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 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, 2022, our Chief Executive Officer and Co-Chief Executive Officer (our Principal Executive Officers), and our Chief Financial Officer (our Principal 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 and Co-Chief Executive Officer (our Principal Executive Officers), and our 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 Generally Accepted Accounting Principles. 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, 2022 , 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, 2022 , 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. 78 Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information The Compensation Committee of the Company’s Board of Directors reviewed and approved employee 2022 bonuses. A discretionary cash bonus of $202,500 and an extraordinary bonus of $250,000 was paid to Dr. Zanganeh, the Company’s co-Chief Executive Officer, President and member of the Board , on January 10, 2023. A discretionary cash bonus of $131,918 and an extraordinary bonus of $250,000 was paid to Ankur Dhingra, the Company’s Chief Financial Officer on January 10, 2023. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 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 included in our proxy statement related to the 2023 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 included in our proxy statement related to the 2023 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 included in our proxy statement related to the 2023 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 included in our proxy statement related to the 2023 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 included in our proxy statement related to the 2023 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. 79 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 88 . (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. 80 (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 Current 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 Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on September 18, 2020) 3.3 Amendment to Restated Certificate of Incorporation of Summit Therapeutics Inc., as filed with the Delaware Secretary of State on July 27, 2022 (incorporated by reference to Exhibit 3. 1 of Form 8-K filed by the Company on July 2 9 , 2022, File No. 001-36866) 3.4 Amendment No. 2 to Restated Certificate of Incorp oration , dated Januar y 19, 2023 ( incorporated by reference to Exhibit 5.1 of Form 8- K filed by the Company on January 20, 2023, File No. 001-36866) 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 Current 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 Current 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) 4.7 Form of Subscription Rights Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on April 21, 2021) 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) 81 Exhibit No. Description 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) 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) 82 Exhibit No. Description 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) 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 Current 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 Current 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) 83 Exhibit No. Description 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 Current 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 (incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K (File No. 001-36866), filed with the Securities and Exchange Commission on March 31, 2021) 10.36 Sublease Agreement, dated March 26, 2021, by and between Maky Zanganeh & Associates Inc. and Summit Therapeutics Sub Inc. (incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K (File No. 001-36866), filed with the Securities and Exchange Commission on March 31, 2021) 10.37 Exit Agreement, dated May 28, 2021, by and between Summit Therapeutics Inc. and Michael Donaldson (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 May 28, 2021) 10.38 (1) Note Purchase Agreement, dated March 10, 2022, 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 11, 2022) 10.39 Promissory Note, dated March 10, 2022, 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 11, 2022) 10.40 Note Purchase Agreement, dated December 6, 2022, by and among Summit Therapeutics Inc., Robert W. Duggan, and Dr. Mahkam Zanganeh (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 December 6 , 2022) 10.41† Collaboration and License Agreement ,dated December 5, 2022, by and between Akeso, Inc. and its affiliates and Summit Therapeutics Sub Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form S-3 (File No. 333-268932) filed with the Securities and Exchange Commission on December 21, 2022) 10.42 Amendment No. 1 to Collaboration and License Agreement Amendment, dated January 16, 2023, by and among Summit Therapeutics Inc. and Akeso, Inc. (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on January 20, 2023, File No. 001-36866) 10.43 Common Stock Issuance Agreement, dated January 17, 2023, by and among Summit Therapeutics Inc. and Akeso, Inc. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on January 20, 2023, File No. 001-36866) 10.44 Promissory Notes, dated January 19, 2023, by and among Summit Therapeutics Inc. and Robert W. Duggan (incorporated by reference to Exhibit 10.3 of Form 8-K filed by the Company on January 20, 2023, File No. 001-36866) 10.45#* Amended and Restated 2020 Stock Incentive Plan, dated July 27, 2022 10.46†* First Amendment to Sublease Agreement, dated July 25, 2022, by and among Summit Therapeutics Inc. and Maky Zanganeh and Associates, Inc. 10.47†* Second Amendment to Sublease Agreement, dated July 29, 2022, by and among Summit Therapeutics Inc. and Maky Zanganeh and Associates, Inc. 10.48#* Contract of Employment, dated April 15 , 2022, by and between Summit Therapeutics Inc. and Ankur Dhingra 16.1 Letter from PwC to the Securities and Exchange Commission, dated May 26, 2021 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K (File No. 001-36866), filed with the Securities and Exchange Commission on May 26, 2021) 21.1* List of Significant Subsidiaries 23.1* Consent of PricewaterhouseCoopers LLP, a Delaware limited liability partnership 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 C o- 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 84 Exhibit No. Description 31.3* 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 pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 101.INS* Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. † Portions of this exhibit have been omitted in compliance with Regulation S-K Item 601(b)(10)(iv) because the Registrant has determined that the information is not material and is the type that the Registrant treats as private or confidential. + 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. 85 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 and Executive Chairman; Principal Executive Officer By: /s/ Mahkam Zanganeh Name: Title: Dr. Mahkam Zanganeh Co-Chief Executive Officer, President and member of the Board; Principal Executive Officer By: /s/ Ankur Dhingra Name: Title: Ankur Dhingra Chief Financial Officer; Principal Financial Officer Date: March 9, 2023 86 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 9, 2023 Robert W. Duggan /s/ Mahkam Zanganeh Co-Chief Executive Officer, President and member of the Board ( Principal Executive Officer ) March 9, 2023 Dr. Mahkam Zanganeh /s/ Ankur Dhingra Chief Financial Officer (Principal Financial Officer) March 9, 2023 Ankur Dhingra /s/ Robert F. Booth Director March 9, 2023 Dr. Robert F. Booth /s/ Alessandra Cesano Director March 9, 2023 Dr. Alessandra Cesano /s/ Kenneth Clark Director March 9, 2023 Kenneth Clark /s/ Ujwala Mahatme Director March 9, 2023 Ujwala Mahatme /s/ Manmeet Soni Director March 9, 2023 Manmeet Soni /s/ Yu Xia Director March 9, 2023 Dr. Yu Xia 87 Summit Therapeutics Inc. Page Index to the Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 89 Consolidated Balance Sheets 91 Consolidated Statements of Operations and Comprehensive Loss 92 Consolidated Statements of Stockholders' Equity 93 Consolidated Statements of Cash Flows 94 Notes to the Consolidated Financial Statements 95 88 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, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the years then ended, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended 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. Emphasis of Matter As discussed in Note 17 to the consolidated financial statements, the Company has a note payable with a principal amount of $100 million maturing in September 2024. Management’s evaluation of the events and conditions related to future funding are described in Note 3. 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 4 and 15 to the consolidated financial statements, included within prepaid expenses as of December 31, 2022 is $0.4 million of prepayments relating to research and development expenditures. Included within accrued liabilities as of December 31, 2022 is $8.9 million relating to research and development expenditures. The Company records accruals for estimated ongoing research and development costs or prepaid expenses where the payments made exceed the estimated costs. These amounts are determined by management based on the estimated costs to complete each study or activity, the estimation 89 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 management’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 are the significant judgment by management when determining the estimated research and development costs, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to estimated current stage of completion of each study or activity. 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 management’s process on a sample basis for determining the current stage of completion of each study or activity; (ii) reading a sample of research and development contracts; (iii) evaluating the reasonableness of progress towards completion for a sample of research and development activities and the associated incurred cost based on invoices, external confirmations or other information received from the supplier; and (iv) testing the completeness and accuracy of the underlying data including total costs included within contracts and actual billed amounts for a sample of contracts. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts March 9, 2023 We have served as the Company’s auditor since 2021. 90 Summit Therapeutics Inc. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 348,607 $ 71,791 Restricted cash 300,000 — Accounts receivable 349 1,464 Prepaid expenses 1,504 7,161 Other current assets 486 1,201 Research and development tax credit receivable 5,766 15,695 Total current assets 656,712 97,312 Non-current assets: Property and equipment, net 906 694 Right-of-use assets 4,175 2,790 Goodwill 1,798 2,009 Intangible assets, net — 10,399 Other assets 577 170 Total assets $ 664,168 $ 113,374 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 355 $ 4,374 Accrued liabilities 10,664 7,197 Accrued compensation 5,641 4,125 Lease liabilities 1,690 1,091 Deferred revenue and other income — 7,939 Other current liabilities 662 897 Promissory note payable to related parties 19,770 — Total current liabilities 38,782 25,623 Non-current liabilities Lease liabilities, net of current portion 2,763 1,691 Other non-current liabilities 1,429 2,776 Promissory notes payable to related parties 494,540 — Total liabilities 537,514 30,090 Commitments and contingencies (Note 21) Stockholders' equity: Preferred stock, $ 0.01 par value, 20,000,000 shares authorized; none issued and outstanding at December 31, 2022 and 2021, respectively — — Common stock, $ 0.01 par value: 350,000,000 shares authorized; 211,091,425 and 98,039,540 shares issued and outstanding at December 31, 2022 and 2021, respectively 2,110 980 Additional paid-in capital 504,767 384,049 Accumulated other comprehensive loss ( 1,893 ) ( 2,197 ) Accumulated deficit ( 378,330 ) ( 299,548 ) Total stockholders' equity 126,654 83,284 Total liabilities and stockholders' equity $ 664,168 $ 113,374 The accompanying notes are an integral part of the consolidated financial statements 91 Summit Therapeutics Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) Year Ended December 31, 2022 Year Ended December 31, 2021 Revenue $ 705 $ 1,809 Operating expenses: Research and development 51,999 85,352 General and administrative 26,743 23,611 Impairment of intangible assets 8,468 — Total operating expenses 87,210 108,963 Other operating income 14,416 20,968 Operating loss ( 72,089 ) ( 86,186 ) Other expense, net ( 6,693 ) ( 2,416 ) Loss before income tax ( 78,782 ) ( 88,602 ) Net loss $ ( 78,782 ) $ ( 88,602 ) Net loss per share: Basic and diluted $ ( 0.41 ) $ ( 0.67 ) Weighted average common shares outstanding: Basic and diluted 193,336,063 131,714,225 Other comprehensive income (loss): Foreign currency translation adjustments 304 1,597 Comprehensive loss $ ( 78,478 ) $ ( 87,005 ) The accompanying notes are an integral part of the consolidated financial statements. 