Summit Therapeutics Inc. (NASDAQ:SMMT) Q4 2022 Earnings Call Transcript

Summit Therapeutics Inc. (NASDAQ:SMMT) Q4 2022 Earnings Call Transcript March 10, 2023

Operator: Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Summit Fourth Quarter and Year-end 2022 Earnings Call. It is now my pleasure to turn today’s call over to Mr. Dave Gancarz, Senior Vice President, Corporate Strategy and Stakeholder Relations. Sir, please go ahead.

Dave Gancarz: Good morning and thank you for joining us. Our press release was issued earlier this morning and is available on the homepage of our website. Today’s call is being simultaneously webcast, and an archived replay will also be available later today on our website, www.smmttx.com. On the call with me today is Bob Duggan, our Chairman of the Board and Chief Executive Officer; Dr. Maky Zanganeh, our Co-CEO and President; and Ankur Dhingra, our Chief Financial Officer. Before we get started, I would like to note that some statements made by our management team and some responses to questions that we make today may be considered forward-looking statements based on our current expectations. Summit cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Please refer to our SEC filings for information about these risks and uncertainties. Summit undertakes no obligation to update these forward-looking statements, except as required by law. Following comments from Bob and Ankur, we will take questions from analysts and others who maybe have them. With that, I will turn the call over to Bob.

Bob Duggan: Thank you, Dave. Good morning, everyone, and thank you for joining us today. I will provide an overview and perspective on our company overall, and then Ankur will provide some updates regarding our financial position and outlook. First, I’m incredibly enthusiastic about the opportunity we have created at Team Summit. Our mission is something that is very important to us and something that I and all of us at Team Summit accept as our obligation to all of our stakeholders. By taking full responsibility for the development of ivonescimab, we intend to make a significant difference by improving the quality and potential duration of patients’ lives who may benefit from this innovative therapy, all the while intending to create world-class stakeholder return.

I’d like to give some color as to where we are currently as a company. In December, we announced our partnership with Akeso to in-license their innovative bispecific antibody, ivonescimab. Akeso is a company based in China, is a pioneer in discovering and developing innovative antibodies and bispecific antibodies. Akeso is led by Dr. Michelle Xia, who founded the company in 2012 and is Akeso’s Chairwoman and CEO. She has exceptional experience in leadership across scientific discovery, R&D, building and scaling manufacturing and overall leadership through her experience at companies in the U.S., including Celera Genomics, Bayer, Crown Biosciences. At Crown, she served in a leadership role in a joint venture with Pfizer. Dr. Xia has about 20 years of experience in the pharmaceutical industry and academic research in the U.S. and the U.K. in addition to her deep experience in China also leading Akeso.

As a company, Akeso has a rich and diversified antibody drug pipeline with over 30 internally discovered drug candidates in various stages of development, including 6 bispecific antibodies. Akeso has taken part in over 80 clinical trials for 17 drug candidates, including 44 pivotal trials. Akeso has 2 drugs approved for oncology indications in China: a PD-1 inhibitor and a novel PD-1 CTLA-4 bispecific antibody called cadonilimab. Cadonilimab is the first PD-1-based bispecific antibody approved in any major market, demonstrating Akeso’s expertise and innovation in this space. Akeso has over 2,300 employees and is publicly listed in Hong Kong, along — with a valuation approaching $5 billion. Ivonescimab, which we also refer to as SMT112, is a bispecific antibody that brings 2 targets together in a single molecule, combining the immunotherapy effects of an anti-PD-1 and the anti-angiogenesis effects of an anti-VEGF.

