Summit Therapeutics Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein and our audited consolidated financial statements and related notes for the year ended December 31, 2023 included in our Annual Report on Form 10-K, filed on February 20, 2024 . Some of the information contained in this discussion and analysis or set forth elsewhere in this filing, including information with respect to our plans and strategy for our business, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we “believe,” “expect,” “anticipate,” “plan,” “target,” “intend” and similar expressions should be considered forward-looking statements. As a result of many factors, including those factors set forth in the risks identified the “Risk Factors’’ section of our other filings with the Securities and Exchange Commission, or the SEC, our actual results could differ materially from the results, performance or achievements expressed in or implied by these forward-looking statements. Company Overview 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 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. 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. Through the License Agreement, the Company obtained the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, and Japan. The License Agreement and transaction closed in January 2023 following customary waiting periods. On June 3, 2024, the Company entered into an amendment to the License Agreement with Akeso to expand its territories covered under the License Agreement to also include the Latin America, Middle East and Africa regions (collectively, and as expanded, the "Licensed Territory"). 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 this filing, 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 will be 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. 23 Akeso Collaboration and License Agreement Pursuant to the License Agreement with Akeso, the Company received the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, and Japan. Akeso will retain development and commercialization rights for the rest of the world excluding such licensed territories. In exchange for these rights, Summit made an upfront payment during the first quarter of 2023 comprised of $474.9 million cash and the issuance of 10 million shares of the Company's common stock in lieu of $25.1 million cash pursuant to a share transfer agreement. Furthermore, on June 3, 2024, the Company entered into an amendment to the License Agreement with Akeso to expand its territories covered under the License Agreement to also include the Latin America, Middle East and Africa regions (collectively, and as expanded, the "Licensed Territory"), for which Summit will pay an upfront payment of $15.0 million cash. In addition, the Company will potentially owe Akeso (a) milestone payments tied to achievement of regulatory approval of ivonescimab with various regulatory authorities in the Licensed Territory (b) milestone payments tied to achievement of annual revenue from ivonescimab in the Licensed Territory and (c) royalty payments equal to low-double-digit percentage of annual revenues from ivonescimab in the Licensed Territory. 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. In connection with the License Agreement, the Company has also agreed to enter into a Supply Agreement with Akeso (the "Supply Agreement"). Pursuant to the Supply Agreement, Summit agreed to purchase a certain portion of drug substance for clinical and commercial supply. 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. Summit has not assumed any liabilities (including contingent liabilities), nor acquired any physical assets or trade names, or hired or acquired any employees from Akeso in connection with the License Agreement. Ivonescimab Ivonescimab is a novel potential first-in-class PD-1 / VEGF bispecific antibody, believed to be the most advanced in clinical development in the Licensed Territory; there are no known PD-1 / VEGF bispecific antibodies approved in our Licensed Territory. Engineered with Akeso’s unique Tetrabody technology, ivonescimab, as a single molecule, blocks programmed cell death protein 1 (“PD-1”) from binding to PD-L1 and PD-L2, and blocks vascular endothelial growth factor (“VEGF”) from binding to VEGF receptors. Ivonescimab is designed to potentially allow cooperative binding of the intended targets, such that the binding of PD-1 increases the binding affinity of VEGF and the binding of VEGF increases the affinity towards PD-1. In view of the co-expression of VEGF and PD-1 in the tumor micro-environment (“TME”), ivonescimab may block these two pathways more effectively and enhance the antitumor activity, as compared to combination therapy through what is believed to be a differentiated cooperative binding mechanism. 