primarily due to short-term investments and Akeso payments, while total liabilities also saw a substantial reduction Condensed Consolidated Balance Sheet Summary | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $23,792 | $348,607 | $(324,815) | -93.18% | | Restricted cash | — | $300,000 | $(300,000) | -100.00% | | Short-term investments | $175,153 | — | $175,153 | N/A | | Total current assets | $204,951 | $656,712 | $(451,761) | -68.80% | | Total assets | $218,476 | $664,168 | $(445,692) | -67.11% | | Total current liabilities | $113,742 | $38,782 | $74,960 | 193.29% | | Total liabilities | $119,097 | $537,514 | $(418,417) | -77.84% | | Total stockholders' equity | $99,379 | $126,654 | $(27,275) | -21.54% | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss significantly increased for the nine months ended September 30, 2023, driven by a substantial in-process research and development expense for the ivonescimab license agreement Condensed Consolidated Statements of Operations Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $— | $220 | $— | $705 | | R&D Expenses | $15,323 | $17,049 | $34,657 | $46,613 | | In-process R&D | $— | $— | $520,915 | $— | | G&A Expenses | $5,434 | $5,573 | $18,690 | $19,165 | | Total Operating Exp. | $20,757 | $22,622 | $574,262 | $65,778 | | Operating Loss | $(20,492) | $(16,940) | $(573,440) | $(51,790) | | Net Loss | $(21,268) | $(21,385) | $(578,361) | $(59,553) | | Basic & Diluted EPS | $(0.03) | $(0.10) | $(0.98) | $(0.37) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $126.65 million to $99.38 million due to a significant net loss, partially offset by a rights offering and common stock issuance for the Akeso upfront payment Condensed Consolidated Statements of Stockholders' Equity Summary | Metric (in thousands) | Dec 31, 2022 | Sep 30, 2023 | | :-------------------- | :----------- | :----------- | | Common Stock (shares) | 211,091,425 | 697,851,308 | | Common Stock (amount) | $2,110 | $6,978 | | Additional Paid-In Capital | $504,767 | $1,051,415 | | Accumulated Deficit | $(378,330) | $(956,691) | | Total Stockholders' Equity | $126,654 | $99,379 | - The 2023 Rights Offering generated $499.38 million (net of costs) from the sale of 476,190,471 shares[21] - 10,000,000 shares of common stock were issued for $45.90 million as part of the Akeso upfront payment[21] Condensed Consolidated Statements of Cash Flows Significant cash outflows from investing activities, primarily for the Akeso upfront payment and short-term investments, were partially offset by cash provided by financing activities from a rights offering Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(57,301) | $(46,773) | | Net cash used in investing activities | $(648,342) | $(634) | | Net cash provided by financing activities | $80,261 | $100,184 | | Decrease in cash and cash equivalents | $(624,815) | $50,180 | | Cash and cash equivalents at end of period | $23,792 | $121,971 | - Investing activities included $475.02 million cash payment to Akeso for upfront milestone payments and $321.02 million for short-term investments[23] - Financing activities included $104.69 million from the 2023 Rights Offering and repayment of $24.69 million in related party promissory notes[23] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering business, accounting policies, liquidity, and significant transactions Note 1. Nature of Business and Operations and Recent Events Summit Therapeutics Inc. strategically shifted its focus to oncology, centered on the in-licensed bispecific antibody ivonescimab, initiating Phase III trials and completing a major rights offering - The company's strategy has significantly shifted to oncology, focusing on the development of ivonescimab (SMT112) for non-small cell lung cancer (NSCLC)[28][141] - Phase III clinical trials (HARMONi and HARMONi-3) for ivonescimab in EGFR-mutated and first-line metastatic squamous NSCLC have commenced[29][33][142][151] - A 2023 Rights Offering generated $500 million in gross proceeds from the sale of 476,190,471 shares of common stock[31][145] - The company entered into a Note Purchase Agreement for $520 million in unsecured promissory notes with its Co-CEOs, with a significant portion repaid through the rights offering[32][145] Note 2. Basis of Presentation, Use of Estimates, and Risks and Uncertainties The unaudited condensed consolidated financial statements are prepared under U.S. GAAP, relying on management's estimates and judgments, while acknowledging potential adverse impacts from COVID-19 and supply chain issues - Financial statements are prepared under U.S. GAAP, and management's estimates are crucial for reported amounts[39][44] - The company considers highly liquid investments with a maturity of 90 days or less as cash equivalents, including money market funds and U.S. treasury securities[40] - Potential adverse impacts from COVID-19 outbreaks and supply chain issues are noted