Anti-PD-1 therapy assists the immune system in killing tumors. Anti-VEGF therapy helps deplete the tumor of new blood vessels and allows the immune system to fight the tumor more effectively. Ivonescimab is believed to be the PD-1/VEGF bispecific antibody that is first and most advanced in the clinic today, engineered with Akeso’s unique tetrabody technology to create bispecific antibodies that overcome manufacturing challenges, such as low expression levels due to high molecular weight of bispecific antibodies, process development obstacles due to the structural heterogeneity of bispecific antibodies and lack of stability of bispecific antibodies. In view of the coexpression of VEGF and PD-1, the tumor microenvironment ivonescimab as a single agent to block these 2 targets intends to block these 2 pathways more effectively and enhance the antitumor activity as compared to combined therapy administering PD-1 and anti-VEGF agents individually.

In China, Akeso has underway 2 Phase III trials for ivonescimab. Ivonescimab is a monotherapy for treatment-naive locally advanced or metastatic non-small cell lung cancer patients whose tumors have positive expression of PD-L1 and ivonescimab combined with chemotherapy for non-small cell lung cancer patients who have progressed after taking EGFR tyrosine kinase inhibitor. Both trials are well under way in China. Additionally, ivonescimab has received breakthrough therapy designations in 3 indications in China as follows: the 2 indications that we just mentioned in which Akeso is currently engaged in Phase III trials as well as ivonescimab in combination with chemotherapy for non-small cell lung cancer patients who have progressed after treatment with PD-1 inhibitor combined with platinum-based chemotherapy, which is currently in Phase II trials in China.

We have licensed the rights to SMT112 in the United States, Canada, Europe and Japan. In exchange for these rights, we agreed to pay $500 million upfront to Akeso, with Akeso eligible to receive meaningful regulatory milestones of up to $1.05 billion and substantive commercialization milestones up to $3.45 billion. Akeso will receive low double-digit royalties on our net sales of SMT112. Our intent is to begin our development of SMT112 in North America and Europe in non-small cell lung cancer indications. We have been in communication with the FDA and other health authorities in our licensed territories, and we have multiple upcoming meetings scheduled with the FDA to discuss our proposed approach to multiple late-stage clinical trials in non-small cell lung cancer.

Based on FDA feedback from our expanding network of highly engaged key opinion leaders with whom we have met on multiple occasions over the past couple of months and our own evaluation of the appropriate next steps, we will provide more color and context as to the specific indications that we intend to pursue in clinical trials over the next year on a timely basis. Operationally, as we build upon the excellent foundation laid by Akeso and the deal we have consummated, we have begun to and are executing upon a number of different areas, including the work to begin clinical trials with different trial sites and vendors readying clinical drug supply for trials in our territory, preparing to expand our supply chain channels long term with respect to having the opportunity to obtain clinical and commercial supply from multiple sources as well as appropriately hiring in support of the scale-up and expansion needed to be a significant player in the late-stage bispecific oncology space.

Finally, we closed our fully subscribed $500 million rights offering last week. Ankur will provide additional details as to our financial position shortly. I’m extremely proud of the level of participation that we had in our rights offering. The offering was oversubscribed above the $500 million target with over 1,500 accounts acquiring shares. Team Summit appreciates this expression of confidence. With that, I will turn things over to Ankur to give a bit more details on our financial position. Ankur?

Ankur Dhingra: Thank you, Bob. We are very excited about the opportunity in front of us to develop ivonescimab to its potential. Executing on this potential requires a significant shift from our previous operating model. We believe that we are well positioned financially to make and leverage this pivot in a bright future for all involved. Let me outline for you the steps we’ve taken to put Summit in a strong financial position. In conjunction with the signing of the collaboration and license agreement with Akeso in the beginning of December, Summit took 3 initial loans from Bob and Makytotaling $520 million. These initial loans allowed us to do 2 things. First, it demonstrated our ability and then execute on the initial upfront payments to Akeso.

And second, it provided flexibility to begin scaling our operations to quickly execute on our trial strategy. In March, we have just concluded a rights offering of $500 million. As Bob mentioned, we are very pleased with the level of interest received. And we have been putting this capital to use. We have paid Akeso the upfront consideration of $500 million, in line with our obligations under the agreement, through cash payments of $474.9 million, which were paid in 2 tranches in January and March this year. And Akeso elected to take 10 million shares of Summit common stock with a value equal to the remaining $25.1 million owed in the deal. Also, we have repaid 2 of the 3 initial loans, totaling $420 million. The third loan of $100 million becomes due in September of 2024.

