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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-03-09 · 161 added, 196 removed, 248 unchanged (59% of the section changed)

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Our pipeline of product candidates is designed with the goal to become the patient-friendly, new-era standard-of-care medicines, in the therapeutic area of oncology.

Our current lead development candidate is ivonescimab, a novel, potential first-in-class bispecific antibody intending to combine the effects of immunotherapy via a blockade of PD-1 with the anti-angiogenesis effects of an anti-VEGF compound into a single molecule.

On December 5, 2022, we 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 benefits 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, we obtained the rights to develop and commercialize SMT112 in the United States, Canada, Europe, and Japan (the “Licensed Territory”).

The License Agreement and transaction closed on January 17, 2023 following customary waiting periods.

The entry into the License Agreement represents a significant change in the Company’s strategy.

All prior development and marketing activities relating to ridinilazole are being terminated.

All business activities related to anti-infectives are being reviewed for partnership opportunities for potential further development.

Our future operations will be focused on the development of ivonescimab and other future activities as the Company determines.

On September 28, 2022, we determined that we would seek partners or a divestiture of ridinilazole, our 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, we discontinued our only active study for

ridinilazole, a pediatric clinical trial evaluating ridinilazole for treating adolescent patients with CDI.

We are currently involved in activities related to closeout of ridinilazole clinical trials.

Our other product candidate, SMT-738, has been in development for combating multidrug resistant infections, specifically carbapenem-resistant Enterobacteriaceae (“CRE”) infections.

SMT-738 is the first of a novel class of precision antibiotics that has been in preclinical development and has been undergoing investigational new drug (“IND”) enabling activities.

and its affiliates (“Akeso”) pursuant to which the Company has in-licensed ivonescimab.

Through the License Agreement, we obtained the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, and Japan (the “Licensed Territory”).

The License Agreement and transaction closed in January 2023 following customary waiting periods.

Our operations will be focused on the development of ivonescimab and other future activities, as the Company determines.

We have begun our development for ivonescimab in non-small cell lung cancer (“NSCLC”), specifically launching Phase III clinical trials in the following indications:

a) ivonescimab combined with chemotherapy in patients with epidermal growth factor receptor (“EGFR”)-mutated, locally advanced or metastatic non-squamous NSCLC who have progressed after treatment with a third-generation EGFR tyrosine kinase inhibitor (“TKI”) (“HARMONi”);

b) ivonescimab combined with chemotherapy in first-line metastatic squamous NSCLC patients (“HARMONi-3”)

As of the date of these financial statements, both studies are enrolling patients.

The entry into the License Agreement with Akeso represents a significant change in our strategy and its future operations will be focused on the development of ivonescimab and other future activities as the Company determines.

Our portfolio includes ridinilazole, a product candidate for treating patients suffering from Clostridioides difficile infection, also known as C.

difficile infection, or CDI.

All prior development and marketing activities related to ridinilazole have been terminated.

Our anti-infectives portfolio includes SMT-738, the first of a novel class of precision antibiotics for combating multidrug resistant infections, specifically carbapenem-resistant Enterobacteriaceae (“CRE”) infections.

We will continue to pursue partnerships for further development of SMT-738.

We have devoted substantially all of our efforts to research and development, including clinical trials.

We have not completed the development of any drugs.

We expect to continue to incur significant expenses and increasing operating losses for at least the next few years.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year, due to the nature and timing of our research and development activities.

We expect that our research and development and general and administrative expenses will continue to be significant in connection with our ongoing research and development efforts.

As a result, we will need to seek additional funding in the future to fund operations.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of some, or all, of the following:

equity and debt offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations, and marketing, distribution or licensing arrangements.

We may be unable to raise sufficient funds through equity or debt financings, or other arrangements when needed based on our liquidity needs acceptable terms, or at all.

Recent Developments

In addition to the events detailed in the Company Overview section above, the following other recent developments have occurred.

On February 15, 2023, the $20 million Zanganeh Note matured and the Company repaid the outstanding principal balance.

On March 1, 2023, we closed our Rights Offering, which was fully subscribed.

We received aggregate gross proceeds from the Rights Offering of $500 million 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 $0.5 million.

In connection with the closing of the Rights Offering, a promissory note with the principal amount of $400 million, issued by us to our Executive Chairman and Chief Executive Officer, Mr.

Duggan, matured and became due and we repaid the principal amounts and all outstanding accrued interest thereunder using a portion of the proceeds from the Rights Offering.