as risks[45] Note 3. Recently Issued or Adopted Accounting Pronouncements The company adopted ASU 2016-13 on January 1, 2023, which had no material impact on its financial statements, and other recent guidance is not expected to have a material effect - ASU 2016-13 (CECL model) was adopted on January 1, 2023, with no material impact on financial statements[46] - ASU No. 2021-04, related to equity-classified written call options, had no modifications or exchanges during 2023 or 2022[47][49] Note 4. Liquidity and Capital Resources Significant net losses and cash outflows resulted in a substantial accumulated deficit, raising doubt about the company's ability to continue as a going concern without raising additional capital Liquidity and Capital Resources Summary | Metric (in thousands) | 9 Months Ended Sep 30, 2023 | | :-------------------- | :-------------------------- | | Net loss | $(578,361) | | Cash flows used in operating activities | $(57,301) | | Accumulated deficit | $(956,691) | | Cash and cash equivalents | $23,792 | | Short-term investments | $175,153 | | R&D tax credit receivable | $1,559 | - The company has a $100 million promissory note payable to a related party maturing on September 6, 2024, and intends to raise additional capital to repay it[51] - These conditions raise substantial doubt about the company's ability to continue as a going concern for at least one year from the issuance date of the financial statements[51] Note 5. Segment Reporting The company operates as a single reportable operating segment focused on oncology product research and development, with long-lived assets distributed across the U.K. and the U.S - The company's chief operating decision makers view and manage the business as a single operating segment, primarily oncology product research activities[54] Long-Lived Assets by Geographic Region | Geographic Region | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :---------------- | :-------------------------- | :-------------------------- | | United Kingdom | $832 | $2,517 | | United States | $5,800 | $2,564 | | Total | $6,632 | $5,081 | Note 6. Revenue The company recognized no revenue for the three and nine months ended September 30, 2023, as prior period revenue from the Eurofarma agreement concluded in 2022 Revenue Summary | Revenue Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Licensing agreements | $— | $220 | $— | $705 | - Revenue from the Eurofarma agreement was fully recognized by 2022, and no additional milestone payments are expected[57][159] Note 7. Other Operating Income, net Other operating income significantly decreased due to the conclusion of funding from BARDA and CARB-X, and a reduction in U.K. research and development tax credits Other Operating Income Summary | Income Category (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Funding income from BARDA | $— | $3,889 | $— | $7,774 | | Research and development tax credits | $265 | $1,224 | $768 | $3,730 | | Grant income from CARB-X | $— | $349 | $45 | $1,779 | | Total | $265 | $5,462 | $822 | $13,283 | - BARDA contract ended in 2022, and CARB-X arrangement concluded in 2022, leading to no further income from these sources[63][68][171][172] - R&D tax credits decreased due to reduced clinical and manufacturing activity for ridinilazole and changes in U.K. tax legislation[170] Note 8. Akeso Collaboration and License Agreement Summit in-licensed ivonescimab from Akeso in January 2023, involving a $500 million upfront payment expensed as in-process R&D, with potential future milestones up to $4.5 billion - Summit in-licensed ivonescimab (SMT112) from Akeso, a bispecific antibody combining PD-1 blockade and anti-VEGF effects for oncology, with rights in the US, Canada, Europe, and Japan[27][30][69][70] - An upfront payment of $500 million was made to Akeso, consisting of $274.9 million cash, 10 million shares of common stock (fair value $45.9 million), and a remaining $200 million cash payment[71][72][166] - The upfront payment was expensed as $520.9 million in-process research and development due to the asset being in clinical development[72][166] - Akeso is eligible for up to $4.5 billion in regulatory and commercial milestones, plus low double-digit royalties on net sales[73] Note 9. Other (Expense) Income, net Other (expense) income, net, for the nine months ended September 30, 2023, was a net expense of $4.92 million, primarily due to interest expense on related party promissory notes, partially offset by interest income Other (Expense) Income Summary | Metric (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Foreign currency gains (losses) | $(475) | $(3,799) | $344 | $(6,281) | | Interest expense on promissory notes | $(2,722) | $(692) | $(13,564) | $(1,497) | | Interest income | $2,485 | $— | $8,028 | $— | | Total | $(776) | $(4,445) | $(4,921) | $(7,763) | - Interest expense increased significantly due to the $520 million