Summit Therapeutics (SMMT) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Financial statements for June 30, 2021, show increased cash and equity from a $75 million rights offering, despite wider net losses due to higher R&D expenses Condensed Consolidated Balance Sheets As of June 30, 2021, total assets increased to $145.5 million and stockholders' equity to $119.4 million, driven by a rise in cash to $103.4 million from a rights offering Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $103,386 | $66,417 | | Total current assets | $121,482 | $87,674 | | Total assets | $145,517 | $102,498 | | Liabilities & Equity | | | | Total liabilities | $26,090 | $23,045 | | Total stockholders' equity | $119,427 | $79,453 | Condensed Consolidated Statements of Comprehensive Loss Net losses widened for the six months ended June 30, 2021, to $41.9 million from $21.4 million, primarily due to a significant increase in research and development expenses Statement of Loss Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Revenue | $249 | $494 | | Research and development | $42,302 | $26,484 | | Operating loss | ($40,653) | ($24,696) | | Net loss | ($41,904) | ($21,413) | | Loss per share (Basic & Diluted) | ($0.48) | ($0.32) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $79.5 million to $119.4 million by June 30, 2021, primarily driven by $74.9 million in net proceeds from a rights offering - A rights offering of common stock resulted in net proceeds of $74.9 million ($75.0 million gross minus $118k costs) in the six months ended June 30, 2021[26] - Stock-based compensation expense for the first six months of 2021 was $4.5 million[26] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2021, net cash used in operating activities increased to $39.8 million, offset by $76.0 million from financing activities, resulting in a $37.0 million increase in cash Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($39,843) | ($23,491) | | Net cash used in investing activities | ($190) | ($327) | | Net cash provided by financing activities | $75,979 | $3 | | Increase / (decrease) in cash | $36,969 | ($27,432) | - Financing activities in H1 2021 included $75.0 million in proceeds from a rights offering and $1.1 million from the exercise of stock options[28] Notes to Unaudited Condensed Consolidated Financial Statements Notes highlight the company's CDI antibiotic focus, going concern status, revenue sources, other income, and a $75 million rights offering with significant CEO participation - The company is a biopharmaceutical firm focused on discovering and developing novel antibiotics, with a Phase 3 clinical program for C. difficile infection (CDI)[30] - Management believes existing cash resources are sufficient to fund operating plans for at least the next twelve months, but the company will need to raise additional capital in the future to continue operations[42][43] - In May 2021, the company closed a fully subscribed rights offering, raising gross proceeds of $75.0 million[65] - The company engaged in significant related-party transactions with its CEO, Mr. Duggan, including two $55.0 million promissory notes (subsequently repaid) and his purchase of shares in the rights offering, resulting in his beneficial ownership of approximately 71% of outstanding common stock[69][70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations Operating loss increased significantly in H1 2021 due to higher R&D for ridinilazole's Phase 3 trial, with COVID-19 impacting enrollment, yet liquidity remains strong at $103.4 million from a $75 million rights offering - The company is focused on its lead CDI product candidate, ridinilazole, and recently combined its two ongoing Phase III trials into a single study[74] - The COVID-19 pandemic has negatively impacted clinical trial enrollment, leading to slower progress and increased development costs[80] Results of Operations For the six months ended June 30, 2021, R&D expenses rose 59.7% to $42.3 million, increasing operating loss to $40.7 million, while revenue from Eurofarma decreased to $0.2 million Comparison of Operating Results (Six Months Ended June 30) | (in thousands) | 2021 | 2020 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $249 | $494 | ($245) | (49.6)% | | Research and development | $42,302 | $26,484 | $15,818 | 59.7% | | General and administrative | $10,169 | $9,346 | $823 | 8.8% | | Operating loss | ($40,653) | ($24,696) | ($15,957) | (64.6)% | | Net loss | ($41,904) | ($21,413) | ($20,491) | (95.7)% | - The increase in R&D expenses was primarily driven by a $10.4 million increase in investment in the CDI program, related to the Phase 3 clinical trials of ridinilazole[94][95] - Other operating income for H1 2021 was $11.6 million, comprising $3.3 million from the BARDA contract and $7.9 million from U.K. R&D tax credits[99][100] Liquidity and Capital Resources As of June 30, 2021, the company had $103.4 million in cash, sufficient for the next twelve months, primarily due to a $75 million rights offering offsetting $39.8 million in cash used for operations - The company had cash and cash equivalents of $103.4 million as of June 30, 2021[106] - The company received net proceeds of $74.9 million from a rights offering in May 2021, which was used in part to repay an unsecured promissory note[104][114] - Net cash used in operating activities increased to $39.8 million for H1 2021 from $23.5 million in H1 2020, reflecting higher operating costs[110][111] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable - Not applicable[122] Controls and Procedures As of June 30, 2021, management concluded the company's disclosure controls and procedures were effective at a reasonable level of assurance - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at a reasonable level of assurance[123] PART II - OTHER INFORMATION Legal Proceedings The company is not currently subject to any material legal proceedings - We are not currently subject to any material legal proceedings[125] Risk Factors No material changes to risk factors from the 10-K, except for a new risk regarding combining two Phase III ridinilazole trials, which could cause delays and add commercialization uncertainty - A new risk factor has been added concerning the determination to combine two pivotal Phase III clinical trials for ridinilazole into a single study[127] - This combination could cause delays, affect future expenses, add uncertainty to commercialization, and impact the likelihood of successful clinical development[127] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[128] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[129] Mine Safety Disclosures This section is not applicable to the company - None[130] Other Information There is no other information to report for the period - None[131] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The exhibits filed include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files[134]