Summit Therapeutics Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the company’s management, which is responsible for the management of the internal controls, and which includes our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation of our disclosure controls and procedures as o f December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable level of assurance. Management's Report on Internal Control Over Financial Reporting and Attestation Report of Registered Public Accounting Firm Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed, under the supervision of the Chief Executive Officer (our principal executive officer) and the Chief Financial Officer (our principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Moreover, projections of any evaluation of the effectiveness of internal control to future periods are subject to a risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Our management has assessed the effectiveness of internal control over financial reporting as of December 31, 2020 , based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013. Based on this assessment, our management has concluded that our internal control over financial reporting as of December 31, 2020 , was effective. This report does not include an attestation report of our registered public accounting firm as we are a non-accelerated filer and a smaller reporting company. Changes in Internal Control Over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred after the fiscal year ended December 31, 2020 , and through the date of this Report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 92 PART III s Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K. Item 11. Executive Compensation The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K. Item 14. Principal Accounting Fees and Services The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K. PART IV Item 15. Exhibits, Financial Statement Schedules (1) Financial Statements As part of this Report, the consolidated financial statements are listed in the accompanying index to financial statements on page F-1. (2) Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable, not required, or the information required is shown in the consolidated financial statements or the notes thereto. 93 (3) Exhibits The exhibits filed as part of this Report are listed below. Exhibit No. Description 2.1 Scheme of Arrangement, dated September 18, 2020 (incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on July 27, 2020) 3.1 Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020 ) 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 4.1 Registration Rights Agreement, dated January 9, 2019, by and among Summit Therapeutics plc and Robert W. Duggan (incorporated by reference to Exhibit 2.1 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on January 10, 2019) 4.2 Form of Specimen Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 29, 2020) 4.3 Form of Consultant Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 4.4 Form of Investor Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 4.5 Description of Securities Registered Under Section 12 of the Exchange Act (incorporated by reference to the description of securities contained in the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 4.6 Registration Rights Agreement, dated November 6, 2020, by and among Summit Therapeutics Inc., Polar Capital Funds plc - Biotechnology Fund and the Mahkam Zanganeh Revocable Trust (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on November 6, 2020) 10.1† Translation Award Funding Agreement, entered into as of October 19, 2012, by and between the Wellcome Trust Limited and Summit Therapeutics plc (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form F-1 (File No. 333-201807), as amended, filed with the Securities and Exchange Commission on February 27, 2015) 10.2 Service Agreement, effective as of January 14, 2015, by and between Cambridge Innovation Center and Summit Therapeutics Inc. (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form F-1 (File No. 333-201807), as amended, filed with the Securities and Exchange Commission on February 20, 2015) 10.3# 2005 Enterprise Management Incentive Scheme (incorporated by reference to Exhibit 4.3 to the Company’s Transition Report on 20-F (File No. 333-36866), as amended, filed with the Securities and Exchange Commission on April 30, 2020) 10.4# 2016 Long Term Incentive Plan (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on May 12, 2016) 10.5† License and Collaboration Agreement, dated October 3, 2016, by and between Summit (Oxford) Ltd. and Sarepta Therapeutics, Inc. (incorporated by reference to Exhibit 4.23 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on March 30, 2017) 94 Exhibit No. Description 10.6 Lease, dated February 17, 2017, by and among MEPC Milton Park No. 1 Limited, MEPC Milton Park No. 2 Limited and Summit Therapeutics plc (incorporated by reference to Exhibit 4.25 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on March 30, 2017) 10.7† Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.26 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.8† Amendment of Solicitation/Modification of Contract (0001), dated June 19, 2018, to Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.13 to the Company’s Transition Report on 20-F (File No. 333-36866) filed with the Securities and Exchange Commission on March 29, 2019) 10.9+ Amendment of Solicitation/Modification of Contract (0002), dated August 14, 2018, to Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.14 to the Company’s Transition Report on 20-F(File No. 333-36866) filed with the Securities and Exchange Commission on March 29, 2019) 10.10+ Amendment of Solicitation/Modification of Contract (0003), dated February 14, 2019, to Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.15 to the Company’s Transition Report on 20-F (File No. 333-36866), filed with the Securities and Exchange Commission on March 29, 2019) 10.11† License and Commercialization Agreement, dated December 18, 2017, by and between Summit (Oxford) Ltd. and Eurofarma Laboratórios S.A. (incorporated by reference to Exhibit 4.27 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.12† (1) Share Purchase Agreement, dated December 23, 2017, by and among Summit Therapeutics plc and the shareholders of Discuva Limited (incorporated by reference to Exhibit 4.28 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.13† Transfer Incentive Agreement, dated December 23, 2017, by and among Discuva Limited and certain of its managers (incorporated by reference to Exhibit 4.29 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.14 Lease, dated December 22, 2017, by and between Merrifield Centre Ltd and Discuva Limited (incorporated by reference to Exhibit 4.31 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.15† Equity and Revenue Sharing Agreement, dated October 16, 2017, by and between Summit (Oxford) Limited and the Wellcome Trust Limited (incorporated by reference to Exhibit 4.32 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.16 Form of Non-Executive Director Restricted Stock Unit (RSU) Agreement (incorporated by reference to Exhibit 4.33 to the Company’s Annual Report on Form 20-F (File No. 001-36866), filed with the Securities and Exchange Commission on April 13, 2018) 10.17 Securities Purchase Agreement, dated December 14, 2018, by and among Summit Therapeutics plc and Robert W. Duggan (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 17, 2018) 10.18+ Amendment of Solicitation/Modification of Contract (0004), dated June 17, 2019, to Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.24 to the Company’s Transition Report on 20-f (File No. 333-36866) filed with the Securities and Exchange Commission on April 30, 2020) 95 Exhibit No. Description 10.19 Securities Purchase Agreement, dated December 6, 2019, by and among Summit Therapeutics plc and Robert W. Duggan (incorporated by reference to Exhibit 4.1 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 6, 2019) 10.20 Placing Agreement, December 6, 2019, by and between Summit Therapeutics plc and Nplus1 Singer Advisory LLP (incorporated by reference to Exhibit 4.2 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 6, 2019) 10.21 Consulting Agreement, dated December 6, 2019, by and between Summit Therapeutics plc and Maky Zanganeh & Associates, Inc. (incorporated by reference to Exhibit 4.4 to the Company's Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 6, 2019) 10.22 Relationship Agreement, dated December 14, 2018, by and among Summit Therapeutics plc, Robert W. Duggan and Cairn Financial Advisers LLP (incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 17, 2018) 10.23 Deed of Termination, dated December 6, 2019, by and among Summit Therapeutics plc, Robert Duggan and Cairn Financial Advisers LLP (incorporated by reference to Exhibit 4.3 to the Company’s Report on Form 6-K (File No. 001-36866), filed with the Securities and Exchange Commission on December 6, 2019) 10.24+ Amendment of Solicitation/Modification of Contract (0005), dated January 21, 2020, to Agreement, dated September 5, 2017, by and between Summit (Oxford) Limited and the U.S. Department of Health and Human Services Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.36 to the Company’s Transition Report on 20-F (File No. 333-36866) filed with the Securities and Exchange Commission on April 30, 2020) 10.25 (1) Securities Purchase Agreement, dated October 2, 2020, by and between Summit Therapeutics Inc. and Robert W. Duggan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-36866) filed with the Securities and Exchange Commission on October 5, 2020) 10.26 (1) Securities Purchase Agreement, dated November 6, 2020, by and between Summit Therapeutics Inc. and Polar Capital Fund plc - Biotechnology Fund (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-36866) filed with the Securities and Exchange Commission on November 6, 2020) 10.27 (1) Securities Purchase Agreement, dated November 6, 2020, by and between Summit Therapeutics Inc. and Mahkam Zanganeh Revocable Trust (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-36866) filed with the Securities and Exchange Commission on November 6, 2020) 10.28# Form of Indemnification Agreement between Summit Therapeutics Inc. and each of its Executive Officers and Directors (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 10.29# Offer of Employment, dated May 21, 2020, by and between Summit Therapeutics Inc. and Michael Donaldson (incorporated by reference to Exhibit 10.25 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 29, 2020) 10.30# Contract of Employment, dated May 29, 2020, by and between Summit Therapeutics Inc. and Ventzislav Stefanov (incorporated by reference to Exhibit 10.26 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 29, 2020) 10.31# 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 10.32# Form of Option Award under 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.28 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 29, 2020) 10.33# Form of Restricted Stock Unit Agreement under 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.29 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 29, 2020) 10.34# 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 to the Company’s Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 10.35* Contract of Employment , dated November 22, 2020, by and between Summit Therapeutics Inc. and Mahkam Zanganeh 96 Exhibit No. Description 10.36* Sublease Agreement , dated March 26, 2021, by and between Maky Zanganeh & Associates Inc. and Summit Therapeutics Sub Inc. 10.37 (1) Note Purchase Agreement , dated March 24, 2021, by and between Summit Therapeutics Inc. and Robert W. Duggan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on March 26, 2021) 10.38 Promissory Note , dated March 24, 2021, issued by Summit Therapeutics Inc. in the name of Robert W. Duggan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on March 26, 2021) 21.1* List of Significant Subsidiaries 23.1* Consent of PricewaterhouseCoopers LLP 31.1* Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. † Confidential treatment has been granted as to certain portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission. + Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the registrant if disclosed. (1) The schedules and exhibits have been omitted. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request. # Indicates management contract or compensatory plan or arrangement. Item 16. Report Summary None. 97 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUMMIT THERAPEUTICS INC. By: /s/ Robert W. Duggan Name: Title: Robert W. Duggan Chief Executive Officer; Executive Chairman Date: March 31, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Robert W. Duggan Chief Executive Officer and Executive Chairman ( Principal Executive Officer) March 31, 2021 Robert W. Duggan /s/ Michael Donaldson Chief Financial Officer (Principal Financial and Accounting Officer) March 31, 2021 Michael Donaldson /s/ Mahkam Zanganeh Director March 31, 2021 Mahkam Zanganeh /s/ Rainer Erdtmann Director March 31, 2021 Rainer Erdtmann /s/ Ujwala Mahatme Director March 31, 2021 Ujwala Mahatme /s/ Manmeet Soni Director March 31, 2021 Manmeet Soni /s/ Michael Wang Director March 31, 2021 Michael (Luhua) Wang 98 SUMMIT THERAPEUTICS INC. Index to Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations and Comprehensive (Loss)/Income F- 5 Consolidated Statements of Stockholders' Equity ( D eficit) F- 6 Consolidated Statements of Cash Flows F- 7 Notes to the Consolidated Financial Statements F- 9 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Summit Therapeutics Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Summit Therapeutics Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and December 31, 2019, and the related consolidated Statements of Operations and Comprehensive (Loss) Income, of Stockholders' Equity (Deficit) and of Cash Flows for the year ended December 31, 2020, the eleven month period ended December 31, 2019 and fiscal year ended January 31, 2019 including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and December 31, 2019 , and the results of its operations and its cash flows for the year ended December 31, 2020, the eleven month period ended December 31, 2019 and fiscal year ended January 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2 Table of Contents Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued and Prepaid Research and Development Costs As described in Notes 3 and 14 to the consolidated financial statements, the Company has entered into various research and development contracts with other companies. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs or prepaid expenses where the payments made exceeds the estimated costs. Included within prepaid expenses at December 31, 2020, is $8.5 million of prepayments relating to research and development expenditure. Included within accrued liabilities at December 31, 2020 is $1.5 million relating to research and development expenditure. These amounts are determined based on the estimated costs to complete each study or activity, the estimation of the current stage of completion and the invoices received, as well as predetermined milestones which are not reflective of the current stage of development for prepaid expenses. However, prepaid expenses decrease, and accrued liabilities increase as the activities progress, and if actual costs incurred exceed the prepaid expense, an accrual will be recorded for the liability. The key sensitivity is the estimated current stage of completion of each study or activity, which is based on information received from the supplier and the Company’s operational knowledge of the work completed under those contracts. The principal considerations for our determination that performing procedures relating to accrued and prepaid research and development costs is a critical audit matter is (i) the significant judgment by management in determining the prepaid or accrued costs and (ii) high degree of auditor judgment and subjectivity and effort in performing procedures and evaluating audit evidence for these accrued or prepaid costs and the factors related to progress towards or the estimated current stage of completion of the research and development activities or studies, invoicing to date under the contracts, and communications from the research institution, or other companies, of any actual costs incurred during the period that have not yet been invoiced. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating the appropriateness of the method used by management to develop the estimates, (ii) testing the completeness and accuracy of the data inputs to the estimates, including total costs included within executed contracts and actual billed expenses under these contracts and the mathematical accuracy of the accrued expense calculation (iii) evaluating the reasonableness of the assumptions used in developing the estimates (including the progress towards completion of specific tasks and the associated cost incurred for services the Company has not yet been invoiced or otherwise notified of the actual cost at period end) by obtaining external confirmation with significant contract research organizations to confirm the costs incurred to date on purchase orders and total amount of invoices raised, and (iv) considered whether evidence contained was consistent with understanding obtained through discussion with the research and development team. /s/PricewaterhouseCoopers LLP Reading, United Kingdom March 31, 2021 We have served as the Company's or its predecessor’s auditor since 2013. F-3 Table of Contents Summit Therapeutics Inc. Consolidated Balance Sheets (in thousands, except share data) December 31, 2020 December 31, 2019 ASSETS Current assets: Cash and cash equivalents $ 66,417 $ 63,842 Accounts and other receivable 331 541 Prepaid expenses 9,547 8,762 Other current assets 1,523 1,399 Research and development tax credit receivable 9,856 5,084 Total current assets 87,674 79,628 Property and equipment, net 725 518 Right-of-use assets 554 1,021 Goodwill 2,030 1,961 Intangible assets, net 11,515 13,120 Total assets $ 102,498 $ 96,248 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,140 $ 4,471 Accrued liabilities 4,261 5,739 Other current liabilities 729 366 Lease liabilities 390 471 Deferred revenue and income 8,370 2,615 Contingent consideration — 105 Total current liabilities 19,890 13,767 Non-current liabilities Deferred revenue and income 569 493 Lease liabilities 75 422 Other non-current liabilities 2,511 2,703 Total liabilities 23,045 17,385 Commitments and contingencies (Note 21) Stockholders' equity: Common stock, $ 0.01 par value: 250,000,000 shares authorized; 82,575,064 and 67,178,054 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 826 672 Additional paid-in capital 293,367 241,204 Accumulated other comprehensive loss ( 3,794 ) ( 4,764 ) Accumulated deficit ( 210,946 ) ( 158,249 ) Total stockholders' equity 79,453 78,863 Total liabilities and stockholders' equity $ 102,498 $ 96,248 The accompanying notes form an integral part of these Consolidated Financial Statements. F-4 Table of Contents Summit Therapeutics Inc. Consolidated Statements of Operations and Comprehensive (Loss) Income (In thousands, except share and per share amounts) Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 Revenue $ 860 $ 743 $ 57,088 Operating expenses: Research and development 53,274 39,809 52,003 General and administrative 19,232 11,279 17,014 Impairment of goodwill and intangible assets 859 — 5,290 Total operating expenses 73,365 51,088 74,307 Other operating income 19,312 22,872 22,608 (Loss) income from operations ( 53,193 ) ( 27,473 ) 5,389 Other income (expense), net 283 ( 1,618 ) 3,694 (Loss) income before income taxes ( 52,910 ) ( 29,091 ) 9,083 Benefit (charge) from income taxes 213 ( 36 ) 1,786 Net (loss) income $ ( 52,697 ) $ ( 29,127 ) $ 10,869 (Loss) earnings per share: Basic ( 0.76 ) ( 0.89 ) 0.63 Diluted ( 0.76 ) ( 0.89 ) 0.63 Weighted-average shares used to compute (loss) earnings per share: Basic 69,524,148 32,829,003 17,140,494 Diluted 69,524,148 32,829,003 17,228,718 Other comprehensive (loss) income: Change in foreign currency translation adjustment 970 51 ( 496 ) Comprehensive (loss) income $ ( 51,727 ) $ ( 29,076 ) $ 10,373 The accompanying notes form an integral part of these Consolidated Financial Statements. F-5 Table of Contents Summit Therapeutics Inc. Consolidated Statements of Stockholders' Equity (Deficit) (in thousands, except share and per share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income(Loss) Total Accumulated Deficit Total Stockholders' Equity (Deficit) Shares Amount Balance at January 31, 2018 14,712,724 $ 147 $ 140,574 $ ( 4,319 ) $ ( 139,991 ) $ ( 3,589 ) Public offering of common stock, net of offering costs of $ 1,116 1,666,666 17 19,860 — — 19,877 Private placement of common stock, net of offering costs of $ 591 15,625,000 156 24,344 — — 24,500 Issuance on common stock from exercise of share options 73,584 1 132 — — 133 Stock-based compensation — — 6,295 — — 6,295 Foreign currency translation adjustment — — — ( 496 ) — ( 496 ) Net income — — — — 10,869 10,869 Balance at January 31, 2019 32,077,974 $ 321 $ 191,205 $ ( 4,815 ) $ ( 129,122 ) $ 57,589 Private placement of common stock, net of offering costs of $ 912 35,075,690 351 49,152 — 49,503 Issuance on common stock from exercise of share options 24,390 — 2 — — 2 Stock-based compensation — — 845 — — 845 Foreign currency translation adjustments — — — 51 — 51 Net loss — — — — ( 29,127 ) ( 29,127 ) Balance at December 31, 2019 67,178,054 $ 672 $ 241,204 $ ( 4,764 ) $ ( 158,249 ) $ 78,863 Private placement of common stock, net of offering costs of $ 48 14,970,060 150 49,802 — — 49,952 Fractional shares issued from reverse stock split 3 — — — — — Issuance on common stock from exercise of share options 426,947 4 595 — — 599 Stock-based compensation — — 1,766 — — 1,766 Foreign currency translation adjustment — — — 970 — 970 Net loss — — — — ( 52,697 ) ( 52,697 ) Balance at December 31, 2020 82,575,064 $ 826 $ 293,367 $ ( 3,794 ) $ ( 210,946 ) $ 79,453 The accompanying notes form an integral part of these Consolidated Financial Statements. F-6 Consolidated Statements of Cash Flows (in thousands, except share and per share data) Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income ( 52,697 ) ( 29,127 ) 10,869 Adjustments to reconcile net (loss) income to net cash used in operating activities: Gain on remeasurement of liabilities ( 480 ) — ( 4,410 ) (Gain) loss on recognition of contingent consideration payable ( 102 ) 2 1,001 Non-cash interest expense 255 286 615 Unrealized foreign exchange (gain) loss ( 278 ) 423 — Depreciation of operating lease right-of-use assets 451 347 443 Depreciation 302 321 409 Amortization of intangible assets 1,250 970 1,100 Loss on disposal of assets 2 13 55 Impairment of goodwill and intangible assets 859 — 5,290 Stock-based compensation 1,766 845 6,295 Deferred income taxes — — ( 1,906 ) Other adjustments ( 58 ) — — Changes in operating assets and liabilities: Accounts and other receivables 212 5,439 ( 2,467 ) Prepaid expenses ( 447 ) 952 ( 1,260 ) Other current assets ( 24 ) 492 580 Research and development tax credit receivable ( 4,381 ) 3,154 ( 2,216 ) Deferred revenue and income 5,372 ( 2,358 ) ( 48,973 ) Accounts payable 1,642 ( 1,306 ) ( 10 ) Accrued liabilities ( 1,296 ) ( 51 ) 144 Contingent consideration paid — ( 703 ) — Lease liabilities ( 459 ) ( 456 ) ( 430 ) Other liabilities — — ( 235 ) Net cash used in operating activities ( 48,111 ) ( 20,757 ) ( 35,106 ) CASH FLOWS FROM INVESTING ACTIVITIES Contingent consideration paid — — ( 167 ) Purchase of property and equipment ( 421 ) ( 205 ) ( 157 ) Purchase of intangible assets — ( 136 ) ( 7 ) Net cash used in investing activities ( 421 ) ( 341 ) ( 331 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of common stock 50,000 50,415 46,084 Transaction costs from the issuance of common stock ( 48 ) ( 912 ) ( 1,707 ) Proceeds from exercise of share options 599 2 133 Net cash provided by financing activities 50,551 49,505 44,510 Effect of exchange rates on cash and cash equivalents 556 190 ( 2,323 ) Increase in cash and cash equivalents 2,575 28,597 6,750 Cash and cash equivalents at beginning of the period / year 63,842 35,245 28,495 Cash and cash equivalents at end of the period / year 66,417 63,842 35,245 F-7 Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 Supplemental Disclosure of Cash Flow Information Cash (received) paid for income taxes $ ( 70 ) $ 63 $ 72 The accompanying notes form an integral part of these Consolidated Financial Statements. F-8 Table of Contents Notes to Consolidated Financial Statements 1. Nature of the Business Summit Therapeutics Inc. ("Summit" or the "Company") is a biopharmaceutical company focused on the discovery, development and commercialization of novel antibiotics for serious infectious diseases. Summit is conducting a Phase 3 clinical program focused on the infectious disease C. difficile infection, or CDI. It is also seeking to expand the product candidate portfolio through the development of new mechanism, precision antibiotics using the proprietary Discuva Platform. On September 18, 2020, Summit, a Delaware corporation, became the successor issuer to Summit Therapeutics plc, a public limited company incorporated under the laws of England and Wales with the Registrar of Companies of England and Wales, United Kingdom, for certain purposes under both the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such succession occurred pursuant to a statutory scheme of arrangement under U.K. law pursuant to which all Summit Therapeutics plc outstanding ordinary shares were exchanged on a five-for-one basis for newly issued shares of Summit common stock and Summit became the holding company of Summit Therapeutics plc (the predecessor registrant and former holding company) and its subsidiaries, which is referred to as the Redomiciliation Transaction. Concurrently, Summit Therapeutics plc was converted into a private limited company under the laws of England and Wales and renamed Summit Therapeutics Limited. In addition, the warrants and stock options to purchase shares of Summit Therapeutics plc were canceled and replacement warrants and stock options to purchase common stock in Summit Therapeutics Inc. were issued. The scheme of arrangement was accounted for as an exchange of equity interests among entities under common control. All assets and liabilities of Summit Therapeutics plc were assumed by Summit, resulting in the retention of the historical basis of accounting as if they had always been combined for accounting purposes and the historical consolidated financial statements of Summit Therapeutics plc became the historical consolidated financial statements of Summit Therapeutics Inc. During the first quarter of 2020, there was a global outbreak of a novel coronavirus, or COVID-19, which was subsequently declared as a pandemic by the World Health Organization. The global impact of the outbreak rapidly evolved, triggering a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. Management believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ongoing impact COVID-19 will have on the global economy generally makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent of the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates. 2. Going Concern