Summit Therapeutics Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Item 1A. Risk Factors” of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Current wording

The following discussion and analysis of our financial condition and results of operations is for the year ended December 31, 2024 compared with the year ended December 31, 2023. This comparison should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K. For a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2023 compared to December 31, 2022, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 20, 2024.

Previous wording

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

Current wording

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.

Previous wording

Our current lead development candidate is ivonescimab, a novel, potential first-in-class bispecific antibody intending to combine the effects of immunotherapy via a blockade of PD-1 with the anti-angiogenesis effects of an anti-VEGF compound into a single molecule. On December 5, 2022, we entered into a Collaboration and License Agreement (the “License Agreement”) with Akeso, Inc. and its affiliates (“Akeso”) pursuant to which the Company has in-licensed ivonescimab. Through the License Agreement, we obtained the rights to develop and commercialize ivonescimab in the United States, Canada, Europe, and Japan (the “Licensed Territory”). The License Agreement and transaction closed in January 2023 following customary waiting periods. Our operations will be focused on the development of ivonescimab and other future activities, as the Company determines.

Current wording

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 (collectively, “Akeso”) pursuant to which the Company has in-licensed intellectual property related to 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.

Previous wording

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

Current wording

The Company has begun its development for ivonescimab in non-small cell lung cancer (“NSCLC”), specifically launching Phase III clinical trials in the following proposed indications:

Previous wording

General and administrative expenses consist primarily of salaries and benefits related to our executive, finance, business development, human resources and other support functions. Other general and administrative expenses include stock-based compensation expenses, market research costs, facility-related costs, consulting costs and expenses associated with the requirements of being a publicly traded company in the United States, including insurance, legal, audit and taxation services fees.

Current wording

General and administrative expenses consist primarily of salaries and benefits related to our executive, finance, business development, human resources, legal and other support functions. Other general and administrative expenses include stock- based compensation expenses, market research costs, facility-related costs, consulting costs and expenses associated with the requirements of being a publicly traded company in the United States, including insurance, legal, audit and taxation services fees.

Previous wording

We have also received income from research and development (“R&D”) tax credits, which consist of the R&D tax credit received in the United Kingdom (“U.K.”). We benefit from two U.K. research and development tax credit cash rebate regimes: Small and Medium Enterprise Program (“SME Program”) and the Research and Development Expenditure Credit Program (“RDEC Program”). Qualifying expenditures largely comprise 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 we do not receive income. Tax credits related to the SME Program and RDEC Program are recorded as other operating income in the consolidated statements of operations and other comprehensive loss. Under both schemes, we receive cash payments that are not dependent on our pre-tax net income levels.

Current wording

Other operating (expense) income, net consists primarily of research and development ("R&D") tax credits received in the United Kingdom (“U.K.”). We benefit from two U.K. research and development tax credit cash rebate regimes: Small and Medium Enterprise Program (“SME Program”) and the Research and Development Expenditure Credit Program (“RDEC Program”). Under both schemes, we receive cash payments that are not dependent on our pre-tax net income levels.

Previous wording

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

Current wording

Based on criteria established by His Majesty’s Revenue and Customs (“HMRC”), a portion of expenditures being carried out in relation to our pipeline research and development, clinical trials management and third-party manufacturing development activities are eligible for the SME regime tax credits and amounts recognized from grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations.

Previous wording

Imputed interest is calculated as the difference between the expected interest payable and the deemed market rate of interest and is recorded as a debt discount at inception of the note payable with a credit to additional paid-in capital for notes payable to related parties. The debt discount is amortized to interest expense using an effective interest rate method. All highly liquid investments with a maturity date of 90 days or less at the date of purchase are considered to be cash equivalents and the related investment income is recognized in net loss. The appropriate classification of investments in securities is determined by the Company at the time of purchase.

Current wording

Interest expense consists of cash and imputed interest expense incurred related to our promissory notes to related parties. Imputed interest is calculated as the difference between the expected interest payable and the deemed market rate of interest and is recorded as a debt discount at inception of the note payable with a credit to additional paid-in capital for notes payable to related parties. The debt discount is amortized to interest expense using an effective interest rate method.

Previous wording

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

Current wording

The table below summarizes our research and development and acquired in-process research and development expenses by category for the year ended December 31, 2024 and 2023, respectively.

Previous wording

The entry into the License Agreement with Akeso, Inc., effective in January 2023, represents a significant change in our strategy from anti-infectives to the therapeutic area of oncology. We have invested our resources in the clinical development of ivonescimab during the year ended December 31, 2023.

