Item 1. Financial Statements
Item 1. Financial Statements.
Summit Therapeutics Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
June 30, 2024 December 31, 2023
Assets
Current assets:
Cash and cash equivalents $ 28,434 $ 71,425
Restricted cash 320 —
Short-term investments 297,035 114,817
Prepaid expenses and other current assets
2,052 2,622
Research and development tax credit receivable 953 848
Total current assets 328,794 189,712
Non-current assets:
Property and equipment, net 223 204
Right-of-use assets 8,716 5,859
Goodwill 1,880 1,893
Research and development tax credit receivable 364 959
Other assets 1,879 4,322
Total assets $ 341,856 $ 202,949
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,340 $ 2,667
Accrued liabilities
12,457 8,783
Accrued compensation 4,877 5,429
Accrued acquired in-process research and development
15,000 —
Lease liabilities 3,688 2,809
Other current liabilities 806 717
Promissory note payable to a related party 100,000 —
Total current liabilities 140,168 20,405
Non-current liabilities:
Lease liabilities, net of current portion 5,017 3,290
Other non-current liabilities 1,596 1,562
Promissory note payable to a related party — 100,000
Total liabilities 146,781 125,257
Commitments and contingencies (Note 18)
Stockholders' equity:
Preferred stock, $ 0.01 par value, 20,000,000 shares authorized; none issued and outstanding at June 30, 2024 and December 31, 2023, respectively
— —
Common stock, $ 0.01 par value: 1,000,000,000 shares authorized; 724,320,201 and 701,660,053 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
7,243 7,017
Additional paid-in capital 1,287,447 1,066,381
Accumulated other comprehensive loss ( 2,499 ) ( 2,448 )
Accumulated deficit ( 1,097,116 ) ( 993,258 )
Total stockholders' equity 195,075 77,692
Total liabilities and stockholders' equity $ 341,856 $ 202,949
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Summit Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended
June 30, Six Months Ended
June 30,
2024 2023 2024 2023
Operating expenses:
Research and development $ 30,798 $ 9,451 $ 61,671 $ 19,334
Acquired in process research and development 15,007 — 15,007 520,915
General and administrative 13,971 6,316 25,700 13,256
Total operating expenses 59,776 15,767 102,378 553,505
Other operating income (expense), net
159 ( 27 ) 372 557
Operating loss ( 59,617 ) ( 15,794 ) ( 102,006 ) ( 552,948 )
Other (expense) income, net
( 768 ) 1,077 ( 1,852 ) ( 4,145 )
Net loss $ ( 60,385 ) $ ( 14,717 ) $ ( 103,858 ) $ ( 557,093 )
Net loss per share:
Basic and diluted $ ( 0.09 ) $ ( 0.02 ) $ ( 0.15 ) $ ( 1.03 )
Weighted-average shares used to compute net loss per share:
Basic and diluted 707,904,643 697,685,365 704,844,946 538,807,328
Comprehensive loss:
Net loss $ ( 60,385 ) $ ( 14,717 ) $ ( 103,858 ) $ ( 557,093 )
Other comprehensive (loss) income:
Foreign currency translation adjustments 92 ( 76 ) 82 ( 128 )
Reclassification of cumulative currency translation gain to other expense, net — — — ( 419 )
Reclassification of unrealized loss on investments to other expense, net
3 — 3 —
Net changes related to short-term investments ( 45 ) ( 965 ) ( 34 ) 3
Comprehensive loss $ ( 60,335 ) $ ( 15,758 ) $ ( 103,807 ) $ ( 557,637 )
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Summit Therapeutics Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(Unaudited)
Three Months Ended June 30, 2024
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance at March 31, 2024 701,974,596 $ 7,020 $ 1,076,370 $ ( 2,449 ) $ ( 1,036,731 ) $ 44,210
Private placement of common stock 22,222,222 222 199,778 — — 200,000
Issuance of common stock under stock purchase plans and exercise of stock options and warrants 123,383 1 211 — — 212
Stock-based compensation — — 11,088 — — 11,088
Net other comprehensive loss — — — ( 50 ) — ( 50 )
Net loss — — — — ( 60,385 ) ( 60,385 )
Balance at June 30, 2024
724,320,201 $ 7,243 $ 1,287,447 $ ( 2,499 ) $ ( 1,097,116 ) $ 195,075
Six Months Ended June 30, 2024
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance at December 31, 2023
701,660,053 $ 7,017 $ 1,066,381 $ ( 2,448 ) $ ( 993,258 ) $ 77,692
Private placement of common stock 22,222,222 222 199,778 — — 200,000
Issuance of common stock under stock purchase plans and exercise of stock options and warrants 437,926 4 693 — — 697
Stock-based compensation — — 20,595 — — 20,595
Net other comprehensive loss — — — ( 51 ) — ( 51 )
Net loss — — — — ( 103,858 ) ( 103,858 )
Balance at June 30, 2024 724,320,201 $ 7,243 $ 1,287,447 $ ( 2,499 ) $ ( 1,097,116 ) $ 195,075
Three Months Ended June 30, 2023
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance at March 31, 2023 697,685,365 $ 6,976 $ 1,048,608 $ ( 1,396 ) $ ( 920,706 ) $ 133,482
Stock-based compensation — — 1,875 — — 1,875
Net changes related to short-term investments — — — ( 965 ) — ( 965 )
Foreign currency translation adjustment — — — ( 76 ) — ( 76 )