24 This could differentiate ivonescimab as there is potentially higher expression (presence) of both PD-1 and VEGF in tumor tissue and the TME as compared to normal tissue in the body. As shown in Akeso’s in-vitro studies, ivonescimab’s tetravalent structure (four binding sites) enables higher avidity (accumulated strength of multiple binding interactions) in the tumor microenvironment with over 18-fold increased binding affinity to PD-1 in the presence of VEGF in vitro , and over 4 times increased binding affinity to VEGF in the presence of PD-1 in vitro . This tetravalent structure, the intentional novel design of the molecule, and bringing these two targets into a single bispecific antibody with cooperative binding qualities have the potential to direct ivonescimab to the tumor tissue versus healthy tissue. The intent of this design, together with a half-life of six to seven days, is to improve upon previously established efficacy thresholds, in addition to side effects and safety profiles associated with these targets. In addition to the two Phase III clinical trials sponsored by the Company, ivonescimab is also being developed in China and Australia by Akeso in multiple solid tumors and has been dosed in more than 1,800 patients globally. Based on data published by Akeso at the 2024 Annual Meeting of the American Society of Clinical Oncology (ASCO 2024) in the HARMONi-A study, in a single-region (China), randomized, double-blinded Phase III study in patients with NSCLC who have progressed following an EGFR-TKI, ivonescimab achieved its primary endpoint of Progression-free Survival (PFS) when combined with doublet chemotherapy (pemetrexed and carboplatin). Patients experienced a 54% reduction in disease progression or death as compared to placebo plus doublet-chemotherapy (HR: 0.46, 95% CI: 0.34 - 0.62; p<0.001). In a pre-specified subgroup analysis of patients who received a previous third-generation TKI, a hazard ratio of 0.48 was observed. A median Overall Survival (mOS) in this study of 17.1 months was observed, reflecting a 20% reduction in death as compared to placebo plus chemotherapy in the study (HR: 0.80, 95% CI: 0.59 - 1.08). The Phase III study was considered to have demonstrated a tolerable safety profile and a low discontinuation rate for adverse events. Based on data published by Akeso at the 2024 European Lung Cancer Conference, in the AK112-201 (Cohort 1), a Phase II study conducted in China, for first-line advanced or metastatic NSCLC patients with squamous histology, (n=63), ivonescimab, combined with carboplatin and paclitaxel, in demonstrated a median PFS of 11.1 months. Median overall survival was not reached after a median follow-up period of 22.1 months. This Phase II study was considered to have demonstrated a tolerable safety profile and a low discontinuation rate for adverse events. In addition, Akeso announced that ivonescimab administered as a monotherapy resulted in a statistically significant improvement in PFS when compared to monotherapy pembrolizumab in patients with previously untreated advanced or metastatic NSCLC whose tumors had positive PD-L1 expression. These results were generated from the HARMONi-2 study, 25 also referred to as AK112-303, a randomized, single-region (China) Phase III study. Akeso has announced that it intends to release the results from this study at an upcoming medical conference later in the year. This study was sponsored by Akeso. Summit plans to conduct its current clinical trials, as well as design and conduct additional clinical trial activities for ivonescimab within its Licensed Territory, to support and submit relevant regulatory filings. Summit also plans to support additional study activities through its investigator-initiated study program. Product Pipeline Summit Sponsored Ivonescimab Trials: Ivonescimab is currently being investigated in global Phase III clinical trials. Phase I and II trials were completed by our partner Akeso. This pipeline reflects clinical trials that have been initiated by Summit in its Licensed Territory. HARMONi study is a Phase III, multi-regional, potentially registration-enabling clinical trial that we joined with Akeso, and for which we started initiating and activating sites in North America and Europe during 2023. The first patient in our Licensed Territory was enrolled during the second quarter of 2023. We expect to complete enrollment during the second half of 2024. The co-primary endpoints for this study are progression free survival (PFS) and overall survival (OS), and the study compares ivonescimab plus doublet-platinum chemotherapy versus placebo plus platinum-based doublet chemotherapy. HARMONi-3 study is a Phase III, multi-regional, potentially registration-enabling clinical trial for which we initiated activating sites in North Americas and China during fourth quarter of 2023. We plan to initiate additional sites in North America, China, Europe , Japan, and several other countries through early 2025. Our plan to initiate in new countries and sites is dependent upon the timing and requirements for getting the regulatory approval of the clinical trial applications with the respective regulatory authorities and approvals from central or local independent review boards. We may decide to modify our plans to go in certain regions or countries based on the timelines and requirements from the respective regulatory regions. We commenced patient enrollment in the HARMONi-3 study during fourth quarter of 2023. The primary endpoint for this study is overall survival (OS), and the study compares ivonescimab plus platinum-based doublet chemotherapy versus pembrolizumab plus platinum-based doublet chemotherapy. In the fourth quarter of 2023, we began collaborating with multiple institutions globally and opened our investigator initiated study program across several disease areas. In July 2024, we entered into a collaboration agreement with The University of Texas M.D. Anderson Cancer Center with the intent to further accelerate the development of ivonescimab through pre-clinical and clinical studies. In addition, our partners at Akeso are sponsoring multiple, ongoing Phase II and III clinical trials in NSCLC and other cancers outside of our Licensed Territory. We plan to review the data generated from these clinical trials as a part of our consideration for advancing our clinical development pipeline for ivonescimab in our Licensed Territory. 