Current wording

The entry into the License Agreement with Akeso, Inc., effective in January 2023, represents a significant change in our strategy from anti-infectives to the therapeutic area of oncology. We invested our resources in the clinical development of ivonescimab during the years ended December 31, 2024 and 2023.

Previous wording

Oncology expenses represent our investment in the clinical development of ivonescimab, known as SMT112 in the United States, Canada, Europe, and Japan. On May 3, 2023 we announced plans to initiate Phase III clinical studies for ivonescimab in non-small cell lung cancer (“NSCLC”) and on May 9, 2023, we announced that the first United States-based patient had been enrolled in the Phase III HARMONi study. We have commenced enrollment in our second Phase III HARMONi-3 clinical trial.

Current wording

Oncology clinical trial related costs represent our investment in the clinical development of ivonescimab, known as SMT112 in the Licensed Territory.

Previous wording

With this shift in focus from anti-infectives to oncology, total research and development expenses increased by $7.4 million during the year ended December 31, 2023, compared to the same period in the prior year, primarily due to our investment in oncology expenses of $31.0 million, and an increase in compensation related expenses of $5.0 million to support the clinical development of ivonescimab as we hire experts in the oncology field, partially offset by a decrease of $30.1 million related to discontinuing the development activities related to ridinilazole and SMT-738. We expect oncology-related research and development costs to continue to increase as we progress with the development of ivonescimab. The Company recorded a net benefit related to its anti-infectives programs during the year ended December 31, 2023 due to completing financial close-out activities with the lead contract research organization for our ridinilazole clinical trials, thus resulting in a true-up of the estimated anti-infectives research and development expenses during the second quarter of 2023.

Current wording

Research and development expenses (excluding acquired in progress research and development noted below) increased by $91.4 million during the year ended December 31, 2024, compared to the same period in the prior year. This increase was primarily due to our continued investment in oncology clinical trial related costs for ivonescimab, known as SMT112 in the Licensed Territory, resulting in an increase of $65.7 million and an increase in compensation and stock-based compensation related expenses of $23.9 million in the year ended December 31, 2024, to support the clinical development of ivonescimab as we continue to hire additional clinical resources in the oncology field, coupled with acceleration charges related to the achievement of certain market conditions on performance stock option awards. We expect oncology-related research and development costs to continue to increase as we progress with the development of ivonescimab.

Previous wording

Our investment in ivonescimab totaled $520.9 million for the year ended December 31, 2023 and primarily relates to our upfront milestone payments pursuant to the License Agreement with Akeso. The License Agreement was executed in January 2023, and both Akeso and Summit entered into the Common Stock Issuance Agreement (“Issuance Agreement”). Pursuant to the License Agreement and Issuance Agreement, Akeso elected to receive 10 million shares of our common stock in lieu of $25.1 million cash and was paid $274.9 million in cash as the initial upfront payment. The remaining $200.0 million upfront payment was paid on March 6, 2023. In-process research and development expense comprised of the $474.9 million paid in cash, the fair value of the 10 million shares of common stock on the date of closing the transaction of $45.9 million, and $0.1 million of direct transactions costs incurred.

Current wording

Our investment in ivonescimab included $520.9 million for the year ended December 31, 2023 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. Acquired 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.

Previous wording

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

Current wording

General and administrative expenses increased by $30.2 million for the year ended December 31, 2024, compared to the same period in the prior year, primarily due to an increase of $25.3 million in stock-based compensation related to an increase in equity award grants and the acceleration charges related to the achievement of certain market conditions on performance stock option awards. Additionally, compensation-related costs, excluding stock-based compensation increased by $4.6 million, for the year ended December 31, 2024, compared to the same period in the prior year, as the Company is focused on building its executive management team to continue supporting its growth. We expect general and administrative expenses to continue to increase as we scale our infrastructure and management to support development of ivonescimab.

Previous wording

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

Current wording

The table below summarizes our other operating (expense) income by category for the year ended December 31, 2024 and 2023, respectively:

Previous wording

•Invest in clinical development of ivonescimab in our Licensed Territory;

Current wording

•invest in clinical development of ivonescimab in the Licensed Territory;

Previous wording

During the year ended December 31, 2023, we incurred a net loss of $614.9 million, and cash flows used in operating activities was $76.8 million. As of December 31, 2023 we had an accumulated deficit of $993.3 million, cash and cash equivalents and short-term investments in U.S. treasury securities of $186.2 million. We expect to continue to generate operating losses for the foreseeable future.