92 Summit Therapeutics Inc. Consolidated Statements of Stockholders' Equity (in thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Total Accumulated Deficit Total Stockholders' Equity Shares Amount Balance at December 31, 2020 82,575,064 $ 826 $ 293,367 $ ( 3,794 ) $ ( 210,946 ) $ 79,453 2021 Rights Offering of common stock, net of offering costs of $ 159 14,312,976 143 74,698 — — 74,841 Issuance on common stock from exercise of share options 1,151,500 11 3,077 — — 3,088 Stock-based compensation — — 12,804 — — 12,804 Imputed interest expense on promissory note payable to a related party — — 103 — — 103 Foreign currency translation adjustment — — — 1,597 — 1,597 Net loss — — — — ( 88,602 ) ( 88,602 ) Balance at December 31, 2021 98,039,540 $ 980 $ 384,049 $ ( 2,197 ) $ ( 299,548 ) $ 83,284 2022 Rights Offering of common stock, net of offering costs of $ 111 103,092,783 1,031 98,858 — — 99,889 Issuance of common stock in lieu of interest to related parties 9,720,291 97 7,497 — — 7,594 Issuance of common stock under stock purchase plans and exercise of stock options 238,811 2 397 — — 399 Stock-based compensation — — 11,948 — — 11,948 Imputed interest expense on promissory notes payable to related parties — — 2,018 — — 2,018 Foreign currency translation adjustment — — — 304 — 304 Net loss — — — — ( 78,782 ) ( 78,782 ) Balance at December 31, 2022 211,091,425 $ 2,110 $ 504,767 $ ( 1,893 ) $ ( 378,330 ) $ 126,654 The accompanying notes are an integral part of the consolidated financial statements. 93 Summit Therapeutics Inc. Consolidated Statements of Cash Flows (in thousands) December 31, 2022 December 31, 2021 Cash flows used in operating activities: Net loss $ ( 78,782 ) $ ( 88,602 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on remeasurement of liabilities ( 1,265 ) — Non-cash interest expense 4,303 196 Unrealized foreign exchange loss 2,614 326 Amortization of operating right-of-use assets 1,251 1,108 Depreciation 349 330 Amortization of intangible assets 914 1,017 Impairment of intangible assets 8,468 — Stock-based compensation 11,948 12,804 Other adjustments 2 301 Changes in operating assets and liabilities: Accounts receivable 975 ( 1,138 ) Prepaid expenses 5,107 2,345 Other current and long-term assets 215 104 Research and development tax credit receivable 8,437 ( 6,015 ) Deferred revenue and other income ( 7,278 ) ( 813 ) Accounts payable ( 4,132 ) ( 1,711 ) Accrued liabilities 4,782 5,075 Accrued compensation 1,609 3,154 Operating lease liabilities ( 1,099 ) ( 1,068 ) Net cash used in operating activities ( 41,582 ) ( 72,587 ) Cash flows used in investing activities: Purchase of property and equipment ( 624 ) ( 306 ) Net cash used in investing activities ( 624 ) ( 306 ) Cash flows provided by financing activities: Proceeds from the issuance of common stock 100,000 75,000 Transaction costs from the issuance of common stock ( 111 ) ( 118 ) Proceeds from related party promissory notes 545,000 110,000 Re-payment of related party promissory notes ( 25,000 ) ( 110,000 ) Payments of related party promissory notes issuance costs ( 44 ) ( 54 ) Proceeds from exercise of share options 399 3,088 Net cash provided by financing activities 620,244 77,916 Effect of exchange rates on cash and restricted cash ( 1,222 ) 351 Increase in cash, cash equivalents and restricted cash 576,816 5,374 Cash at beginning of period 71,791 66,417 Cash, cash equivalents and restricted cash at end of period $ 648,607 $ 71,791 Supplemental Disclosure of Cash Flow Information Cash paid for interest on related party promissory note $ 434 $ 85 Debt issuance costs in accrued expenses $ 31 $ — Transaction costs included in accrued expenses $ — $ 41 Deferred transaction costs included in other non-current assets $ 425 $ — Leased assets obtained in exchange for operating lease liabilities $ 2,860 $ 3,389 The accompanying notes are an integral part of the consolidated financial statements. 94 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Notes to Consolidated Financial Statements 1. Nature of Business and Operations and Recent Events Nature of Business and Operations The Company is a biopharmaceutical company focused on the discovery, development, and commercialization of patient-, physician-, caregiver- and societal-friendly medicinal therapies intended to improve quality of life, increase potential duration of life, and resolve serious unmet medical needs. The Company's pipeline of product candidates is designed with the goal to become the patient-friendly, new-era standard-of-care medicines. Recent Events On September 28, 2022, the Company determined that it would seek partners or a divestiture of ridinilazole, the Company's lead product candidate for treating patients suffering from Clostridioides difficile infection, also known as C. difficile infection, or CDI, as the path forward for the clinical development of the asset. As a result of this determination, the Company discontinued its only active study for ridinilazole, a pediatric clinical trial evaluating ridinilazole for treating adolescent patients with CDI. The Company is currently involved in activities related to closeout of ridinilazole clinical trials. On December 5, 2022, the Company entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which we are partnering with Akeso to in-license its breakthrough bispecific antibody, ivonescimab. Ivonescimab, known as AK112 in China and Australia, and also as SMT112 in the United States, Canada, Europe, and Japan, is a novel, potential first-in-class bispecific antibody intending to combine the power of immunotherapy via a blockade of PD-1 with the anti-angiogenesis benefits of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well established oncology targeted mechanisms together. Through the License Agreement, the Company obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan. In exchange for these rights, an upfront payment of $ 500,000 is payable to Akeso, $ 300,000 of which was payable within the later of 15 days after execution of the License Agreement or upon the earliest date on which the parties have actual knowledge that all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any comparable extension periods with respect to the transactions contemplated by the License Agreement have expired or been terminated (the “Antitrust Clearance Date”) and $ 200,000 of which is payable within the later of (i) 90 days after execution of the License Agreement or (ii) the Antitrust Clearance Date. In connection with the first payment, up to 16 million shares of Company common stock may be issued in lieu of cash at Akeso’s election (the “Share Transfer”), with the value of such shares based on the ten ( 10 ) day volume-weighted average price for the five -trading day period prior to and the five -trading day period after the execution of the License Agreement. The total of the upfront payment and potential milestone payments is $ 5,000,000 , as Akeso will be eligible to receive regulatory milestones of up to $ 1,050,000 and commercial milestones of up to $ 3,450,000 . In addition, Akeso will be eligible to receive low double-digit royalties on net sales. The License Agreement closed on January 17, 2023, and both Akeso and Summit entered into the Common Stock Issuance Agreement (“Issuance Agreement”). Pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10 million shares of Company common stock in lieu of cash and was paid $ 274,900 dollars in cash as the initial upfront payment. The remaining $ 200,000 amount of the upfront payment was paid on March 6, 2023. On December 6, 2022, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement"), with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $ 520,000 . For further details see Note 17. On January 6, 2023, the Company held a Special Meeting of Stockholders (the “Shareholder Special Meeting”), whereby the following matters were submitted to a vote of the Company’s stockholders: (i) an amendment to the Company’s Restated Certificate of Incorporation, dated September 18, 2020, as amended on July 27, 2022 (the “Restated Certificate”), to increase the number of authorized shares of common stock by 650,000,000 (from 350,000,000 to 1,000,000,000 ); and (ii) an amendment to the Restated Certificate to effect, as needed, a reverse stock split of all of the outstanding shares of the Company’s common stock at a ratio in the range of 1-for-5 to 1-for-10. 95 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Each of the matters submitted to a vote of the Company’s stockholders at the Special Meeting was approved by the requisite vote of the Company’s stockholders in accordance with the recommendation of the Company’s Board of Directors. The final decision of whether to proceed with the amendments may be determined by the Company's Board of Directors, in its discretion, at any time prior to January 6, 2024. On January 19, 2023, the Company filed Amendment No. 2 to the Restated Certificate of Incorporation (the “Amendment No. 2”) with the Secretary of State of the State of Delaware to increase the number of authorized shares of its common stock by 650,000,000 (from 350,000,000 to 1,000,000,000 ), which became effective on such date. On February 7, 2023, the Company commenced its previously announced rights offering ("Rights Offering"). On March 1, 2023, the Company closed the Rights Offering, which was fully subscribed. The Company received aggregate gross proceeds from the Rights Offering of $ 500,000 from the sale of  476,190,471  shares of our common stock at a price per share of $ 1.05 . Issuance costs associated with the Rights Offering were approximately $ 500 . In connection with the closing of the Rights Offering, $ 400,000 of the unsecured promissory notes, issued by us to Mr. Duggan, matured and became due and the Company repaid the principal amount and all outstanding accrued interest thereunder using a portion of the proceeds from this Rights Offering. On February 15, 2023, $ 20,000 of the unsecured promissory notes, issued by us to Dr. Zanganeh, matured and the Company repaid the outstanding principal balance. 2. Basis of Presentation and Use of Estimates The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued research and development expenses, stock-based compensation, intangible assets, goodwill, other long-lived assets and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The progression of the COVID-19 pandemic continues to evolve and its enduring impact on the Company's business remains uncertain. Management believes the estimates and assumptions underlying its financial statements are reasonable and supportable based on the information available as of December 31, 2022, however, the extent to which the COVID-19 pandemic impacts the Company's financial results beyond December 31, 2022 will depend on future developments that are highly uncertain and cannot be predicted at this time. 3. Liquidity and Capital Resources During the year ended December 31, 2022, the Company incurred a net loss of $ 78,782 and cash flows used in operating activities was $ 41,582 . As of December 31, 2022, the Company had an accumulated deficit of $ 378,330 , cash and cash equivalents of $ 348,607 , restricted cash of $ 300,000 , research and development tax credit receivable of $ 5,766 and accounts receivable of $ 349 . The Company expects to continue to generate operating losses for the foreseeable future. Based on the Company's existing cash, cash equivalents and U.K. research and development tax credits, after considering the payments made to Akeso in January and March 2023 totaling $ 474,900 , the net proceeds of $ 499,500 from the Rights Offering that closed on March 1, 2023, and repayments of the promissory notes payable to related parties in February and March 2023 96 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) totaling $ 420,000 , the Company has the ability to fund its operating costs and working capital needs for its planned clinical trials for ivonescimab for a period of at least twelve months from the date of issuance of these consolidated financial statements. Until the Company can generate substantial revenue and achieve profitability, the Company will need to raise additional capital to fund its ongoing operations and capital needs. The Company continues to evaluate options to further finance its operating cash needs for its product candidates 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 marketing, distribution or licensing arrangements. While the Company believes that funds would be available in this manner before 2024, there is no assurance, however, that additional financing will be available when needed or that management of the Company will be able to obtain financing on terms acceptable to the Company. If the Company is unable to obtain funding when required in the future, the Company could be required to delay, reduce, or eliminate research and development programs, product portfolio expansion, or future commercialization efforts, which could adversely affect its business prospects. 