26 Results of Operations Amounts reported in millions within this Quarterly Report are computed based on the amounts in thousands, and therefore, the sum of components may not equal the total amount reported in millions due to rounding. The following table sets forth our results of operations for the three and six month periods ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Operating expenses: Research and development $ 30.8 $ 9.5 $ 61.7 $ 19.3 Acquired in process research and development 15.0 — 15.0 520.9 General and administrative 14.0 6.3 25.7 13.3 Total operating expenses 59.8 15.8 102.4 553.5 Other operating income 0.2 — 0.4 0.6 Operating loss (59.6) (15.8) (102.0) (552.9) Other (expense) income, net (0.8) 1.1 (1.9) (4.1) Net loss $ (60.4) $ (14.7) $ (103.9) $ (557.0) Operating Expenses Research and Development and Acquired In-Process Research and Development Expenses The table below summarizes our research and development expenses by category for the three and six month periods ended June 30, 2024 and 2023, respectively. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Oncology $ 20.0 $ 5.8 $ 41.9 $ 9.2 Acquired in process research and development 15.0 — 15.0 520.9 Anti-infectives (0.1) (2.0) — (1.6) Compensation related costs, excluding stock-based compensation 7.4 5.0 13.9 9.9 Stock-based compensation 3.5 0.7 5.9 1.8 Total $ 45.8 $ 9.5 $ 76.7 $ 540.2 Research and development expenses (excluding acquired in progress research and development noted below) increased by $21.3 million and $42.4 million during the three and six month periods ended June 30, 2024, respectively, compared to the same periods in the prior year. This increase was primarily due to our continued investment in oncology expenses for ivonescimab, known as SMT112 in our Licensed Territory, resulting in an increase of $14.2 million and $32.7 million for the three and six month periods ended June 30, 2024, respectively, and an increase in compensation and stock-based compensation related expenses of $5.2 million and $8.1 million in the three and six months period ended June 30, 2024, respectively, to support the clinical development of ivonescimab as we continue to hire experts in the oncology field. The increase was partially offset by a decrease of $1.9 million and $1.6 million in the three and six months period ended June 30, 2024, respectively, due to the discontinued 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. In June 2024, we entered into a second amendment (the "Second Amendment") to the License Agreement with Akeso to expand our licensed territories to include Latin America, Middle East and Africa regions. Considered an extension of the original License Agreement, we agreed to make an upfront payment to Akeso in the amount of $15.0 million for these expanded territories which we expect to pay in the third quarter of 2024. This was recorded in our condensed consolidated statement of operations and comprehensive loss as Acquired in process research and development expenses for the three and six months ended June 30, 2024, respectively. 27 We incurred charges of $520.9 million for the six months ended June 30, 2023 which primarily related to our upfront milestone payments pursuant to the License Agreement with Akeso. The License Agreement closed 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 three and six month periods ended June 30, 2024 and 2023, respectively. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Compensation related costs, excluding stock-based compensation $ 3.5 $ 2.5 $ 6.0 $ 5.1 Stock-based compensation 7.7 1.1 14.7 2.8 Legal fees and professional services 2.1 1.9 3.1 3.6 Other general and administrative expenses 0.7 0.8 1.9 1.8 Total $ 14.0 $ 6.3 $ 25.7 $ 13.3 General and administrative expenses increased by $7.7 million and $12.4 million for the three and six months ended June 30, 2024, respectively, compared to the same period in the prior year, primarily due to an increase of $6.6 million and $11.9 million, respectively, in stock-based compensation and increase of $1.0 million and $0.9 million, respectively, in compensation-related costs, excluding stock-based compensation, as the Company is focused on building its executive management team to continue supporting the growth of the Company. We expect our general and administrative costs to increase as we expect acceleration of stock options vesting related to certain performance awards with market service conditions, and as we continue to support our development efforts in ivonescimab. Other Operating Income The table below summarizes our other operating income for the three and six month periods ended June 30, 2024 and 2023, respectively. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Research and development tax credits $ 0.2 $ — $ 0.4 $ 0.5 $ 0.2 $ — $ 0.4 $ 0.5 U.K. research and development tax credits increased by $0.2 million for the three months ended June 30, 2024, compared to the same period in the prior year due to an increase in eligible qualifying expenditures on ivonescimab, which resulted in an increase in tax credits claimed. U.K. research and development tax credits decreased overall by $0.1 million for the six months ended June 30, 2024, compared to the same period in the prior year as our U.K. operations were focused on the related close-out activities for ridinilazole in addition to beginning efforts on ivonescimab. Our focus has been on ivonescimab for the six months ended June 30, 2024. 