Current wording

During the year ended December 31, 2024, we incurred a net loss of $221.3 million, and cash flows used in operating activities was $142.1 million. As of December 31, 2024 we had an accumulated deficit of $1,214.6 million, cash and cash equivalents and short-term investments in U.S. treasury securities of $412.3 million. We expect to continue to generate operating losses for the foreseeable future.

Previous wording

We have evaluated whether our cash, cash equivalents, short-term investments and U.K. research and development tax credits provide sufficient cash to fund our operating cash needs for the next twelve months from the date of issuance of these annual financials. We are investing in the clinical development of ivonescimab, including our ongoing clinical trials. In addition, we have a $100 million promissory note payable to a related party (refer to Note 18 in the consolidated financials included in this Annual Report further details) that matures on April 1, 2025. Based upon our cash and cash equivalents and short-term investments as of December 31, 2023, we expect to be able to operate into the first quarter of 2025. In order to further fund our operating cash needs and repay this promissory note, we intend to raise additional capital. As of the date of the issuance of these financial statements the additional capital has not been secured. As a result, these conditions raise substantial doubt about our ability to continue as a going concern.

Current wording

We have evaluated whether our cash, cash equivalents and short-term investments provide sufficient cash to fund our operating cash needs for the next 12 months from the date of issuance of these annual financials. We concluded that our cash, cash equivalents and short-term investments as of December 31, 2024 will fund our operating cash needs for at least the next 12 months from the date of issuance of these financial statements.

Previous wording

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

Current wording

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.

Previous wording

•the extent to which we become liable for milestone payments under our Licensing Agreement for ivonescimab;

Current wording

•the extent to which we become liable for milestone payments under the License Agreement and Second Amendment for ivonescimab;

Previous wording

Net cash used in operating activities for the year ended December 31, 2023 was $76.8 million and resulted from a net loss of $614.9 million, which included an adjustment of $475.0 million in cash payments related to investing activities for the purchase of in-process research and development from Akeso under the terms of the License Agreement and the associated direct transaction costs and non-cash charges of $65.5 million and a net increase in working capital of $2.4 million. Non-cash charges primarily include a $45.9 million expense for the issuance of shares in lieu of cash for the Akeso upfront payment, $14.1 million of stock-based compensation, $6.3 million related to non-cash interest expense, $1.9 million related to amortization of right-of-use assets, and a $0.5 million impairment charge, partially offset by $1.9 million related to amortization of discount on short-term investments and $0.8 million in a net unrealized foreign exchange gain. The net increase in working capital is primarily due to a $3.7 million increase in other long-term assets, a $2.4 million decrease in accrued liabilities, and a $2.2 million decrease in lease liabilities , partially offset by a $4.2 million decrease in the research and development tax credit receivable and a $2.3 million increase in accounts payable.

Current wording

Net cash used in operating activities for the year ended December 31, 2023 was $76.8 million and resulted from a net loss of $614.9 million, which included an adjustment of $475.0 million in cash payments related to investing activities for the purchase of in-process research and development from Akeso under the terms of the License Agreement and the associated direct transaction costs and non-cash charges of $63.6 million and a net decrease in working capital of $0.5 million. Non-cash charges primarily include a $45.9 million expense for the issuance of shares in lieu of cash for the Akeso upfront payment, $14.1 million of stock-based compensation, $6.3 million related to non-cash interest expense, and a $0.5 million impairment charge, partially offset by $1.9 million related to amortization of discount on short-term investments and $0.8 million in a net unrealized foreign exchange gain. The net increase in working capital is primarily due to a $3.7 million increase in other long-term assets, a $2.4 million decrease in accrued liabilities, and a $0.4 million decrease in lease liabilities, partially offset by a $4.2 million decrease in the research and development tax credit receivable and a $2.3 million increase in accounts payable.

Previous wording

Net cash used in investing activities for the years ended December 31, 2023 was $587.8 million and was primarily due to $475.0 million of cash payments made to Akeso pursuant to the License Agreement and $112.9 million of net purchases of short-term investments. Net cash used in investing activities for the year ended December 31, 2022 was for the purchase of property and equipment.