Net loss — — — — ( 14,717 ) ( 14,717 )
Balance at June 30, 2023 697,685,365 $ 6,976 $ 1,050,483 $ ( 2,437 ) $ ( 935,423 ) $ 119,599
Six Months Ended June 30, 2023
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity
Shares Amount
Balance at December 31, 2022 211,091,425 $ 2,110 $ 504,767 $ ( 1,893 ) $ ( 378,330 ) $ 126,654
Rights offering of common stock, net of offering costs of $ 619
476,190,471 4,762 494,619 — — 499,381
Issuance of common stock under stock purchase plans and exercise of stock options 403,469 4 647 — — 651
Issuance of common stock in lieu of cash for Akeso upfront payment 10,000,000 100 45,800 — — 45,900
Stock-based compensation — — 4,650 — — 4,650
Net changes related to short-term investments — — — 3 — 3
Reclassification of cumulative translation gain (Note 8)
— — — ( 419 ) — ( 419 )
Foreign currency translation adjustment — — — ( 128 ) — ( 128 )
Net loss — — — — ( 557,093 ) ( 557,093 )
Balance at June 30, 2023
697,685,365 $ 6,976 $ 1,050,483 $ ( 2,437 ) $ ( 935,423 ) $ 119,599
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Summit Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
June 30,
2024 2023
Cash flows from operating activities:
Net loss $ ( 103,858 ) $ ( 557,093 )
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense — 6,087
Amortization of discount on short-term investments ( 2,007 ) ( 2,901 )
Unrealized foreign exchange (gain) ( 115 ) ( 864 )
Reclassification of currency translation gain — ( 419 )
Impairment of fixed assets — 474
Depreciation 47 136
Gain on disposal of assets — ( 122 )
Stock-based compensation 20,595 4,650
Acquired in-process research and development expense
15,000 520,915
Change in operating assets and liabilities:
Accounts receivable — 356
Prepaid expenses 753 ( 4,565 )
Other current and long-term assets 2,256 ( 923 )
Research and development tax credit receivable 478 897
Accounts payable 674 605
Accrued liabilities 3,798 ( 7,528 )
Other long-term liabilities
46 —
Accrued compensation ( 551 ) ( 2,135 )
Operating lease right-of-use assets and lease liabilities, net
( 252 ) 26
Net cash used in operating activities ( 63,136 ) ( 42,404 )
Cash flows from investing activities:
Purchases of property and equipment ( 67 ) ( 73 )
Proceeds from sale of property. plant and equipment — 226
Purchase of short-term investments ( 362,995 ) ( 208,165 )
Maturities and sales of short-term investments 182,854 38,171
Payments to Akeso for upfront milestone payments and associated
direct transaction costs — ( 475,015 )
Net cash used in investing activities
( 180,208 ) ( 644,856 )
Cash flows from financing activities:
Proceeds from the issuance of common stock for rights offering — 104,686
Transaction costs related to the issuance of common stock for rights offering — ( 619 )
Proceeds from the issuance of common stock via private placement 200,000 —
Repayment of related party promissory notes
— ( 24,686 )
Proceeds received related to the exercise of warrants
101 —
Proceeds received related to employee stock awards 596 651
Net cash provided by financing activities 200,697 80,032
Effect of exchange rate changes on cash ( 24 ) 737
Decrease in cash and cash equivalents
( 42,671 ) ( 606,491 )
Cash, cash equivalents and restricted cash at beginning of period
71,425 648,607
Cash, cash equivalents and restricted cash at end of period
$ 28,754 $ 42,116
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest on related party promissory notes $ 1,501 $ 4,794
Cash paid for income taxes $ — $ 52
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Consideration for the issuance of common stock for rights offering used to satisfy a portion of a related party promissory note (Note 14)
$ — $ 395,314
Upfront consideration to Akeso for Second Amendment (Note 7)
$ 15,000 $ —
Issuance of common stock pursuant to the Akeso License Agreement (Note 7)
$ — $ 45,900
Lease assets obtained in exchange for operating lease liabilities $ 4,216 $ 4,245
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
1. Nature of Business and Operations
Nature of Business and Operations
Summit Therapeutics Inc. (“we”, “Summit” or 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 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, the Company entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which the Company has in-licensed ivonescimab as further described in Note 7 . Through the License Agreement, the Company obtained the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, Japan, and through the subsequent amendment with Akeso signed on June 3, 2024, expanded the Company's licensed territories to include the Latin America, Middle East and Africa regions (collectively, and as expanded, the “Licensed Territory”). The License Agreement and transaction closed in January 2023 following customary waiting periods. The Company’s operations are focused on the development of ivonescimab and other future activities, as the Company determines.