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. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result from the outcome of this uncertainty. 4. Summary of Significant Accounting Policies The significant accounting policies adopted by the Company in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 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 reflect the accounts of Summit Therapeutics Inc. and its wholly owned subsidiaries. Intercompany balances and transactions are eliminated in consolidation. Foreign Currency Translation The financial statements of the Company’s subsidiaries with functional currencies other than the United States ("U.S.") dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for stockholders’ equity and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive (loss) income in shareholders’ equity. Foreign currency transaction gains and losses are included in other expense, net in the results of operations. The Company recorded realized and unrealized foreign currency transaction losses of $ 4,109 and $ 2,135 for the years ended December 31, 2022 and 2021, respectively, which is included in other expense, net in the statements of operations and comprehensive loss. Revenue Recognition The Company accounts for revenue using ASC 606. 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. 97 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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. 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 98 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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. 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 unbilled receivable, 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, classified as other operating 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. The Company benefits from two U.K. research and development ("R&D") tax credit cash rebate regimes: Small and Medium Enterprise ("SME") Program and the Research and Development Expenditure Credit ("RDEC") Program. Each reporting period, management evaluates which tax relief programs the Company is expected to be eligible for and records as other operating income the portion of the expense that it expects to qualify under the programs, that it plans to submit a claim for, and it has reasonable assurance that the amount will ultimately be realized. Based on criteria established by HM Revenue and Customs (“HMRC”), management of the Company expects a proportion of expenditures being undertaken in relation to its pipeline research, clinical trials management and manufacturing development activities to be eligible for the research and development tax relief programs for the year ended December 31, 2022 . Qualifying expenditures largely comprise of 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 and RDEC Programs 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 of up to 33.3 % of eligible research and development expenditures and these payments are not dependent on the Company’s pre-tax net income levels. The Company has qualified under the more favorable SME regime for the year ended December 31, 2021 and expects to qualify under the SME regime for the year ending December 31, 2022. Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the diluted net loss by the weighted-average number of common shares outstanding for the period, including potentially dilutive common shares. The dilutive effect of share options and warrants are determined under the treasury stock method using the average market price for the 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. 99 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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 consideration transferred over the net fair value of assets acquired and liabilities assumed is recorded as goodwill. The accounting for an acquisition involves a considerable amount of judgement and estimation. Cost, income, market or a combination of approaches may be used to establish the fair value of consideration exchanged, assets acquired, and liabilities assumed, depending on the nature of those items. The valuation approach is determined in accordance with generally accepted valuation methods. Key areas of estimation and judgment may include the selection of valuation approaches, cost of capital, market characteristics, cost structure, impacts of synergies, and estimates of terminal value, among other factors. While the Company uses estimates and assumptions as part of the purchase price allocation process to estimate the value of assets acquired and liabilities assumed, estimates are inherently uncertain and subject to refinement. During the measurement period, which maybe up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill, to the extent that adjustments are identified to the preliminary purchase price allocation. Upon conclusion of the measurement period, or final determination of the value of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to results of operations. 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 acquired. Goodwill is assigned to reporting units at the time of acquisition or when there is a change in the reporting structure and bases that allocation on which reporting units will benefit from the acquired assets and liabilities. Reporting units are defined as operating segments or one level below an operating segment, referred to as a component. Typically acquisitions related to a single reporting unit do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process. The Company assesses goodwill for impairment on an annual basis or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results. The process of evaluating the potential impairment of goodwill requires significant judgment. In performing the Company’s annual goodwill impairment test, the Company is permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. In performing the qualitative assessment, the Company considers certain events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company is also permitted to bypass the qualitative assessment and proceed directly to the quantitative test. If the Company chooses to undertake the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company would then proceed to the quantitative impairment test. In the quantitative assessment, the Company compares the fair value of the reporting unit to its carrying amount, which includes goodwill. If the fair value exceeds the carrying value, no impairment loss exists. If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded. The Company performed its annual impairment assessment of goodwill in the fourth quarter of 2022 by performing a qualitative analysis for its single identified reporting unit for goodwill and determined that it is more likely than not that the fair value of the reporting unit exceeded its carrying amount. 100 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Intangible Assets Intangible assets are estimated by management based on the fair value of assets acquired. These include acquired technology, licenses, an option over non-financial assets and a research and development discovery platform ("Discuva Platform"). Intangible assets are amortized from one to 18 years on a straight-line basis which represents the estimated periods of benefit and the expected pattern of consumption. Our intangible assets are recorded at fair value at the time of their acquisition, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives or over the period of the relevant agreement for an option over non-financial assets. Intangible assets are stated in our consolidated balance sheets net of accumulated amortization and impairments, if applicable. The Company evaluates the recoverability of its intangible and long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. If events and circumstances indicate that the carrying amount may not fully be recoverable, the carrying values of the asset or asset group are evaluated in relation to their operating performance and future undiscounted cash flows of the underlying business. If the future undiscounted cash flows are less than their carrying value, impairment exists. The impairment is measured as the difference between the carrying value and the fair value of the underlying asset or asset group. Fair values are based on estimates of market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. 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. As of December 31, 2022 and 2021, intangible assets were $ 0 and $ 10,399 , respectively. The carrying value of $ 10,399 as of December 31, 2021 related to the Discuva Platform has been impaired in full during the year end December 31, 2022. 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 significant, 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 depending on the nature of the underlying assets. 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 has operating leases for real estate. The Company does not have any finance leases. Under ASC 842, a contract is or contains a lease when the lessee has the right to control the use of an identified asset. The Company determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The lease term used to calculate the lease liability include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. 101 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) At the lease commencement date, the Company measures and recognizes a lease liability and a right-of-use asset in the financial statements. Lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. The right-of use asset is measured by taking the present value of future lease payments, plus any incremental direct costs incurred, less any lease incentives received. As most of the Company's leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate based on the lease term and the economic environment of the lease at the lease commencement date, which is then utilized to determine the present value of future lease payments. Lease expense for minimum lease payments are 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 existing lease agreements with lease and non-lease components, has elected to account for the lease and non-lease components as a single lease component, and has allocated all of the contract consideration to the lease component only. 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. 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 product 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. 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. Additionally, the Company uses a Monte Carlo simulation model to calculate the estimated fair value on the date of grant related to awards with market-based service conditions. 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 of stock options represents the weighted-average period the stock options are expected to be outstanding. The Company uses the simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. 102 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) • Expected volatility—The expected volatility is calculated based on historical volatility of the Company's share price. • Risk-free interest rate—The risk-free rate assumption is based on the U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options. • Expected dividend—The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends. The Company estimates expected forfeitures at the time of grant instead of accounting for forfeitures as they occur. Stock option and restricted stock unit awards have been granted at fair value to non-employees in connection with research and consulting services provided to the Company. Equity awards generally vest over terms of 3 or 4 years. The Company classifies stock-based compensation expense in the consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified. Income Taxes The Company is primarily subject to corporation taxes in the U.S. and the U.K.. The calculation of the Company’s tax provision involves the application of both U.S. and U.K. tax law and requires judgment and estimates. 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. The Company records interest and penalties related to income tax matters as part of income tax expense. The Company accounts for uncertainty in income taxes by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the consolidated financial statements. The amount of benefits that may be used is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties. At December 31, 2022 and 2021, the Company had no uncertain tax positions. 