Current wording

Net cash used in investing activities for the years ended December 31, 2024 was $205.3 million and was primarily due to $190.2 million of net purchases of short-term investments and $15.0 million of cash payments made to Akeso pursuant to the License Agreement. Net cash used in investing activities for the years ended December 31, 2023 was $587.8 million and was primarily due to $475.0 million of cash payments made to Akeso pursuant to the License Agreement and $112.9 million of net purchases of short-term investments.

Previous wording

On December 6, 2022, we entered into a Note Purchase Agreement (the “Note Purchase Agreement”), with Mr. Robert Duggan and Dr. Maky Zanganeh, pursuant to which the Company agreed to sell to each of Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the aggregate amount of $520 million. Pursuant to the Note Purchase Agreement, the Company issued to Mr. Duggan and Dr. Zanganeh unsecured promissory notes in the amount of $400 million (the “Duggan February Note”) and $20 million (the “Zanganeh Note”), respectively, which matured and became due on February 15, 2023 and an unsecured promissory note to Mr. Duggan in the amount of $100 million (the “Duggan September Note” and together with the Duggan February Note and the Zanganeh Note, the “December 2022 Notes”), which was originally due on September 15, 2023. The maturity dates of the December 2022 Notes could have been extended one or more times at the Company’s election, but in no event to a date later than September 6, 2024. In addition, if the Company consummates a public offering, then upon the later to occur of (i) five business days after the Company receives the net cash proceeds therefrom or (ii) May 15, 2023, the Duggan February Note and the Zanganeh Note shall be prepaid by an amount equal to the lesser of (a) 100% of the amount of the net proceeds of such offering and (b) the outstanding principal amount on such Notes. On January 19, 2023, the Company provided notice to extend the term of the Duggan February Note and Duggan September Note to a maturity date of September 6, 2024. Furthermore, on January 19, 2023, the Company and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that the Company may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by Summit in the approximate amount of $500 million (the “Rights Offering”), or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) the Duggan September Note following the completion of a capital raising transaction subsequent to the Rights Offering in an amount equal to the lesser of (A) the net proceeds of such capital raise or (B) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes (the “Duggan Promissory Notes”), the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes (together with the Zanganeh Note, the “Notes”). The Notes accrue interest at an initial rate of 7.5%. All interest on the Notes shall be paid on the date of signing for the period through February 15, 2023. Such prepaid interest shall be paid in a number of shares of the Company’s common stock, par value $0.01 (“Common Stock”) equal to the dol…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Furthermore, on January 19, 2023, we and Mr. Duggan rectified the Duggan February Note and Duggan September Note in order to correctly reflect the parties’ intent that we may only prepay (i) the Duggan February Note following the completion of a public rights offering to be conducted by us in the approximate amount of $500 million, or a similar capital raise, in an amount equal to the lesser of (x) the net proceeds of the Rights Offering or such capital raise or (y) the full amount outstanding of the Duggan February Note, and (ii) the Duggan September Note following the completion of a capital raising transaction subsequent to the 2023 Rights Offering (as defined in Note 17 Stockholders’ Equity to the consolidated financial statements included under Item 15 Exhibits, Financial Statement Schedules) in an amount equal to the lesser of (A) the net proceeds of such capital raise or (B) the full amount outstanding of the Duggan September Note. Following the issuance of the two new Promissory Notes (the “Duggan Promissory Notes”), the Duggan February Note and Duggan September Note were marked as “cancelled” on their face and replaced in their entirety by the Duggan Promissory Notes (together with the Zanganeh Note, the “Notes”). The Notes 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 our 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 we entered into the Note Purchase Agreement, plus $.01), which was 9,720,291 shares. For all applicable periods following February 15, 2023, interest accrued 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. Accrued interest was paid in cash, quarterly in arrears, on each of March 31, June 30, September 30 and December 31.

Previous wording

On February 17, 2024 the Duggan February Note was amended to extend the maturity date from September 6, 2024 to April 1, 2025. For all applicable periods commencing February 17, 2024, interest shall accrue on the outstanding principal balance at the greater of 12% or the US prime interest rate, as reported in the Wall Street Journal plus 350 basis points, as adjusted monthly, compounded quarterly. Interest shall be paid upon maturity of the loan.

Current wording

On February 17, 2024 the Duggan February Note was amended to extend the maturity date from September 6, 2024 to April 1, 2025. For all applicable periods commencing February 17, 2024, interest accrued 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 was paid upon maturity of the loan.

Previous wording

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

Current wording

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. As of December 31, 2024, total unconditional purchase obligations, excluding lease commitments, are estimated to be approximately $13.9 million.

Previous wording

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 December 31, 2023, 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.