In conjunction with the significant change in our strategy and shift in focus to the therapeutic area of oncology, the Company is re-prioritizing its investments and financial resources towards the development of ivonescimab.

This could result in reduced investment in our infectious diseases programs, including, subject to local legal process and approvals, reducing research and development employee compensation-related costs and facility-related costs incurred with respect to our laboratory and office space.

Key Components of our Results of Operations

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These payments were initially reported as deferred revenue in the balance sheet and were recognized as revenue ratably over the determined 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 our 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.

There was no revenue recognized for the year ended December 31, 2023.

Revenue recognized during the year ended December 31, 2022 related to the upfront payment and the first two enrollment milestones earned in accordance with our 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.

This output method is, in management’s judgment, the best measure of progress towards satisfying the performance period.

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Other operating income includes income received and recognized from grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations.

In September 2017, we were 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 our Ri-CoDIFy clinical trials and clinical development of ridinilazole.

The awarded contract was originally worth up to $62.0 million.

In June 2019 and again in January 2020, BARDA increased the value of the contract such that it is now worth up to $72.5 million and brought the total amount of committed funding to $62.4 million.

In September 2017, we were awarded a 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, to fund, in part, the clinical and regulatory development of ridinilazole for the treatment of infections caused by C.

The contract provides for a cost-sharing arrangement under which BARDA funded a specified portion of estimated costs for the continued clinical and regulatory development of ridinilazole for CDI.

Under this cost sharing arrangement, we were responsible for a portion of the costs associated with each segment of work, including any costs in excess of the estimated amounts.

The awarded contract, as amended in 2019 and 2020, provided for total award up to $72.5 million, and total amount of committed funding to $62.4 million.

As of December 31, 2023, based on translation of historical foreign currency amounts in the period, the Company has recognized $59.2 million of cumulative income since contract inception.

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.

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Based on criteria established by His Majesty’s Revenue and Customs (“HMRC”), a portion of expenditures being carried out in relation to our pipeline research and development, clinical trials management and third-party manufacturing development activities are eligible for the SME regime and we expect such elements of research and development expenditure incurred in our UK entities will also continue to be eligible for the SME regime for future periods.

In May 2021, we 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.

In May 2021, we started development of a new preclinical candidate, SMT-738, for development in the fight against multi-drug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae (“CRE”) infections.

Simultaneously, we 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 $4.1 million with the possibility of up to another $3.7 million based on the achievement of future milestones.

The award committed initial funding of up to $4.1 million with the possibility of up to another $3.7 million based on the achievement of future milestones.

As of December 31, 2023, based on translation of historical foreign currency amounts in the period, $2.9 million of cumulative income has been recognized since contract inception.

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These include:

• costs incurred in conducting our preclinical studies and clinical trials through contract research organizations, including preclinical toxicology, pharmacology, formulation and manufacturing work;

• laboratory and vendor expenses incurred in relation to our preclinical and non-clinical studies;

• costs incurred in conducting our preclinical studies and clinical trials through contract research and development organizations, including, but not limited to, preclinical toxicology, pharmacology, formulation and manufacturing work, as well as regulatory, operational, drug supply and treatment costs related to conducting the study;

• laboratory and vendor expenses incurred in relation to our preclinical, non-clinical and clinical studies;

• costs incurred in supply chain development and scale up activities to support product registration;

• employee related expenses, which include salary, benefits and stock-based compensation, for our research and development staff;

• costs incurred in development and conduct of training and education related our development candidates;

• facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

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Other expense, net

Other expense, net primarily consists of foreign currency net gains and losses, cash and imputed interest expense incurred related to our promissory notes to related parties, investment income related to our money market fund and investments in highly liquid U.S.

treasury securities and interest income on restricted cash.

Other expense, net primarily consists of foreign currency net gains and losses, cash and imputed interest expense incurred related to our promissory notes to related parties and investment income related to investments in money market funds and U.S.

treasury securities.

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.

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Due to the nature of our business, we have generated losses since inception.

We have recorded a full valuation allowance against the deferred tax assets with respect to these tax losses in excess of our deferred tax liabilities in each jurisdiction because we do not consider it probable that there will be suitable taxable profits in the foreseeable future based on the evidence available against which to offset these losses.

Jumpstart Our Business Startups Act of 2021

As of January 1, 2021, we are no longer an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act.

Formerly, as an emerging growth company, we were able to take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies.

The last day of the fiscal year following the fifth anniversary of our initial public offering in March 2015 was December 31, 2020, hence we have ceased to be an emerging growth company.