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 is 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. The Company does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The credit risk with respect to customers and funding bodies is limited as the Company has only a small number of these arrangements. 103 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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. Fair Value Measurements In accordance with the provisions of fair value accounting, a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability and defines fair value based on the exit price model. The fair value measurement guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments or securities or derivative contracts that are valued using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company categorizes such assets and liabilities based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. Cash and Cash Equivalents We consider only those investments that are highly liquid, readily convertible to cash and that mature within 90 days or less from date of purchase to be cash equivalents, and the related investment income is recognized in net loss. As of December 31, 2022 , cash equivalents were comprised of a money market funds and U.S. treasury securities with maturities less than 90 days from the date of purchase. We did not have cash equivalents as of December 31, 2021. Restricted Cash Restricted cash represents amounts which are legally restricted to withdrawal or usage and is presented in the Consolidated Balance Sheet as restricted cash. On December 15, 2022, the Company transferred $ 300,000 into an escrow fund reserved for the Company's initial upfront payment to Akeso in connection with the License Agreement, as described further in Note 23. Following the Antitrust Clearance Date, on January 17, 2023, the License Agreement closed and Akeso was issued 10 million shares of Company common stock pursuant to the Common Stock Issuance Agreement and was paid $ 274,900 in cash as initial upfront payment. The remaining amounts in escrow were returned to the Company's operating cash accounts. 104 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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 and gains or losses upon remeasurement are recognized as part of operating expenses in the consolidated statements of operations and comprehensive loss. 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 recorded in the consolidated statement of operations and comprehensive loss on a straight-line 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. 5. Recently Issued or Adopted Accounting Pronouncements In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10, " Government Assistance (Topic 832)". This ASU increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements as diversity currently exists in the recognition, measurement, presentation and disclosure of government assistance received by business entities because of the lack of specific authoritative guidance in U.S. GAAP. This ASU is effective for annual periods, and interim periods within those fiscal years, beginning after December 15, 2021. Early application of this ASU is permitted. The Company applied the amendments of this ASU to its disclosures during the fourth quarter of 2021 and the application of this ASU did not have a material impact on its financial position, results of operations or cash flows. In October 2021, the FASB issued ASU No. 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". This ASU improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency relating to: 1) recognition of an acquired contract liability and 2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination, whereas current U.S. GAAP requires that the acquirer measure such assets and liabilities at 105 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) fair value on the acquisition date. This ASU is effective for annual periods, and interim periods within those fiscal years, beginning after December 15, 2022. The Company will apply this ASU on a prospective basis for business combinations once this ASU is effective and at that time, will be able to determine the potential impact on its financial position, results of operations or cash flows. In May 2021, the FASB issued AS No. 2021-04, "Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging Contracts in Entity's Own Equity (Subtopic 815-40) - Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options". This ASU provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This ASU is effective for annual periods, and interim periods within those fiscal years, beginning after December 15, 2021. The Company will apply this ASU on a prospective basis for any modifications or exchanges once this ASU is effective and at that time, will be able to determine the potential impact on its financial position, results of operations or cash flows. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740)". This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for annual periods, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this ASU during the first quarter of 2021 and the adoption of this ASU did not have a material impact on its financial position, results of operations or cash flows. 6. Segment Reporting The Company's chief operating decision makers (the "CODM function"), which are the Company's Co-CEOs, Mr. Duggan and Dr. Zanganeh, utilize consolidated financial information to make decisions about allocating resources and assessing performance for the entire Company. The CODM function approves of key operating and strategic decisions, including key decisions in clinical development and clinical operating activities, entering into significant contracts, such as revenue contracts and collaboration agreements and approves the Company's consolidated operating budget. The CODM function views the Company's operations and manages its business as a single reportable operating segment. The Company's single operating segment covers the Company’s research and development activities, primarily comprising of oncology product research activities (including ivonescimab), antibiotic pipeline research activities, and CDI program activities. As the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. The Company operates in two geographic regions: the U.K. and the U.S. The following table summarizes the Company's long-lived assets, which include the Company's property and equipment, net and right-of-use assets by geography: Year Ended December 31, 2022 Year Ended December 31, 2021 United Kingdom $ 2,517 $ 2,762 United States (1) 2,564 722 $ 5,081 $ 3,484 (1) The increase of long-lived assets in the United States is primarily attributed to additional right-of-use assets recorded related to the Company's first and second amendments to its sublease agreement during the period for its Menlo Park, California, U.S. location. For details of revenue from external customers by geography refer to Note 7. 106 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 7. Revenue The following table summarizes revenue by category: Year Ended December 31, 2022 Year Ended December 31, 2021 Licensing agreements $ 705 $ 1,809 Revenue recognized consists of amounts received from the Company's license and commercialization agreement with Eurofarma Laboratórios S.A. The following table summarizes revenue by geography: Year Ended December 31, 2022 Year Ended December 31, 2021 Latin America $ 705 $ 1,809 The analysis of revenue by geography has been identified on the basis of the geographical location of each collaboration partner. The following table summarizes the deferred revenue relating to Eurofarma Laboratórios S.A. and deferred other income relating to BARDA (as defined in Note 8): 2022 2021 Beginning deferred revenue and other income, January 1 (1) $ 7,939 $ 8,939 Additions 1,397 5,443 Amount of deferred revenue and other income recognized in the statement of operations ( 8,790 ) ( 6,438 ) Foreign currency adjustment ( 546 ) ( 5 ) Ending deferred revenue and other income, December 31 (2) $ — $ 7,939 __________ (1) Beginning deferred revenue and other income as of January 1, 2022 and 2021 included $ 7,939 of current and $ 0 of long-term deferred revenue and other income, and $ 8,370 of current and $ 569 of long-term deferred revenue and other income, respectively. (2) Ending deferred revenue and other income as of December 31, 2022 and 2021 included $ 0 of current and $ 0 of long-term deferred revenue and other income, and $ 7,939 of current and $ 0 of long-term deferred revenue and other income, respectively. As of January 1, 2022, deferred revenue and other income is compromised of $ 756 and $ 7,183 relating to Eurofarma and BARDA, respectively. As of December 31, 2022, deferred revenue was $ 0 . Refer to Note 8 below for further details regarding other income recognized under the BARDA contract. 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. 107 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Under the terms of the license and commercialization agreement with Eurofarma, the Company received an upfront payment of $ 2,500 in December 2017. In February 2020, the Company reached the first enrollment milestone and earned $ 1,000 . In September 2021, the Company reached the second enrollment milestone and earned $ 1,250 . The terms of the contract have been assessed under ASC 606 and currently only the upfront payment and the first two enrollment milestone payments are included in the transaction price. These payments were initially reported as deferred revenue in the balance sheet and were recognized as revenue ratably over the performance period. Revenue recognized during the years ended December 31, 2022 and 2021 related to the upfront payment and the first two enrollment milestones earned in accordance with the Company's revenue recognition policy. The revenue was recognized ratably over the determined performance period to reflect the transfer of control to the customer occurring over the time period that the research and development services were provided by the Company. This output method is, in management’s judgment, the best measure of progress towards satisfying the performance obligation. As of December 31, 2022 and 2021, the current contract liability relating to the Eurofarma contract was $ 0 and $ 756 , respectively, and was recorded in current deferred revenue in the consolidated balance sheet. As of December 31, 2022, the Company has recognized $ 4,678 of cumulative income since inception. 8. Other Operating Income The following table sets forth the components of other operating income by category: Year Ended December 31, 2022 Year Ended December 31, 2021 Other operating income by category: Funding income from BARDA (as defined below) $ 8,085 $ 4,604 Research and development tax credits 4,523 15,206 Grant income from CARB-X (as defined below) 1,808 1,158 $ 14,416 $ 20,968 BARDA (as defined below) In September 2017, the Company was awarded a funding contract from the Biomedical Advanced Research and Development Authority ("BARDA"), part of the Office of the Assistant Secretary for Preparedness and Response at the United States Department of Health and Human Services, in support of the Company's Ri-CoDIFy clinical trials and clinical development of of ridinilazole. The awarded contract was originally worth up to $ 62,000 . In June 2019 and again in January 2020, BARDA increased the value of the contract such that it is now worth up to $ 72,500 and brought the total amount of committed funding to $ 62,400 . 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. This option work segment was never exercised by BARDA. The contract ran through April 2022 and was extended through December 2022 as a no cost contract, solely to close out open activities. As of December 31, 2022, based on translation of historical foreign currency amounts in the period of recognition, the Company has recognized $ 59,203 of cumulative income since contract inception. As a result of the Company's decision, on September 28, 2022, to not pursue further internal clinical development of ridinilazole and seek partners or a divestiture related to ridinilazole as a path forward for the clinical development of the asset, the Company recorded expenses for the remaining clinical trial costs associated with the close out activities of ridinilazole and recognized the remainder of the deferred income that had been received from BARDA prior to the expenses being recognized during the third quarter of 2022. Research and development credits Income from tax credits, consist of R&D tax credits received in the U.K. The Company benefits from two U.K. research and development tax credit cash rebate regimes: Small and Medium Enterprise Program ("SME, Program") and the Research and 108 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Development Expenditure Credit Program ("RDEC Program"). Qualifying expenditures largely comprise of 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 Program are recorded as other operating income in the consolidated statements of operations and other comprehensive loss. 