Current wording

We have certain commitments under our agreements with Akeso. The License Agreement with Akeso also contains certain manufacturing and purchase commitments. As of December 31, 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. For additional information about the License Agreement with Akeso, refer to Note 5, “Akeso License and Collaboration Agreement” to the Consolidated Financial Statements included under Item 15, “Exhibits, Financial Statement Schedules.”

Previous wording

We are not currently subject to any material legal proceedings.

Current wording

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently subject to any material legal proceedings.

Previous wording

The Company has entered into various research and development contracts with other companies. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs or prepaid expenses where the payments made exceeds the estimated costs. When evaluating the adequacy of these balances, the Company analyzes progress of the studies, including the estimated costs to complete each study or activity, 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. Actual results could differ from the Company’s estimates. In all cases, the full cost of each study or activity is expensed by the time the final report or where applicable, product, has been received. The Company’s historical estimates have not been materially different from the actual costs.

Current wording

The Company has entered into various research and development contracts with other companies. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs or prepaid expenses where the payments made exceed the estimated costs. These amounts are determined based on the estimated costs to complete each study or activity, 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. Actual results could differ from the Company’s estimates. In all cases, the full cost of each study or activity is expensed by the time the final report or where applicable, product, has been received. The Company’s historical estimates have not been materially different from the actual costs.

Previous wording

The Company measures and recognizes compensation expense for all stock option and restricted stock unit awards based on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. Additionally, the Company uses a Monte Carlo simulation model to calculate the estimated fair value on the date of grant related to awards with market-based service conditions. The fair value is recognized as expense, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis for each separately vesting portion of the award when the only condition to vesting is continued service. If vesting is subject to a market or performance condition, recognition is based on the derived service period of the award. Expense for awards with performance conditions is estimated and adjusted on a quarterly basis based upon the assessment of the probability that the performance condition will be met. Use of the Black-Scholes option-pricing model requires management to apply judgment under highly subjective assumptions. These assumptions include:

Current wording

The Company measures and recognizes compensation expense for all stock option and restricted stock unit awards based on the estimated fair value of the award on the grant date. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. Additionally, the Company uses a Monte Carlo simulation model to calculate the estimated fair value on the date of grant related to awards with market-based service conditions. The fair value is recognized as expense, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis for each separately vesting portion of the award when the only condition to vesting is continued service. If vesting is subject to a market or performance condition, recognition is based on the derived service period of the award. Expense for awards with performance conditions is estimated and adjusted on a quarterly basis based upon the assessment of the probability that the performance condition will be met. Use of the Black-Scholes option-pricing model requires management to apply judgment under subjective assumptions. These assumptions include:

Previous wording

The Company estimates expected forfeitures at the time of grant instead of accounting for forfeitures as they occur. Stock option and restricted stock unit awards have been granted at fair value to non-employees, in connection with research and consulting services provided to the Company, to non-employees in connection with corporate activities, and to employees, in connection with Stock Purchase and Restriction Agreements. Equity awards generally vest over terms of 3 or 4 years.

Current wording

The Company estimates expected forfeitures at the time of grant instead of accounting for forfeitures as they occur. Stock option awards have been granted at fair value to non-employees, in connection with research and consulting services provided to the Company, to non-employees in connection with corporate activities, and to employees, in connection with Stock Purchase and Restriction Agreements. Equity awards generally vest over terms of 3 or 4 years.

Previous wording

The Company classifies stock-based compensation expense in the consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified.

Current wording

The Company classifies stock-based compensation expense in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified.

Previous wording

The Company accounts for uncertainty in income taxes by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the consolidated financial statements. The amount of benefits that may be used is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties. At December 31, 2023 and 2022, the Company had unrecognized tax positions of $1.1 million and nil, respectively. Due to the Company’s full valuation allowance, the unrecognized tax benefits would not materially impact the Company’s effective tax rate when recognized. The Company does not anticipate the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as part of its income tax provision. For the years ended December 31, 2023 and 2022, the Company had no interest or penalties related to unrecognized tax benefits.

Current wording

The Company accounts for uncertainty in income taxes by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the consolidated financial statements. The amount of benefits that may be used is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties. At December 31, 2024 and 2023, the Company had unrecognized tax positions of $2.1 million and $1.1 million, respectively. Due to the Company’s full valuation allowance, the unrecognized tax benefits would not materially impact the Company’s effective tax rate when recognized. The Company does not anticipate the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as part of its income tax provision.