promissory notes issued to Co-CEOs in December 2022[76][176] - Interest income increased due to investments in money market funds and U.S. treasury securities[76][176] Note 10. Loss per Share Basic and diluted net loss per share for the nine months ended September 30, 2023, was $(0.98), reflecting a higher net loss, with potentially dilutive securities excluded as anti-dilutive Loss per Share Summary | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss per share (Basic & Diluted) | $(0.03) | $(0.10) | $(0.98) | $(0.37) | | Weighted-average shares (Basic & Diluted) | 697,739,477 | 208,909,351 | 592,366,880 | 161,846,345 | - Potentially dilutive securities, including stock options and warrants, were excluded from diluted EPS calculation due to the company being in a net loss position[77][79] Note 11. Fair Value Measurements and Investments The company's financial assets measured at fair value primarily consist of money market funds and U.S. Government treasury bills, with short-term investments totaling $175.15 million as of September 30, 2023 Fair Value Measurements and Investments Summary | Asset Category (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :---------------------------- | :------ | :------ | :------ | :---- | | Money market funds | $4,711 | $— | $— | $4,711 | | U.S. Government treasury bills | $— | $175,153 | $— | $175,153 | | Total financial assets | $4,711 | $175,153 | $— | $179,864 | - All short-term investments, primarily U.S. Government treasury bills, are due within one year[88] Note 12. Goodwill and Intangible Assets Goodwill remained stable at $1.81 million, while intangible assets, including the Discuva platform and Utrophin program, are fully amortized or impaired, resulting in a net carrying amount of zero Goodwill Summary | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Goodwill | $1,814 | $1,798 | Intangible Assets Summary | Intangible Asset (in thousands) | Gross Carrying Amount | Accumulated Amortization and Impairment | Net | | :------------------------------ | :-------------------- | :-------------------------------------- | :-- | | Discuva platform acquired | $13,019 | $(13,019) | $— | | Utrophin program acquired | $— | $— | $— | | Other licenses | $134 | $(134) | $— | | Total | $13,977 | $(13,977) | $— | - The Utrophin program intangible assets were fully impaired and removed from accounting records due to the dissolution of Muox Limited[92] Note 13. Leases The company holds operating leases for office space, with a new lease in Menlo Park, California, and the termination of a U.K. lease due to strategic reprioritization towards ivonescimab - A new operating lease for office space in Menlo Park, California, commenced, adding $4.25 million in right-of-use assets[94] - The Cambridge, U.K. laboratory and office space lease was terminated, disposing of $788 thousand in right-of-use assets, as the company reprioritized investments to ivonescimab[94] Lease Cost Summary | Lease Cost (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Fixed lease costs | $678 | $444 | $1,535 | $1,033 | | Variable lease costs | $2 | $53 | $71 | $91 | | Total lease cost | $680 | $497 | $1,606 | $1,124 | Note 14. Promissory Notes Payable to Related Parties The company issued $520 million in unsecured promissory notes to its Co-CEOs in December 2022, with $420 million repaid by September 2023, leaving a $100 million note outstanding - The company issued $520 million in unsecured promissory notes to Co-CEOs Mr. Duggan and Dr. Zanganeh in December 2022[98][119] - The $20 million Zanganeh Note and $400 million Duggan Promissory Note were repaid in February 2023, largely through the 2023 Rights Offering[100][121] - A $100 million Duggan September Note remains outstanding, maturing on September 6, 2024[103][105] - Interest expense on these notes for the nine months ended September 30, 2023, was $13.56 million[103] Note 15. Stock-Based Compensation and Warrants The company's 2020 Stock Incentive Plan had 20.55 million options outstanding, with stockholders approving an increase of 70 million shares, and total stock-based compensation expense was $5.36 million Stock Option Activity Summary | Stock Option Activity | 9 Months Ended Sep 30, 2023 | | :-------------------- | :-------------------------- | | Outstanding at Dec 31, 2022 | 19,476,359 | | Granted | 3,921,450 | | Forfeited | (2,672,305) | | Exercised | (177,237) | | Outstanding at Sep 30, 2023 | 20,548,267 | | Weighted average exercise price | $3.24 | - Stockholders approved an increase of 70,000,000 shares for the 2020 Stock Incentive Plan[108] Stock-Based Compensation Expense Summary | Stock-Based Compensation (in thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $149 | $1,162 | $1,962 | $3,300 | | General and administrative | $556 | $1,636 | $3,393 | $5,990 | | Total | $705 | $2,798 | $5,355 | $9,290 | Note 16. Related Party Transactions The company engaged in various related