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 His Majesty’s Revenue and Customs ("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 research and development expenditure incurred in its UK entities will also continue to be eligible for the SME regime for future periods. As of December 31, 2022 and 2021, the current research and development tax credit receivable was $ 5,766 and $ 15,695 , respectively. CARB-X (as defined below) In May 2021, the Company announced the selection of a new preclinical candidate, SMT-738, from the DDS-04 series for development in the fight against multi-drug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae ("CRE") infections. Simultaneously, the Company announced it had received an award from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program ("CARB-X") to progress this candidate through preclinical development and Phase Ia clinical trials. The award commits initial funding of up to $ 4,100 , with the possibility of up to another $ 3,700 based on the achievement of future milestones. As of December 31, 2022, based on translation of historical foreign currency amounts in the period that the amounts were recognized, the Company has recognized $ 2,875 of cumulative income since contract inception. During the quarter ended September 30, 2022, CARB-X announced changes to its funding arrangements and terms and conditions. As a result, the current arrangement concluded as of June 30, 2022, however the Company has the ability to recognize reimbursements for any milestone payments related to work incurred subsequent to this date in accordance with this agreement. 9. Other Expense, net The following table sets forth the components of other (expense) income: Year Ended December 31, 2022 Year Ended December 31, 2021 Foreign currency loss $ ( 4,109 ) $ ( 2,135 ) Interest expense on promissory notes payable to related parties ( 4,401 ) ( 242 ) Investment income 1,513 — Other income (expense), net 304 ( 39 ) Other Expense, net $ ( 6,693 ) $ ( 2,416 ) For the year ended December 31, 2022, other expense, net primarily consisted of unfavorable changes in foreign currency, loan interest expense incurred related to the $ 520,000 and $ 25,000 promissory notes, as described in Note 17, partially offset by investment income related to our money market funds and investments in highly liquid U.S. treasury securities, which are classified as cash equivalents as of December 31, 2022. For the year ended December 31, 2021, other expense, net primarily consisted of unfavorable changes in foreign currency and loan interest expense incurred related to the $ 55,000 promissory note, as described in Note 22. 109 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 10. Income Tax The components of the Company's loss before income taxes are as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 United Kingdom $ ( 46,868 ) $ ( 72,244 ) United States ( 31,914 ) ( 16,358 ) Loss before income taxes $ ( 78,782 ) $ ( 88,602 ) The Company has not recognized a current or deferred provision for federal, state or non-United States income taxes in either of the years ending December 31, 2022 or December 31, 2021. Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The major components of deferred tax assets and liabilities are as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 Deferred tax assets: Net operating loss carryforward $ 52,948 $ 49,422 Research and development credit carryforward 1,723 941 Stock-based compensation 3,879 2,560 Section 174 Research and Development Capitalization 3,553 — Other 2,139 1,477 Total deferred tax assets 64,242 54,400 Deferred tax liabilities: Intangible asset — ( 2,600 ) Other ( 226 ) ( 54 ) Total deferred tax liabilities ( 226 ) ( 2,654 ) Net deferred tax assets before valuation allowance 64,016 51,746 Valuation allowance ( 64,016 ) ( 51,746 ) Deferred tax, net $ — $ — For the year ended December 31, 2022 and 2021, the Company recorded a deferred tax asset of $ 64,242 and $ 54,400 respectively. The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards and excess tax benefits related to stock-based compensation. Management has considered the Company’s history of cumulative net losses in the United States ("U.S.") and the United Kingdom ("U.K."), estimated future taxable income, as well as prudent and feasible tax planning strategies, and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets and U.K. deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2022 and 2021, respectively. The Company reevaluates the positive and negative evidence at each 110 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) reporting period. The Company’s valuation allowance increased during 2021 by $ 12,270 primarily due to the generation of net operating loss and stock-based compensation. As of December 31, 2022 and 2021, the Company had U.S. Federal gross operating loss carryforwards of approximately $ 11,620 and $ 4,921 , respectively, which may be available to offset future income tax liabilities. The 2017 Tax Cuts and Jobs Act (“ TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely, but will generally limit the net operating loss deduction to the lesser of the net operating loss carryover or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). In addition, the Company has approximately $ 7,278 in U.S. State gross loss carryforwards which expire through various dates through 2036 and as of December 31, 2022, the Company had an estimated U.S. federal research and development tax credit carryforwards of $ 1,723 which may be available to offset future tax liabilities, and each begin to expire in 2041. The Company also had approximately $ 199,091 in U.K. gross loss carryforwards available to use against future taxable profits on a year-by-year basis (a potential deferred tax asset of $ 49,773 ). To the extent that U.K. taxable profits exceed £5,000 in each year, the loss available to utilize against profits in excess of £5,000 will be restricted to 50%. The U.K. loss carryforwards do not lapse and therefore, the full amount will be relieved over time provided there are sufficient profits against which the losses can be utilized. Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation. Any limitation may result in the loss of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. U.K. tax losses are subject to additional restrictions where there is a change in ownership in the business and certain other conditions are met. An ownership change of a UK tax resident company would occur where (directly or indirectly) a single person acquires more than half of the ordinary share capital of a company, or two or more persons each acquire a holding of at least 5% of the ordinary share capital of a company and these holdings together amount to more than half the ordinary share capital of a company. Where a change in ownership has occurred, and within three years prior to that change in ownership and five years afterwards, there is a major change in the nature and conduct of trade of that company or the trade of that business becomes small or negligible, any losses carried forward will be extinguished from the point of the change in ownership. In addition, losses accrued subsequent to April 1, 2017 will be extinguished on a change of ownership when there is a major change in the nature or conduct of a company’s business, or where there is a major change in the scale of that business, or a company ceases to carry on a particular trade or business. The Company has not completed a study to assess whether a change of ownership has occurred since its formation, or whether there has been a major change in the Company's business that would restrict the U.K. tax losses. Any limitation may result in the loss of a portion of the net operating loss carryforwards before utilization. The 2017 Tax Cuts and Jobs Act (“TCJA”) created a requirement that US corporations include in income earnings of certain controlled foreign corporations (“CFC”) under the global intangible low taxed income (“GILTI”) regime. Pursuant to the FASB Staff Q&A, Topic 740 No.5. Accounting for Global Intangible Low-taxed Income, the Company is allowed to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as period expense only. The Company has elected to account for GILTI in the year the tax is incurred and include the current tax impact of GILTI in the effective tax rate. Given the Company's loss position in the U.S. and the valuation allowance recorded against its U.S. net deferred tax assets, these provisions have not had a material impact on the Company's consolidated financial statements. IRC Section 174 generally permitted taxpayers that incurred research expenses to deduct them in the current year. For tax years beginning before January 1, 2022, taxpayers were able to make an election with respect to research and experimental (“R&E”) expenditures incurred in connection with a trade or business to either currently deduct or defer and amortize such expenditures. The TCJA amended this provision to require that R&E expenditures be capitalized and amortized, but delayed the effective date of this amendment, which applies to tax years beginning January 1, 2022 or later. As such, the changes to IRC Section 174 111 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) pursuant to the TCJA are currently applicable to the Company for the 2022 tax year. R&E expenditures attributable to U.S. based research must be amortized over a period of five years and R&E expenditures attributable to research conducted outside of the U.S. must be amortized over a period of 15 years. As such, the Company is capitalizing $ 14,830 R&E expenditures with a net adjustment of $ 13,347 to account for the capitalization and amortization of R&D expenses incurred in the U.S. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The Company considered the provisions under the CARES Act and elected not to take advantage of the provisions of the CARES Act as the effect of such provisions was not expected to have a material impact on the Company’s results of operations, cash flows, and consolidated financial statements. During 2021, the U.K. Government announced that from April 1, 2023, the corporation tax rate would increase to 25%. This new law was enacted on June 10, 2021. The overall effect of the change was an increase in net deferred tax assets by $ 9,311 and an increase in valuation allowance by an equal amount for the year ended December 31, 2021. No changes to this rate have been made during 2022. A reconciliation of the Company's effective tax rate to the U.S. federal statutory rate is as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 U.S. federal income tax statutory rate 21.0 % 21.0 % Change in valuation allowance ( 16.8 ) ( 10.5 ) Non-deductible expenses — ( 0.4 ) Refundable research and development tax credit ( 3.6 ) ( 8.3 ) Effect of foreign operations taxed at various rates 2.1 0.5 Stock-based compensation ( 2.2 ) ( 1.6 ) Other ( 0.5 ) ( 0.7 ) — % — % 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, 2022 and 2021, the Company recognized research and development tax relief of $ 4,523 and $ 15,206 respectively, which is included in other operating income in the consolidated statements of operations and other comprehensive loss. It is the intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations and not to repatriate the earnings to the U.S. Accordingly, the Company does not provide for deferred taxes on differences between financial reporting and tax basis in its investments in foreign subsidiaries as they are considered permanent in duration or are not expected to reverse in the foreseeable future. 112 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) The Company does not have any uncertain tax positions as of December 31, 2022. In the U.K., tax returns for the year ended December 31, 2021 remains subject to examination by HMRC. In the U.S., the Company files income tax returns in various states. In the U.S., tax years from 2019 remain subject to examination by the U.S. Internal Revenue Service and state tax authorities. The Company is not currently under examination by the Internal Revenue Service or any other jurisdiction for years 2019 through present. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as part of its income tax provision. As of December 31, 2022, and 2021, the Company has recorded no liability for unrecognized tax benefits, interest, or penalties related to federal, state or foreign income tax matters. 11. Loss per Share The following table sets forth the computation of basic and diluted net loss per share: Year Ended December 31, 2022 Year Ended December 31, 2021 Net loss $ ( 78,782 ) $ ( 88,602 ) Basic weighted average number of shares of common stock outstanding 193,336,063 131,714,225 Diluted weighted average number of shares of common stock outstanding 193,336,063 131,714,225 Basic net loss per share $ ( 0.41 ) $ ( 0.67 ) Diluted net loss per share $ ( 0.41 ) $ ( 0.67 ) Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the diluted net loss by the weighted-average number of common shares outstanding for the period, including potentially dilutive common shares. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all potential common share equivalents outstanding would have been anti-dilutive. Because the Rights Offering exercise price of $ 1.05 per share was less than the closing price of $ 1.82 per share on March 1, 2023, the expiration of the Rights Offering (further detailed in Note 23), the Company has retroactively adjusted earnings per share and weighted average number of shares outstanding for the bonus element for all periods presented. The following potentially dilutive securities were excluded from the computation of the diluted net loss per share of common stock for the periods presented because their effect would have been anti-dilutive: 2022 2021 Options to purchase common stock 19,476,359 13,797,556 Warrants 5,821,137 5,821,137 Shares expected to be purchased under employee stock purchase plan 229,475 202,045 25,526,971 19,820,738 113 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 12. Goodwill and Intangible Assets Goodwill The Company’s annual evaluation for impairment of goodwill consists of one reporting unit. In accordance with the Company’s policy, the Company completed its annual evaluation for impairment in the fourth quarter of 2022 using the qualitative assessment. No impairment charge was recognized for the year ended December 31, 2022 and there have been no cumulative goodwill impairment charges recognized to date. As of December 31, 2022 and 2021, goodwill was $ 1,798 and $ 2,009 , respectively. Changes year over year are the result of foreign currency movements. Intangible Assets Components of the Company's acquired intangible assets are comprised of the following: December 31, 2022 Gross Accumulated amortization and impairment charges Net Utrophin program acquired $ 4,015 $ ( 4,015 ) $ — Discuva platform acquired 12,900 ( 12,900 ) — Option over non-financial asset 816 ( 816 ) — Other intangibles 133 ( 133 ) — $ 17,864 $ ( 17,864 ) $ — December 31, 2021 Gross Accumulated amortization and impairment charges Net Utrophin program acquired $ 4,487 $ ( 4,487 ) $ — Discuva platform acquired 14,416 ( 4,017 ) 10,399 Option over non-financial asset 912 ( 912 ) — Other intangibles 148 ( 148 ) — $ 19,963 $ ( 9,564 ) $ 10,399 In December 2017, we expanded our activities in the field of infectious diseases with the acquisition of Discuva Limited, a privately held United Kingdom-based company. Through this acquisition, we obtained a bacterial genetics platform and a suite of software-based technologies (collectively termed our “Discuva Platform”), which facilitates the discovery and development of new mechanism antibiotics. In conjunction with the significant change in the Company’s strategy and shift in focus to the therapeutic area of oncology, the Company determined that it will cease further investment in the Discuva Platform and evaluate further options for the use of the Discuva Platform. Management have concluded that this indicated the carrying amount of the acquired Discuva Platform intangible asset may not be recoverable and hence performed an assessment using a probability-weighted approach to determine the undiscounted cash flows of the asset, which indicated that an impairment exists. Based on the assessment to compare the fair value of the asset to its carrying amount, an impairment charge of $ 8.5 million was recognized during the year ended December 31, 2022, representing the aggregate carrying value of the intangible asset. This impairment charge is presented as impairment of intangible assets in the consolidated statements of operations and comprehensive loss. 114 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Changes year over year in the gross amount of intangible assets are the result of foreign currency movements only. Amortization expense was $ 914 and $ 1,017 for the years ended December 31, 2022 and 2021, respectively. Changes year over year in the accumulated amount of amortization and impairment also include the effect of foreign currency movements. 13. Cash Equivalents and Fair Value Measurements The following tables set forth the fair value of the Company's financial assets measured at fair value on a recurring basis and indicates the level within the fair value hierarchy utilized to determine such values: Fair Value Measurements as of December 31, 2022 using: Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 60,783 $ — $ — $ 60,783 U.S. Government treasury bills $ — $ 225,730 $ — $ 225,730 Total financial assets $ 60,783 $ 225,730 $ — $ 286,513 The table above does not include cash at December 31, 2022 of $ 62,094 . There were no cash equivalents held by the Company as of December 31, 2021. Cash at December 31, 2021 was $ 71,791 . The Company's financial instruments include cash and cash equivalents and restricted cash. Cash consists of non-interest-bearing deposits denominated in the U.S. dollar, British pound and Euro, while cash equivalents consists of interest-bearing money market fund deposits denominated in the U.S. dollar and U.S. treasury bills, and restricted cash consists of interest-bearing deposits denominated in the U.S. dollar. The Company believes that the carrying amounts of prepaid expenses, other current assets, accounts payable, and accrued expenses approximates their fair values due to the short-term nature of those instruments. The carrying value of the Company’s promissory notes approximates its fair value due to the recent issuance of the notes in December 2022 when compared to market interest rates (which represents a Level 2 measurement). 14. Property and Equipment Property and equipment consisted of the following: December 31, 2022 December 31, 2021 Laboratory equipment $ 505 $ 546 Furniture and fixtures, office equipment and software 889 819 Leasehold improvements 809 365 Property and equipment, gross 2,203 1,730 Less: accumulated depreciation 1,297 1,036 Property and equipment, net $ 906 $ 694 Depreciation expense for the years ended December 31, 2022 and 2021 was $ 349 and $ 330 , respectively. 15. Research and Development Prepaid Expenses and Accrued Liabilities Included within prepaid expenses at December 31, 2022 and 2021 is $ 442 and $ 6,138 , respectively, of prepayments relating to research and development expenditures. Included within accrued liabilities at December 31, 2022 and 2021 is $ 8,911 and $ 5,226 , respectively, relating to research and development expenditures. 115 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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. 16. Leases The Company has operating leases for real estate. The Company does not have any finance leases. During the year ended December 31, 2022, the Company recorded $ 2,860 of additional right-of-use assets of which $ 2,755 related to the first and second amendments to its sublease agreement during the period for its Menlo Park, California, United States location and $ 105 which related to a remeasurement of the right of use asset and lease liability following a contractual rent review resulting in an increase in rent payments during the period for its Oxfordshire, United Kingdom location. The carrying value of the right-of-use assets as of December 31, 2022 and 2021 is $ 4,175 and $ 2,790 , respectively. The elements of lease expense were as follows: Lease Cost: Year Ended December 31, 2022 Year Ended December 31, 2021 Fixed lease costs $ 1,384 $ 785 Variable lease costs 137 164 Short-term lease (1) 31 278 Total lease cost $ 1,552 $ 1,227 (1) Short-term lease costs relate to the Company's Cambridge, Massachusetts, United States office lease which the Company exited during fiscal year 2022. The weighted average discount rate and the weighted average remaining lease term were 5.7 % and 3.4 years, respectively, as of December 31, 2022. The weighted average discount rate and the weighted average remaining lease term were 2.5 % and 3.9 years, respectively, as of December 31, 2021. The Company made cash payments related to lease liabilities of $ 1,092 and $ 1,041 for the years ending December 31, 2022 and 2021 respectively. Future lease payments under non-cancelable leases as of December 31, 2022 are detailed as follows: Year Ending December 31, 2023 $ 1,474 2024 1,502 2025 1,533 2026 381 Total lease payments 4,890 Less: imputed interest 437 Total operating lease liabilities $ 4,453 Total operating lease liabilities balance sheet presentation: Current lease liabilities $ 1,690 Non-current lease liabilities 2,763 $ 4,453 116 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 17. Promissory Notes Payable to Related Parties Non-current and current debt consisted of the following: Current notes Non-current notes December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Principal amounts $ 20,000 $ — $ 500,000 — Debt discount ( 230 ) — ( 5,460 ) $ — Total promissory notes payable to related parties $ 19,770 $ — $ 494,540 $ — March 2022 Promissory Note On March 10, 2022, Mr. Duggan, entered into a Note Purchase Agreement (the “March 2022 Note”), pursuant to which he loaned the Company $ 25,000 in exchange for the issuance by the Company of an unsecured promissory note in the amount of $ 25,000 . The March 2022 Note accrued interest at a rate per annum equal to the prime rate as reported in the Wall Street Journal . The March 2022 Note, including all accrued interest, became due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 25,000 or (ii) 18 months from the date of issuance of the March 2022 Note. Debt issuance costs associated with the March 2022 Note were immaterial and expensed as incurred. The March 2022 Note of $ 25,000 , plus accrued interest of $ 434 has been repaid to Mr. Duggan on August 10, 2022 in connection with the completion of the rights offering with aggregate gross proceeds of $ 100,000 . The Company incurred interest expense of $ 1,296 for the year ended December 31, 2022, which included amortized imputed interest of $ 861 for the year ended December 31, 2022. December 2022 Promissory Notes On December 6, 2022, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement"), with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $ 520,000 . Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the amount of $ 400,000 (the "Duggan February Note") and $ 20,000 (the "Zanganeh Note"), respectively, which would mature and become due on February 15, 2023 and an unsecured promissory note to Mr. Duggan in the amount of $ 100,000 (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which will mature and become due on September 15, 2023. The maturity dates of the December 2022 Notes could be extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company shall consummate a public offering, then upon the later to occur of (i) five business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100 % of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such Notes. On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $ 500,000 (the “Rights Offering”), or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) Duggan September Note following the completion of a capital raising transaction subsequent to the Rights Offering in an amount equal to the lesser of (i) the net proceeds of such capital raise or (ii) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes (the “Duggan Promissory Notes”), the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes (together with the Zanganeh Note, the "Notes"). 