The Company has begun its 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”); and
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 represented a significant change in the Company’s strategy and its future operations are focused on the development of ivonescimab and other future activities as the Company determines. The Company’s portfolio also includes ridinilazole, a product candidate for treating patients suffering from Clostridioides difficile infection, also known as C. difficile infection, or CDI, and SMT-738, the first of a novel class of precision antibiotics for combating multidrug resistant infections, specifically carbapenem-resistant Enterobacteriaceae (“CRE”) infections. All prior development activities related to ridinilazole and SMT-738 have been terminated; the Company will continue to pursue partnerships for both assets.
2. Basis of Presentation and Use of Estimates
Basis of Presentation
The accompanying unaudited condensed 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 SEC. Accordingly, certain information and disclosures required by U.S. GAAP for complete consolidated financial statements are not included herein. All intercompany accounts and transactions have been eliminated in consolidation. The interim financial data as of June 30, 2024 and for the three and six months ended June 30, 2024 are unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The condensed consolidated balance sheet presented as of December 31, 2023 has been derived from the consolidated audited financial statement as of that date. The results of the period are not necessarily indicative of full year results or any other interim period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 20, 2024. The financial results of the Company's activities are reported in United States Dollars.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Use of Estimates
The preparation of these unaudited condensed consolidated 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 unaudited condensed consolidated 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 accrued research and development expenses, stock-based compensation, 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.
3. Summary of Significant Accounting Policies and Recently Issued or Adopted Accounting Pronouncements
Summary of Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements for the six months ended June 30, 2024 are consistent with those discussed in Note 4 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, except as updated below:
Marketable Securities
Marketable securities consist of investments with original maturities greater than ninety days from the date of acquisition. The Company classifies investments with maturities of greater than 90 days as short-term, based on the liquid nature of the securities and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments as available-for-sale. Accordingly, these investments are recorded at fair value, which is based on quoted market prices or other observable inputs. Unrealized gains and losses are recorded as a component of other comprehensive income (loss). Realized gains and losses are determined on a specific identification basis and are included in other (expense) income. Amortization and accretion of discounts and premiums are also recorded in other (expense) income.
When the fair value is below the amortized cost of the asset, an estimate of expected credit losses is made. This estimate is limited to the amount by which fair value is less than amortized cost. The credit-related impairment amount is recognized in the condensed consolidated statements of operations and comprehensive loss and the remaining impairment amount and unrealized gains are reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. Credit losses are recognized through the use of an allowance for credit losses account and subsequent improvements in expected credit losses are recognized as a reversal of the allowance account. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis the allowance for credit loss is written off and the excess of the amortized cost basis of the asset over its fair value is recorded in the condensed consolidated statements of operations and comprehensive loss.
Recently Issued or Adopted Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update ("ASU 2023-07"), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to provide more disaggregated expense information about a public entity’s reportable segments. The amendments in this update should be applied retrospectively and are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently assessing the impact of the adoption of this guidance on its financial statements and disclosures.
4. Liquidity and Capital Resources
During the three and six months ended June 30, 2024, the Company incurred a net loss of $ 60,385 and $ 103,858 , respectively, and cash flows used in operating activities for the six months ended June 30, 2024 was $ 63,136 . As of June 30, 2024, the Company had an accumulated deficit of $ 1,097,116 , cash and cash equivalents of $ 28,434 , short-term investments in U.S. treasury securities of $ 297,035 and current and long-term U.K. research and development tax credits receivable of $ 1,317 . The Company expects to continue to generate operating losses for the foreseeable future.
9
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The Company has evaluated whether its cash, cash equivalents, short-term investments, and U.K. research and development tax credits provide sufficient cash to fund its operating cash needs for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company is investing in the clinical development of ivonescimab, including its ongoing clinical trials. In addition, the Company has a $ 100,000 promissory note and interest payable to a related party (refer to Note 14 for further details) that matures on April 1, 2025. Based upon the Company’s cash, cash equivalents and short term investments as of June 30, 2024 and after factoring in the repayment of the $ 100,000 promissory note, the Company has capital resources to fund its operating plan for approximately 12 months from the date of issuance of these condensed consolidated financial statements, however, the Company will need to raise additional equity or debt capital to further fund its operating cash needs for the period shortly after approximately 12 months from the date of issuance of these condensed consolidated financial statements. As of the date of issuance of these condensed consolidated financial statements, additional capital has not yet been secured. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
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. 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 condensed 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 condensed 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.