28 Other (Expense) Income, net The table below summarizes our other expense, net by category for the three and six month periods ended June 30, 2024 and 2023, respectively. Three Months Ended June 30, Six Months Ended June 30, (in millions) 2024 2023 2024 2023 Foreign currency (losses)/gains $ (0.2) $ 0.3 $ — $ 0.8 Interest expense on promissory notes payable to related parties (3.1) (2.5) (6.2) (10.8) Investment income 2.6 3.3 4.4 5.5 Reclassification of cumulative currency translation gain — — — 0.4 Other expense, net — — — (0.1) $ (0.7) $ 1.1 $ (1.8) $ (4.2) For the three and six months ended June 30, 2024, other expense, net primarily consisted of loan interest expense incurred related to the $100 million promissory note as described in Note 14 to our condensed consolidated financial statements. These amounts for both periods presented are partially offset by investment income related to our money market funds and short-term investments in U.S. treasury securities. Other (expense) income, net increased by $1.8 million for the three months ended June 30, 2024, compared to the same period in the prior year, primarily due to an increase in the interest expense on the $100 million promissory note. The $100 million promissory note was amended during the first quarter of 2024, resulting in a higher interest rate of 12.0% compared to the original agreement. This increase is coupled by a decrease of $0.6 million in interest income related to an overall decrease in our money market funds and our short-term investments in U.S. government securities and an increase in unfavorable changes in foreign currency of $0.5 million. Other (expense) income, net decreased by $2.2 million for the six months ended June 30, 2024, compared to the same period in the prior year, primarily due to a decrease of $1.1 million in interest income related to our money market funds and our short-term investments in U.S. government securities and a decrease of $4.6 million in interest expense on an outstanding promissory note to a related party, where amounts recognized in 2023 relate to the $520 million promissory notes issued to our CEOs in December 2022, an increase in unfavorable changes in foreign currency of $0.8 million and a decrease of $0.4 million related to the reclassification of cumulative foreign currency translation gains from accumulated other comprehensive loss. Liquidity and Capital Resources Sources of Liquidity To date, we have financed our operations primarily through issuances of our common stock, including our most recent private placement issued for $200 million, 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. 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. In addition, if we obtain marketing approval for any of our product candidates in the United States or other jurisdictions where we retain commercial rights, and if we choose to retain those rights, we would expect to incur significant sales, marketing, 29 distribution and outsourced manufacturing expenses, as well as ongoing research and development expenses. In addition, our expenses will increase if and as we: • invest in clinical development of ivonescimab in our Licensed Territory; • conduct research and continue development of additional product candidates; • maintain and augment our intellectual property portfolio and opportunistically acquire complimentary intellectual property; • seek further regulatory advancement for ivonescimab; • invest in our manufacturing capabilities for ivonescimab and any other products for which we may obtain regulatory approval; • seek marketing approvals for any product candidates that successfully complete clinical development; • ultimately establish a sales, marketing and distribution infrastructure in jurisdictions where we have retained commercialization rights and scale up external manufacturing capabilities to commercialize any product candidates for which we receive marketing approval; • perform our obligations under our collaboration agreements; • pursue business development opportunities, including investing in other businesses, products and technologies; • experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges • hire additional clinical, regulatory, scientific and administrative personnel; • expand our physical presence; • add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and • borrow capital to fund our resources and have to pay interest expenses on such borrowings. During the three and six months ended June 30, 2024, we incurred a net loss of $60.4 million and $103.9 million, respectively, and cash flows used in operating activities for the six months ended June 30, 2024 was $63.1 million. As of June 30, 2024, we had an accumulated deficit of $1,097.1 million, cash and cash equivalents of $28.4 million, and short-term investments in U.S. treasury securities of $297.0 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 quarterly financials. We are investing in the clinical development of ivonescimab, including its ongoing clinical trials. In addition, we have a $100.0 million promissory note and interest payable to a related party (refer to Note 14 to our condensed consolidated financial statements included in this report for