The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of the business. As of December 31, 2020, the Company had cash and cash equivalents of $ 66.4 million and an accumulated deficit of $ 210.9 million. During the year ended December 31, 2020, the Company incurred a net loss of $ 52.7 million and used $ 48.1 million of cash in operating activities. The Company expects to continue to generate operating losses for the foreseeable future. Until such time as the Company can generate substantial revenue and achieve profitability, the Company will need to raise additional capital. On March 25, 2021, the Company’s Board of Directors approved a rights offering available to all holders of record of the Company’s common stock, as of the close of business on April 9, 2021. The terms of this rights offering are more fully described in Note 23 – Subsequent Events. Assuming the rights offering is fully subscribed, the Company will receive gross proceeds of up to $ 75.0 million, less expenses related to the rights offering. Mr. Robert W. Duggan, the Executive Chairman and Chief Executive Officer and primary stockholder, has given his commitment to the Board that he will subscribe for at least the full amount of his basic subscription rights. Upon the successful completion of the rights issue, the Company will repay the unsecured promissory note of $ 55.0 million received from Mr. Duggan on March 24, 2021 (see note 23 - Subsequent Events). This promissory note will mature and become due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 55.0 million, or (ii) 13 months from the date of issuance of the promissory note. The Company's existing cash resources, funding agreements, receipt from the promissory note and research and development tax credits receivable, are expected to be sufficient to enable the Company to fund its current operating plans until the second quarter of 2022. If the Rights Offering is fully subscribed at $ 75.0 million, the Company expects to be able to fund its current operating plan until the fourth quarter of 2022. F-9 Table of Contents The Company continues to evaluate options to further finance its cash needs through a combination of some, or all, of the following: equity and debt offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations and patient advocacy groups, and marketing, distribution or licensing arrangements. While the Company believes that funds would be available in this manner before the second quarter of 2022, there can be no assurance that the Company will be able to generate funds, on terms acceptable to the Company, on a timely basis or at all, which would impact the Company’s ability to continue as a going concern. 3. Summary of Significant Accounting Policies The significant accounting policies adopted by the Company in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Certain prior period amounts within the consolidated statements of operations and comprehensive (loss) income have been reclassified to conform to the current period presentation. Specifically, foreign currency losses of $ 1.3 million during the eleven months ending December 31, 2019 and foreign currency gains of $ 0.6 million during the year ending January 31, 2019, were included within general and administrative expenses and have now been reclassified to be presented as part of other income (expense), net in conformity with the current period presentation. Revision and Immaterial Correction of an Error in Previously Issued Financial Statements During the quarter ended December 31, 2020, the Company identified a deferred tax asset relating to the acquired carried forward tax losses arising from the acquisition of Discuva Limited in December 2017 that was not included as part of the business combination accounting. Furthermore, the Company identified deferred tax assets relating to available carried forward group tax losses arising as a result of the acquisition of Discuva Limited in December 2017 that were not included in the Company's subsequent balances sheets. As a result, in the Company's previously issued December 31, 2019, January 31, 2019 and January 31, 2018 financial statements, the Company incorrectly recognized $ 0.4 million of goodwill and omitted the inclusion of deferred tax assets of $ 2.0 million, $ 2.2 million and $ 1.3 million in the balance sheets as of December 31, 2019, January 31, 2019 and January 31, 2018 respectively. Since the Company's deferred tax liabilities and deferred tax assets both arise in the U.K. tax jurisdiction, accordingly these are offset on the consolidated balance sheet. The Company has recorded a full valuation allowance against the deferred tax assets in excess of the deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences. The impact of these errors on net (loss) income was a deferred tax charge of $ 0.1 million for the eleven months ended December 31, 2019, and a deferred tax benefit of $ 1.0 million and $ 0.8 million for the years ended January 31, 2019 and January 31, 2018, respectively. The misstatement had no net impact on the Company’s consolidated statements of cash flows. Management concluded that the correction was not material to previously issued consolidated financial statements. Since these errors were not material to any previously issued annual or interim financial statements, no amendments to previously filed financial statements were required. Consequently, the Company has corrected for these errors by revising the December 31, 2019, January 31, 2019 and January 31, 2018 balances herein. Principles of consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. The consolidated financial statements include the accounts of Summit Therapeutics Inc and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In December 2019, the Board of Directors adopted a resolution to change the Company’s fiscal year end from January 31 to December 31, commencing December 31, 2019. Use of estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Foreign currency translation The financial results of the Company's activities are reported in U.S. dollars (“USD”). The statement of comprehensive income of the Company's foreign subsidiaries which have a functional currency other than USD are translated into USD using average exchange rates for the period. The net assets of foreign subsidiaries whose functional currencies are other than USD are F-10 translated into USD using exchange rates as of the balance sheet date. The effects that arise from translating these subsidiaries at changing rates are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity (deficit). Revenue recognition Effective February 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), using the full retrospective method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards. The Company enters into out-licensing agreements within the scope of ASC 606 under which it licenses certain rights to its product candidates to third parties. Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty. Payments made by the customers may include one or more of the following: non-refundable, up-front license fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products if they are successfully approved and commercialized. Each of these payments may result in license, collaboration, or other revenue, except revenue from royalties on net sales of licensed products, which would be classified as royalty revenue. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its out-licensing agreements, the following steps are performed: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. Revenue is then recognized in respect of the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the accounting for these arrangements, the Company must use significant judgment to determine: (a) the performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the standalone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. The Company also uses judgment to determine whether milestone payments or other variable consideration, except for royalties and sales-based milestones, should be included in the transaction price, as described below. The transaction price is allocated to each performance obligation based on the relative standalone selling price of each performance obligation in the contract, and the Company recognizes revenue based on those amounts when, or as, the performance obligations under the contract are satisfied. Exclusive Licenses If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition. The measure of progress, and the resulting periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research, development and licensing arrangement. Such a change could have a material impact on the amount of revenue the Company records in future periods. Under the Company’s existing license and collaboration agreements, the Company has concluded that the transfer of control to the customer occurs over the time period that the research and development services are to be provided by the Company, and this output method is, in management’s judgment, the best measure of progress towards satisfying the performance obligation. F-11 Milestone Payments At the inception of each arrangement that includes potential research, development or regulatory milestone payments, the Company evaluates whether the milestones are considered likely to be met and estimates the amount to be considered for inclusion in the transaction price using the most-likely-amount method. If it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur, the associated milestone payment value is included in the transaction price. For milestone payments due upon events that are not within the control of the Company or the licensee, such as regulatory approvals, the Company is not able to assert that it is likely that the regulatory approval will be granted and that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur until those approvals are received. In making this assessment, the Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone. There is considerable judgment involved in determining whether it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price of the arrangement. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the amounts of revenue and earnings in the period of adjustment. Royalties For arrangements that include sales-based royalties, including milestone payments due upon first commercial sales or based on a level of sales, that are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) the occurrence of the related sales or (ii) the date upon which the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue from any of its licensing arrangements. Manufacturing Supply Services Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded when the customer obtains control of the goods, which is upon delivery. To date, the Company has not yet entered into any manufacturing supply arrangements Other operating income The Company generates income from government contracts that reimburse the Company for certain allowable costs for funded projects. For contracts with government agencies where the funding arrangement is considered central to the Company’s ongoing operations, the Company classifies the recognized funding received as other operating income. Income from government grants is recognized as the qualifying expenses related to the contracts are incurred, provided that there is reasonable assurance of recoverability. If the government agency approves the project proposed by the Company, the government agency funds the project upon receipt of the support for the costs incurred up to the contract limit. Income recognized upon incurring qualifying expenses in advance of billing is recorded as accrued income, a component of other current assets, in the consolidated balance sheet. Grant income is not recognized as deductions of research and development costs because the Company acts as the principal in conducting the research and development activities and these contracts are central to its ongoing operations. The funds received through these means are held as deferred income in the consolidated balance sheets and are released to the consolidated statement of operations and comprehensive (loss) income as the underlying expenditure is incurred and to the extent the conditions of the grant are met. The related costs incurred by the Company are included in research and development expense in the Company’s consolidated statements of operations and comprehensive (loss) income. The Company benefits from two U.K. R&D tax credit cash rebate regimes: Small and Medium Enterprise, or SME, Program and the Research and Development Expenditure Credit, or RDEC, Program. Qualifying expenditures largely comprise employment costs for research staff, consumables, a proportion of relevant, permitted sub-contract costs and certain internal overhead costs incurred as part of research projects for which the Company does not receive commercial or other funding income. Credits related to the SME Program and RDEC are recorded as other operating income in the consolidated statements of operations and other comprehensive (loss)/income. Under both schemes, the Company receives cash rebate payments ranging from 9.7 % to 33.4 % of eligible research and development expenditure, these payments are not dependent on the Company’s pre-tax net income levels. F-12 Business combinations Business combinations are accounted for under the acquisition method. Acquired assets and assumed liabilities are measured at their fair values at the acquisition date. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within general and administrative expenses. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is assigned to reporting units and evaluated for impairment on at least an annual basis, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). Intangible assets Intangibles assets include patents, licenses, an option over non-financial assets and a research and development discovery platform ("Discuva Platform"). Patents, licenses, and the option over non-financial assets are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives (see below). The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. The intangible asset relating to the Discuva Platform capitalized as part of the acquisition of Discuva Limited in December 2017 is a software based platform and is available for alternative use. As such, it is subject to amortization over the period of the relevant associated patents. Other intangible assets are amortized in equal installments over their useful estimated lives as follows: Software licenses 3 - 5 years Option over non-financial assets Over the period of the relevant agreement Amortization of intangible assets is included as part of the research and development expense line shown on the face of the consolidated statement of operations and comprehensive (loss) income. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Cost comprises the purchase price plus any incidental costs of acquisition and commissioning. Depreciation is calculated based on cost, less residual value, in equal annual installments over the estimated useful lives of the assets. The residual value, if not insignificant, is reassessed annually. Leasehold improvements Over the shorter of the asset's useful life or the remaining lease term Laboratory equipment 2 - 10 years Office and IT equipment 3 - 5 years Depreciation is recognized as part of the general and administrative and research and development expense lines shown on the face of the consolidated statement of operations and comprehensive (loss) income depending on the nature of the underlying assets. F-13 Expenditures for repairs and maintenance are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations. Leases The Company determines if an arrangement is a lease at inception. At the lease commencement date, the Company measures and recognizes a lease liability and a right of use ("ROU") asset in the financial statements. ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent the Company's obligation to make lease payments arising from the lease. Lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. ROU asset is measured at the initial measurement of the lease liability, plus any lease payments made prior to the commencement date and any initial direct costs incurred, less any lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the periods in which they are incurred. The Company has lease agreements with lease and non-lease components. For all leases with non-lease components the Company accounts for the lease and non-lease components as a single lease component. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term. Financial liabilities on funding arrangements When entering into funding agreements with charitable and not for profit organizations, management is required to assess whether, based on the terms of the agreement, it can avoid a transfer of cash by settlement using a non-financial obligation. Under U.S. GAAP, when such arrangements also give the counterparties rights over unexploited intellectual property, all or part of the funding agreement should be accounted for as a financial liability recognized in the balance sheet rather than as a charitable grant. Financial liabilities are initially recognized at fair value using a discounted cash flow model with the difference between the fair value of the liability and the cash received considered to represent a charitable grant. The financial liabilities are subsequently measured at amortized cost using discounted cash flow models which calculate the risk adjusted net present values of estimated potential future cash flows for the relevant project. The financial liabilities are remeasured when there is a specific significant event that provides evidence of a significant change in the probability of successful development such as the completion of a phase of research or public reporting of significant interim data and changes in use or market for a product. The model is updated for changes in the clinical probability of success and other associated assumptions with the discount factor remaining unchanged within the model. Research and development costs Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs of outside vendors engaged to conduct preclinical and clinical development activities and clinical trials as well as to manufacture clinical trial materials. Non - refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Milestone and other payments made to third-parties with respect to in-process research and development, in accordance with the Company’s license, acquisition and other similar agreements are expensed when determined to be probable and estimable. The Company has entered into various research and development contracts with other companies. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs or prepaid expenses where the payments made exceeds the estimated costs. When evaluating the adequacy of these balances, the Company analyzes progress of the studies, including the estimated costs to complete each study or activity, the estimation of the current stage of completion and the invoices received, as well as predetermined milestones which are not reflective of the current stage of development for prepaid expenses. F-14 Actual results could differ from the Company’s estimates. In all cases, the full cost of each study or activity is expensed by the time the final report or where applicable, product, has been received. The Company’s historical estimates have not been materially different from the actual costs. Stock-Based Compensation The Company measures and recognizes compensation expense for all stock option and restricted stock unit awards based on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The fair value is recognized as expense, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis for each separately vesting portion of the award when the only condition to vesting is continued service. If vesting is subject to a market or performance condition, recognition is based on the derived service period of the award. Expense for awards with performance conditions is estimated and adjusted on a quarterly basis based upon the assessment of the probability that the performance condition will be met. Use of the Black-Scholes option-pricing model requires management to apply judgment under highly subjective assumptions. These assumptions include: • Expected term—The expected term represents the average period that the stock-based awards are expected to be outstanding and is based on a method that considers historical information of stock option exercise patterns and post-vesting termination behavior. • Expected volatility—The expected volatility was calculated based on historical volatility of the Company's share price. • Risk-free interest rate—The risk-free interest rate is based on the United States Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option. • Expected dividend—The Company has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero . The Company accounts for estimated expected forfeitures as compensation cost for stock-based awards is recognized. Stock option and restricted stock unit awards have been granted at fair value to nonemployees, in connection with research and consulting services provided to the Company, and to employees, in connection with Stock Purchase and Restriction Agreements. Equity awards generally vest over terms of three or four years . Income Taxes The provision for income taxes is determined using the asset and liability approach. Tax laws may require items to be included in tax filings at different times than the items are reflected in the financial statements. A current asset or liability is recognized for the estimated taxes receivable or payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are initially recognized at enacted tax rates in force at the time of initial recognition and are subsequently adjusted for any enacted changes in tax rates and tax laws. Subsequent changes to deferred taxes originally recognized in equity are recognized in income. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company has recorded a full valuation allowance against the deferred tax assets in excess of its deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences. These deferred tax balances both arise in the U.K. tax jurisdiction, accordingly these are offset in the consolidated balance sheet. The Company records interest and penalties related to income tax matters as part of income tax expense. Concentration of credit risk and of significant supplier Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of short-term cash deposits and accounts and other receivables. The Company's cash and cash equivalents are comprised of short-term cash deposits at a variety of financial institutions with strong credit ratings in amounts that may exceed federally insured limits and has not experienced any losses on such accounts. Cash balances maintained during the year have been principally held with reputable U.K.-based and U.S.-based banks and building societies. The Company does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As of December 31, 2020 and December 31, 2019 the majority of cash and cash equivalents were placed with HSBC Bank plc. F-15 The credit risk with respect to customers and funding bodies is limited as the Company has only a small number of these arrangements, including with Eurofarma, BARDA and Carb-X. The Company relies, and expects to continue to rely, on a number of vendors to conduct its clinical trials and preclinical studies, manufacture drug product and supply clinical trial and preclinical study materials for its development programs. These programs could be adversely affected by a significant interruption in these services or the availability of materials. Financial instruments Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets: quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Assumed Contingent Liabilities As part of the acquisition of Discuva Limited in December 2017, the Company assumed certain contingent liabilities as certain employees, former employees and former directors of Discuva Limited are eligible for payments from Discuva Limited based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform. The timing of these potential payments is uncertain. The fair value of the assumed contingent liability was estimated using the expected value of the payments. The assumed contingent liabilities are subsequently measured at amortized cost using discounted cash flow models which calculate the risk adjusted net present values of estimated potential future cash flows of the payments. The assumed contingent liabilities are remeasured when there is a specific significant event that provides evidence of a significant change in the probability of successful development and clinical milestones being achieved. The models will be updated for changes in the probability of successful development and clinical milestones being achieved and other associated assumptions with the discount factor remaining unchanged within the model. A discount factor of 13 % has been used to discount the contingent liabilities back to net present value. This discount factor has been calculated using appropriate measures and rates which could have been obtained in the period that the contingent liabilities were assumed. Accretion of the discount factor, or interest expense, is recognized as part of other income (expense), net in the Consolidated Statement of Operations and Comprehensive (Loss) Income. Warrants Warrants issued by the Company are recognized and classified as equity when, upon exercise, the Company would issue a fixed amount of its own equity instruments (common stock) in exchange for a fixed amount of cash or another financial asset. Consideration received, net of incremental costs directly attributable to the issue of such new warrants, is shown in equity. Such warrants are not remeasured at fair value in subsequent reporting periods. Warrants issued in which external services are received as consideration for equity instruments of the company should be measured at the fair value of the goods or services received. Only if the fair value of the services cannot be measured reliably would the fair value of the equity instruments granted be used. The fair value for the warrants is calculated using the Black-Scholes formula and charged to the Consolidated Statement of Operations and Comprehensive (Loss) Income on a straight-line F-16 basis over the period of the consulting services. If the services are terminated prior to the end of the consultancy agreement, the warrants cease vesting and any unvested portion of the warrants will lapse immediately. The warrants in issue are classified within stockholders’ equity as they are indexed to the Company's own shares of common stock and require settlement in its shares of common stocks with no provision for any cash settlement. 4. New Accounting Standards Recently adopted accounting standards In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update introduces the current expected credit loss ("CECL") model. Under this model, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, since the Company has immaterial amounts of accounts and other receivables, all of which are considered fully recoverable. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, as the value of financial instruments with Level 3 inputs was $nil as of December 31, 2020. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). Under the guidance, public companies will be required to capitalize implementation costs incurred in a cloud computing arrangement that is a service contract. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, since the Company acquired immaterial amounts of software licenses during the year ended December 31, 2020. Recent accounting standards not yet adopted In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issues ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update simplifies the accounting for goodwill impairments by removing the requirement to determine the fair value of individual assets and liabilities in order to calculate a reporting unit’s “implied” goodwill under the current guidance. This update will be effective for the Company for fiscal years beginning after December 15, 2022. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements. Other recent authoritative guidance issued by the FASB (including technical corrections to the FASB ASC), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to have a material impact on the Company's consolidated financial statements . F-17 Table of Contents 5. Segment Reporting .Operating segments are defined as components of a business for which separate discrete financial information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company and its chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manages its business as a single operating segment, which is the discovery, development and commercialization of novel antibiotics for serious infectious diseases. The Company operates in 2 geographic regions: the United Kingdom and the United States. Substantially all of the Company's long-lived assets are held in the United Kingdom. For details of revenue from external customers by geography refer to Note 6. 6. Revenue Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Analysis of revenue by category: Licensing agreements $ 860 $ 743 $ 56,761 Research collaboration agreement — — 327 $ 860 $ 743 $ 57,088 Revenue recognized during the year ended December 31, 2020 consists only of amounts received from the license and commercialization agreement with Eurofarma Laboratórios S.A. Revenue recognized during prior periods also includes amounts received from a license and collaboration agreement with Sarepta Therapeutics, Inc. (which was terminated in August 2019) and the a research collaboration agreement with F.Hoffmann-La Roche Ltd (which ended in February 2018). Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Analysis of revenue by geography: United States $ — $ 160 $ 56,099 Latin America 860 583 662 Europe — — 327 $ 860 $ 743 $ 57,088 The analysis of revenue by geography has been identified on the basis of the geographical location of each collaboration partner. Eurofarma Laboratórios S.A. On December 21, 2017, Summit announced it had entered into an exclusive license and commercialization agreement with Eurofarma Laboratórios S.A. ('Eurofarma'), pursuant to which the Company granted Eurofarma the exclusive right to commercialize ridinilazole in specified countries in South America, Central America and the Caribbean. The Company has retained commercialization rights in the rest of the world. Under the terms of the license and commercialization agreement with Eurofarma, the Company received an upfront payment of $ 2.5 million from Eurofarma in December 2017. In February 2020, the Company reached the first enrollment milestone and received $ 1.0 million. The terms of the contract have been assessed under ASC 606 and currently only the upfront payment and the first enrollment milestone payment are included in the transaction price. These payments were initially reported as deferred revenue in the balance sheet and are being recognized as revenue ratably over the performance period. F-18 Table of Contents In addition, the Company will be entitled to receive an additional $ 2.75 million in development milestones upon the achievement of staged patient enrollment targets in the licensed territory in one of the two planned Phase 3 clinical trials of ridinilazole. The Company is eligible to receive up to $ 21.4 million in development, commercial and sales milestones when cumulative net sales equal or exceed $ 100.0 million in the Eurofarma licensed territory. Each subsequent achievement of an additional $ 100.0 million in cumulative net sales will result in the Company receiving additional milestone payments, which, when combined with anticipated product supply transfer payments from Eurofarma paid to the Company in connection with a commercial supply agreement to be entered into between the two parties, will provide payments estimated to range from a mid-teens to high-teens percentage of cumulative net sales in the Eurofarma licensed territory. The Company estimates such product supply transfer payments from Eurofarma will range from a high single-digit to low double-digit percentage of cumulative net sales in the licensed territory. 7. Other Operating Income Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Analysis of other operating income by category: Income recognized in respect of BARDA $ 9,472 $ 16,570 $ 17,375 Grant income 477 829 1,576 Income on remeasurement of financial liabilities on funding arrangements — — 715 Research and development credit 9,363 5,473 2,934 Other income — — 8 $ 19,312 $ 22,872 $ 22,608 BARDA In September 2017, the Company was awarded a funding contract from the Biomedical Advanced Research and Development Authority ("BARDA"), an agency of the US government's Department of Health and Human Services' Office of the Assistant Secretary for Preparedness and Response, to fund a specified portion of the clinical and regulatory development activities of ridinilazole for the treatment of C. difficile infection ("CDI"). Under the terms of this contract, the Company was initially eligible to receive base period funding of $ 32 million. In addition, the contract included three option work segments that, if exercised in full by BARDA, would increase the total federal government funding under the contract to approximately $ 62 million. In August 2018, BARDA exercised one of the option work segments worth $ 12 million. In June 2019, BARDA increased the total value of the funding contract to up to $ 63.7 million; at this time, BARDA also exercised a second of the option work segments worth $ 9.6 million to bring the total amount of committed BARDA funding to $ 53.6 million. In January 2020, BARDA increased its award by $ 8.8 million to bring the total amount of the funding contract to $ 72.5 million and the total amount of committed BARDA funding to $ 62.4 million. The remaining federal government funding is dependent on BARDA in its sole discretion exercising the final independent option work segment, upon the achievement by the Company of certain agreed-upon milestones for ridinilazole. As of December 31, 2020, an aggregate of $ 53.3 million of the total committed BARDA funding had been received and the Company has recognized $ 46.2 million of cumulative income since contract inception. CARB-X Grant income includes income from funding arrangements with CARB-X for the Company's antibiotic pipeline research and development activities. In July 2018, the Company was granted a sub-award of up to $ 4.5 million from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program, or CARB-X, to help fund the selection of a preclinical candidate from the Company's lead gonorrhea series of clinical candidates and support the development of the selected candidate through the end of a Phase 1 clinical trial. Under the award, the Company received an initial $ 2.0 million in funding from CARB-X in July 2018. In February 2020, CARB-X increased the value of the initial funding by $ 1.2 million. The Company recognized income of up to 70 % of eligible research and development expenditures which are funded by CARB-X, up to the maximum award. In the third quarter of 2020, the Company decided not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhea program based on toxicology data from preclinical studies. It is expected CARB-X will cover its remaining share of the work that has been funded under the award. F-19 Table of Contents Research and development credits Credits from research and development ("R&D") tax credit, consists of the R&D tax credit received in the U.K. The Company benefits from two U.K. R&D tax credit cash rebate regimes: Small and Medium Enterprise, or SME, Program and the Research and Development Expenditure Credit ("RDEC") Program. Qualifying expenditures largely comprise employment costs for research staff, consumables, a proportion of relevant, permitted sub-contract costs and certain internal overhead costs incurred as part of research projects for which the Company does not receive income. Tax credits related to the SME Program and RDEC are recorded as other operating income in the consolidated statements of operations and other comprehensive (loss) income. Under both schemes, the Company receives cash payments that are not dependent on the Company’s pre-tax net income levels. Based on criteria established by Her Majesty’s Revenue and Customs, or HMRC, a portion of expenditures being carried out in relation to the Company's pipeline research and development, clinical trials management and third-party manufacturing development activities are eligible for the SME regime and the Company expects such elements of expenditure will also continue to be eligible for the SME regime for future accounting periods. For the year ended December 31, 2020, the eleven months ended December 31, 2019 and for the year ended January 31, 2019 the Company recognized research and development tax relief in respect of the SME regime of $ 9.1 million, $ 4.7 million and $ 2.5 million, respectively, the remaining research and development credit related to the RDEC regime. 8. Other income (expense) Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Foreign currency gains (losses) $ 54 $ ( 1,332 ) $ 614 Remeasurement of liabilities 480 — 3,695 Interest income 4 5 5 Interest expense ( 255 ) ( 291 ) ( 620 ) $ 283 $ ( 1,618 ) $ 3,694 Remeasurement of liabilities during the year ended December 31, 2020, relates to a revaluation of assumed contingent liabilities for potential payments to certain employees, former employees and former directors of Discuva Limited, based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform (see note 18 for further details). Remeasurement of liabilities during the year ended January 31, 2019, relates to the remeasurement of the Company’s financial liabilities on funding arrangements relating to DMD-related U.S. not for profit organizations following the discontinuation of the development of ezutromid in June 2018. 9. Income Tax The components of the Company's (loss) income before income taxes for the year ended December 31, 2020, eleven months ended December 31, 2019 and year ended January 31, 2019 consisted of the following: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) United Kingdom $ ( 51,197 ) $ ( 29,224 ) $ 7,549 United States ( 1,713 ) 133 1,534 (Loss)/profit before income taxes $ ( 52,910 ) $ ( 29,091 ) $ 9,083 F-20 Table of Contents Significant components of the provision for income taxes are as follows: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Current income tax benefit United States $ ( 213 ) $ 36 $ 120 Total ( 213 ) 36 120 Deferred income tax benefit United Kingdom — — ( 1,906 ) Total — — ( 1,906 ) Total income tax $ ( 213 ) $ 36 $ ( 1,786 ) Deferred income tax benefit for the eleven months ended December 31, 2019 and the year ended January 31, 2019, has been revised pursuant to the information included in note 3 regarding the revision and immaterial correction of an error in previously issued financial statements. The major components of deferred tax assets and liabilities are as follows: December 31, 2020 December 31, 2019 (in thousands) Deferred tax assets: Net operating loss carryforward $ 29,831 $ 20,095 Stock based compensation 1,167 319 Other 491 34 Total deferred tax assets 31,489 20,448 Deferred tax liabilities: Intangible asset ( 2,189 ) ( 2,057 ) Other ( 71 ) — Total deferred tax liabilities ( 2,260 ) ( 2,057 ) Net deferred tax assets before valuation allowance 29,229 18,391 Valuation allowance ( 29,229 ) ( 18,391 ) Deferred tax, net $ — $ — Deferred tax liabilities as of December 31, 2019, have been revised pursuant to the information included in note 3 regarding the revision and immaterial correction of an error in previously issued financial statements. The Company records net deferred tax assets to the extent that these assets will more likely than not be realized. In making such determination, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. Management has determined that the evidence connected with U.K. loss carryforwards and certain US federal and state loss carryforwards do not support a conclusion of being more likely than not to be fully realized. Accordingly, as of December 31, 2020, the Company recorded a valuation allowance of $ 29.2 million. The increase in valuation allowance of $ 8.8 million during 2020 was primarily due to loss carryforwards. As of December 31, 2020, the Company had approximately $ 153.9 million in U.K. loss carryforwards available to use against future taxable profits on a year by year basis. To the extent that taxable profits exceed £5.0 million ($6.4 million) in each year, the loss available to utilize against profits in excess of £5.0 million will be restricted to 50%. The U.K. loss carryforwards do F-21 Table of Contents not lapse and therefore, the full amount will be relieved over time provided there are sufficient profits against which the losses can be utilized. The Company also had approximately $ 1.9 million of U.S. Federal loss carryforwards which can be carried forward for an indefinite period and used to offset 80% of taxable income in each year. In addition, the Company has approximately $ 2.3 million in U.S. State loss carryforwards which expire beginning 2019 through 2040. In the Spring Budget 2020, the U.K. Government announced that from April 1, 2020, the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law was substantively enacted on March 17, 2020. The overall effect of the change was an increase in net deferred tax assets by $ 2.3 million and an increase in valuation by an equal amount. The reconciliation between the U.S. statutory income tax rate for Summit and the effective income tax rates are as follows: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 U.S. corporation tax rate 21.0 % 21.0 % 21.0 % Effect of: Adjustment on adoption of ASC 606 — % — % ( 36.2 ) % Adjustment on adoption of ASC 842 — % — % 0.1 % Change in valuation allowance ( 12.1 ) % ( 11.2 ) % 16.5 % Non-deductible expenses ( 3.9 ) % 1.2 % 26.4 % Refundable R&D tax credit ( 7.0 ) % ( 6.5 ) % ( 23.8 ) % Overseas profits taxed at different rates 0.9 % ( 4.7 ) % ( 2.8 ) % Other 1.4 % — % — % Release of temporary difference relating to intangible assets — % — % ( 20.9 ) % Reported effective income tax rate 0.3 % ( 0.2 ) % ( 19.7 ) % In the U.K., the Company is entitled to a research and development tax relief for small and medium-sized enterprises which allows the Company an enhanced deduction rate of 230% on qualifying research and development expenditure (the tax relief). If the Company incurs tax losses, it is entitled to surrender the lesser of unrelieved tax loss sustained and the tax relief. As the realization of the tax relief does not depend on generation of future taxable income or the Company's ongoing tax status or tax position, the Company does not consider the tax relief as an element of income tax accounting under ASC 740. For the year ended December 31, 2020, the eleven months ended December 31, 2019 and for the year ended January 31, 2019, the Company recognized research and development tax relief of $ 9.1 million, $ 4.7 million and $ 2.5 million, respectively, which is included in other operating income in the consolidated statements of operations and other comprehensive (loss) income. The Company does not have any uncertain tax positions as of December 31, 2020. In the U.K., tax returns for the periods January 31, 2019 and December 31, 2019 remain subject to examination by Her Majesty's Revenue and Customs. In the U.S., tax years from 2018 remain subject to examination by Internal Revenue Service. F-22 Table of Contents 10. (Loss) earnings per share The calculation of (loss) earnings per share is based on the following data: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands, except per share data) Net (loss) profit $ ( 52,697 ) $ ( 29,127 ) $ 10,869 Basic weighted average number of shares of common stock outstanding 69,524 32,829 17,140 Dilutive potential common shares — — 89 Diluted weighted average number of shares of common stock outstanding 69,524 32,829 17,229 Basic (loss) earnings per share from operations ( 0.76 ) ( 0.89 ) 0.63 Diluted (loss) earnings per share from operations ( 0.76 ) ( 0.89 ) 0.63 Anti-dilutive shares excluded from diluted earnings per share 9,521 13,403 1,715 Basic loss per share has been calculated by dividing the (loss) earnings for the period by the weighted average number of shares outstanding during period. Diluted earnings per share has been calculated by adjusting the weighted average number of shares of common stock outstanding to assume conversion of all potentially dilutive share options and warrants using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of share options and warrants is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options and warrants that are in-the-money. Potential shares related to certain of the Company’s outstanding stock options and warrants were excluded because they were anti-dilutive. 11. Goodwill December 31, 2020 December 31, 2019 (In thousands) Goodwill - beginning of year $ 1,961 $ 1,951 Impairment — — Currency translation 69 10 Goodwill - end of year $ 2,030 $ 1,961 Goodwill was recognized in respect of acquisitions of Discuva Limited and MuOx Limited. Goodwill as of December 31, 2019, January 31, 2019 and January 31, 2018, has been revised pursuant to the information included in note 3 regarding the revision and immaterial correction of an error in previously issued financial statements. The Company determines that the carrying value of goodwill associated with Discuva Limited December 31, 2020 is not impaired as, based on a qualitative assessment, the fair value of the reporting unit exceeds its carrying value. As a result of the Company's decision in June 2018 to discontinue development of ezutromid, management concluded that this was an indication of both goodwill and intangible asset impairment associated with the acquisition of MuOx Limited which related to the utrophin program acquired . The Company determined the fair value of the reporting unit by using a discounted cash flow methodology, which is largely based on assumptions about future events that may or may not occur as anticipated, and such deviations could have a significant impact on the estimated fair value of the reporting unit. These assumptions included, but were not limited to, estimates of discount rates, future growth rates and terminal values for each reporting unit. Based on this review, it was determined that the fair value of MuOx Limited was $ nil as there would be no future cash flows attributable to the reporting unit, resulting in a goodwill impairment charge of $ 0.9 million being recognized during the year ended January 31, 2019. See note 12 for details of the intangible asset impairment. F-23 Table of Contents F-24 Table of Contents 12. Intangible Assets December 31, 2020 December 31, 2019 Gross carrying amount Accumulated amortization and impairment Net Gross carrying amount Accumulated amortization and impairment Net (In thousands) Utrophin program acquired $ 4,534 $ ( 4,534 ) $ — $ 4,379 $ ( 4,379 ) $ — Discuva platform acquired 14,565 ( 3,050 ) 11,515 14,070 ( 1,972 ) 12,098 Option over non-financial asset 921 ( 921 ) — 881 ( 119 ) 762 Other patents and licenses 150 ( 150 ) — 432 ( 172 ) 260 $ 20,170 $ ( 8,655 ) $ 11,515 $ 19,762 $ ( 6,642 ) $ 13,120 During the year ended December 31, 2020, management identified an impairment related to the option over non-financial asset pursuant to an Evaluation and Option Agreement with a collaboration partner. The partner is no longer conducting antibiotic candidate programs over which the Company had the option, management therefore determined that the fair value of the option to acquire the assignment of the proprietary rights for antibiotic candidates is $ nil . Accordingly, the asset was written off in its entirety resulting in an impairment charge of $ 0.9 million. As discussed in note 11, management concluded that the Company's decision in June 2018 to discontinue development of ezutromid was an indication of both goodwill and intangible asset impairment and hence reviewed the assets associated with the acquisition of MuOx Limited which related to the utrophin program acquired. Based on this review, an intangible asset impairment charge of $ 4.4 million related to the utrophin program acquired was recognized during the year ended January 31, 2019. Following this impairment charge, there was no remaining net book value associated with the Utrophin program. Amortization expense was $ 1.3 million, $ 1.0 million and $ 1.1 million, for the periods ending December 31, 2020, December 31, 2019 and January 31, 2019, respectively. Estimated future amortization expense related to intangible assets held at December 31, 2020 and 2019 is $ 1.0 million for each of the years from 2021 to 2025. 13. Property and Equipment Property and equipment consisted of the following: December 31, 2020 December 31, 2019 (In thousands) Laboratory equipment $ 759 $ 638 Office and IT equipment 804 654 Leasehold improvements 291 250 Property and equipment, gross 1,854 1,542 Less accumulated depreciation 1,129 1,024 Property and equipment, net $ 725 $ 518 Depreciation expense for the periods ending December 31, 2020, December 31, 2019 and January 31, 2019 was $ 0.3 million, $ 0.3 million and $ 0.4 million, respectively. For additional details regarding the right-of-use assets under the Company’s lease agreements see Note 17 Leases. F-25 Table of Contents 14. Research and Development Prepaid Expenses and Accrued Liabilities Included within prepaid expenses at December 31, 2020, is $ 8.5 million (December 31, 2019: $ 7.7 million) of prepayments relating to research and development expenditure. Included within accrued liabilities at December 31, 2020 is $ 1.5 million (December 31, 2019: $ 3.2 million) relating to research and development expenditure. These amounts are determined based on the estimated costs to complete each study or activity, the estimation of the current stage of completion and the invoices received, as well as predetermined milestones which are not reflective of the current stage of development for prepaid expenses. However, prepaid expenses decrease and accrued liabilities increase as the activities progress, and if actual costs incurred exceed the prepaid expense, an accrual will be recorded for the liability. The key sensitivity is the estimated current stage of completion of each study or activity, which is based on information received from the supplier and the Company's operational knowledge of the work completed under those contracts. If the estimated stage of completion of each study or activity increased by 5% then the aggregate increase in accruals and decrease in prepayments would result in an overall increase in total research and development expenses of $ 1.9 million. If the estimated stage of completion decreased by 5%, then the aggregate decrease in accruals and increase in prepayments would result in an overall decrease in total research and development expenses of $ 2.3 million. In all cases, the full cost of each study or activity is expensed by the time the final report or where applicable, product, has been received. 15. Financial Liabilities on Funding Arrangements The Company entered into charitable funding arrangements with the Wellcome Trust and the U.S. not for profit organizations, the Muscular Dystrophy Association ("MDA") and Duchenne Partners Fund ("DPF"). In exchange for the funding provided, these arrangements required the Company to pay royalties on potential future revenues generated from the CDI and DMD programs respectively or transfer the rights over unexploited intellectual property. Because of the Company's decision in June 2018 to discontinue the development of ezutromid, the financial liabilities attributable to the charitable funding arrangements with MDA and DPF were remeasured during the year ended January 31, 2019, as future royalties on revenues generated from the DMD program are no longer anticipated. This remeasurement resulted in a credit to the Statement of operations and comprehensive (loss) income. The portion of the credit presented as other operating income during the year ended January 31, 2019, represents the component of the funding received from MDA and DPF not previously credited to the consolidated statement of operations and comprehensive (loss) income upon initial recognition of the financial liability. The portion of the credit presented as a remeasurement of financial liabilities on funding arrangements during the year ended January 31, 2019, relates to previous remeasurements and discounting associated with the financial liability which were previously recognized as finance costs. As such, the value of the estimated financial liabilities for funding arrangements as of December 31, 2020 and 2019, amounted to $ nil . As the Company discontinued the development of ezutromid, there are no sensitivities disclosed in relation to the charitable funding arrangements with MDA and DPF, since there are no reasonably possible changes in assumptions that would result in a different value of the liability as of December 31, 2020 or 2019. 16. Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, accounts and other receivables, accounts payable and contingent considerations. The Company believes that the recorded values of cash and cash equivalents, accounts and other receivables and accounts payable approximate their current fair values because of their nature and respective maturity dates or durations. The fair value of the contingent consideration liability as of December 31, 2020 is $ nil (December 31, 2019: $ 0.1 million) and is determined based on “Level 3” inputs. The contingent consideration relates to the acquisition of Discuva Limited in December 2017 based on the terms of the share purchase agreement. During the year ended December 31, 2020, the Company reassessed the contingent consideration in line with the anticipated settlement of consideration liability and determined no further payments were required under the agreement. The remaining balance of $ 0.1 million was reversed to the consolidated statement of operations and comprehensive loss. During the year ended December 31, 2020 and eleven months ended December 31, 2019, payments of $ nil and $ 0.7 million were made during the periods respectively. F-26 Table of Contents The fair value of the contingent consideration was measured using the discounted cashflow forecast model. The expected payments were primarily due to research and development tax credits received and receivable by Discuva in respect to financial years prior to the Company's acquisition, of which the sellers were due a specified portion of these amounts. The following table is a reconciliation of Level 3 liabilities recorded at fair value using significant unobservable inputs: (In thousands) Balance January 31, 2019 $ 825 Payments ( 703 ) Foreign currency translation ( 17 ) Balance December 31, 2019 $ 105 Release of liability ( 105 ) Balance December 31, 2020 $ — 17. Leases The Company has two operating leases relating to its U.K.-leased properties in Oxford and Cambridge that are within the scope of ASC 842. A summary of these leases is as follows: • In February 2017, the Company entered into a 10 -year lease agreement for its office premises in Oxford, U.K. The lease contains a break clause with the option to terminate the lease on the fifth anniversary of the agreement. The Company does not factor in the period covered by the break clause when accounting for this lease. • In December 2017, the Company entered into a 4 -year lease agreement for its office and lab premises in Cambridge, U.K. The lease contains a break clause with the option to terminate the lease on the second anniversary of the agreement. The Company factors in the period covered by the break clause when accounting for this lease, as the break clause notice period has now passed and was not exercised by the Company. The adoption of ASC 842 resulted in the recognition of lease liabilities and right-of-use assets. The carrying value of the right-of-use assets as of December 31, 2020, is $ 0.6 million (December 31, 2019: $ 1.0 million). Future minimum lease payments under non-cancellable operating leases as of December 31, 2020 were as follow: (in thousands) 2021 $ 401 2022 76 Total minimum lease payments 477 Less: imputed interest ( 12 ) Present value of lease liabilities $ 465 Liabilities Current lease liabilities $ 390 Non-current lease liabilities 75 $ 465 The weighted average remaining lease term is 1.1 years (December 31, 2019: 2.1 years). The weighted average discount rate is 3.75 % (December 31, 2019: 3.75 %). F-27 Table of Contents Lease payments consist primarily of fixed payments. The following table contains a summary of the lease costs recognized and other information pertaining to the Company’s leases for the periods ending December 31, 2020, December 31, 2019 and January 31, 2019: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Operating lease cost $ 478 $ 447 $ 501 Other information Cash paid for amounts included in the measurement of operating lease liabilities $ 488 $ 435 $ 369 18. Other Non-Current Liabilities Included within other non-current liabilities at December 31, 2020 is $ 2.3 million (December 31, 2019: $ 2.4 million) relating to assumed contingent liabilities. As part of the acquisition of Discuva Limited in December 2017, the Company assumed certain contingent liabilities as certain employees, former employees and former directors of Discuva Limited are eligible for payments from Discuva Limited based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform. The timing of these potential payments is uncertain. The contingent liability was remeasured in the third quarter of 2020 to reflect a change in the timing of expected payments following the Company's decision not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhea program. The gain on remeasurement of the liability is included within other income (expense) in the Consolidated Statement of Operations and Comprehensive (Loss) Income. The table below describes the value of the assumed contingent liabilities as of December 31, 2020, of $ 2.3 million compared to what the total value would be following the presented variations to the underlying assumptions in the model: December 31, 2020 Estimated assumed contingent liabilities (In thousands) 1% lower discount rate 2,416 1% higher discount rate 2,129 10% lower probability of success 1,864 10% higher probability of success 2,630 19. Equity Reverse stock split In conjunction with the Company’s Redomiciliation, the Company acquired all of the outstanding ordinary shares of Summit Therapeutics, plc on the basis of one share of the Company’s common stock for every 5 ordinary shares outstanding, which had the effect of a 1-for-5 reverse stock split. On the effective date of the Redomiciliation, the number of outstanding shares was reduced from 335.9 million to 67.2 million. All share and per share amounts in these consolidated financial statements and related notes for periods prior to the Redomiciliation have been retroactively adjusted to reflect the effect of the exchange ratio. Common stock On November 6, 2020 the Company closed on a fundraising of $ 50.0 million through the issuance and sale in a private placement of shares of common stock to Mr. Robert W. Duggan and other existing stockholders of the Company. The Company issued 14,970,060 shares of common stock at a price of $ 3.34 per share and received gross proceeds of $ 50.0 million. All new shares of common stock rank pari passu with existing shares of common stock. On December 24, 2019, the Company completed an equity placing, issuing 35,075,690 new shares of common stock at a price of $ 1.43 to existing investors. Total gross proceeds of $ 50.0 million were raised and directly attributable transaction costs $ 0.9 million were incurred. All new shares of common stock rank pari passu with existing shares of common stock. F-28 Table of Contents Warrants As part of the equity placing on December 24, 2019, the participating investors were granted warrants with the right to subscribe for 5,261,350 new shares of common stock at an exercise price of $ 1.58 , exercisable any time in the period commencing on the date falling six months following December 24, 2019 and ending on the tenth anniversary of admission. Each warrant entitles the warrant holder to subscribe in cash for one share. Shares of common stock allotted pursuant to the exercise of the warrant will rank in full for all dividends and other distributions with a record date after the exercise date with the shares of common stock in issue at that date. The Company has the option to require the warrant holder to exercise some or all of the outstanding warrants after the third anniversary date if the ten-day volume weighted average price of the shares of common stock as reported on Nasdaq represents a premium of at least 50 percent to the exercise price. The warrants are classified within stockholders’ equity as they are indexed to the Company's shares of common stock and require settlement in its shares of common stocks with no provision for any cash settlement. Warrants granted over shares of comment stock to consultants in exchange for certain services are similar to stock based compensation, further details on these warrants can be found in note 20. The Company has total warrants outstanding of 5,821,137 as of December 31, 2020 (December 31, 2019: 8,620,082 ). Dividends No dividends were paid or declared during year ended December 31, 2020, eleven months ended December 31, 2019 and the year ended January 31, 2019. Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated other comprehensive loss: Foreign currency translation adjustment (In thousands) Balance, January 31, 2018 $ ( 4,319 ) Other comprehensive income ( 496 ) Balance, January 31, 2019 $ ( 4,815 ) Balance, January 31, 2019 $ ( 4,815 ) Other comprehensive loss 51 Balance, December 31, 2019 $ ( 4,764 ) Balance, December 31, 2019 $ ( 4,764 ) Other comprehensive loss 970 Balance, December 31, 2020 $ ( 3,794 ) 20. Stock Based Compensation 2016 Long Term Incentive Plan In September 2020, in conjunction with the Redomiciliation, the 2016 Long Term Incentive Plan, (the "2016 Plan") and the Company's outstanding restricted stock units ("RSUs") were assumed and adopted by Summit Therapeutics Inc. and all awards were exchanged with replacement awards issued. Subsequent to the Redomiciliation, no additional grants will be made under the 2016 Plan and any outstanding awards under the 2016 Plan and RSUs will continue with their original terms. The Company concluded that the adoption of the 2016 Plan and RSUs and issuance of replacement awards was a modification but with no change in the material rights and preferences and therefore no recorded change in the fair value of each respective award. 2020 Stock Award Plan In September 2020, the Company’s board of directors approved the 2020 Stock Incentive Plan (the “2020 Plan”), which became effective on September 21, 2020. The 2020 plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Upon the effectiveness of the 2020 Plan, the Company ceased granting awards under its 2016 Plan (the “2016 Plan” together with the 2020 Plan, the “Plans”). F-29 Table of Contents A total of 8,000,000 shares of common stock were initially reserved for issuance under the 2020 Plan. Additionally, up to 5,000,000 shares of common stock can be added to the 2020 Plan for future issuance from options that expire, lapse unexercised or are terminated from the 2016 Plan or any other predecessor plans. The number of shares of common stock that may be issued under the 2020 Plan will automatically increase on each January 1, beginning in 2021 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 6,400,000 shares of common stock, (ii) 4 % of the common shares outstanding on the final day of the immediately preceding calendar year and (iii) an amount as determined by the Company’s board of directors. As of December 31, 2020, 4,650,091 shares remained available for future grant under the 2020 Plan. On January 1, 2021, the Company increased the number of shares to be issued by 3,303,002 shares, which represented 4 % of the common shares outstanding on December 31, 2020. After the annual increase, there are 7,953,093 shares available to be issued under the 2020 Plan. 2020 Employee Share Purchase Plan In September 2020, the Company’s board of directors approved the 2020 Employee Share Purchase Plan (the “2020 ESPP”), which became effective on September 21, 2020. A total of 1,000,000 common shares were initially reserved for issuance under the 2020 ESPP. The number of common shares that may be issued under the 2020 ESPP will automatically increase on each January 1, beginning in 2021 and continuing for each fiscal year until, and including the fiscal year beginning January 1, 2030 equal to the lesser of (i) 1,600,000 shares of common stock, (ii) 1 % of the common shares outstanding on the final day of the immediately preceding calendar year and (iii) an amount as determined by the Company’s board of directors. As of December 31, 2020, 1,000,000 common shares were available to be issued under the ESPP. Stock Options The grant-date fair value of the Company’s stock option awards issued to employees and directors was calculated using the Black-Scholes option-pricing model, based on the following weighted-average assumptions: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 Risk-free interest rate 0.29 % 0.61 % 0.86 % Expected term (in years) 5.9 2.5 2.6 Expected volatility 71.9 % 64.6 % 60.7 % Expected dividend yield zero zero zero The following table summarizes stock option activity for the year ended December 31, 2020: ` Number of share options Weighted average exercise price Weighted average remaining contractual term Aggregate intrinsic value (in thousands) Outstanding at December 31, 2019 4,644,835 $ 1.80 Granted 3,135,204 $ 3.47 Forfeited ( 3,791,662 ) $ 2.07 Exercised ( 315,409 ) $ 1.88 Outstanding at December 31, 2020 3,672,968 $ 2.90 8.9 years $ 6,641 Vested and Expected to Vest at December 31, 2020 3,488,858 $ 2.89 8.9 years $ 6,325 Exercisable at December 31, 2020 769,564 $ 2.36 7.7 years $ 1,817 The weighted-average grant-date fair value of stock options granted during the year ended December 31, 2020, the eleven months period ended December 31, 2019 and year ended January 31, 2019, was $ 2.20 , $ 0.65 and $ 2.00 , respectively, per share. The aggregate intrinsic value of the Company's stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during the year ended December 31, 2020 and the eleven months F-30 Table of Contents period ended December 31, 2019, was $ 0.9 million and zero , respectively. There were no stock option exercises in the eleven months ended December 31, 2019 as the market value was below the exercise price. During the year ended December 31, 2020, the Company granted 7,865,676 stock options subject to performance based conditions, of which 5,562,500 stock options are outstanding at December 31, 2020. As of December 31, 2020, the performance conditions had not been agreed and communicated and therefore a grant date has not yet been established. As such, these performance based stock options have been excluded from the summary of stock option activity above and no expense has been recorded in the consolidated statement of operations. During the year ended January 31, 2019, the former executive director, key management and employees voluntarily surrendered options to subscribe for a total of 1,434,410 shares of common stock. This cancellation resulted in an accelerated stock-based payment expense of the remaining fair value of those awards during the year ended January 31, 2019. At December 31, 2020, there was $ 3.8 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 3.6 years. Restricted Stock Units The Company's outstanding restricted stock units ("RSUs") consist of nominal-cost options which were granted to non-executive directors. The following table summarizes the activity relating to RSUs for the year ended December 31, 2020: Number of shares Weighted average exercise price Weighted average remaining contractual term Aggregate intrinsic value (in thousands) Outstanding at January 1, 2020 138,461 $ 0.07 Exercised during the year ( 111,538 ) $ 0.07 Number of RSUs outstanding at December 31, 2020 26,923 $ 0.07 0.1 years $ 125 Vested at December 31, 2020 26,923 $ 0.07 0.1 years $ 125 No RSUs were granted during the year ended December 31, 2020. The weighted-average grant-date fair value of stock options granted during the eleven months period ended December 31, 2019 was $ 1.62 a per share. The aggregate intrinsic value of the Company's stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during the year ended December 31, 2020 and the eleven months period ended December 31, 2019, was $ 124,653 and $ 118,261 , respectively. At December 31, 2020, there was no unrecognized compensation expense related to RSU's as the requisite service period was completed in a prior year. The assumptions used in the valuation on grant date are as follows: Date of grant Exercise price Share price at grant date Fair value per option Award life (years) Risk free rate Volatility January 11, 2019 $ 0.07 $ 1.65 $ 1.60 1 year 0.79 % 57.00 % F-31 Table of Contents Consultant Warrants As part of the equity placing on December 24, 2019, participating investors were granted warrants with the right to subscribe for 3,358,732 new shares of common stock to a consultant in exchange for certain services. The warrants have an exercise price of $ 1.44 and vest quarterly over three years . If the consulting agreement terminates prior to three years after the date of the grant, all unvested warrants will be deemed lapsed. On June 30, 2020 the consulting agreement was terminated and 2,798,945 warrants lapsed immediately. The fair value of shares of common stock involved is estimated on the date of grant using Black-Scholes valuation methodology that uses the assumptions noted in the following table. Because Black-Scholes valuation methodology incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on historical share price performance, weighted to exclude periods of unusually high volatility. The Company assumed the warrant to be exercised immediately on vesting. The risk-free rate is equal to the prevailing U.K. Gilts rate at grant date that most closely matches the expected term of the grant. Expected dividend yield is zero , consistent with the Directors’ view that the Company’s business model is to generate value through capital growth rather than the payment of dividends. As of December 31, 2020, 559,787 of consultant warrants were vested and had an intrinsic value of $ 1.82 million. These consultant warrants outstanding at December 31, 2020, had a weighted average exercise price of $ 1.44 and a weighted average remaining contractual life of 4.5 years. Each warrant entitles the warrant holder to subscribe in cash for one share. Shares of common stock allotted pursuant to the exercise of the warrant will rank in full for all dividends and other distributions with a record date after the exercise date with the shares of common stock in issue at that date. At December 31, 2020, there was no unrecognized compensation expense related to warrants. The fair value per consultant warrant granted and the assumptions used in the calculations are as follows: Date of grant Exercise price Share price at grant date Fair value per option Award life (years) Risk free rate Volatility December 24, 2019 1.44 1.37 0.95 5.38 0.10 % 73.00 % The Company recorded stock‑based compensation expense for options granted to consultants of $ 0.5 million and $ 0.02 million during the year ended December 31, 2020 and eleven months ended December 31, 2019, respectively. Stock‑based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows: Year ended December 31, 2020 Eleven months ended December 31, 2019 Year ended January 31, 2019 (in thousands) Research and development $ 749 $ 381 $ 1,448 General and administrative 1,017 464 4,847 Total stock-based compensation $ 1,766 $ 845 $ 6,295 21. Commitments and Contingencies Fixed asset purchase commitments At December 31, 2020 and December 31, 2019, the Company had no capital commitments. Other commitments The Company enters into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore are cancellable contracts and are not required to be disclosed. F-32 Table of Contents Indemnifications The Company's certificate of incorporation provides that it will indemnify the directors and officers to the fullest extent permitted by Delaware law. In addition, the Company has entered into indemnification agreements with all of the directors and executive officers. These indemnification agreements may require the Company, among other things, to indemnify each such director or executive officer for some expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by him or her in any action or proceeding arising out of his or her service as one of the Company's directors or executive officers. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of December 31, 2020. 22. Related Party Transactions On March 24, 2021, Mr. Duggan entered into a Note Purchase Agreement (the “Purchase Agreement”) pursuant to which he has loaned the Company $ 55.0 million in exchange for the issuance by the Company of an unsecured promissory note (the “Note”) in the amount of $ 55.0 million. The Note accrues interest at a rate per annum equal to 150 % of the applicable 10 Year US Treasury rate, as adjusted monthly. The rate is initially estimated to be approximately 2.4 %. The Company may prepay any portion of the Note at its option without penalty. The Note will mature and become due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 55.0 million, or (ii) 13 months from the date of issuance of the Note. It is anticipated that this Note will be repaid in connection with the consummation of the rights offering described below. In addition, the Purchase Agreement provides Mr. Duggan a pro rata participation right in a subsequent Company equity financing transaction on terms at least equivalent to such terms as are agreed with any other third party investors. In any such transaction, Mr. Duggan would be permitted to apply the principal of the Note (to the extent the Note remains outstanding) to the purchase price of any such equity investment. On November 6, 2020, the Company completed a private placement with Mr. Robert W. Duggan who subscribed for an aggregate of 14,071,856 shares of common stock, par value $ 0.01 per share at a price of $ 3.34 per common share of stock. On November 6, 2020, the Company completed a private placement with the Mahkam Zanganeh Revocable Trust which subscribed for an aggregate of 149,701 shares of common stock, par value $ 0.01 per share at a price of $ 3.34 per common share of stock. Dr Zanganeh was appointed to the Board of Directors on November 11, 2020 and as Chief Operating Officer on November 22, 2020. As trustee of the Mahkam Zanganeh Revocable Trust, Dr. Zanganeh may be deemed to beneficially own the securities of the Company held by the Mahkam Zanganeh Revocable Trust. On December 24, 2019, the Company completed a private placement with Mr. Robert W. Duggan, who subscribed for an aggregate of 33,231,410 shares of common stock, par value $ 0.01 per share, and warrants to purchase an aggregate of 4,984,711 shares of common stock at a subscription price of $ 1.43 for a Subscription Share plus a Subscription Warrant, pursuant to a securities purchase agreement he entered into with the Company. The exercise price of the Subscription Warrants is $ 1.58 per share. The Subscription Warrants are exercisable any time in the period commencing on June 24, 2020, and ending on December 24, 2029. On December 6, 2019, the Company entered into a deed of termination of the relationship agreement with Mr. Duggan and Cairn Financial Advisers LLP, a limited liability partnership incorporated in England and Wales with the Registrar of Companies of England and Wales, as the Company's nominated adviser. The relationship agreement regulated the Company’s relationship with Mr. Duggan and limited Mr. Duggan’s influence over the Company’s corporate actions and activities and the outcome of general matters pertaining to the Company. The deed of termination became effective on February 24, 2020, upon the cancellation of the admission of the ordinary shares on AIM. On December 24, 2019, the Company completed a private placement with Mr. Glyn Edwards, the former Chief Executive Officer, who subscribed for an aggregate of 90,495 shares of common stock, par value $ 0.01 per share, and warrants to purchase an aggregate of 13,574 shares of common stock at a subscription price of $ 1.43 for a Subscription Share plus a Subscription Warrant, pursuant to a securities purchase agreement he entered into with the Company. The exercise price of the Subscription Warrants is $ 1.58 per share. The Subscription Warrants are exercisable any time in the period commencing on June 24, 2020, and ending on December 24, 2029. In 2020, the Company had in place a consultancy agreement with Maky Zanganeh and Associates, Inc. (“MZA”) to provide support for clinical operation activities related to the ongoing global Phase 3 clinical trials of ridinilazole for the treatment of CDI, regulatory activities pertaining to a potential new drug application should the Phase 3 trials be successful and strategic planning support more generally for the ridinilazole program. Maky Zanganeh is the sole owner of MZA, and Dr. Elaine F-33 Table of Contents Stracker, who served for a period during fiscal year 2020 as a director of the Company and as the Company’s Interim Chief Operating Officer, was at the time the General Counsel and Senior Vice President for Corporate Development at MZA. The fees for such services under the consultancy agreement with MZA were $ 75,000 per month. In addition to such monthly fee, MZA was granted warrants over 3,358,732 shares of common stock with an exercise price of $ 1.44 per share, vesting on a quarterly basis over three years from the date of grant, subject to MZA’s provision of consultancy services to the Company during such period. During the period of MZA's engagement, $ 470,000 of consultancy fees were incurred by the Company and a warrant expense of $ 511,872 was recognized. The consultancy agreement with MZA was terminated by mutual agreement on June 30, 2020. The warrants granted to MZA were subsequently assigned to Dr. Zanganeh and Dr. Stracker. Dr. Zanganeh and Dr. Stracker have vested warrants to purchase 489,815 and 69,973 shares of common stock, respectively, which can be exercised through June 30, 2025. 23. Subsequent Events On March 24, 2021, Mr. Duggan entered into a Note Purchase Agreement (the “Purchase Agreement”) pursuant to which he has loaned the Company $ 55.0 million in exchange for the issuance by the Company of an unsecured promissory note (the “Note”) in the amount of $ 55.0 million. The Note accrues interest at a rate per annum equal to 150 % of the applicable 10 Year US Treasury rate, as adjusted monthly. The rate is initially estimated to be approximately 2.4 %. The Company may prepay any portion of the Note at its option without penalty. The Note will mature and become due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 55.0 million, or (ii) 13 months from the date of issuance of the Note. It is anticipated that this Note will be repaid in connection with the consummation of the rights offering. In addition, the Purchase Agreement provides Mr. Duggan a pro rata participation right in a subsequent Company equity financing transaction on terms at least equivalent to such terms as are agreed with any other third party investors. In any such transaction, Mr. Duggan would be permitted to apply the principal of the Note (to the extent the Note remains outstanding) to the purchase price of any such equity investment. On March 25, 2021, the Company’s Board of Directors approved a rights offering available to all holders of record of the Company’s common stock, par value $ 0.01 (the "Common Stock"), as of the close of business on April 9, 2021. The Company intends to distribute to all holders of Common Stock as of the record date non-transferable subscription rights to purchase shares of Common Stock at a price per share equal to the lesser of (i) $ 5.24 per share, the closing price of the Common Stock on March 24, 2021, or (ii) the volume weighted-average price of the Common Stock for the ten consecutive trading days through and including the expiration date of the offering, currently contemplated to be May 4, 2021. Assuming that the rights offering is fully subscribed, the Company will receive gross proceeds of up to $ 75.0 million, less expenses related to the rights offering. The rights offering will include an over-subscription right to permit each rights holder that exercises its basic subscription rights in full to purchase additional shares of Common Stock that remain unsubscribed at the expiration of the offering. The availability of the over-subscription right will be subject to certain terms and conditions to be set forth in the offering documents. Robert W. Duggan, the Executive Chairman and Chief Executive Officer and principal stockholder, has indicated that he intends to participate in the rights offering and subscribe for at least the full amount of his basic subscription rights, but has not made any formal binding commitment to do so. On March 26, 2021, Summit Therapeutics Sub Inc. entered into a Sublease with MZA for premises consisting of 4,500 feet of space at 2882 Sand Hill Road, Menlo Park, CA (the “Sublease”). The Sublease runs until September 2022, with monthly rent payments to MZA of $ 57,960 in the first six months and $ 59,670 for the remainder of the term of the Sublease. The rent payable under the terms of the Sublease is equivalent to the proportionate share of the rent payable by MZA to the third party landlord, based on the square footage of office space sublet by the Company, and no mark-up has been applied. F-34