5. Segment Reporting
The Company's chief operating decision makers (the "CODM function"), which are the Company's 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). As the Company operates as one operating segment, all required financial segment information can be found in these condensed 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:
June 30, 2024 December 31, 2023
United Kingdom $ 684 $ 808
United States (1)
8,255 5,254
$ 8,939 $ 6,062
(1) The increase in long-lived assets as of June 30, 2024 as compared to December 31, 2023, is primarily due to $ 3,937 of net right-of use assets recorded as a result of the Company entering into a new lease agreement for its Miami, FL headquarters, partially offset by $ 1,234 of amortization expense for right-of-use assets relating to lease agreements for its office space in Menlo Park, CA.
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Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
6. Other Operating Income (Loss), net
The following table sets forth the components of other operating income, net by category:
Three Months Ended
June 30, Six Months Ended
June 30,
Other operating income (loss), net by category:
2024 2023 2024 2023
Research and development tax credits $ 159 $ ( 39 ) $ 372 $ 503
Grant income from CARB-X (as defined below) — 11 — 45
Other income — 1 — 9
$ 159 $ ( 27 ) $ 372 $ 557
Research and development tax credits
Income from tax credits consist of R&D tax credits received in the U.K. The Company benefits from the Small and Medium Enterprise Program ("SME Program") U.K. research and development tax credit cash rebate regime, and The Research and Development Expenditure Credit ("The RDEC scheme"), a UK government tax incentive that promotes innovation amongst UK's larger businesses. 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 The RDEC scheme are recorded as other operating income in the consolidated statements of operations and other comprehensive loss. Under these 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 June 30, 2024, the current and non-current research and development tax credit receivable was $ 953 and $ 364 , respectively. As of December 31, 2023, the current and non-current research and development tax credit receivable was $ 848 and $ 959 , 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 committed 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 June 30, 2024, based on translation of historical foreign currency amounts in the period, the Company has recognized $ 2,920 of cumulative income since contract inception.
7. Akeso Collaboration and License Agreement
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 the Company is in-licensing Akeso's breakthrough bispecific antibody, ivonescimab. The License Agreement and transaction closed in January 2023 following customary waiting periods.
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 effects of immunotherapy via a blockade of PD-1 with the anti-angiogenesis effects of an anti-VEGF into a single molecule. Ivonescimab was engineered to bring two well established oncology targeted mechanisms together. Ivonescimab is currently in clinical development and, pursuant to the terms of the License Agreement, Summit will design and conduct the clinical trial activities to support regulatory filings in the Licensed Territory that Summit will submit.
11
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Pursuant to the terms of the License Agreement, Summit will have final decision-making authority with respect to clinical development strategy and execution in the Licensed Territory. For co-joined studies in which both Summit and Akeso participate, mutual agreement is required for material decisions; Summit retains the exclusive decision making with respect to participating in, and continuing its participation in, co-joined studies. Pursuant to the terms of the License Agreement, Summit will have final decision-making authority with respect to commercial strategy, pricing and reimbursement and other commercialization matters in the Licensed Territory. In connection with the License Agreement, the Company has also entered into a Supply Agreement with Akeso, pursuant to which Summit agrees to purchase a certain portion of drug substance for clinical and commercial supply. Summit is not assuming any liabilities (including contingent liabilities), acquiring any physical assets or trade names, or hiring or acquiring any employees from Akeso in connection with the License Agreement. Through the License Agreement, the Company obtained the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, and Japan.
In exchange for the rights obtained, an upfront payment of $ 500,000 was made to Akeso, of which $ 274,900 was paid in cash and, pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10,000,000 shares of the Company's common stock in lieu of $ 25,100 cash. The remaining $ 200,000 amount of the upfront payment was paid on March 6, 2023.
Effective June 3, 2024, the Company and Akeso entered into an amendment (the “Second Amendment”) to the License Agreement to expand the Company’s territories covered under the License Agreement to include the Latin America, Middle East and Africa regions. Pursuant to the Second Amendment, the Company agreed to make an upfront payment to Akeso in the amount of $ 15,000 which is expected to be paid out in the third quarter of 2024. Akeso will also be eligible to receive up to an additional $ 55,000 upon the achievement of certain commercial milestones. Except as specifically modified by the Second Amendment, the terms and conditions of the License Agreement remain in full force and effect.
The Company has accounted for the License Agreement and Second Amendment to acquire the rights to develop and commercialize ivonescimab as the acquisition of an asset. All of the consideration relates to ivonescimab and technological feasibility of the asset has not yet been established since ivonescimab is in clinical development. As such, the Company has expensed the consideration as acquired in-process research and development upon closing of the transaction in the condensed consolidated statement of operations and comprehensive loss. Acquired i n-process research and development expense for the three and six months ended June 30, 2024 was $ 15,007 , which is comprised of the upfront payment of $ 15,000 and immaterial transaction costs, and for the six months ended June 30, 2023, $ 520,915 , which is comprised of the $ 474,900 paid in cash, the fair value of the 10,000,000 shares of common stock on the date of closing the transaction of $ 45,900 , and $ 115 of direct transactions costs incurred.