At the conclusion of these transactions that I have just described above, we currently have approximately $235 million of cash and cash equivalents and a loan of $100 million on our balance sheet. We believe we have sufficient resources to fund our currently planned clinical trials for SMT112 into the second half of 2024. This includes appropriately building an experienced oncology team capable of executing multiple large clinical trials and development work. Finally, as we are focusing our company completely towards oncology and SMT112, we’re taking steps to reprioritize our current investments away from anti-infectives development and other discovery-related work and towards maximizing the development of SMT112. As a result of these decisions, we have taken some noncash charges, including impairments of our anti-infectives-based intangible assets.

In addition, in 2023, we will incur some closeout costs in order to effect the transition fully into a company focused solely on oncology. With all these actions, we’ve taken concrete steps to refocus the company towards development of SMT112 and laid a solid financial foundation and some runway for our planned trials and development of ivonescimab. And with that, I will hand it back over to Dave.

Dave Gancarz: Thank you, Bob and Ankur. We can now transition to see if there are any questions that we could answer. We have received a couple of questions in writing in advance, and we can start with those. Team, do you have rights to manufacture the product elsewhere besides China and continue research and development in case of any geopolitical-based interruptions?

Q&A Session

Ankur Dhingra: Yes. As part of our collaboration and license agreement, we have entered into both a supply agreement as well as an ability to put up manufacturing capabilities outside of China and specifically within our licensed territories. As part of our strategy, we do intend to lay down the foundation for manufacturing ivonescimab within our licensed territories.

Dave Gancarz: Thank you. Have clinical trials, such as Phase I and Phase II trials, from another country been used or accepted in the United States? So I’m happy to take that question. Ultimately, we have multiple meetings, as Bob and Ankur spoke to, with the FDA. So at this point, we currently are working through our development strategy and want to align with the U.S. FDA and the other health authorities within our licensed territories. So we will plan to give more information on those but see an opportunity moving forward to develop in our licensed territories based on data previously generated. The next question asks whether the deal is specific for SMT112 or if there are other Akeso products that are part of this deal.

Bob Duggan: At this point in time, the transaction is entirely specific to SMT112.

Dave Gancarz: And then final question received, what percentage of Summit does Akeso currently own, given the 10 million shares acquired as you spoke about, Ankur? Did they participate in the rights offering?

Ankur Dhingra: Yes. Good question. The — their participation in rights offering is not public information, so stay tuned for SEC filing from us or from Akeso as appropriate for additional information there. Akeso, as we have said, chose to elect part of the upfront payment in terms of shares, and they elected to buy 10 million shares as part of that upfront payment. And that’s what we published and included in our filings.

Bob Duggan: And they were — do have the possibility to add shares in the offering. It’s just not at this point in time, a public record, but it soon will be. So we look forward to looking at that.

Dave Gancarz: Thank you. And then, Brent, if you could please open the line for questions, any that may be received at this point?

Operator:

Bob Duggan: This is Bob Duggan. I would like to make one comment. A few people have asked me how — why we’re doing business with China and with Akeso. And I’d just point out that the 2 countries, the United States and China have about a $1 trillion annual intercompany — intercountry trading position, is rather large. Our transaction was $0.5 billion. And we are dealing with importing drugs made by China for the benefit of humans around the world, including those in the U.S.A. So we think transactions such as this are quite beneficial to our forward relationship, and we’re really honored to be a part of this partnership.

Dave Gancarz: Thank you, Bob and Ankur. And I would like to also thank everyone very much for attending our earnings call. An archived version of the webcast will be available on our website, www.smmttx.com. Thank you and enjoy the rest of your day.

Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.