further details) that matures on April 1, 2025. Based upon our cash and cash equivalents and short-term investments as of June 30, 2024, we expect to be able to operate into the fourth quarter of 2025. In order to further fund our operating cash needs and repay this promissory note, we may raise additional equity or debt capital through both registered offerings off of a shelf registration, including “at-the-market” offerings, or ATM, and private offerings of securities. On February 20, 2024, we filed a shelf registration statement on Form S-3 with the SEC, which the SEC declared effective on February 27, 2024. Through our shelf registration statement we may, from time to time, sell up to an aggregate of $450 million of our common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts, or units. Of the $450 million of liquidity available to us under this shelf registration statement, on May 13, 2024, we had established an at-the-market offering program with J.P. Morgan Securities LLC, as sales agent, in the amount of up to $90 million, all of which remains available for sale. If we require or elect to seek additional capital through debt or equity financing in the future, we may not be able to raise capital on terms acceptable to us or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to our stockholders. If we are required and unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected. As of the date of this report, 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 and Second Amendment, there are additional potential milestone payments of $4.56 billion, as Akeso will be eligible to receive regulatory milestones of up to $1.05 billion and commercial milestones of up to $3.51 billion. In addition, Akeso will be eligible to receive low double-digit royalties on net sales. Until we can generate substantial revenue and achieve profitability, we will need to raise additional capital to fund ongoing operations and capital needs, including the payment of the milestone payments referenced above. We have based the foregoing estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. This estimate assumes, among other things, that we do not obtain any additional funding 30 through grants and clinical trial support or through new collaboration arrangements. Our future capital requirements will depend on many factors, including: • the costs, timing and outcome of clinical trials required for clinical development of ivonescimab; • the number and development requirements of other future product candidates that we pursue; • the costs, timing and outcome of regulatory review of ivonescimab and/or our other product candidates we develop; • the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval; • the extent to which we become liable for milestone payments under the License Agreement and Second Amendment for ivonescimab; • subject to receipt of marketing approval, revenue received from commercial sales of any product candidates; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims; • our ability to establish and maintain collaborations, licensing or other arrangements and the financial terms of such arrangements; • the extent to which we acquire or invest in other businesses, products and technologies; • the rate of the expansion of or the extent to which we change our physical presence. 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 will need to seek additional funding in the future to fund operations. Additional capital, when needed, may not be available to us on acceptable terms, or at all. 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. 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, which could materially adversely affect our business prospects or our ability to continue operations. 31 Cash Flows The following table summarizes the results of our cash flows for the six months ended June 30, 2024 and 2023: Six Months Ended June 30, (in millions) 2024 2023 Net cash used in operating activities $ (63.1) $ (42.4) Net cash used in investing activities $ (180.2) $ (644.9) Net cash provided by financing activities $ 200.7 $ 80.0 Operating Activities Net cash used in operating activities for the six months ended June 30, 2024 was $63.1 million and was due to a net loss of $103.9 million, which included non-cash charges of $33.5 million and a net change in working capital of $7.2 million. The non-cash charges primarily consisted of $20.6 million of stock-based compensation, $15.0 million in accrued acquired in process research and development for the upfront payment to Akeso for the Second Amendment signed in June 2024 with expected payment in the third quarter of 2024, partially offset by $2.0 million for amortization of the discount on short-term investments. The net change in working capital was primarily due to an increase of $3.8 million in accrued liabilities, which represents the interest on the current promissory notes payable, an increase of $0.7 million in accounts payable, a decrease of $2.3 million in current and other long-term assets, and a decrease of $0.8 million in prepaid expenses, partially offset by a decrease of $0.6 million in accrued compensation. Net cash used in operating activities for the six months ended June 30, 2023 was $42.4 million and resulted from a net loss of $557.1 million, which included an adjustment of $475.0 million cash payments 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, non-cash charges of $52.9 million and a net decrease in working