party transactions, including sublease agreements, the issuance and repayment of $520 million in promissory notes to Co-CEOs, and the Akeso License Agreement - Sublease agreements for office space with Maky Zanganeh and Associates, Inc. (MZA), an entity related to Co-CEO Dr. Zanganeh, resulted in payments of $730 thousand for the nine months ended September 30, 2023[113][114] - The $520 million Note Purchase Agreement with Co-CEOs Mr. Duggan and Dr. Zanganeh was a significant related party financing event, with $420 million repaid by February 2023[119][121] - The Akeso License Agreement led to Dr. Yu (Michelle) Xia, Akeso's founder, being appointed to Summit's Board of Directors[124] - In the 2023 Rights Offering, Mr. Duggan's $395.31 million subscription price was satisfied by extinguishing a portion of his outstanding promissory note[125] Note 17. Commitments and Contingencies The company has lease commitments, $6.36 million in non-cancellable purchase commitments for clinical trials, and unestimable contingent payment obligations for milestones and royalties under various agreements - New lease for office space in Menlo Park, California, with total payments of $4.7 million over 36 months[129][198] - Termination of Cambridge, U.K. laboratory and office space lease due to strategic reprioritization[129][198] - Approximately $6.36 million in non-cancellable purchase commitments associated with clinical trials as of September 30, 2023[132][200] - Contingent payment obligations for royalties or milestone payments under agreements with Akeso, Wellcome Trust, University College London, and others are currently unestimable[133][199] Note 18. Subsequent Events On October 16, 2023, Mr. Manmeet Soni was appointed Chief Operating Officer and purchased 2,976,190 shares of common stock for $5 million via a private placement - Mr. Manmeet Soni was appointed Chief Operating Officer on October 16, 2023[38][136][153] - Mr. Soni purchased 2,976,190 shares of common stock for $5 million in a private placement, effective October 13, 2023[38][136][153] 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, emphasizing the strategic shift to oncology with ivonescimab, the financial impact of the Akeso license, and the ongoing need for additional capital due to significant operating losses and debt obligations Company Overview Summit Therapeutics Inc. is a biopharmaceutical company that strategically shifted its focus to oncology, with ivonescimab as its primary product candidate in-licensed from Akeso, Inc - The company is a biopharmaceutical firm focused on oncology, aiming to develop patient-friendly, new-era standard-of-care medicines[139] - Ivonescimab (SMT112), a potential first-in-class bispecific antibody, is the key product candidate, in-licensed from Akeso for development and commercialization in the US, Canada, Europe, and Japan[140] - The company's strategy has significantly changed, with future operations focused on ivonescimab development, and anti-infective activities being reviewed for partnership opportunities[141] Recent Events Recent events include the in-licensing of ivonescimab and initiation of its Phase III clinical trials, a $500 million rights offering, and $520 million in related party promissory notes, with most repaid - The Collaboration and License Agreement for ivonescimab with Akeso, Inc. closed in January 2023[143] - Phase III clinical studies for ivonescimab in NSCLC (HARMONi and HARMONi-3) were initiated, with the first US patient enrolled in HARMONi in May 2023[149] - A $500 million 2023 Rights Offering was completed, and $520 million in promissory notes were issued to Co-CEOs, with $420 million repaid by February 2023[145][147] - The 2020 Stock Incentive Plan was amended to increase authorized shares by 70 million, and Mr. Manmeet Soni was appointed COO, purchasing $5 million in common stock[152][153] Results of Operations The company reported a net loss of $578.4 million for the nine months ended September 30, 2023, primarily due to a $520.9 million in-process R&D expense for ivonescimab Consolidated Statements of Operations Summary | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $— | $0.2 | $— | $0.7 | | Operating Loss | $(20.4) | $(16.9) | $(573.5) | $(51.8) | | Net Loss | $(21.2) | $(21.3) | $(578.4) | $(59.6) | Revenue Revenue for the three and nine months ended September 30, 2023, was zero, attributed to the full recognition of milestones from the Eurofarma license agreement in 2022 Revenue Summary | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $— | $0.2 | $— | $0.7 | - The decrease in revenue is due to the Eurofarma license and commercialization agreement milestones being fully recognized by 2022, with no additional milestones expected[159] Operating Expenses Total operating expenses significantly increased to $574.3 million for the nine months ended September 30, 2023, primarily driven by a $520.9 million in-process