We have recorded a full valuation allowance against the deferred tax assets with respect to these tax losses in excess of our deferred tax liabilities in each jurisdiction because we do not consider it more likely than not that there will be suitable taxable profits in the foreseeable future based on the evidence available against which to offset these losses.

Results of Operations

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Research and development 59.4 52.0 7.4

In-process research and development 520.9 — 520.9

General and administrative 30.3 26.7 3.6

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Net loss $ (614.9) $ (78.8) $ (536.1)

Revenue for the years ended December 31, 2022 and 2021 relates to revenue from our license and commercialization agreement with Eurofarma Laboratórios S.A ("Eurofarma").

This revenue was recognized ratably over the performance period the research and development services were provided.

The decrease for the year ended December 31, 2022 compared to the same period in the prior year is attributed to the achievement of a milestone related to this agreement in September of 2021.

The total milestone of $1.3 million was recognized ratably over the determined performance period the research and development service were provided.

Revenue for the year ended December 31, 2022 relates to revenue from our license and commercialization agreement with Eurofarma Laboratórios S.A.

for ridinilazole, the Company’s product candidate for treating patients suffering from Clostridioides difficile infection, also known as C.

difficile infection .

This revenue was recognized ratably over the determined performance period that the research and development services were provided.

The decrease for the year ended December 31, 2023 compared to the same period in the prior year is attributed to the total milestones received of $4.8 million being fully recognized ratably over the determined performance period, which ended during 2022.

We are currently not anticipating receipt of additional milestone payments under this agreement given Company’s determination that it would seek partners or a divestiture of ridinilazole as the path forward for the clinical development of the asset.

Operating Expenses

Research and Development Expenses

(in millions) Year Ended

December 31, 2022 December 31, 2021 $ Change

CDI program $ 25.3 $ 53.9 $ (28.6)

Antibiotic pipeline research and development costs 3.3 1.9 1.4

Other research and development expenses 23.4 29.6 (6.2)

Total $ 52.0 $ 85.4 $ (33.4)

Investment in our CDI program decreased by $28.6 million for the year ended December 31, 2022, compared to the same period in the prior year, primarily due to a decrease in clinical and manufacturing activity spend associated with the ridinilazole Phase III clinical program as a result of our decision to seek partners or a divestiture related to ridinilazole as the path forward for the clinical development of the asset.

Investment in our antibiotic pipeline development activities increased by $1.4 million for the year ended December 31, 2022, compared to the same period in the prior year, primarily due to increased development activity spend, specifically IND-enabling activities, associated with the development of our 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.

Other research and development expenses are comprised of the following:

The table below summarizes our research and development expenses by category for the year ended December 31, 2023 and 2022, respectively.

(in millions) Year Ended

December 31, 2023 December 31, 2022 $ Change

Compensation related costs $ 16.3 $ 19.4 $ (3.1)

Oncology $ 31.0 $ — $ 31.0

Anti-infectives (1.5) 28.6 (30.1)

Compensation related costs, excluding stock-based compensation 21.3 16.3 5.0

Stock-based compensation 4.4 4.3 0.1

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Total $ 59.4 $ 52.0 $ 7.4

Other research and development expenses decreased by $6.2 million for the year ended December 31, 2022, compared to the same period in the prior year, primarily due to a decrease of $3.1 million in compensation related costs, a decrease of $1.6 million in stock-based compensation due to a lower headcount as compared to the same period in the prior year, and recognition of a $1.3 million gain on the remeasurement of assumed contingent liabilities.

The entry into the License Agreement with Akeso, Inc., effective in January 2023, represents a significant change in our strategy from anti-infectives to the therapeutic area of oncology.

We have invested our resources in the clinical development of ivonescimab during the year ended December 31, 2023.

Oncology expenses represent our investment in the clinical development of ivonescimab, known as SMT112 in the United States, Canada, Europe, and Japan.

On May 3, 2023 we announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer (“NSCLC”) and on May 9, 2023, we announced that the first United States-based patient had been enrolled in the Phase III HARMONi study.

We have commenced enrollment in our second Phase III HARMONi-3 clinical trial.

We are continuing to focus our efforts on patient enrollment in both the Phase III HARMONi and Phase III HARMONi-3 studies.

With this shift in focus from anti-infectives to oncology, total research and development expenses increased by $7.4 million during the year ended December 31, 2023, compared to the same period in the prior year, primarily due to our investment in oncology expenses of $31.0 million, and an increase in compensation related expenses of $5.0 million to support the clinical development of ivonescimab as we hire experts in the oncology field, partially offset by a decrease of $30.1 million related to discontinuing the development activities related to ridinilazole and SMT-738.

