Summit Therapeutics Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; filed November 9, 2022. Summit is a development-stage biopharmaceutical company with no approved or marketed drugs reported in this filing.
Business context and key developments
- On September 28, Summit decided to seek a partner or divest ridinilazole, its lead candidate for C. difficile infection, rather than continue internal clinical development. It discontinued its only active ridinilazole study, a pediatric trial.
- SMT-738, a preclinical precision-antibiotic candidate for carbapenem-resistant Enterobacteriaceae infections, remains in development. The company also reports two discovery-stage oncology assets.
- Summit said FDA discussions about ridinilazole identified a possible route toward marketing authorization that would involve at least one additional clinical trial.
Financial results
Amounts below are in millions of dollars unless otherwise stated.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.220 | $1.309 | $0.705 | $1.558 |
| Research and development | $17.049 | $19.943 | $46.613 | $62.245 |
| General and administrative | $5.573 | $5.662 | $19.165 | $15.831 |
| Other operating income | $5.462 | $4.810 | $13.283 | $16.379 |
| Operating loss | $(16.940) | $(19.486) | $(51.790) | $(60.139) |
| Other expense, net | $(4.445) | $(0.113) | $(7.763) | $(1.364) |
| Net loss | $(21.385) | $(19.599) | $(59.553) | $(61.503) |
| Basic and diluted loss per share | $(0.14) | $(0.20) | $(0.52) | $(0.67) |
Revenue came from the Eurofarma license and commercialization agreement and fell year over year because the prior-year period included recognition of a milestone earned in September 2021. Product gross margins are not applicable to the reported business mix, and the filing does not present a product-margin measure.
Cash flow, liquidity and capital
- Cash and cash equivalents were $121.971 million at September 30, 2022, versus $71.791 million at December 31, 2021. Cash flow used in operations was $46.773 million for the first nine months, compared with $63.408 million a year earlier; investing activities used $0.634 million.
- Financing activities provided $100.184 million, mainly from a $100 million rights offering, net of $0.111 million in issuance costs. The offering issued 103,092,783 shares at $0.97 each. Shares outstanding increased from 98.0 million at year-end 2021 to 201.3 million at September 30, 2022.
- The $25 million related-party promissory note, plus accrued interest, was repaid on August 10, 2022 using offering proceeds. No promissory-note balance was reported at quarter-end. Lease liabilities were $4.365 million in total; total liabilities were $22.079 million.
- Current assets were $137.119 million and current liabilities were $16.682 million. The balance sheet also included $16.259 million of current and non-current R&D tax-credit receivables, and stockholders’ equity of $133.248 million.
- Management stated that available funding and resources were expected to cover operating costs and working capital needs for more than 12 months from the filing’s issuance date. Summit nevertheless expects ongoing losses and says it will need additional capital to fund operations.
Material changes, outlook and risks
- Nine-month R&D expense declined $15.632 million year over year, primarily due to lower ridinilazole Phase III clinical and manufacturing activity. The company also recognized $6.5 million of costs for remaining contractual obligations related to internal ridinilazole development. SMT-738 development spending increased.
- Nine-month G&A expense increased $3.334 million, primarily from higher stock-based compensation and employee compensation.
- BARDA income rose to $7.774 million for the nine months, including recognition of the remaining deferred BARDA income following the decision to stop internal ridinilazole development. The BARDA contract’s final option was not exercised; its no-cost closeout extension runs through December 2022. This income increase should not be assumed to recur.
- R&D tax-credit income fell to $3.730 million for nine months, reflecting reduced eligible clinical and manufacturing activity and changes in U.K. tax legislation. The CARB-X arrangement ended June 30, 2022; Summit said it was discussing a new agreement.
- Other expense increased substantially, primarily because of foreign-currency losses of $6.281 million for nine months and interest on the repaid related-party note.
- Management cautioned that future financing may not be available on acceptable terms. Additional equity could dilute shareholders; inability to obtain funding could force delays, reductions or termination of development programs. Business-development discussions are uncertain and potential deals may require upfront, milestone or royalty payments.
- COVID-19’s continuing effects on operations and development were described as uncertain. The company reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether Summit secures a partner or completes a divestiture for ridinilazole, and what that means for its development path and any remaining commitments.
- How long the reported cash runway lasts under actual spending and financing assumptions, including whether new funding is needed.
- The potential effects of the rights offering’s substantial share issuance and outstanding options and warrants on future dilution.
- Whether CARB-X funding is renewed and whether other grant or collaboration support replaces BARDA-related income.
- Whether the unusually large foreign-exchange losses and the nonrecurring BARDA income materially affect comparisons in subsequent periods.