Summit Therapeutics (SMMT) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements for Summit Therapeutics Inc. as of March 31, 2021, and for the three months ended March 31, 2021 and 2020, detailing financial position and performance Condensed Consolidated Balance Sheets As of March 31, 2021, total assets increased, driven by cash, while total liabilities significantly rose due to a new promissory note, resulting in decreased stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $102,194 | $66,417 | | Total current assets | $125,217 | $87,674 | | Total assets | $140,794 | $102,498 | | Liabilities & Equity | | | | Promissory note payable to a related party | $54,963 | $0 | | Total current liabilities | $73,052 | $19,890 | | Total liabilities | $76,389 | $23,045 | | Total stockholders' equity | $64,405 | $79,453 | Condensed Consolidated Statements of Comprehensive Loss For Q1 2021, the company reported a significantly increased net loss, primarily driven by higher research and development expenses and a decrease in other operating income Q1 2021 vs Q1 2020 Performance (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenue | $192 | $324 | | Research and development expenses | $18,379 | $12,912 | | General and administrative expenses | $4,185 | $3,572 | | Operating loss | $(16,923) | $(9,340) | | Net loss | $(17,488) | $(6,134) | | Basic and Diluted Loss per share | $(0.21) | $(0.09) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased primarily due to the net loss for the quarter, partially offset by stock option exercises and stock-based compensation - The primary driver for the decrease in stockholders' equity was the net loss of $17.5 million incurred during the quarter[26] - Positive contributions to equity included $0.9 million from the issuance of common stock from exercised stock options and $0.9 million from stock-based compensation[26] Condensed Consolidated Statements of Cash Flows Cash and cash equivalents increased significantly in Q1 2021, primarily driven by financing activities from a related-party promissory note, despite increased cash usage in operations Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,669) | $(4,959) | | Net cash used in investing activities | $(39) | $(194) | | Net cash provided by financing activities | $55,897 | $3 | | Increase / (decrease) in cash | $35,777 | $(8,899) | - Financing activities were the main source of cash, with $55.0 million received from a related party promissory note and $0.9 million from the exercise of stock options[29] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide critical context to the financial statements, detailing the company's business, going concern status, revenue recognition, other operating income, related party transactions, and subsequent financing events - The company is a biopharmaceutical firm focused on discovering and developing novel antibiotics, with a Phase 3 clinical program for C. difficile infection (CDI)[31] - Management concluded there is substantial doubt about the company's ability to continue as a going concern, but expects existing cash and proceeds from a May 2021 rights offering to fund operations until Q4 2022[45][46] - Revenue of $0.2 million in Q1 2021 was recognized from the license and commercialization agreement with Eurofarma Laboratórios S.A[51][55] - Other operating income for Q1 2021 totaled $5.4 million, comprising $1.8 million from BARDA and $3.7 million from UK R&D tax credits[57][63] - On March 24, 2021, the company received a $55.0 million loan from its CEO, Robert W. Duggan, via an unsecured promissory note[67][74] - Subsequent to the quarter end, in May 2021, the company closed a fully subscribed rights offering, raising gross proceeds of $75.0 million[80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, noting increased net loss due to higher R&D expenses, and details liquidity from recent financing expected to fund operations into Q4 2022 Results of Operations Q1 2021 saw a widened operating loss, primarily due to increased R&D expenses for Phase 3 clinical trials and a decrease in other operating income Comparison of Operations (in thousands) | Line Item | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $192 | $324 | $(132) | (40.7)% | | Research and development | $(18,379) | $(12,912) | $(5,467) | (42.3)% | | General and administrative | $(4,185) | $(3,572) | $(613) | (17.2)% | | Other operating income | $5,449 | $6,820 | $(1,371) | (20.1)% | | Operating loss | $(16,923) | $(9,340) | $(7,583) | (81.2)% | | Net loss | $(17,488) | $(6,134) | $(11,354) | (185.1)% | - R&D expenses increased by $5.5 million primarily due to increased clinical and manufacturing activities for the Phase 3 trials of ridinilazole[93][94] - Other operating income decreased as BARDA contract income fell by $3.1 million, partially offset by a $1.9 million increase in UK R&D tax credits[91] Liquidity and Capital Resources The company's liquidity is supported by existing cash and recent financing, expected to fund operations until Q4 2022, though additional capital is needed for Phase 3 trials - The company had cash and cash equivalents of $102.2 million as of March 31, 2021[103] - Recent financing includes a $55.0 million promissory note in March/April 2021 and a $75.0 million rights offering in May 2021[101] - Current capital resources are expected to fund the operating plan until Q4 2022, but are insufficient to complete all activities for the Phase 3 trials without additional funding[103] Cash Flows Q1 2021 saw a significant increase in cash from financing activities, primarily a related-party promissory note, offsetting higher cash usage in operations Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,669) | $(4,959) | | Net cash used in investing activities | $(39) | $(194) | | Net cash provided by financing activities | $55,897 | $3 | | Net change in cash | $35,777 | $(8,899) | - The increase in cash used in operations was primarily due to higher operating costs and changes in working capital, including an increased R&D tax credit receivable[107] - Financing activities were driven by $55.0 million in proceeds from a promissory note from a related party[110] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company indicates this item is not applicable, implying no significant market risk exposures requiring disclosure - Not applicable[118] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance as of March 31, 2021 - Based on an evaluation as of March 31, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance[119] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[121] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K filed on March 31, 2021 - There have been no material changes from the risk factors described in the Form 10-K filed on March 31, 2021[122] Other Part II Items The company reported no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and no other information requiring disclosure - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds: None[123] - Item 3. Defaults Upon Senior Securities: None[124] - Item 4. Mine Safety Disclosures: None[125] - Item 5. Other Information: None[126] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[129] - Interactive Data Files (XBRL documents) are also included as exhibits[129]