We expect oncology-related research and development costs to continue to increase as we progress with the development of ivonescimab.

The Company recorded a net benefit related to its anti-infectives programs during the year ended December 31, 2023 due to completing financial close-out activities with the lead contract research organization for our ridinilazole clinical trials, thus resulting in a true-up of the estimated anti-infectives research and development expenses during the second quarter of 2023.

In-process research and development

The table below summarizes our in-process research and development expenses by category for the year ended December 31, 2023 and 2022, respectively.

(in millions) 2023 2022

Upfront milestone payments $ 520.8 $ —

Direct transaction costs 0.1 —

Total $ 520.9 $ —

Our investment in ivonescimab totaled $520.9 million for the year ended December 31, 2023 and primarily relates to our upfront milestone payments pursuant to the License Agreement with Akeso.

The License Agreement was executed in January 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 our common stock in lieu of $25.1 million cash and was paid $274.9 million in cash as the initial upfront payment.

The remaining $200.0 million upfront payment was paid on March 6, 2023.

In-process research and development expense comprised of the $474.9 million paid in cash, the fair value of the 10 million shares of common stock on the date of closing the transaction of $45.9 million, and $0.1 million of direct transactions costs incurred.

General and Administrative Expenses

The table below summarizes our general and administrative expenses by category for the year ended December 31, 2023 and 2022, respectively.

(in millions) Year Ended

December 31, 2023 December 31, 2022 $ Change

Compensation related costs $ 11.5 $ 9.7 $ 1.8

Compensation related costs, excluding stock-based compensation $ 10.1 $ 9.7 $ 0.4

Stock-based compensation 9.7 7.6 2.1

Legal and professional fees 3.7 2.6 1.1

Legal fees and professional services (1)

Other general and administrative expenses 3.6 3.9 (0.3)

Total $ 30.3 $ 26.7 $ 3.6

General and administrative expenses increased by $3.1 million, compared to the same period in the prior year, primarily due to an increase of $1.8 million in compensation related costs and an increase of $0.7 million in stock-based compensation as the Company is focused on building our executive management team to support the growth of the Company, and an increase of $1.1 million in legal and professional fees to support our financings and business development efforts during the year.

General and administrative expenses increased by $3.6 million for the year ended December 31, 2023, compared to the same period in the prior year, primarily due to an increase of $2.1 million in stock-based compensation as the Company is focused on building its executive management team to continue supporting the growth of the Company, and an increase of $1.4 million in legal and professional services related to corporate projects and transactions.

We expect general and administrative expenses to continue to increase in the coming quarters as we scale our infrastructure and management to support development of ivonescimab.

(1) Note management has updated this category to include general and administrative consulting expenses and has reclassified these expenses in the prior period for consistency.

Expenses of $1.8 million for the year ended December 31, 2022, were previously recorded in compensation related costs.

Impairment of Intangible Assets

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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 amount of the intangible asset.

Management also concluded that this indicated the carrying amount of the acquired Discuva Platform intangible asset may not be recoverable and performed an assessment to calculate the fair value of the asset using a probability-weighted approach which was compared to the carrying value of the asset.

An impairment charge of $8.5 million which represented the carrying value of the Discuva Platform was recognized for the year ended December 31, 2022.

This impairment charge is presented as impairment of intangible assets in the consolidated statements of operations and comprehensive loss.

Other Operating Income

Other operating income is comprised of the following:

The table below summarizes our other operating income by category for the year ended December 31, 2023 and 2022, respectively:

(in millions) Year Ended

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Total $ 1.0 $ 14.4 $ (13.4)

Funding income from BARDA increased by $3.5 million for the year ended December 31, 2022, compared to the same period in the prior year, primarily due to the accrual of the remaining clinical trial costs associated with ridinilazole as a result of our decision to seek partners or a divestiture related to ridinilazole as the path forward for the clinical development of the asset.

The recognition of the remaining clinical trial costs resulted in the acceleration of deferred other income for costs that had been billed and collected from BARDA prior to the expense being recognized.

research and development tax credits decreased by $10.7 million for the year ended December 31, 2022, compared to the same period in the prior year, due to a decrease in clinical and manufacturing activity spend associated with the ridinilazole Phase III clinical program, which was ceased during the third quarter of 2022, and resulted in a decrease in tax credits claimed, coupled with a decrease in eligible expenses claimed due to recent changes in tax legislation.