In addition to the payments already made to Akeso, under the License Agreement and Second Amendment, there are additional potential milestone payments of up to $ 4,555,000 , as Akeso will be eligible to receive regulatory milestones of up to $ 1,050,000 and commercial milestones of up to $ 3,505,000 . In addition, Akeso will be eligible to receive low double-digit royalties on net sales.
8. Other (Expense) Income, net
The following table sets forth the components of other (expense) income:
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Foreign currency (losses)/gains $ ( 244 ) $ 311 $ ( 36 ) $ 819
Interest expense on promissory notes payable to related parties ( 3,102 ) ( 2,515 ) ( 6,223 ) ( 10,842 )
Investment income
2,578 3,286 4,407 5,543
Reclassification of cumulative currency translation gain (1)
— — — 419
Other expense, net
— ( 5 ) — ( 84 )
$ ( 768 ) $ 1,077 $ ( 1,852 ) $ ( 4,145 )
(1) During the six months ended June 30, 2023, the Company dissolved certain dormant entities and as a result, $ 419 of cumulative foreign currency translation adjustments were re-classified from accumulated other comprehensive loss relating to these entities.
12
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
For the three and six months ended June 30, 2024, other expense, net primarily consisted of loan interest expense incurred related to the $ 100,000 promissory note as described in Note 14. For the three and six months ended June 30, 2023, other expense, net primarily consisted of loan interest expense incurred related to the $ 520,000 promissory notes, as described in Note 14. These amounts for all periods presented are partially offset by investment income related to the Company's money market funds and short-term investments in U.S. treasury securities.
9. Net Loss per Share
The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended
June 30, Six Months Ended
June 30,
2024 2023 2024 2023
Net loss $ ( 60,385 ) $ ( 14,717 ) $ ( 103,858 ) $ ( 557,093 )
Basic weighted average number of shares of common stock outstanding 707,904,643 697,685,365 704,844,946 538,807,328
Diluted weighted average number of shares of common stock outstanding 707,904,643 697,685,365 704,844,946 538,807,328
Basic net loss per share $ ( 0.09 ) $ ( 0.02 ) $ ( 0.15 ) $ ( 1.03 )
Diluted net loss per share $ ( 0.09 ) $ ( 0.02 ) $ ( 0.15 ) $ ( 1.03 )
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.
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:
June 30,
2024 2023
Options to purchase common stock 59,485,356 20,322,585
Warrants 4,945,669 5,821,137
Shares expected to be purchased under employee stock purchase plan 121,505 185,963
64,552,530 26,329,685
Stock options that are outstanding and contain performance-based or market-based vesting criteria for which the performance or market conditions have not been met are excluded from the presentation of common stock equivalents outstanding in the table above.
10. Fair Value Measurements and Short-Term Investments
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:
13
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
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.
The following tables sets forth the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:
Fair Value Measurements as of June 30, 2024 using:
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 2,571 $ — $ — $ 2,571
U.S. Government treasury bills — 10,167 — 10,167
Short-term investments:
U.S. Government treasury bills — 297,035 — 297,035
Total financial assets $ 2,571 $ 307,202 $ — $ 309,773
Fair Value Measurements as of December 31, 2023 using:
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 21,016 $ — $ — $ 21,016
U.S. Government treasury bills — 39,341 — 39,341
Short-term investments
U.S. Government treasury bills — 114,817 — 114,817
Total financial assets $ 21,016 $ 154,158 $ — $ 175,174
The tables above do not include cash at June 30, 2024 and December 31, 2023 of $ 15,697 and $ 11,068 , respectively.
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
14
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Company’s promissory note approximates its fair value and the current interest rate of the note outstanding when compared to market interest rates (which represents a Level 2 measurement). Refer to Note 14 for further details.
The following table sets forth the Company’s short-term investments as of June 30, 2024 and December 31, 2023, which have a contractual maturity of less than one year:
June 30, 2024
Amortized Cost Unrealized Gains
Unrealized (Losses)
Credit (Loss)
Fair Value
Assets
U.S. Government treasury bills $ 297,070 $ — $ ( 35 ) $ — $ 297,035
Total $ 297,070 $ — $ ( 35 ) $ — $ 297,035
December 31, 2023
Amortized Cost Unrealized Gains
Unrealized (Losses)
Credit (Loss)
Fair Value
Assets
U.S. Government treasury bills $ 114,781 $ 36 $ — $ — $ 114,817
Total $ 114,781 $ 36 $ — $ — $ 114,817
Realized gains and losses for the three and six months ended June 30, 2024 were immaterial.
11. Goodwill
Goodwill
As of June 30, 2024 and December 31, 2023, goodwill was $ 1,880 and $ 1,893 , respectively. Changes in the gross carrying amount of goodwill during the three and six months ended June 30, 2024 as compared to December 31, 2023, are the result of changes in foreign currency. As of December 31, 2023, the Company performed its annual impairment assessment of goodwill and determined that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. There have been no cumulative goodwill impairments recognized during the three and six months ended June 30, 2024.