capital of $13.3 million. The non-cash charges primarily comprised of $45.9 million issuance of shares in lieu of cash for Akeso upfront payment, $6.1 million of non-cash interest expense, $4.7 million of non-cash charges related to stock-based compensation, partially offset by $2.9 million for amortization of discount on short-term investments. The net decrease in working capital was primarily due to a decrease of $9.7 million in accrued liabilities and accrued compensation, an increase of $4.6 million in prepaid expenses and an increase of $0.9 million in other current and long-term assets, partially offset by a decrease of $0.9 million in the research and development tax credit receivable. Investing Activities Net cash provided by investing activities for the six months ended June 30, 2024 was $180.2 million and was primarily due to $182.9 million received from the maturity, redemption and sale of short-term investments in U.S. Treasury securities, offset by $363.0 million related to the purchase of short-term investments. Net cash used in investing activities for the six months ended June 30, 2023 primarily comprised of $475.0 million cash payments made to Akeso for the upfront payment pursuant to the License Agreement, $208.2 million for the purchase of short-term investments in U.S. treasury securities, partially offset by $38.2 million received from the maturity and sale of short-term investments in U.S. treasury securities. Financing Activities Net cash provided by financing activities was $200.7 million for the six months ended June 30, 2024, and primarily consisted of proceeds from a $200.0 million private placement of 22,222,222 shares of our common stock, par value $0.01 per share, at purchase price of $9.00 per share, and proceeds received of $0.6 million related to employee stock awards. Net cash provided by financing activities was $80.0 million for the six months ended June 30, 2023 and was 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, proceeds received of $0.7 million related to employee stock awards, offset by the repayment of $24.7 million related to promissory notes from related parties. 32 Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, research and development costs, intangible assets, 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. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and in Critical Accounting Policies and Significant Judgments and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 20, 2024 (our "Annual Report"). There have been no material changes to our critical accounting policies and estimates that were disclosed in our Annual Report. Contractual Obligations and Commitments Lease Commitments We lease office space in Menlo Park, California, Miami, Florida, United States and in Oxfordshire, United Kingdom. In addition to our lease commitments as of December 31, 2023, which were disclosed in our Annual Report, we entered into a new lease agreement for our Miami, Florida headquarters in the first fiscal quarter of 2024. Total future lease payments as of June 30, 2024, which include base rent and sales tax are approximately $4.6 million on an undiscounted basis. This lease commenced on February 1, 2024 and has a term of 64 months. As of June 30, 2024, we have $0.3 million of restricted cash associated with an irrevocable letter of credit required by the landlord to enter into this lease. Debt Commitments Refer to Note 14 to our condensed consolidated financial statements included in this report for a discussion of the promissory note payable to a related party. Other Commitments We enter 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 our Annual Report other than the agreed upon upfront payment to Akeso in the amount of $15.0 million, as described in Note 7 to our condensed consolidated financial statements included in this report. 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. The License Agreement with Akeso also contains certain manufacturing and purchase commitments. As of June 30, 2024, we are unable to estimate the amount, timing or likelihood of achieving the milestones, making future product sales or assessing estimated forecasts for manufacturing and supplied materials which these contingent payment obligations relate to. Indemnifications Our certificate of incorporation provides that it will indemnify the directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with all of the directors and executive officers. These indemnification agreements may require us, 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 33 or proceeding arising out of his or her service as one of our directors or executive officers. We believe the fair value for these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations as of June 30, 2024 and December 31, 2023. Legal Proceedings We are not currently subject to any material legal proceedings. Off-Balance Sheet Arrangements Other than the contractual obligations and commitments described above, we did not have during the periods presented, and we do not currently have, any off‑balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission. Recently Issued Accounting Pronouncements For a discussion of recently issued accounting pronouncements, refer to Note 3, Summary of Significant Accounting Policies and Recently Issued or Adopted Accounting Pronouncements , to our condensed consolidated financial statements included in this report. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).