Grant income received from CARB-X increased by $0.6 million for the year ended December 31, 2022, compared to the same period in the prior year due to an increase in spend to progress the preclinical candidate SMT-738 from the DDS-04 series for development in the fight against multidrug resistant infections, specifically CRE infections.

Other Expense, Net

Other expense, net is comprised of the following:

Funding income from BARDA decreased by $8.1 million for the year ended December 31, 2023, compared to the same periods in the prior year, due to management’s decision to terminate all prior development and marketing activities related to ridinilazole.

research and development tax credits decreased by $3.5 million for the year ended December 31, 2023, compared to the same period in the prior year, due to a decrease in clinical and manufacturing activity spend associated with the ridinilazole Phase III clinical program, which resulted in a decrease in tax credits claimed in the U.K., coupled with a decrease in eligible expenses claimed due to recent changes in U.K.

tax legislation.

Grant income received from CARB-X decreased by $1.8 million for the year ended December 31, 2023, compared to the same period in the prior year due to the CARB-X arrangement for our preclinical candidate SMT-738 concluding in 2022.

We do not expect further income under this arrangement.

Other (Expense) Income, Net

The table below summarizes our other income (expense), net by category for the year ended December 31, 2023 and 2022, respectively.

(in millions) Year Ended

December 31, 2023 December 31, 2022 $ Change

Foreign currency loss $ (4.1) $ (2.1) $ (2.0)

Foreign currency gains (losses)

$ 0.6 $ (4.1) $ 4.7

Interest expense on promissory notes payable to related parties (16.5) (4.4) (12.1)

Investment income 1.5 — 1.5

Other income (expense), net 0.3 (0.1) 0.4

Interest income 10.5 1.5 9.0

Reclassification of cumulative currency translation gain 0.4 — 0.4

Other expense (0.3) 0.3 (0.6)

Total $ (5.3) $ (6.7) $ 1.4

Other expense, net primarily increased by $4.3 million for the year ended December 31, 2022, compared to the same period in the prior year, due to unfavorable changes in foreign currency of $2.0 million, increase in loan interest expense of $4.2 million related to the $25.0 million and $520.0 million promissory notes issued to related parties during the year (as described below), partially offset by $1.5 million of investment income related to increased balances and yields in our money-market fund and highly liquid U.S.

government treasury securities.

Other (expense) income, net primarily decreased by $1.4 million for the year ended December 31, 2023, compared to the same period in the prior year, primarily due to favorable changes in foreign currency gains of $4.7 million, an increase of $9.0 million in interest income related to investments in money market funds and U.S.

government securities, and an increase of $0.4 million related to the reclassification of cumulative foreign currency translation gains from accumulated other comprehensive loss due to the dissolution of certain dormant entities, partially offset by an increase of $12.1 million in interest expense on promissory notes to related parties, where amounts recognized in 2023 related to the $520 million promissory notes issued to our Chief Executive Officers.

Liquidity and Capital Resources

Sources of Liquidity

To date, we have financed our operations primarily through issuances of our common stock, payments to us under license, collaboration, and commercialization arrangements, for example, our license and commercialization agreement with Eurofarma Laboratórios SA, or Eurofarma, and development funding and other assistance from government entities, philanthropic, non-government and not-for-profit organizations for our product candidates.

To date, we have financed our operations primarily through issuances of our common stock, issuance of debt, receipt of payments to us under license, collaboration, and commercialization arrangements, for example, our license and commercialization agreement with Eurofarma Laboratórios SA, or Eurofarma, development funding and other assistance from government entities, philanthropic, non-government and not-for-profit organizations for our product candidates.

In particular, we have received funding from BARDA, CARB-X, Innovate UK, Wellcome Trust and a number of not-for-profit organizations.

On March 24, 2021, pursuant to an unsecured promissory note we received net proceeds of $55.0 million.

Such note was later repaid without interest or penalty, rescinded and replaced by a new note on April 20, 2021, pursuant to a second unsecured promissory note we received net proceeds of $55.0 million.

Subsequently, on May 12, 2021, we received proceeds of $75.0 million in the aggregate from the sale of 14,312,976 shares of Common Stock at a price per share of $5.24 from our 2021 rights offering ("2021 Rights Offering), the proceeds of which were used in part to repay amounts outstanding on the second unsecured promissory note.

On March 10, 2022, we received net proceeds of $25.0 million from the issuance of an unsecured promissory notes.

On August 8, 2022, we received net proceeds of $99.9 million from the sale of 103,092,783 share of Common Stock at a price of $0.97 per share from our 2021 Rights Offering, the proceeds of which were used in part to repay amounts outstanding on the March 2022 Note.