12. Leases
The Company has operating leases for real estate. The Company does not have any finance leases.
In the first fiscal quarter of 2024, the Company recorded $ 4,216 of additional right-of-use assets related to a new lease for office space that commenced during the period for its Miami, Florida headquarters location ("Miami HQ"). Total future lease payments as of June 30, 2024, which include base rent and sales tax, are approximately $ 4,579 on an undiscounted basis. This lease commenced on February 1, 2024 and has a term of 64 months. As of June 30, 2024 the Company has $ 320 of restricted cash associated with an irrevocable letter of credit required by the landlord to enter into this lease. The carrying value of the right-of-use assets as of June 30, 2024 and December 31, 2023 was $ 8,716 and $ 5,859 , respectively.
Sublease to Related Parties
Effective April 1, 2024, the Company entered into two sublease agreements of its Miami HQ location, one with Genius 24C Inc. ("Genius"), an affiliate of Robert W. Duggan (the "Genius Sublease Agreement") and one with Duggan Investments Research LLC ("Investments Research"), an affiliate of Robert W. Duggan (the "Investments Research Sublease Agreement"). Pursuant to the Genius Sublease Agreement, Genius will sublease from the Company 848 square feet of office space in the Miami HQ for a sixty-two month term for total rental payments of approximately $ 446 . Pursuant to the Investments Research Sublease Agreement, Investments Research will sublease from the Company 848 square feet of office space in the Miami HQ for a sixty-two month term for total rental payments of approximately $ 446 . Refer to Note 17 Related Party Transactions for further details.
15
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
13. Research and Development Prepaid Expenses and Accrued Liabilities
Included within prepaid expenses and other current assets at June 30, 2024 and December 31, 2023 is $ 498 and $ 1,466 , respectively, of prepayments relating to research and development expenditures. Included within accrued liabilities at June 30, 2024 and December 31, 2023 is $ 6,279 and $ 7,289 , respectively, relating to research and development expenditures.
These amounts are determined based on the estimated costs to complete each study or activity related to the ongoing clinical trials for ivonescimab, 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 expenses, 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.
14. Promissory Note Payable to Related Parties
Current promissory note payable to a related party was $ 100,000 as of June 30, 2024 and non-current as of December 31, 2023.
December 2022 Promissory Note
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 was originally 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 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 $ 500,000 , 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 2023 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").
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 2023 Rights Offering, the $ 400,000 Duggan Promissory Note matured and became due, and the Company satisfied all principal and accrued interest thereunder using a combination of a portion of the cash proceeds from the 2023 Rights Offering and the extinguishment of a portion of the amount due equal to the subscription price for shares subscribed by Mr. Duggan in the 2023 Rights Offering.
16
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The Notes accrued interest at an initial rate of 7.5 %. All interest on the Notes was paid on the date of signing for the period through February 15, 2023. Such prepaid interest was 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 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. Such accrued interest shall be paid in cash, quarterly in arrears, on each of March 31, June 30, September 30 and December 31.
Debt issuance costs associated with the Notes were $ 44 and were capitalized as part of the carrying value of the promissory notes payable to related parties.
On February 17, 2024, the Duggan February Note was amended and restated 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 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 8.9 % and the effective interest rate of the Duggan September Note is 12.4 %.
During the three and six months ended June 30, 2024, the Company incurred interest expense of $ 3,102 and $ 6,223 , respectively. During the three and six months ended June 30, 2023, the Company incurred interest expense of $ 2,515 and $ 10,842 , respectively. Interest expense incurred during the six months ended June 30, 2023 included amortized imputed interest of $ 761 . As of June 30, 2024, accrued interest was $ 4,482 and was recorded in accrued liabilities. As of December 31, 2023, accrued interest was $ 120 and was recorded in accrued liabilities.
The estimated future principal payments are $ 0 and $ 100,000 for 2024 and 2025, respectively, as the note matures on April 1, 2025.
15. Stockholders' Equity
Preferred Stock
As of June 30, 2024 and December 31, 2023, the Company had 20,000,000 shares of preferred stock, par value $ 0.01 authorized and no shares issued and outstanding.
Common Stock
As of June 30, 2024 and December 31, 2023, the Company had authorized 1,000,000,000 shares of common stock, par value $ 0.01 (the "Common Stock"). As of June 30, 2024 and December 31, 2023, the Company had 724,320,201 shares and 701,660,053 shares of Common Stock issued and outstanding, respectively.
June 2024 PIPE (Private Investment in Public Equity)
On June 3, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with 667, L.P. and Baker Brothers Life Sciences, L.P., affiliates of Baker Bros. Advisors, L.P. (the “Investors”), for the sale by the Company in a private placement (the “Private Placement”) of 22,222,222 shares (the “Shares”) of Common Stock, at purchase price of $ 9.00 per share, for an aggregate purchase price of approximately $ 200,000 .
The closing of the Private Placement was subject to the satisfaction of certain customary closing conditions, which were achieved on June 6, 2024. The Purchase Agreement contained customary representations, warranties and covenants by the Company, customary indemnification obligations of the Company, including for liabilities under the Securities Act of 1933, as amended (the “Securities Act”), other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement and as of specific dates, were solely for the benefit of the parties to such agreements and were subject to limitations agreed upon by the contracting parties.
The Shares issued pursuant to the Purchase Agreement are not registered under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act or Regulation D
17
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
promulgated under the Securities Act. The Company relied on these exemptions from registration based in part on representations made by the Investors.
On June 3, 2024, in connection with the Purchase Agreement, the Company entered into a Registration Rights Agreement with the Investors (the “Registration Rights Agreement”). The Registration Rights Agreement provides, among other things, that the Company will as soon as reasonably practicable, file with the SEC a registration statement registering the resale of the Shares. The Company agreed to use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, and in any event no later than 75 days after the date that such registration statement is initially filed.
16. Stock-Based Compensation and Warrants
The Company currently grants stock options to employees and directors under the 2020 Stock Incentive Plan (the "2020 Plan") and formerly, the Company granted stock options under the 2016 Long Term Incentive Plan (the "2016 Plan"). The 2020 Plan is administered by the Compensation Committee of the Company's Board of Directors ("Board"). The 2020 Plan is intended to attract and retain employees and directors and provide an incentive for these individuals to assist the Company to achieve long-range performance goals and to enable these individuals to participate in the long-term growth of the Company.
On May 3, 2024, the Board adopted the 2024 Inducement Pool (the “Inducement Pool”), which mirrors the terms of the 2020 Plan, with a total of 2,000,000 shares of common stock reserved for issuance under the Inducement Pool. The Inducement Pool provides for the grant of non-qualified stock options and was approved by the Compensation Committee of the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.
The Inducement Pool is administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the Inducement Pool may only be made to an employee who has not previously been an employee of the Company or member of the Board of Directors of the Company (or any parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. As of June 30, 2024, there were 1,470,000 shares available for grant under the Inducement Pool.
The following table summarizes the Company's time-based stock option activity for the six months ended June 30, 2024:
Number of Options
Weighted average exercise price
Outstanding at December 31, 2023
54,209,289 $ 2.28
Granted 6,804,824 $ 4.24
Forfeited ( 1,394,537 ) $ 2.23
Exercised ( 134,220 ) $ 2.03
Outstanding at June 30, 2024
59,485,356 $ 2.51
Exercisable at June 30, 2024
6,594,164 $ 4.74
The total intrinsic value of all outstanding time-based stock options and exercisable stock options at June 30, 2024 was $ 316,187 and $ 20,762 , 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.
18
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
The following table summarizes the Company's performance-based stock option activity for the six months ended June 30, 2024:
Number of Options
Weighted average exercise price
Outstanding at December 31, 2023
46,654,220 $ 1.62
Granted 2,825,000 $ 4.14
Forfeited ( 1,045,000 ) $ 1.33
Exercised — $ —
Outstanding at June 30, 2024
48,434,220 $ 1.77
Exercisable at June 30, 2024
— $ —
The total intrinsic value of all performance-based stock options at June 30, 2024 was $ 291,959 .
As of June 30, 2024, total unrecognized compensation expense related to performance-based stock options that were deemed probable of vesting was approximately $ 7,166 , which excludes 39,282,376 of unvested performance-based stock options that were deemed not-probable of vesting totaling unrecognized stock-based compensation expense of $ 54,127 .
The total stock-based compensation expense included in the Company's condensed consolidated statements of operations and comprehensive loss was as follows:
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Research and development $ 3,513 $ 727 $ 5,927 $ 1,813
General and administrative 7,575 1,148 14,668 2,837
Total stock-based compensation expense $ 11,088 $ 1,875 $ 20,595 $ 4,650
The following summarizes share-based compensation expense associated with each of the Company's stock-based compensation arrangements:
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Time-based stock options
$ 9,696 $ 1,809 $ 17,811 $ 4,479
Performance-based stock options
1,301 44 2,622 93
Employee stock purchase plan
91 22 162 78
Total stock-based compensation expense $ 11,088 $ 1,875 $ 20,595 $ 4,650
Warrants
The Company had outstanding and exercisable warrants of 4,945,669 and 5,015,642 with a weighted average exercise price of $ 1.58 and $ 1.57 as of June 30, 2024 and December 31, 2023, respectively. Warrants of 69,973 with a weighted average exercise price of $ 1.44 were exercised during the six months ended June 30, 2024.
19
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
17. Related Party Transactions
Lease Agreements
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 Maky Zanganeh and Associates, Inc. ("MZA"), consisting of 4,500 square feet of office space at 2882 Sand Hill Road, Menlo Park, California. 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. During the three and six months ended June 30, 2024, payments of $ 195 and $ 390 , respectively, were made pursuant to the first amendment to the Sublease Agreement. During the three and six months ended June 30, 2023, payments of $ 189 and $ 378 , respectively, were made pursuant to the first amendment to the Sublease Agreement.
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 three and six months ended June 30, 2024, payments of $ 55 and $ 110 , respectively, were made pursuant to the second amendment to the Sublease Agreement. During the three and six months ended June 30, 2023, payments of $ 54 and $ 107 , respectively, were made pursuant to the second amendment to the Sublease Agreement.
April 1, 2024 Miami Sublease Agreements
As previously described in Note 12, effective April 1, 2024, the Company entered into two sublease agreements of its Miami headquarters location, one with Genius 24C Inc. ("Genius"), an affiliate of the Company's CEO, Robert W. Duggan (the "Genius Sublease Agreement") and one with Duggan Investments Research LLC ("Investments Research"), also an affiliate of the Company's CEO, Robert W. Duggan (the "Investments Research Sublease Agreement"). Pursuant to the Genius Sublease Agreement, Genius will sublease from the Company 848 square feet of office space in the Miami HQ for a sixty-two month term for total rental payments of approximately $ 446 . Pursuant to the Investments Research Sublease Agreement, Investments Research will sublease from the Company 848 square feet of office space in the Miami HQ for a sixty-two month term for total rental payments of approximately $ 446 . For the three and six months ended June 30, 2024, the Company has recognized $ 48 of sublease income recorded net of operating lease expenses and in operating, and $ 48 recognized in other receivables on the condensed consolidated balance sheet as of June 30, 2024.
August 2, 2024 Third Amendment to Sublease Agreement with Maky Zanganeh and Associates, Inc.
On August 2, 2024, the Company entered into a third amendment to its existing sublease agreement with MZA. The third amendment has an effective date of August 1, 2024, which includes an additional space of 145 square feet of office space at 2882 Sand Hill Road, Menlo Park, California. The Company continues to be obligated to pay its proportionate share of the net payable by MZA to the third-party landlord, which is revised to 93.6 % as of the effective date, based on the square footage of office space sublet by the landlord.
Promissory Note Payable to Related Parties
Refer to Note 14 for a discussion of the promissory note payables to related parties issued December 6, 2022.
20
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Akeso Collaboration and License Agreement
Upon the closing of the License Agreement, the Board of Directors (the “Board”) of the Company appointed Dr. Yu (Michelle) Xia to serve as a member of the Board pursuant to the terms of the License Agreement. Dr. Xia is the founder of Akeso, Inc. ("Akeso"), and has been the chairwoman, president and CEO of Akeso since its inception in 2012. For details on the License Agreement and Second Amendment entered into on June 3, 2024, see Note 7. Furthermore, in connection with the License Agreement, the Company also entered into a Supply Agreement with Akeso, pursuant to which Summit agreed to purchase a certain portion of drug substance for clinical and commercial supply (the “Supply Agreement”).
2023 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 for $ 1.05 per share. The 2023 Rights Offering commenced on February 7, 2023 and the associated subscription rights expired on March 1, 2023. Aggregate gross proceeds from the 2023 Rights Offering were $ 500,000 from the sale of 476,190,471 shares of Common Stock and issuance costs were $ 619 . Mr. Duggan and Dr. Zanganeh fully subscribed to their respective basic subscription rights at a price of $ 1.05 per share. To satisfy the $ 395,314 subscription price for the shares subscribed by Mr. Duggan in the 2023 Rights Offering, Mr. Duggan agreed with the Company to extinguish a portion of the amount due and payable to him by the Company at the closing of the 2023 Rights Offering pursuant to the $ 400,000 Duggan Promissory Note in an amount equal to the subscription price.
Private Placement
On October 16, 2023, the Company announced the appointment of Mr. Manmeet Soni as its Chief Operating Officer, effective immediately. Mr. Soni has been a part of the Board since 2019. He remains a member of the Board. In conjunction with his appointment, Mr. Soni entered into a share purchase agreement with the Company to invest $ 5,000 in shares of Common Stock via a private placement. The transaction was effective October 13, 2023 with a closing price of $ 1.68 per share, resulting in the purchase of 2,976,190 shares of Common Stock.
21
Summit Therapeutics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
18. Commitments and Contingencies
Lease Commitments
There were no material changes to the Company's lease commitments that were disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC, other than the new lease for the Miami, FL headquarter location as described in Note 12 .
Debt Commitments
Refer to Note 14 for discussion on the promissory note payable to a related party.
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. The majority of these commitments are due within one year . There have been no material changes to the Company's other contractual commitments that were disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 other than the agreed upon upfront payment to Akeso in the amount of $ 15,000 , as described in Note 7.
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 June 30, 2024 and December 31, 2023.
Legal Proceedings
The Company is not currently subject to any material legal proceedings.
22