R&D expense for ivonescimab Operating Expenses Summary | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $15.3 | $17.0 | $34.7 | $46.6 | | In-process research and development | $— | $— | $520.9 | $— | | General and administrative | $5.4 | $5.6 | $18.7 | $19.2 | | Total operating expenses | $20.7 | $22.6 | $574.3 | $65.8 | Research and Development Expenses Research and development expenses decreased by $11.9 million due to concluding anti-infectives programs, partially offset by investment in oncology (ivonescimab) and compensation-related costs Research and Development Expenses by Category | R&D Category (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Oncology | $9.4 | $— | $16.7 | $— | | Anti-infectives | $(0.1) | $11.9 | $(1.8) | $28.2 | | Compensation related costs | $4.8 | $3.0 | $14.7 | $12.1 | | Stock-based compensation | $0.1 | $1.2 | $2.0 | $3.3 | | Other R&D costs | $1.1 | $0.9 | $3.1 | $3.0 | | Total | $15.3 | $17.0 | $34.7 | $46.6 | - The company is investing resources in the clinical development of ivonescimab, including Phase III HARMONi and HARMONi-3 studies for NSCLC[162][163] - Anti-infectives programs for ridinilazole and SMT-738 concluded development activities, resulting in a $30.0 million decrease in expenses[164] In-process research and development In-process research and development expense totaled $520.9 million for the nine months ended September 30, 2023, representing upfront milestone payments for the ivonescimab license agreement with Akeso In-process Research and Development Expenses Summary | IPR&D Category (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Upfront milestone payments | $— | $— | $520.8 | $— | | Direct transaction costs | $— | $— | $0.1 | $— | | Total | $— | $— | $520.9 | $— | - The $520.9 million expense includes $474.9 million in cash and $45.9 million fair value of 10 million common shares issued to Akeso[166] General and Administrative Expenses General and administrative expenses slightly decreased by $0.5 million due to lower stock-based compensation, partially offset by increases in compensation-related costs and legal/professional services General and Administrative Expenses by Category | G&A Category (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Compensation related costs | $2.3 | $2.1 | $7.3 | $6.3 | | Stock-based compensation | $0.6 | $1.6 | $3.4 | $6.0 | | Legal fees and professional services | $1.3 | $1.0 | $4.9 | $3.9 | | Other G&A expenses | $1.2 | $0.9 | $3.1 | $3.0 | | Total | $5.4 | $5.6 | $18.7 | $19.2 | - Stock-based compensation decreased due to awards becoming fully amortized, lower fair values, and forfeitures[168] - Compensation-related expenses and legal/professional services increased to support company growth and corporate projects[168] Other Operating Income Other operating income significantly decreased to $0.8 million due to the conclusion of funding from BARDA and CARB-X, and reduced U.K. research and development tax credits Other Operating Income by Category | Income Category (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development tax credits | $0.3 | $1.2 | $0.8 | $3.7 | | Funding income from BARDA | $— | $3.9 | $— | $7.8 | | Grant income from CARB-X | $— | $0.4 | $— | $1.8 | | Total | $0.3 | $5.5 | $0.8 | $13.3 | - BARDA and CARB-X contracts ended in 2022, and no further income is expected from these arrangements[171][172] - U.K. R&D tax credits decreased due to reduced clinical and manufacturing activity for ridinilazole and changes in U.K. tax legislation[170] Other (Expense) Income, net Other (expense) income, net, was a net expense of $4.9 million, an improvement driven by favorable foreign currency gains and increased interest income, partially offset by higher interest expense on related party notes Other (Expense) Income, Net Summary | Metric (in millions) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Foreign currency (losses) gains | $(0.5) | $(3.8) | $0.3 | $(6.3) |\ | Interest expense on promissory notes | $(2.7) | $(0.6) | $(13.6) | $(1.5) |\ | Interest income | $2.5 | $— | $8.0 | $— |\ | Total | $(0.8) | $(4.4) | $(4.9) | $(7.8) | - Interest expense increased by $12.1 million due to the $520 million promissory notes issued to Co-CEOs in December 2022[176] - Interest income increased by $8.0 million from investments in money market funds and U.S. government securities[176] Liquidity and Capital Resources The company faces significant liquidity concerns with an accumulated deficit of $956.7 million and insufficient cash to fund operations, raising substantial doubt about its ability to continue as a going concern Sources of Liquidity Historically, funding came from stock issuances, license agreements, government funding, and related party promissory notes, with recent financing including a $100 million rights offering and $520 million in related party notes - Primary funding sources include common stock issuances, license/collaboration agreements, government/philanthropic funding, and related party promissory notes[177] - The 2022 Rights Offering generated $99.9 million in net proceeds[178] - In December 2022, $520 million in unsecured promissory notes were issued to Co-CEOs, with $420 million repaid by February 2023, leaving a $100 million note outstanding[179][180] Cash Flows Net cash used in operating activities was $57.3 million, and investing activities used $648.3 million (Akeso payment, short-term investments), while financing activities provided $80.3 million (rights offering) Cash Flow Activities Summary | Cash Flow Activity (in millions) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(57.3) | $(46.8) | | Net cash used in investing activities | $(648.3) | $(0.6) | | Net cash provided by financing activities | $80.3 | $100.2 | - Investing activities included $475.0 million cash payment to Akeso and $321.0 million for short-term investments[192] - Financing activities included $104.1 million net proceeds from the 2023 Rights Offering and repayment of $24.7 million in related party promissory notes[194] Critical Accounting Policies and Significant Judgments and Estimates The financial statements rely on management's estimates and judgments for revenue, R&D, intangible assets, stock-based compensation, and income taxes, with no material changes since the 2022 Form 10-K - Management evaluates estimates and judgments related to revenue recognition, R&D expenses, stock-based compensation, intangible assets, goodwill, and income taxes[196] - No material changes to critical accounting policies and estimates were disclosed since the 2022 Form 10-K[197] Contractual obligations and commitments The company has lease commitments, $6.4 million in non-cancellable purchase commitments for clinical trials, and unestimable contingent payment obligations for milestones and royalties under various agreements - Lease commitments include a new 36-month lease for office space in Menlo Park, California, with total payments of $4.7 million, and the termination of a U.K. lease[198] - Approximately $6.4 million in non-cancellable purchase commitments are associated with clinical trials as of September 30, 2023[200] - Contingent payment obligations for royalties or milestone payments under agreements with Akeso, Wellcome Trust, and others are currently unestimable[199] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented or currently - The company has no off-balance sheet arrangements[201] Recently Issued Accounting Pronouncements For a discussion of recently issued accounting pronouncements, refer to Note 3 of the condensed consolidated financial statements - Refer to Note 3 for details on recently issued or adopted accounting pronouncements[202] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Summit Therapeutics Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing market risk disclosures as it qualifies as a 'smaller reporting company'[203] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective at a reasonable level of assurance as of September 30, 2023, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective at a reasonable level of assurance as of September 30, 2023[204] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[205] PART II - Other Information Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently subject to any material legal proceedings[135][207] Item 1A. Risk Factors The company highlights significant investment risks, including substantial doubt about its ability to continue as a going concern due to insufficient working capital and uncertainty in raising additional funds - There is substantial doubt about the company's ability to continue as a going concern due to insufficient working capital to fund planned operations for the next twelve months and uncertainty in raising additional capital[209][210] - Inadequate funding or disruptions to government agencies (FDA, SEC) could hinder product development, regulatory reviews, and access to capital, negatively impacting the business[211] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[212] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report - No defaults upon senior securities to report[213] Item 4. Mine Safety Disclosures There were no mine safety disclosures to report - No mine safety disclosures to report[215] Item 5. Other Information There was no other information to report - No other information to report[216] Item 6. Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including employment agreements, certifications, and XBRL taxonomy documents - Exhibits include employment agreements, certifications (Sarbanes-Oxley Act), and XBRL taxonomy documents[218] Signatures The report is duly signed on behalf of Summit Therapeutics Inc. by Ankur Dhingra, Chief Financial Officer, on November 7, 2023 - The report was signed by Ankur Dhingra, Chief Financial Officer, on November 7, 2023[220]