On December 6, 2022, the Company entered into a 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 million.

Pursuant to the Note Purchase Agreement, the Company issued to Mr.

Duggan and Dr.

Zanganeh the unsecured Duggan February Note in the amount of $400 million and $20 million Zanganeh Note, respectively, which would mature and become due on February 15, 2023 and an unsecured Duggan September Note to Mr.

Duggan in the amount of $100 million, 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 million (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 “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 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, 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 $.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.

On February 15, 2023, the $20 million Zanganeh Note matured and the Company repaid the outstanding principal balance.

In connection with the closing of the Rights Offering, the $400 million 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.

Following the repayment of this note, only the $100 million Duggan September Note remains outstanding.

We have devoted substantially all of our efforts to research and development, including clinical trials.

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During the year ended December 31, 2023, we incurred a net loss of $614.9 million, and cash flows used in operating activities was $76.8 million.

As of December 31, 2022 we had an accumulated deficit of $378.3 million, cash and cash equivalents of $348.6 million, restricted cash of $300.0 million, research and development tax credits of $5.8 million and accounts receivable of $0.3 million.

These losses could continue for the next several years as we invest in clinical development of ivonescimab.

We believe that our financial resources as of December 31, 2022, after considering the payments made to Akeso in January and March 2023 totaling $474.9 million, the net proceeds of $499.5 million 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 totaling $420 million, will fund our operating costs and working capital needs for our planned clinical trials for ivonescimab into the second half of 2024.

As of December 31, 2023 we had an accumulated deficit of $993.3 million, cash and cash equivalents and short-term investments in U.S.

treasury securities of $186.2 million.

We expect to continue to generate operating losses for the foreseeable future.

We have evaluated whether our cash, cash equivalents, short-term investments and U.K.

research and development tax credits provide sufficient cash to fund our operating cash needs for the next twelve months from the date of issuance of these annual financials.

We are investing in the clinical development of ivonescimab, including our ongoing clinical trials.

In addition, we have a $100 million promissory note payable to a related party (refer to Note 18 in the consolidated financials included in this Annual Report further details) that matures on April 1, 2025.

Based upon our cash and cash equivalents and short-term investments as of December 31, 2023, we expect to be able to operate into the first quarter of 2025.

In order to further fund our operating cash needs and repay this promissory note, we intend to raise additional capital.

As of the date of the issuance of these financial statements the additional capital has not been secured.

As a result, these conditions raise substantial doubt about our ability to continue as a going concern.

In addition to the payments already made to Akeso, under the License Agreement there are additional potential milestone payments of $4.5 billion, as Akeso will be eligible to receive regulatory milestones of up to $1.05 billion and commercial milestones of up to $3.45 billion.

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• the costs, timing and outcome of clinical trials required for clinical development of ivonescimab;

• the costs, timing and outcome of activities related to development, validation, manufacturing and establishment of supply chain for ivonescimab;

• the number and development requirements of other future product candidates that we pursue;

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To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends or other distributions.

Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as

incurring additional debt, making capital expenditures or declaring dividends or other distributions.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

The following table summarizes the results of our cash flows for the years ended December 31, 2023 and 2022.

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Operating Activities

Net cash used in operating activities for the year ended December 31, 2022 was $41.6 million and resulted from a net loss of $78.8 million, which included non-cash charges of $37.2 million, which is primarily comprised of $11.9 million of stock-based compensation, $8.5 million impairment charge, $4.3 million non-cash interest expense, $2.5 million of amortization and depreciation charges, $2.6 million unrealized foreign exchange loss and a $8.6 million net decrease in working capital.

The net decrease in working capital was primarily due to a $8.4 million decrease in the research and development tax credit receivable, a $4.8 million increase in accrued liabilities and accrued compensation, a $5.1 million decrease in prepaid expenses, partially offset by a $7.3 million decrease in deferred revenue and other income and a $4.1 million decrease in accounts payable.

Net cash used in operating activities for the year ended December 31, 2021 was $72.6 million and resulted from a net loss of $88.6 million, which included non-cash charges of $16.1 million, which is primarily comprised of $12.8 million of stock-based compensation, and a $0.1 million net increase in working capital.

The net increase in working capital was primarily due to a $6.0 million increase in the research and development tax credit receivable, a $1.7 million decrease in accounts payable, a $1.1 million increase in accounts receivable, a $1.1 million decrease in lease liabilities and a $0.8 million decrease in deferred revenue, partially offset by a $8.2 million increase in accrued liabilities and accrued compensation and a $2.3 million decrease in prepaid expenses.

