Summit Therapeutics plc — FY2018 Form 20-F
Reporting period: Fiscal year ended January 31, 2018. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS in pounds sterling; dollar figures are convenience translations where stated. Summit is a clinical-stage biopharmaceutical company focused on Duchenne muscular dystrophy (DMD) and Clostridium difficile infection (CDI). It had no approved products or product-sales revenue.
Financial performance and position
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | £25.419 million | £2.304 million |
| Other operating income | £2.725 million | £0.072 million |
| Research and development expense | £28.970 million | £18.952 million |
| General and administrative expense | £11.999 million | £8.277 million |
| Operating loss | £12.825 million | £24.853 million |
| Net loss | £7.131 million | £21.371 million |
| Cash and cash equivalents at year-end | £20.102 million | £28.062 million |
| Working capital | Negative £3.156 million | Negative £5.621 million |
| Total equity/(deficit) | £9.875 million | Negative £3.493 million |
- Operating cash flow was an outflow of £14.689 million, versus an inflow of £12.141 million in FY2017. Investing cash outflow was £5.242 million, including £4.775 million net cash used to acquire Discuva. Financing cash inflow was £13.905 million, principally from the September 2017 share offering.
- Cash declined by £6.026 million before a £1.934 million adverse foreign-exchange effect. No conventional borrowings are reported; liabilities included £3.090 million of funding-arrangement financial liabilities and £28.045 million of deferred revenue.
- Revenue mainly reflected the Sarepta collaboration: a £17.2 million development milestone and recognition of part of its upfront payment. Eurofarma and Discuva/Roche contributed smaller amounts. Revenue was therefore collaboration-related, not product sales.
- FY2018 net loss improved substantially, but included £3.085 million finance income and £0.908 million other operating income from derecognition of Wellcome Trust funding liabilities. BARDA funding contributed £1.772 million of other operating income. These items helped reduce reported losses.
Material changes and business developments
- Revenue rose to £25.419 million from £2.304 million, primarily due to Sarepta milestone and collaboration revenue. R&D expense rose 52.9% to £28.970 million, with increased DMD activity and ridinilazole Phase 3 preparation.
- Cash fell from £28.062 million to £20.102 million, despite the Sarepta milestone and September equity raise. The company issued 8.389 million ordinary shares in the offering, raising £13.5 million net.
- In December 2017, Summit acquired Discuva for consideration of £11.1 million, including £6.1 million cash and £5.0 million in shares. The acquisition added a bacterial-genetics antibiotic discovery platform; the balance sheet recognized £10.670 million in related intangible assets and £1.814 million goodwill, along with £1.466 million in contingent liabilities.
- Summit licensed ridinilazole commercialization rights in specified Latin American and Caribbean territories to Eurofarma, receiving $2.5 million upfront and becoming eligible for milestones and supply-related payments. It retained rights elsewhere.
- After year-end, Summit raised £15.0 million gross in a March 2018 share placement. This subsequent financing is not included in January 31, 2018 cash.
Outlook, clinical programs, and risks
- Liquidity outlook: Management estimated existing cash, the $32 million BARDA base-period award, and Sarepta cost-sharing would fund operations and capital needs through at least April 30, 2019. Management cautioned that this estimate depended on assumptions. Summit expected to need additional capital to complete its planned placebo-controlled ezutromid trial and ridinilazole Phase 3 trials.
- Ezutromid: In the open-label Phase 2 PhaseOut DMD trial, interim 24-week results showed a statistically significant 23% reduction in developmental myosin and a significant decrease in calf-muscle MRI/MRS-T2 inflammation; mean utrophin protein intensity increased 7%, without statistical significance. The company planned to report 48-week top-line results in Q3 2018 and was preparing a placebo-controlled study and a possible accelerated-approval filing. The interim findings are not proof of clinical benefit, and functional measures at 24 weeks included a decrease in mean six-minute walk distance from 404m to 395m and a small decline in mean North Star score.
- Ridinilazole: The Phase 2 trial versus vancomycin reported sustained clinical response of 66.7% versus 42.4%, with lower recurrence in the ridinilazole arm. A small exploratory comparison with fidaxomicin was not designed to establish efficacy differences. Planned Phase 3 trials were delayed: manufacturing challenges with tablet-form clinical supply shifted expected commencement from the first half of 2018 to Q1 2019. Further delay remained possible if the supplier could not resolve the issues.
- Funding dependence: BARDA’s $32 million base period supported planned trial initiation; three discretionary options could raise total potential funding to approximately $62 million through potential U.S. filing activities. BARDA may decline options or terminate the contract. Sarepta funds 45% of budgeted global utrophin-program R&D costs from January 2018, with Summit responsible for 55%.
- Other risks: Summit had accumulated losses of £80.898 million and expected losses to continue. Key risks include clinical and regulatory failure, dependence on third-party manufacturers and collaborators, further capital needs and dilution, patient enrollment, patent limitations, reimbursement and pricing pressures, and currency exposure. Ridinilazole lacks active-ingredient composition-of-matter patent protection, as disclosed by the company.
- Accounting item: Summit expected full retrospective adoption of IFRS 15 from February 1, 2018. It estimated FY2018 revenue would be reduced by £13.059 million, principally because the Sarepta milestone and development cost-share income would be recognized over the development period rather than in full; estimated liabilities at January 31, 2018 would increase by £13.0 million in total. Actual adoption effects remained subject to final assessment.
Investor facts to verify
- Check the reported 48-week PhaseOut DMD results against the positive but non-placebo-controlled 24-week interim biomarker data, including functional outcomes and safety.
- Confirm resolution of ridinilazole tablet-manufacturing issues, actual Phase 3 start timing, and whether BARDA exercised funding options beyond the base period.
- Reconcile cash runway with post-year-end placement proceeds, expected trial costs, and the stated need for further financing to complete pivotal studies.
- Review the final IFRS 15 adoption and any restated revenue, deferred-revenue, and liability balances.
- Assess Discuva’s acquired platform and contingent milestone obligations, as well as the practical value and scope of Summit’s patent protection.
The financial statements received an unqualified audit opinion. Management reported effective disclosure controls and internal control over financial reporting as of January 31, 2018; the auditor did not provide an internal-controls attestation.