117 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) The Notes accrue interest at an initial rate of 7.5 %. All interest on the Notes shall be paid on the date of signing for the period through February 15, 2023. Such prepaid interest shall be paid in a number of shares of the Company’s common stock, par value $ 0.01 (“Common Stock”) equal to the dollar amount of such prepaid interest, divided by $ 0.7913 (the consolidated closing bid price immediately preceding the time the Company entered into the Note Purchase Agreement, plus $ 0.01 ), which was 9,720,291 shares. For all applicable periods following the February 15, 2023, interest shall accrue on the outstanding principal balance of the Notes at the US prime interest rate, as reported in the Wall Street Journal, plus 50 basis points, as adjusted monthly, for three months immediately following February 15, 2023, and thereafter at the US prime rate plus 300 basis points, as adjusted monthly. Debt issuance costs associated with the Notes were $ 44 and we capitalized as part of the carrying value of the promissory notes payable to related parties. The Company incurred interest expense of $ 3,105 for the year ended December 31, 2022, which included amortized imputed interest of $ 395 . Imputed interest is calculated as the difference between the expected interest payable and the deemed market rate of interest and is recorded as a debt discount at inception of the note payable with a credit to additional paid-in capital for notes payable to related parties. The debt discount is amortized to interest expense using an effective interest rate method. The effective interest rate of the Duggan February Note and Zanganeh Note was 8.7 % and the effective interest rate of the Duggan September Note was 8.8 %. The Company incurred interest expense of $ 244 for the year ended December 31, 2021, which included amortized imputed interest $ 159 for the year ended December 31, 2021, respectively, related to the March 24, 2021 Note Purchase Agreement with Mr. Duggan, for $ 55,000 which was subsequently rescinded and replaced by a second note on April 20, 2021, of the same amount, and paid in full in May 2021, as described further in Note 22. As of December 31, 2022, and reflecting the Company's election to extend the term of the Duggan February Note and the Duggan September Note, the estimated future principal payments due were as follows: Year Ending December 31, 2023 $ 20,000 2024 500,000 $ 520,000 On February 15, 2023, the $ 20,000 Zanganeh Note matured and the Company repaid the outstanding principal balance. In connection with the closing of the rights offering, the $ 400,000 Duggan Promissory Note matured and became due, and the Company repaid all principal and accrued interest thereunder using a portion of the proceeds from this rights offering. 18. Other Non-Current Liabilities Included within other non-current liabilities at December 31, 2022 and 2021 is $ 1,209 and $ 2,531 , respectively, 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. In conjunction with the significant change in the Company’s strategy and shift in focus to the therapeutic area of oncology, the Company determined that it will cease further investment in the Discuva platform and evaluate further options for the use of the Discuva Platform. As a result, management has revised the estimated presented value of these payments and remeasured the contingent liabilities. This resulted in recording a gain on remeasurement of liabilities of $ 1,265 during the year ended December 31, 2022, which is included net as part of the research and development expenses in the consolidated statement of operations and comprehensive loss. There were no remeasurement losses or gains recognized during the year ended December 31, 2021. 118 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 19. Stockholders' Equity Common Stock In August 2022, the Company announced the closing of its 2022 rights offering ("2022 Rights Offering). The rights offering commenced on July 18, 2022, and the associated subscription rights expired on August 8, 2022. The 2022 Rights Offering received aggregate gross proceeds of $ 100,000 from the sale of 103,092,783 shares of common stock. Mr. Duggan and Dr. Zanganeh fully subscribed to their respective basic subscription rights and oversubscribed, at a price per share of $ 0.97 . Offering costs of $ 111 were incurred. On May 12, 2021, the Company closed its rights offering ("2021 Rights Offering"), which was fully subscribed and received aggregate gross proceeds of $ 75,000 from the sale of 14,312,976 shares of common stock to existing investors at a price per share of $ 5.24 . Offering costs of $ 159 were incurred. Warrants As part of the private placement on December 24, 2019, the participating investors were granted warrants with the right to subscribe for 5,261,350 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 stock with no provision for any cash settlement. Also, as part of the private placement on December 24, 2019, certain consultants were granted warrants with the right to subscribe for 3,358,732 shares of common stock in exchange for certain services. The warrants have an exercise price of $ 1.44 and vest quarterly over three years . If the consulting agreement terminated prior to three years after the date of the grant, all unvested warrants will be deemed cancelled. On June 30, 2020, the consulting agreement was terminated and 2,798,945 warrants cancelled immediately. The remaining 559,787 of outstanding warrants are held by Dr. Zanganeh and Dr. Elaine Stracker. Warrants granted over shares of common stock to consultants in exchange of certain services are similar to stock-based compensation (see Note 20). The Company had 5,821,137 total warrants outstanding as of December 31, 2022 and 2021, respectively, and an intrinsic value of $ 15,640 as of December 31, 2022 and $ 6,559 as of December 31, 2021. Dividends The Company has never declared or paid cash dividends on its shares of common stock or on Summit Therapeutics plc's ordinary shares. The Company currently intends to retain all of its future earnings to fund the development and expansion of its business. 20. Stock-Based Compensation 2016 Long Term Incentive Plan Upon the effectiveness of the 2020 Stock Incentive Plan, no additional grants will be made under the 2016 Long Term Incentive Plan, (the "2016 Plan") and any outstanding awards continue with their original terms. 119 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. 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, including RSUs can be added to the 2020 Plan for future issuance from options that expire, lapse 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. On July 27, 2022, the Company held a Special Meeting of Stockholders (the "Special Meeting") whereby the following matters were submitted to a vote of the Company's stockholders at the Special Meeting and the Board of Directors resolved the following: (i) an amendment to the Company's Restated Certificate of Incorporation, dated September 18, 2020, to increase the number of authorized shares of common stock by 100,000,000 (from 250,000,000 to 350,000,000 ); and (ii) an amendment to the Summit Therapeutics Inc. 2020 Stock Incentive Plan (the "Plan") to increase the number of shares of the Company's common stock issuable under the Plan by 8,000,000 shares. As of December 31, 2022, there are 5,879,768 shares available to be issued under the 2020 Plan. 2020 Employee Stock Purchase Plan The 2020 Employee Stock Purchase Plan (the "2020 ESPP") was adopted by the Board of Directors and approved by the Company's shareholders on July 17, 2020 and approved by the predecessor company shareholders on August 19, 2020 and is qualified under Section 423 of the Internal Revenue Code. The 2020 ESPP initially authorized the issuance of up to 1,000,000 shares of common stock to participating employees. The number of common shares that may be issued under the 2020 ESPP automatically increases on each fiscal year commencing January 1, 2021 and continuing for each fiscal year until, and including the fiscal year commencing on, January 1, 2030 equal to the lesser of (i) 1,600,000 shares of common stock, (ii) 1 % of the common shares outstanding on such date and (iii) an amount as determined by the Company’s Board of Directors. As of December 31, 2022, there were 2,628,893 shares available to be issued under the 2020 ESPP. The first offering period of the 2020 ESPP plan consisted of seven months , commencing on August 2, 2021 and completed on February 28, 2022. The second offering period commenced on March 1, 2022 and was completed on August 31, 2022. Offering periods thereafter will be six months in duration and will commence immediately proceeding the end of the previous offering period, unless otherwise determined by the Board of Directors or Compensation Committee. Under the 2020 ESPP, eligible employees can purchase shares of common stock through payroll deductions of up to 15 % of their compensation received during the plan period or such shorter period during which deductions from payroll are made, up to a defined maximum amount. The option price is determined based on the lesser of the closing price of common stock on (i) the first business day of the plan period or (ii) the exercise date, or shall be based solely on the closing price of the common stock on the exercise date; provided that such option price shall be at least 85 % of the applicable closing price. In the absence of a determination by the Board of Directors or the Compensation Committee, the option price is 85 % of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The closing price is the (a) the closing price (for the primary trading session) on the Nasdaq Global Select Market or (b) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in the Wall Street Journal or another source selected by the Board or the Committee. During the fiscal year ended December 31, 2022, 176,857 shares were issued under the 2020 ESPP. As the first offering period of the 2020 ESPP plan completed during the fiscal year ended December 31, 2022, no shares were issued under the 2020 ESPP during the fiscal year ended December 31, 2021. 120 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Stock Option Valuation The Company estimates the fair value of stock options granted to employees and directors using the Black-Scholes valuation model. Stock options granted under the 2016 and 2020 Plans generally vest over three or four years and expire after ten years . This valuation methodology utilizes several key assumptions as highlighted below. The assumptions used in the Company's valuation are summarized as follows, presented on a weighted average basis: Year Ended December 31, 2022 Year Ended December 31, 2021 Risk-free interest rate 3.11 % 1.05 % Expected term (in years) 5.9 5.7 Expected volatility 91.2 % 74.5 % Expected annual dividends per share — % — % The following table summarizes the Company's stock option activity for the year ended December 31, 2022: Number of share options Weighted average exercise price Weighted average remaining contractual term Aggregate intrinsic value Outstanding as of December 31, 2021 13,797,556 $ 5.55 8.6 years $ 712 Granted 9,837,797 1.31 Forfeited ( 4,097,040 ) 4.89 Exercised ( 61,954 ) 2.04 Outstanding as of December 31, 2022 19,476,359 $ 3.55 8.8 years $ 29,657 Outstanding as of December 31, 2022 - vested and expected to vest 13,110,654 4.49 8.5 years $ 11,799 Exercisable at December 31, 2022 3,895,109 $ 4.91 8.0 years $ 1,652 During the year ended December 31, 2022, the Compensation Committee of the Company's Board of Directors and management approved 6,984,000 option grants to its executives and certain employees of the Company which will vest based upon certain market-based and revenue performance conditions. The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2022 and 2021 was $ 0.87 and $ 3.50 , per share, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022 and December 31, 2021 was $ 142 and $ 3,744 , respectively. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. As of December 31, 2022, total unrecognized compensation cost related to unvested stock option grants was approximately $ 12,274 . This amount is expected to be recognized over a weighted average period of approximately 1.8 years. This excludes unvested market-based and performance stock options outstanding that were deemed not probable of vesting as of December 31, 2022, constituting 6,764,000 shares with unrecognized stock-based compensation expense of $ 4,655 , for which the timing of recognition will be determined once the conditions for achievement become probable. 121 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) In September 2021, the Compensation Committee of the Board of Directors approved a modification to the Company's outstanding performance-based stock option awards for active employees which removed the performance-based vesting criteria from these awards. Following this modification, the option awards are subject only to previously existing time-based vesting conditions. The Company accounted for this change as a modification in accordance with the requirements of Accounting Standards Codification Topic 718. As a result, 9,250,000 options, related to twenty-five employees, that were previously authorized that had not achieved a grant date became granted on September 24, 2021 relating to the modification. The Company is recognizing the newly assessed measurement date fair value of the awards as compensation expense over the remaining vesting period. Warrants The fair value of warrants is estimated on the date of grant using the Black-Scholes valuation methodology. Expected volatilities are based on historical share price performance, weighted to exclude periods of unusually high volatility. The Company assumed the warrants 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, as the warrants were issued when the Company was domiciled in the U.K.. Expected dividend yield is zero , and consistent with the Board of Directors’ view that the Company’s business model is to generate value through capital growth rather than the payment of dividends. 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. As of December 31, 2022, 5,821,137 warrants were granted, of which 559,787 warrants were granted to consultants and 5,261,350 warrants were granted to investors. All warrants are considered vested at December 31, 2022, have a weighted-average exercise price of $ 1.56 , an aggregate intrinsic value of $ 15,640 , and a weighted average remaining contractual life of 3.5 years. At December 31, 2022, there was no unrecognized compensation expense related to warrants. Stock-Based Compensation Stock‑based compensation expense related to stock options is recorded within the consolidated statements of operations and comprehensive loss as follows: Year Ended December 31, 2022 Year Ended December 31, 2021 Research and development $ 4,303 $ 5,909 General and administrative 7,645 6,895 Total stock-based compensation $ 11,948 $ 12,804 21. Commitments and Contingencies Fixed asset purchase commitments At December 31, 2022 and 2021, the Company had no capital commitments. Lease commitments Refer to Note 16 for a discussion of the Company's lease commitments. Debt commitments Refer to Note 17 for discussion of promissory notes payable to related parties. 122 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 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. Most contracts provide for termination upon notice, and therefore are cancellable contracts. As of December 31, 2022, total contractual commitments, excluding leases commitments and debt commitments, are estimated to be approximately $ 11,510 and the majority of these commitments are due within one year . The Company has certain commitments under its agreements with the Akeso, Wellcome Trust, the University College London and certain employees, former employees and former directors of Discuva, pursuant to which it will be required to pay royalties or make milestone payments. The License Agreement with Akeso also contains certain manufacturing and purchase commitments. As of December 31, 2022, the Company is unable to estimate the amount, timing or likelihood of achieving the milestones, making future product sales or assessing estimated forecasts for manufacturing and supplied materials which these contingent payment obligations relate to. 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, 2022. Legal Proceedings The Company is not currently subject to any material legal proceedings. 22. Related Party Transactions March 24, 2021 Note Purchase Agreement On March 24, 2021, Mr. Duggan, the Company's Executive Chairman and Chief Executive Officer and primary stockholder, entered into a Note Purchase Agreement (the “Initial Purchase Agreement”) pursuant to which he loaned the Company $ 55,000 in exchange for the issuance by the Company of an unsecured promissory note (the “Initial Note”) in the amount of $ 55,000 . The Initial Note was to accrue interest at a rate per annum equal to 150 % of the applicable 10 Year United States Treasury rate, as adjusted monthly. The rate was initially estimated to be approximately 2.4 %. The terms of the Initial Note were that it would mature and become due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 55,000 , or (ii) 13 months from the date of issuance of the Initial Note. On April 20, 2021, the Company determined, with Mr. Duggan’s agreement, to rescind both the Initial Purchase Agreement and the Initial Note issued thereunder, and repaid the principal amount of the Initial Note in full, without interest or penalty. April 20, 2021 Note Purchase Agreement On April 20, 2021, subsequent to the repayment of the Initial Note, Mr. Duggan entered into a second Note Purchase Agreement (the “Second Purchase Agreement”) pursuant to which he loaned the Company $ 55,000 in exchange for the issuance by the Company of an unsecured promissory note (the “Second Note”) in the amount of $ 55,000 . The Second Note accrued interest at a rate per annum equal to 150 % of the applicable 10 Year United States Treasury rate, as adjusted monthly (initially estimated to be approximately 2.4 %). The Company was permitted to prepay any portion of the Second Note at its option without penalty. 123 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) May 12, 2021 Rights Offering ("2021 Rights Offering") On May 12, 2021, the Company closed its 2021 Rights Offering, which was fully subscribed. Aggregate gross proceeds from the 2021 Rights Offering were $ 75,000 from the sale of  14,312,976  shares of the Company's common stock, of which 11,365,921 shares were purchased by Mr. Duggan and 389,977 shares were purchased by Dr. Zanganeh, at price of $ 5.24 per share. In connection with the closing of the 2021 Rights Offering, the Second Note, issued by the Company to Mr. Duggan, matured and became due and was repaid using a portion of the proceeds from the 2021 Rights Offering. March 26, 2021 Sublease Agreement with Maky Zanganeh and Associates, Inc. On March 26, 2021, the Company entered into a sublease with Maky Zanganeh and Associates, Inc. ("MZA") consisting of 4,500 square feet of office space at 2882 Sand Hill Road, Menlo Park, California (the “Sublease”). Dr. Zanganeh, the Company's Co-Chief Executive Officer and President, is the sole owner of MZA. The sublease ran until September 2022. The rent payable under the terms of the sublease was 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. During the years ended December 31, 2022 and 2021, payments of $ 544 and $ 556 , were made pursuant to the sublease. July 25, 2022 First Amendment to Sublease Agreement with Maky Zanganeh and Associates, Inc. On July 25, 2022 the Company entered into a first amendment, dated July 19, 2022, to its existing sublease agreement with MZA, described above. The existing sublease term, which was set to expire on September 30, 2022, was extended for a period of thirty-nine months from October 1, 2022 through December 31, 2025. The rent payable under the terms of the sublease is equivalent to the proportionate share of the net 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. July 29, 2022 Second Amendment to Sublease Agreement with Maky Zanganeh and Associates, Inc. On July 29, 2022, the Company entered into a second amendment, dated August 1, 2022, to its existing sublease agreement with MZA, described above. The second amendment was effective as of August 1, 2022 and expires on December 31, 2025. The second amendment includes an additional 1,277 square feet (the "Expansion Premises") of office space at 2882 Sand Hill Road, Menlo Park, California. The rent payable under the terms of the sublease is equivalent to the proportionate share of the net 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. During the year ended December 31, 2022 payments of $ 54 , were made pursuant to the secondment amendment to the sublease. March 10, 2022 Note Purchase Agreement On March 10, 2022, the Company entered into a Note Purchase Agreement (the "March 2022 Note"), with Mr. Duggan, pursuant to which Mr. Duggan loaned the Company $ 25,000 in exchange for the issuance by the Company of an unsecured promissory note in the amount of $ 25,000 . The March 2022 Note accrued interest at a rate per annum equal to the prime rate as reported in the Wall Street Journal , which was 3.25 % as of the effective date and 4.75 % as of June 30, 2022. The March 2022 Note, including accrued interest, became due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $ 25,000 or (ii) 18 months from the date of issuance of the March 2022 Note, and was repaid on August 10, 2022. 2022 Rights Offering ("2022 Rights Offering") In August 2022, the Company announced the closing and final results of its previously announced rights offering. The 2022 Rights Offering commenced on July 18, 2022, and the associated subscription rights expired on August 8, 2022. Aggregate gross proceeds received from the rights offering were $ 100,000 from the sale of 103,092,783 shares of common stock. Mr. Duggan and Dr. Zanganeh fully subscribed to their respective basic subscription rights and oversubscribed, at a price of $ 0.97 per share. Issuance costs were $ 111 . In connection with the closing of the 2022 Rights Offering, the March 2022 Note matured and became due, and the Company repaid all principal and accrued interest thereunder using a portion of the proceeds from the 2022 Rights Offering on August 10, 2022. 124 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) December 6, 2022 Note Purchase Agreement On December 6, 2022, the Company entered into a Note Purchase Agreement (the "Note Purchase Agreement"), with Mr. Duggan and Dr. Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $ 520,000 . Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the amount of $ 400,000 (the "Duggan February Note") and $ 20,000 (the "Zanganeh Note"), respectively, which would mature and become due on February 15, 2023 and an unsecured promissory note to Mr. Duggan in the amount of $ 100,000 (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which will mature and become due on September 15, 2023. The maturity dates of the December 2022 Notes could be extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company shall consummate a public offering, then upon the later to occur of (i) five business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100 % of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such notes. On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $ 500,000 (the “Rights Offering”), or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) Duggan September Note following the completion of a capital raising transaction subsequent to the Rights Offering in an amount equal to the lesser of (i) the net proceeds of such capital raise or (ii) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes (the “Duggan Promissory Notes”), the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes (together with the Zanganeh Note, the "Notes"). The Notes accrue interest at an initial rate of 7.5 %. All interest on the Notes shall be paid on the date of signing for the period through February 15, 2023. Such prepaid interest shall be paid in a number of shares of the Company’s common stock, par value $ 0.01 (“Common Stock”) equal to the dollar amount of such prepaid interest, divided by $ 0.7913 (the consolidated closing bid price immediately preceding the time the Company entered into the Note Purchase Agreement, plus $ 0.01 ), which was 9,720,291 shares. For all applicable periods following the February 15, 2023, interest shall accrue on the outstanding principal balance of the Notes at the United States prime interest rate, as reported in the Wall Street Journal, plus 50 basis points, as adjusted monthly, for three months immediately following February 15, 2023, and thereafter at the United States prime rate plus 300 basis points, as adjusted monthly. 23. Subsequent Events Akeso Collaboration and License Agreement On December 5, 2022, the Company entered into the License Agreement with Akeso, which is detailed further in Note 1. The License Agreement closed on January 17, 2023, and both Akeso and Summit entered into the Common Stock Issuance Agreement (“Issuance Agreement”). Pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10 million shares of Company common stock in lieu of cash and was paid $ 274,900 in cash as the initial upfront payment. The remaining $ 200,000 of the upfront payment was paid on March 6, 2023. As regulatory approval for ivonescimab has not yet been granted, the Company will record in-process research and development expenses in the first quarter of 2023 for the cash payments of $ 474,900 and for the fair market value of the 10 million shares issued to Akeso. 125 Summit Therapeutics Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) Maturity date extension and rectification of promissory notes issued pursuant to the Note Purchase Agreement As disclosed in Notes 17 and 22, on January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent, see Notes 17 and 22 for further details. 2023 Rights Offering ("Rights Offering") On December 6, 2022, the Company announced a rights offering for its existing shareholders to participate in the purchase of additional shares of its common stock. The Rights Offering commenced on February 7, 2023 and the associated subscription rights expired on March 1, 2023. Aggregate gross proceeds from the Rights Offering were $ 500,000 from the sale of 476,190,471 shares of the Company's common stock at a price of $ 1.05 per share. Issuance costs were approximately $ 500 . Repayment of promissory notes On February 15, 2023, the $ 20,000 Zanganeh Note matured and the Company repaid the outstanding principal balance. In connection with the closing of the Rights Offering, the $ 400,000 Duggan Promissory Note, which is defined in Note 17, matured and became due, and the Company repaid all principal and accrued interest thereunder using a portion of the proceeds from the Rights Offering. 126