Net cash used in operating activities for the year ended December 31, 2023 was $76.8 million and resulted from a net loss of $614.9 million, which included an adjustment of $475.0 million in cash payments related to investing activities for the purchase of in-process research and development from Akeso under the terms of the License Agreement and the associated direct transaction costs and non-cash charges of $65.5 million and a net increase in working capital of $2.4 million.

Non-cash charges primarily include a $45.9 million expense for the issuance of shares in lieu of cash for the Akeso upfront payment, $14.1 million of stock-based compensation, $6.3 million related to non-cash interest expense, $1.9 million related to amortization of right-of-use assets, and a $0.5 million impairment charge, partially offset by $1.9 million related to amortization of discount on short-term investments and $0.8 million in a net unrealized foreign exchange gain.

The net increase in working capital is primarily due to a $3.7 million increase in other long-term assets, a $2.4 million decrease in accrued liabilities, and a $2.2 million decrease in lease liabilities , partially offset by a $4.2 million decrease in the research and development tax credit receivable and a $2.3 million increase in accounts payable.

Net cash used in operating activities for the year ended December 31, 2022 was $41.6 million and resulted from a net loss of $78.8 million, which included non-cash charges of $28.6 million and a $8.6 million net decrease in working capital.

Non-cash charges primarily include $11.9 million of stock-based compensation, a $8.5 million impairment charge, $4.3 million related to non-cash interest expense, a $2.6 million unrealized foreign currency exchange loss, and $1.3 million in amortization of right-of-use assets, partially offset by a $1.3 million gain on remeasurement of an assumed contingent liability.

The net decrease in working capital primarily includes an $8.4 million decrease in research and development tax credit receivable, a $5.1 million decrease in prepaid expenses, a $4.8 million increase in accrued liabilities, and a $1.6 million increase in accrued compensation, partially offset by a $7.3 million decrease in deferred revenue and income, a $4.1 million decrease in accounts payable, and a $1.1 million decrease in lease liabilities.

Investing Activities

Net cash used in investing activities for the years ended December 31, 2022 and 2021of $0.6 million and $0.3 million, respectively, was for the purchase of property and equipment.

Net cash used in investing activities for the years ended December 31, 2023 was $587.8 million and was primarily due to $475.0 million of cash payments made to Akeso pursuant to the License Agreement and $112.9 million of net purchases of short-term investments.

Net cash used in investing activities for the year ended December 31, 2022 was for the purchase of property and equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 was $86.5 million and was primarily due to net proceeds received of $104.1 million (net of paid issuance costs) related to the issuance of common stock from the 2023 Rights Offering and net of the extinguishment of $395.3 million of principal and accrued interest due and payable by us under

the $400 million Duggan Promissory Note in satisfaction of the subscription price for the shares subscribed by Mr.

Duggan in the 2023 Rights Offering, $5.0 million received for the issuance of common stock via a private placement to a related party, and $1.2 million received for the exercise of stock option warrants, partially offset by the repayment of $24.7 million related to promissory notes from related parties.

Net cash provided by financing activities for the year ended December 31, 2022 was $620.2 million and primarily resulted from net proceeds of $99.9 million from the rights offering in August 2022, proceeds from promissory notes from related parties of $545.0 million, partially offset by the repayment of a promissory note from a related party of $25.0 million and $0.4 million of net proceeds from the exercise of stock options.

Net cash provided by financing activities for the year ended December 31, 2021, was $77.9 million and primarily resulted from net proceeds of $74.8 million from the rights offering in May 2021, proceeds from the promissory notes from a related party of $110.0 million, partially offset by repayments of the promissory notes from a related party of $110.0 million and $3.1 million of net proceeds received from the exercise of stock options.

Contractual Obligations and Commitments

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Operating lease obligations $6.6 $2.8 $3.8 $ — $ —

The table above does not include the lease agreement signed by the Company on January 8, 2024 for executive office space for its new headquarters in Miami, Florida.

The office space is approximately 9,000 square feet.

The term of the lease is 64 months.

Total payments for this office space is approximately $5.1 million over the term of the lease.

The table above excludes payments related to the lease signed in January 2024.

Debt commitments

December 2022 Promissory Notes

On December 6, 2022, we entered into the Note Purchase Agreement, with Mr.

Duggan and Dr.

Zanganeh, pursuant to which we agreed to sell to each of Mr.

On December 6, 2022, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”), with Mr.

Robert Duggan and Dr.

Maky 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 million.

Pursuant to the Note Purchase Agreement, we issued to Mr.

Pursuant to the Note Purchase Agreement, the Company issued to Mr.

Duggan and Dr.

Zanganeh the Duggan February Note and the Zanganeh Note, respectively, which would mature and become due on February 15, 2023 and the Duggan September Note to Mr.

Duggan, which will mature and become due on September 15, 2023.

On January 19, 2023, we 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, we and Mr.

Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent regarding prepayment terms.

Please see "Liquidity and Capital Resources-Sources of Liquidity" section for further details of the Company's debt commitments.

On February 15, 2023, the $20 million Zanganeh Note matured and the Company repaid the outstanding principal balance.

Zanganeh unsecured promissory notes in the amount of $400 million (the “Duggan February Note”) and $20 million (the “Zanganeh Note”), respectively, which matured and became due on February 15, 2023 and an unsecured promissory note to Mr.

Duggan in the amount of $100 million (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which was originally due on September 15, 2023.

The maturity dates of the December 2022 Notes could have been 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 consummates 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 million (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) the Duggan September Note following the completion of a capital raising transaction subsequent to the Rights Offering in an amount equal to the lesser of (A) the net proceeds of such capital raise or (B) 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 $.01), which was 9,720,291 shares.

For all applicable periods following 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.

On February 15, 2023, the $20 million Zanganeh Note matured and we repaid the outstanding principal balance.

In connection with the closing of the Rights Offering, the $400 million Duggan Promissory Note matured and became due, and we repaid all principal and accrued interest thereunder using a portion of the proceeds from the Rights Offering.

On February 17, 2024 the Duggan February Note was amended to extend the maturity date from September 6, 2024 to April 1, 2025.

For all applicable periods commencing February 17, 2024, interest shall accrue on the outstanding principal balance at the greater of 12% or the US prime interest rate, as reported in the Wall Street Journal plus 350 basis points, as adjusted monthly, compounded quarterly.

Interest shall be paid upon maturity of the loan.

The estimated future principal payments are $0 and $100,000,000 for 2024 and 2025, respectively, as the note matures on April 1, 2025.

Other commitments

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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 $11.5 million and the majority of these commitments are due within one year.

As of December 31, 2023, total contractual commitments, excluding leases commitments and debt commitments, are estimated to be approximately $37.7 million and the majority of these commitments are due within one year.

Subsequent to December 31, 2023 through February 9, 2024, the Company entered into additional contractual commitments of approximately $23.0 million with various third parties related to our clinical trials.

We have certain commitments under our agreements with Akeso, Wellcome Trust, the University College London and certain employees, former employees and former directors of Discuva, pursuant to which we will be required to pay royalties or make milestone payments.

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, intangible assets, accrued research and development expenses, stock-based compensation and income taxes.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, stock-based compensation and income taxes.

We base our estimates on historical experience, known trends and events, and various other factors that we believe 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.

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We believe the following critical accounting policies affect the most significant judgments, assumptions and estimates we use in preparing the consolidated financial statements:

Revenue Recognition

The Company accounts for revenue using Accounting Standards Codification ("ASC") 606 ("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.

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 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.

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.

Intangible Assets

Intangible assets are estimated by management based on the fair value of assets acquired.

These include acquired technology, patents, licenses, an option over non-financial assets and a research and development discovery platform ("Discuva Platform").

Intangible assets are amortized from one to eighteen 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 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 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.

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.

Acquired In-Process Research and Development

The Company may enter into agreements with collaboration partners for the development and commercialization of its products.

These arrangements may include payments contingent on the occurrence of certain events such as development, regulatory or sales-based milestones.

The Company considers the unique nature, terms and facts and circumstances of each transaction.

The Company considers whether or not the assets acquired have a future alternative use.

The fair value associated with acquired in-process research and development which does not have an alternative future use is expensed and is recorded as research and development expense.

Any development or commercial milestone payments are recognized when the achievement of the associated milestone becomes probable and will either be expensed or capitalized depending upon whether or not regulatory approval has been obtained.

Research and Development Costs

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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, 2023 and 2022, the Company had unrecognized tax positions of $1.1 million and nil, respectively.

Due to the Company’s full valuation allowance, the unrecognized tax benefits would not materially impact the Company’s effective tax rate when recognized.

The Company does not anticipate the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as part of its income tax provision.

For the years ended December 31, 2023 and 2022, the Company had no interest or penalties related to unrecognized tax benefits.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis