Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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.

Company Overview

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel antibiotics for serious infectious diseases. We are conducting a Phase 3 clinical program focused on the infectious disease C. difficile infection, or CDI. We are also seeking to expand our product candidate portfolio through the development of new mechanism, precision antibiotics using our proprietary Discuva Platform. Our lead CDI product candidate is ridinilazole (formerly SMT19969), an orally administered small molecule antibiotic.

To date, we have financed our operations primarily through issuances of our common stock (and before the Redomiciliation Transaction issuances of Summit Therapeutics plc’s ordinary shares and American Depositary Shares, or ADSs), payments to us under our license and commercialization agreement with Eurofarma Laboratórios SA, or Eurofarma, payments to us under our now-terminated license and collaboration agreement with Sarepta, and development funding and other assistance from government entities, philanthropic, non-government and not for profit organizations and patient advocacy groups 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 several 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 anticipate that our expenses will increase substantially in connection with conducting clinical trials for our lead product candidate, ridinilazole (formerly SMT19969), for the treatment of patients with CDI and seeking marketing approval for ridinilazole in the United States, as well as other geographies. In addition, if we obtain marketing approval of ridinilazole in the United States or other jurisdictions where we retain commercial rights, we expect to incur significant sales, marketing, distribution and outsourced manufacturing expenses, as well as ongoing research and development expenses.

Key Components of our Results of Operations

Revenue

Revenue consists of amounts received from the license and commercialization agreement with Eurofarma. Prior periods also include amounts received from the license and collaboration agreement with Sarepta, which was terminated in August 2019, and a research collaboration agreement with F. Hoffmann-La Roche Ltd, which ended in February 2018. We have not generated any revenue from product sales.

Under the terms of the agreement with Eurofarma, we received an upfront payment of $2.5 million in December 2017. We are eligible to receive additional development milestones upon the achievement of staged patient enrollment targets in our ongoing Phase 3 clinical trials of ridinilazole. In February 2020, we achieved the first of these enrollment targets and triggered a milestone payment of $1.0 million from Eurofarma, and we are eligible to receive up to an additional $2.75 million in development milestones upon the achievement of additional enrollment targets. We are also eligible to receive up to an

additional $21.4 million through other development milestones, commercial milestones, and one-time sales milestones based on cumulative net sales up to $100.0 million in the territory where Eurofarma has commercialization rights. Further, the agreement provides for product supply transfer payments expected to provide a return equivalent of a high single digit to low double-digit percentage of net sales. For each incremental $100.0 million in cumulative net sales achieved, we are entitled to a further milestone payment which, when combined with the aforementioned product supply transfer payments, is expected to provide a return equivalent to a mid- to high-teens percentage of net sales in the territories where we have granted Eurofarma commercialization rights.

Under the terms of the agreement with Sarepta, we received an upfront payment of $40.0 million and a development milestone payment of $22.0 million, which was payable after the first dosing of the last patient in PhaseOut DMD, our Phase 2 clinical trial of ezutromid. We also agreed to collaborate with Sarepta on the research and development of our utrophin modulators, or the licensed products, pursuant to a joint development plan. Until December 31, 2017, we were solely responsible for all research and development costs for the licensed products in the licensed territory, and thereafter we were responsible for 55.0% and Sarepta was responsible for 45.0% of such costs.

In June 2018, we announced the discontinuation of the development of ezutromid after PhaseOut DMD did not meet its primary or secondary endpoints. As a result, we updated the development period over which the revenues were recognized and deemed it to have concluded in June 2018 in line with when the development of ezutromid was discontinued. This resulted in all revenues relating to the Sarepta agreement that were previously deferred in the balance sheet being recognized in full. We continued to receive cost share income for wind-down activities in relation to PhaseOut DMD and our earlier-stage utrophin modulation development activities up until the agreement was terminated in August 2019.

Other Operating Income

Other operating income includes income received and recognized from grants and clinical trial support from government entities, philanthropic, non-government and not for profit organizations and patient advocacy groups. Specifically, the BARDA contract provides for a cost-sharing arrangement under which BARDA funds a specified portion of estimated costs for specified activities related to the continued clinical and regulatory development of ridinilazole for the treatment of CDI. We also have received grant income from a funding arrangement with CARB-X for our gonorrhea program, however, work on this program has since ceased as the series of antibiotics was determined not to have suitable qualities for further development.

Other operating income also includes benefit from two U.K. research and development tax credit cash rebate regimes: Small and Medium Enterprise, or SME, Program and the Research and Development Expenditure Credit, or 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 commercial or other funding income. Under both schemes, the Company receives cash rebate payments ranging from 9.7% to 33.4% of eligible research and development expenditure, these payments are not dependent on the Company’s pre-tax net income levels.

Operating Expenses

The majority of our operating expenses since inception have consisted of research and development activities and general and administrative costs.

Research and Development Expenses

Research and development expenses consist of all costs associated with our research and development activities.

These include:

•costs incurred in conducting our preclinical studies and clinical trials through contract research organizations, including preclinical toxicology, pharmacology, formulation and manufacturing work;

•laboratory and vendor expenses incurred in relation to our preclinical and non-clinical studies;

•costs incurred in supply chain development and scale up activities to support product registration;

•employee related expenses, which include salary, benefits and stock-based compensation, for our research and development staff; and

•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.

We utilize our employee and infrastructure resources across multiple research projects. We track expenses related to our clinical programs and certain preclinical programs on a per project basis. We expect our research and development expenses to continue to increase as compared to prior periods as we continue to enroll our Phase 3 clinical trials of ridinilazole for the treatment of CDI, continue our early-stage research programs for the treatment of Enterobacteriaceae infections, and continue our activities and initiate preclinical programs for future product candidates, including under our Discuva Platform. The timing and amount of these expenses will depend upon the outcome of our clinical trials and the associated costs. The timing and amount of these expenses will also depend on the costs associated with potential future clinical trials of our product candidates and the related expansion of our research and development organization, regulatory requirements, advancement of our preclinical programs and product candidate manufacturing costs.

The table below summarizes our research and development expenses by category. Our CDI program expenses, antibiotic pipeline development activities and DMD program expenses include costs paid to contract research organizations, manufacturing costs for our clinical trials and laboratory testing costs and research related expenses. Other research and development costs include staff and travel costs (including those of our internal CDI, antibiotic development and DMD teams), research and development related legal costs, patent registration fees, an allocation of facility-related costs and other non-core program related expenses.

Year ended Eleven months ended Year ended

December 31, December 31, January 31,

Antibiotic pipeline research and development costs 1,765 3,213 2,546

From inception to December 31, 2020, our total CDI program expenses were $118.5 million, our total antibiotic pipeline research and development expenses were $7.5 million and our total DMD program expenses were $69.8 million. We no longer expect to incur future costs related to the DMD program with the close-out activities related to ezutromid complete and the research collaboration with the University of Oxford terminated.

The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of ridinilazole or any of our future product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:

•the progress, costs and results of clinical trials of ridinilazole for CDI;

•the scope, rate of progress, costs and results of preclinical development, laboratory testing and clinical trials for our future product candidates;

•the costs, timing and outcome of regulatory review of our product candidates;

•the efficacy and potential advantages of our product candidates compared to alternative treatments, including any standard of care, and our ability to achieve market acceptance for any of our product candidates that receive marketing approval;

•the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval and the rate we expand our physical presence; and

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining, enforcing and protecting our intellectual property rights and defending against any intellectual property-related claims.

A change in the outcome of any of these variables with respect to the development of ridinilazole or any other product candidate that we may develop could result in a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration, or the FDA, the European Medicines Agency, or EMA, or another regulatory authority were to require us to conduct clinical trials or other testing beyond those that we currently contemplate for the completion of clinical development of ridinilazole or any other product candidate, or if we

experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

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.

We anticipate that our general and administrative expenses will continue to increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. We also anticipate continued accounting, audit, regulatory, compliance, insurance and investor and public relations expenses associated with being a publicly traded company in the United States. Prior to the Redomiciliation Transaction, our American Depositary Shares, or ADSs, had traded on the Nasdaq Global Market and, until we canceled the admission on February 24, 2020, our ordinary shares had traded on AIM in the United Kingdom. Our common stock is currently traded on the Nasdaq Global Market, and therefore, we only anticipate incurring future expenses associated with being a listed public company in the United States.

Taxation

As a U.S. tax resident trading entity we are subject to U.S. corporate taxation. Prior to the Redomiciliation Transaction we were a U.K. resident trading entity and were subject to U.K. corporate taxation on group-wide taxable income. Our U.K. resident trading subsidiaries are still individually subject to U.K. corporate taxation. Due to the nature of our business, we have generated losses since inception. We have recorded a full valuation allowance against the deferred tax assets with respect to these tax losses in excess of our deferred tax liabilities because we do not consider it probable that there will be suitable taxable profits in the foreseeable future based on the evidence available against which to offset these losses.

Jumpstart Our Business Startups Act of 2012

As of January 1, 2021, we are no longer an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. Formerly, as an emerging growth company, we were able to take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

•an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal controls over financial reporting;

•an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

•reduced disclosure about our executive compensation arrangements; and

•exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a shareholder approval of any golden parachute arrangements.

The last day of the fiscal year following the fifth anniversary of our initial public offering in March 2015 was December 31, 2020, hence we have ceased to be an emerging growth company. Accordingly, from January 1, 2021, we will no longer benefit from the above provisions.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We had irrevocably elected not to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will continue to be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

Business Impact of COVID-19 Pandemic

In December 2019, an outbreak of respiratory illness caused by a novel coronavirus, commonly referred to as COVID-19, began in Wuhan, China and has now spread worldwide. On March 11, 2020, the World Health Organization declared the outbreak a global pandemic and public health emergency, and on March 13, 2020, the President of the United States declared the virus as a national emergency. In addition to those who have been directly affected, millions more have been affected by government efforts in the United States, the United Kingdom, the European Union and around the world to slow the spread of the pandemic through quarantines, travel restrictions, heightened border scrutiny and other measures. The pandemic and measures taken in response by governments, private industry, individuals and others have also had significant direct and indirect adverse impacts on businesses and commerce as supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services has spiked, while demand for other goods and services has decreased significantly.

The COVID-19 pandemic and measures taken to contain it have affected our business and operations in several ways. These include, but are not limited to, the following:

•A substantial portion of our employees are remote working and expect to continue working remotely for the foreseeable future. We have been unable to undertake certain activities directly at the same level as prior to the pandemic, including clinical trial visits and investigator meetings, with such activities being done remotely where possible. We have been relying on remote means of working and communication both internally and externally. We are continuing to monitor and support the health and well-being of our employees and their productivity as remote working continues.

•Certain of our clinical trial sites have suspended enrollment due to facility closures, reduced staff and operations, quarantine travel restrictions and other governmental restrictions. Additionally, we have experienced, and may continue to experience, patient enrollment at a slower pace at certain of our clinical trial sites than expected. We may also face difficulties in recruiting and retaining patients in our clinical trials to the extent patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the pandemic. As a result, we expect the results from our clinical trials to be delayed, which we expect will have a material adverse impact on our clinical trial timelines and result in increased clinical development costs.

•As a result of the slower pace of patient enrollment, our clinical supplies of ridinilazole and vancomycin manufactured for our Phase 3 clinical trials may not be utilized prior to their expiration and may need to be replaced. While we do not currently anticipate significant interruptions in our clinical supply chain, quarantines, travel restrictions and other measures may significantly impact the ability of employees of our third-party suppliers to get to their places of work to manufacture and deliver additional clinical supplies, which could cause the results from our clinical trials to be delayed even further and may increase the costs of our clinical trials.

•Many of our clinical trial sites have been operating with reduced staff and other restrictions. We have increased our efforts to engage with our clinical trial sites with a focus on retaining patients and maintaining scheduled visits and treatments, and where possible, instituted practices such as addition of home healthcare provider services for patients and remote monitoring.

•The pandemic has caused significant disruption to the financial markets and has caused volatility in the price of our stock and that of other companies in the biotechnology industry.

The progression of the COVID-19 pandemic continues to evolve and its enduring impact on our business remains uncertain. There may be other material adverse impacts on our business, operations and financial condition that are unpredictable at this time, including delays in the development and regulatory approval of our product candidates and difficulties in retaining qualified personnel during the pandemic and once it subsides. The extent to which the pandemic may impact our business will depend on future developments, such as the duration of the pandemic, quarantines, travel restrictions and other measures in the United States, the United Kingdom, the European Union and around the world, business closures or business disruptions and the effectiveness of actions taken to contain the pandemic.

Results of Operations

Comparison of the Year Ended December 31, 2020, to the Eleven Months Ended December 31, 2019

Following the change in the Company's fiscal year end from January 31 to December 31, effective December 31, 2019, the following table summarizes the results of our operations for the year ended December 31, 2020, and the eleven months ended December 31, 2019, together with the changes to those items:

(in thousands, except percentages)

Operating expenses:

Impairment of goodwill and intangible assets 859 — 859 100.0

Revenue

Revenue was $0.9 million for the year ended December 31, 2020, compared to $0.7 million for the eleven months ended December 31, 2019.

The Company recognized revenue of $0.9 million during the year ended December 31, 2020 and $0.6 million during the eleven months ended December 31, 2019, relating to the receipt of a $2.5 million upfront payment and a $1.0 million enrollment milestone payment in respect of the license and commercialization agreement signed with Eurofarma in December 2017.

Revenues in the period ended December 31, 2019, also included $0.1 million relating to the Company’s license and collaboration agreement with Sarepta which was terminated, effective August 2019, following the Company’s decision to discontinue development of ezutromid in June 2018 and has no material ongoing obligations for either party.

Other Operating Income

Other operating income was $19.3 million for the year ended December 31, 2020, as compared to $22.9 million for the eleven months ended December 31, 2019. Other operating income for these periods primarily related to the Company's funding contract with BARDA for the development of ridinilazole for the treatment of CDI. Specifically, the Company recognized other operating income of $9.5 million during the year ended December 31, 2020, as compared to $16.6 million during the eleven months ended December 31, 2019, from the BARDA contract. This decrease of $7.1 million is due to reaching the funding limit on certain work segments of the contract. This decrease is partially offset by an increase in U.K. Research and Development Expenditure Credits as research and development expenses not funded by third parties may be eligible for these credits, see below for details.

The Company also recognized other operating income of $0.5 million during the year ended December 31, 2020, as compared to $0.8 million during the eleven months ended December 31, 2019, related to the Company's funding arrangements with CARB-X for its gonorrhea program. With the Company's decision not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhea program, it is expected CARB-X will cover its remaining share of the work that has been funded under the award.

In addition, $9.4 million was recognized in respect of U.K. Research and Development Expenditure Credits for the year ended December 31, 2020 as compared to $5.5 million for the eleven months ended December 31, 2019. This increase of $3.9 million is due primarily to additional research and development expenses incurred during the year ended December 31, 2020 that were not funded by third parties.

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $13.5 million to $53.3 million for the year ended December 31, 2020 from $39.8 million for the eleven months ended December 31, 2019. There was increased expenditure related to the Company's CDI program and the research and development related staffing and facilities costs, offset by decreased expenditure related to antibiotic pipeline research and development activities and the discontinued DMD program. This net increase is also due, in part, to the comparison of a twelve month period to an eleven month period. When comparing these results with the year ended December 31, 2019 rather than the eleven month period, research and development costs would have increased by $10.0 million.

Expenses in connection with the CDI program increased by $10.8 million to $37.5 million for the year ended December 31, 2020, from $26.7 million for the eleven months ended December 31, 2019. This increase primarily related to clinical and manufacturing activities related to the Phase 3 clinical trials of ridinilazole that commenced in February 2019.

Investment in the Company's antibiotic pipeline development activities decreased by $1.4 million to $1.8 million for the year ended December 31, 2020, compared to $3.2 million for the eleven months ended December 31, 2019. This decrease primarily related to the decision not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhea program.

Expenses related to the DMD program decreased by $0.3 million to $nil for the year ended December 31, 2020, from $0.3 million for the eleven months ended December 31, 2019. This was driven by the decision to discontinue development of ezutromid in June 2018 as well as ending all the next and future generation utrophin modulation research activities.

Other research and development expenses increased by $4.4 million to $14.0 million during the year ended December 31, 2020, as compared to $9.6 million during the eleven months ended December 31, 2019. This was primarily due to an increase in supporting staff and facilities costs related to the CDI program.

General and Administrative Expenses

General and administrative expenses increased by $7.9 million to $19.2 million for the year ended December 31, 2020, from $11.3 million for the eleven months ended December 31, 2019. This increase is primarily due to additional legal and professional fees incurred in connection with the Redomiciliation Transaction, increased support staff related costs and commercial preparatory activities, such as market research. This net increase is also due, in part, to the comparison of a twelve month period to an eleven month period. When comparing these results with the year ended December 31, 2019 rather than the eleven month period, general and administrative would have increased by $7.1 million.

Impairment of Intangible Assets

During the year ended December 31, 2020, the Company identified an impairment related to our option over non-financial asset pursuant to an Evaluation and Option Agreement with a collaboration partner. The partner is no longer conducting antibiotic candidate programs over which the Company had the option, management therefore determined that the fair value of our option to acquire the assignment of the proprietary rights for antibiotic candidates is $nil. Accordingly, the asset was written off in its entirety resulting in an impairment charge of $0.9 million.

Other income (expense), net

Other income, net was $0.3 million for the year ended December 31, 2020, compared to other expense, net of $1.6 million for the eleven months ended December 31, 2019. This net movement was primarily due to a net positive movement in foreign currency gains (losses) of $1.4 million and a gain of $0.5 million for a revaluation recorded during the year ended December 31, 2020 in relation to the assumed contingent liabilities for potential payments to certain employees, former employees and former directors of Discuva Limited, based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform. Other interest expense remained consistent.

Benefit (charge) from income tax

The income tax benefit for the year ended December 31, 2020, was $0.2 million as compared to a charge of $0.04 million for the eleven months ended December 31, 2019. These amounts relate to the Company's U.S. corporate taxation due in relation to the U.S. tax resident trading entity. The Company has recorded a full valuation allowance against the deferred tax assets in excess of our deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences.

Comparison of Eleven Months Ended December 31, 2019 and Year Ended January 31, 2019

The following table summarizes the results of our operations for the eleven months ended December 31, 2019 and year ended January 31, 2019, together with the changes to those items:

Period ended Change December 2019 vs. January 2019

(in thousands, except percentages)

Operating expenses:

Impairment of goodwill and intangible assets — 5,290 (5,290) 100.0 %

Revenue

Revenue was $0.7 million for the eleven months ended December 31, 2019, compared to $57.1 million for the year ended January 31, 2019.

The Company recognized $0.6 million of revenue during the eleven months ended December 31, 2019, relating to the receipt of a $2.5 million upfront payment in respect of the license and commercialization agreement signed with Eurofarma in December 2017.

Revenues in the period ended January 31, 2019, related primarily to the Company’s license and collaboration agreement with Sarepta following the recognition of all remaining deferred revenue related to the Sarepta agreement following the Company’s decision to discontinue development of ezutromid in June 2018. This recognition of deferred revenues did not impact the Company's cash flows. The agreement with Sarepta was terminated, effective August 2019, with no material ongoing obligations for either party.

Other Operating Income

Other operating income was $22.9 million for the eleven months ended December 31, 2019, as compared to $22.6 million for the year ended January 31, 2019. Other operating income for these periods primarily was related to the Company's funding contract with BARDA for the development of ridinilazole for the treatment of CDI. Specifically, the Company recognized other operating income of $16.6 million during the eleven months ended December 31, 2019, as compared to $17.4 million during the year ended January 31, 2019, from the BARDA contract.

The Company also recognized other operating income of $0.8 million during the eleven months ended December 31, 2019, related to the Company's funding arrangements with CARB-X for its gonorrhea program.

In addition, $5.5 million was recognized in respect of U.K. Research and Development Expenditure Credits for the eleven months ended December 31, 2019 as compared to $2.9 million for the year ended January 31, 2019. This increase of $2.6 million is due to the use of some of the R&D tax credit for the year ended January 31, 2019 to offset taxable income.

Operating Expenses

Research and Development Expenses

Research and development expenses decreased by $12.2 million to $39.8 million for the eleven months ended December 31, 2019, from $52.0 million for the year ended January 31, 2019. This decrease was primarily caused by the discontinuation of the

DMD program and related research and development staffing and facilities costs. This decrease is also due to the comparison of an eleven month period to a twelve month period. When comparing the year ended December 31, 2019 rather than the eleven month period, research and development costs would have decreased by $10.0 million.

Expenses related to the DMD program decreased by $12.3 million to $0.3 million for the eleven months ended December 31, 2019, from $12.6 million for the year ended January 31, 2019. This was driven by the decision to discontinue development of ezutromid in June 2018 as well as ending all the next and future generation utrophin modulation research activities.

Investment in expenses in connection with the CDI program increased by $2.9 million to $26.7 million for the eleven months ended December 31, 2019, from $23.8 million for the year ended January 31, 2019. This increase primarily related to clinical and manufacturing activities related to the Phase 3 clinical trials of ridinilazole that commenced in February 2019.

Investment in the Company's antibiotic pipeline development activities was $3.2 million for the eleven months ended December 31, 2019, compared to $2.5 million for the year ended January 31, 2019. This increase primarily related to research activities in relation to the DDS-01 and DDS-04 programs for gonorrhea and Enterobacteriaceae infections.

Other research and development expenses decreased by $3.5 million to $9.5 million during the eleven months ended December 31, 2019, as compared to $13.0 million during the year ended January 31, 2019. This was due to a decrease in staff and facilities costs related to the DMD program, a non-cash charge related to the acceleration of stock-based payment expenses resulting from the surrender of share option awards and a non-cash charge for amortization of our proprietary Discuva Platform in the prior period.

General and Administrative Expenses

General and administrative expenses decreased by $3.8 million to $12.6 million for the eleven months ended December 31, 2019, from $16.4 million for the year ended January 31, 2019. The higher expenses in the year ended January 31, 2019 were primarily due to a non-cash charge for the acceleration of stock-based payment expenses resulting from the surrender of share option awards and a loss on recognition of contingent consideration payable relating to the acquisition of Discuva Limited.

Impairment of Goodwill and Intangible Assets

As a result of discontinuing the development of ezutromid, the Company recognized a full impairment charge during the year ended January 31, 2019, of $5.3 million relating to the utrophin program intangible asset and goodwill associated with the acquisition of MuOx Limited.

Other income (expense), net

Other expense, net was $1.6 million for the eleven months ended December 31, 2019, compared to other income, net of $3.7 million for the year ended January 31, 2019. This net movement was primarily due to a net negative movement in foreign currency gains (losses) of $1.9 million and a revaluation of $3.7 million recognized during the year ended January 31, 2019 in relation to the Company's financial liabilities on funding arrangements relating to DMD-related U.S. not for profit organizations following the discontinuation of the development of ezutromid in June 2018.

Benefit (charge) from income taxes

The income tax charge for the eleven months ended December 31, 2019, was less than $0.1 million as compared to a benefit of $1.8 million for the year ended January 31, 2019. This movement primarily relates to the recognition of available carried forward group tax losses. The Company has recorded a full valuation allowance against the deferred tax assets in excess of our deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences.

Liquidity and Capital Resources

Sources of liquidity

To date, we have financed our operations primarily through issuances of our common stock (and before the Redomiciliation Transaction issuances of Summit Therapeutics plc’s ordinary shares and American Depositary Shares, or ADSs), payments to us under our former license and collaboration agreement with Sarepta and our license and commercialization agreement with Eurofarma and development funding and other assistance from government entities, philanthropic, non-government and not for profit organizations and patient advocacy groups 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.

In March 2018, we received net proceeds of $19.8 million from the issuance and sale of 1,666,667 shares of common stock to investors in Europe. In January 2019, we received net proceeds of $24.4 million from the issuance and sale of 15,625,000 shares of common stock to a single investor, Mr. Robert W. Duggan. In December 2019, we received net proceeds of $49.1 million from the issuance and sale of 35,075,690 shares of common stock to three existing investors. As part of the equity placing, the participating investors were granted warrants with the right to subscribe for 5,261,353 new shares of common stock at an exercise price of $1.58 per share. On November 6, 2020, we received net proceeds of $50.0 million from the issuance and sale of 14,970,060 shares of common stock to three existing investors. Following the issuance of an unsecured promissory note on March 24, 2021, we received net proceeds of $55.0 million.

Funding requirements

Since our inception, we have incurred significant operating losses. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and general and administrative expenses will continue to increase in connection with conducting clinical trials for our lead product candidate, ridinilazole, for the treatment of CDI, conducting preclinical research and development activities and seeking marketing approval for ridinilazole in the United States as well as other geographies where we retain commercialization rights. In addition, our expenses will increase if and as we:

•continue the research and development of ridinilazole, as well as our early-stage programs targeting infections caused by Enterobacteriaceae;

•seek to identify and develop additional future product candidates, including through our bacterial genetics-based Discuva Platform for the discovery and development of new mechanism antibiotics, and specifically our research activities against a group of bacteria that collectively are known as the ESKAPE pathogens;

•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;

•acquire or in-license other product candidates and technology;

•maintain, expand and protect our intellectual property portfolio;

•hire additional clinical, regulatory and scientific personnel;

•expand our physical presence; and

•add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

As of December 31, 2020, we had cash and cash equivalents of $66.4 million. We believe that the proceeds of $55 million received in March 2021 from Mr. Robert W. Duggan, our Executive Chairman and Chief Executive Officer and primary stockholder in exchange for the issuance of an unsecured promissory note combined with our existing cash resources, funding agreements and research and development tax credits receivable, will be sufficient to enable us to fund our current operating plans until the second quarter of 2022. While these capital resources have allowed us to conduct our two Phase 3 clinical trials of ridinilazole, we do not expect to be able to complete all activities associated with these trials without additional capital. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations and financial condition.

On March 25, 2021, the Company’s Board of Directors approved a rights offering available to all holders of record of the Company’s common stock, as of the close of business on April 9, 2021. Assuming the rights offering is fully subscribed, the Company will receive gross proceeds of up to $75.0 million, less expenses related to the rights offering.

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 through grants and clinical trial support or through new collaboration arrangements. Our future capital requirements will depend on many factors, including:

•the progress, costs and results of clinical trials of ridinilazole for CDI;

•the number and development requirements of other future product candidates that we pursue;

•the costs, timing and outcome of regulatory review of ridinilazole and 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;

•subject to receipt of marketing approval, revenue received from commercial sales of ridinilazole or any other 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 contract with BARDA and whether BARDA elects to pursue its final designated option beyond the base period and two exercised options;

•the amounts we receive from Eurofarma under our license and commercialization agreement, including for the achievement of development, commercialization and sales milestones and for product supply transfers;

•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 our physical presence; and

•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 patient advocacy groups, and marketing, distribution or licensing arrangements. We do not have any committed external source of funds other than amounts we may receive from BARDA and Eurofarma under our arrangements with them and our research and development tax credits receivable. As a result, we will need additional capital to fund our 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 will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. 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.

Cash Flows

The following table summarizes the results of our cash flows for the year ended December 31, 2020, the eleven months ended December 31, 2019 and the year ended January 31, 2019.

Net cash used in investing activities (421) (341) (331)

Operating Activities

Net cash used in operating activities for the year ended December 31, 2020, was $48.1 million, consisting primarily of operating costs of $70.1 million, offset by $16.9 million received from licensing agreements and funding arrangements, $5.0 million U.K. research and development tax credits received and a net taxation refund received of $0.1 million. Net loss of $52.7 million for the year ended December 31, 2020 included net $4.6 million of non-cash items. Significant non-cash items include stock-based compensation expense of $1.8 million, depreciation and amortization expense of $2.0 million and an impairment charge of $0.9 million relating to our option over non-financial asset. The significant items in the change in operating assets that impacted our use of cash in operations was an increase in deferred revenue and income of $5.4 million and an increase in research and development tax credit receivable of $4.4 million.

Net cash used in operating activities for the eleven months ended December 31, 2019, was $20.8 million, consisting primarily of a net loss of $29.1 million adjusted for non-cash items including stock-based compensation expense and deferred income taxes of $1.4 million, depreciation and amortization expense of $1.6 million, and a net decrease in operating assets and liabilities of $5.2 million. The significant items in the change in operating assets that impacted our use of cash in operations was a decrease in accounts receivable of $5.4 million.

Net cash used in operating activities for the year ended January 31, 2019, was $35.3 million consisting primarily of net income of $10.9 million adjusted for non-cash items including stock-based compensation expense and impairment of goodwill of $7.9 million, depreciation and amortization expense of $2.0 million, an impairment charge of $5.3 million and a net decrease in operating assets and liabilities of $55.0 million. The significant items in the change in operating assets that impacted our use of cash in operations was a decrease in deferred revenue and income of $49.0 million due to the recognition of all revenue from Sarepta due to the decision to terminate the DMD project in June 2019, as well as increases of $2.5 million and $2.2 million, respectively, on both accounts receivable and current taxes receivable.

Investing Activities

Net cash outflow in investing activities for the year ended December 31, 2020, was $0.4 million which represents amounts paid to acquire property and equipment.

Net cash outflow in investing activities for the eleven months ended December 31, 2019, was $0.3 million which represents amounts paid to acquire property and equipment and intangible assets.

Net cash outflow from investing activities for the year ended January 31, 2019, was $0.3 million which represents $0.2 million contingent consideration paid in connection with the acquisition of Discuva Limited and $0.1 million paid to acquire property and equipment and intangible assets.

Financing Activities

Net cash inflow from financing activities for the year ended December 31, 2020, was $50.6 million. This includes $50.0 million of net proceeds received following the issuance and sale in a private placement of shares of common stock in November 2020, and $0.6 million received following the exercise of RSUs and share options.

Net cash inflow from financing activities for the eleven months ended December 31, 2019, was $49.1 million, which represents the net proceeds received following our equity placing of ordinary shares on the AIM market of the London Stock Exchange in December 2019.

Net cash generated from financing activities for the year ended January 31, 2019, was $44.5 million. This includes $20.0 million of net proceeds received following our equity placing of ordinary shares on the AIM market of the London Stock Exchange in March 2018, $24.4 million of net proceeds received following our private placement of ADSs in the United States in January 2019, and $0.1 million received following the exercise of RSUs and share options.

Contractual obligations and commitments

The following table summarizes our contractual obligations as of December 31, 2020.

Payment due by period

(in thousands)

Operating lease obligations $ 477 $ 401 $ 76 $ — $ —

The preceding table excludes contingent payment obligations which primarily consist of commitments under our agreements with the 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. As of December 31, 2020, we were unable to estimate the amount, timing or likelihood of achieving the milestones or making future product sales that these contingent payment obligations relate to. For additional information regarding these agreements, see “Business—Our Collaborations and Funding Arrangements” in this Annual Report on Form 10-K.

Additionally, 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. These contracts generally provide for termination upon notice, and therefore are cancellable contracts and not included in the table of contractual obligations and commitments.

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.

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 consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued research and development expenses, income taxes, and stock-based compensation. 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.

While our significant accounting policies are described in more detail in Note 3 to our consolidated financial statements appearing elsewhere in this Report, we believe the following accounting policies to be most critical to understanding the judgments and estimates used by management in the preparation of our financial statements.

Other operating income

The Company generates income from government contracts that reimburse the Company for certain allowable costs for funded projects. For contracts with government agencies, when the Company has concluded that it is the principal in conducting the research and development activities, and where the funding arrangement is considered central to the Company’s ongoing operations, the funding is classified as other operating income, rather than as a reduction of research and development expenses. This funding income is not recorded as revenue as the Company's primary business activity is not to do research and development on behalf of government bodies, but rather to ultimately produce and sell pharmaceutical products commercially.

Income from government grants is recognized in the consolidated statement of operations and comprehensive income (loss) as the qualifying expenses related to the contracts are incurred, provided that there is reasonable assurance of recoverability and to the extent the conditions of the grant are met. If the government agency approves the project proposed by the Company, the government agency funds the project upon receipt of the support for the costs incurred up to the contract limit. Amounts received from these sources are recorded either as deferred income or recognized as accrued income (a component of other current assets) in the consolidated balance sheets, as appropriate depending on timing of receipts. The related costs incurred by

the Company are included in research and development expenses in the Company’s consolidated statements of operations and comprehensive (loss) income.

Credits related to the two U.K. research and development tax credit cash rebate regimes (SME Program and RDEC), received in respect of qualifying expenditure are recorded as other operating income in the consolidated statements of operations and other comprehensive (loss) income.

Research and development costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs of outside vendors engaged to conduct preclinical and clinical development activities and clinical trials as well as to manufacture clinical trial materials. Non - refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Milestone and other payments made to third-parties with respect to in-process research and development, in accordance with the Company’s license, acquisition and other similar agreements are expensed when determined to be probable and estimable.

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.

Income Taxes

The provision for income taxes is determined using the asset and liability approach. Tax laws may require items to be included in tax filings at different times than the items are reflected in the financial statements. A current asset or liability is recognized for the estimated taxes receivable or payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are initially recognized at enacted tax rates in force at the time of initial recognition and are subsequently adjusted for any enacted changes in tax rates and tax laws. Subsequent changes to deferred taxes originally recognized in equity are recognized in income. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company has recorded a full valuation allowance against the deferred tax assets in excess of our deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences. These deferred tax balances both arise in the U.K. tax jurisdiction, accordingly these are offset in the consolidated balance sheet. We record interest and penalties related to income tax matters as part of income tax expense.

Assumed Contingent Liabilities

As part of the acquisition of Discuva Limited in December 2017, the Company assumed certain contingent liabilities as certain employees, former employees and former directors of Discuva Limited are eligible for payments from Discuva Limited based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform. The timing of these potential payments is uncertain. The fair value of the assumed contingent liability was estimated using the expected value of the payments. The assumed contingent liabilities are subsequently measured at amortized cost using discounted cash flow models which calculate the risk adjusted net present values of estimated potential future cash flows of the payments. The assumed contingent liabilities are remeasured when there is a specific significant event that provides evidence of a significant change in the probability of successful development and clinical milestones being achieved. The models will be updated for changes in the probability of successful development and clinical milestones being achieved and other associated assumptions with the discount factor remaining unchanged within the model. A discount factor of 13% has been used to discount the contingent liabilities back to net present value. This discount factor has been calculated using appropriate measures and rates which could have been obtained in the period that the contingent liabilities were assumed. Accretion of the discount factor, or interest expense, is recognized as part of other income (expense), net in the Consolidated Statement of Operations and Comprehensive (Loss) Income.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, please see Note 4 to our consolidated financial statements contained in this Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our activities expose us to a variety of financial risks: foreign currency risk, interest rate risk, credit risk and liquidity risk. Our principal financial instrument comprises cash and cash equivalents, and this is used to finance our operations. We have various other financial instruments such as accounts and other receivables and trade and other payables that arise directly from our operations. The category of loans and receivables contains only accounts and other receivables, shown on the face of the balance sheet, all of which mature within one year. We have compared fair value to book value for each class of financial asset and liability and no difference was identified. Further information is included in Note 16 to our consolidated financial statements appearing at the end of this Report. We have a policy, which has been consistently followed, of not trading in financial instruments.

Foreign Currency Risk

Foreign currency risk refers to the risk that the value of a financial commitment or recognized asset or liability will fluctuate due to changes in foreign currency rates. Our net income (loss) and financial position, as expressed in U.S. dollar, are exposed to movements in foreign exchange rates against the pounds sterling and the euro. The main trading currencies are pounds sterling, the U.S. dollar, and the euro. We are exposed to foreign currency risk as a result of operating transactions, capital raises in the United Kingdom and the translation of foreign bank accounts. We monitor our exposure to foreign exchange risk. Exposures are generally managed through natural hedging via the currency denomination of cash balances and any impact currently is not material to us.

Interest Rate Risk

We do not hold any derivative instruments, or other financial instruments, that expose us to material interest rate risk.

Credit Risk

We consider all of our material counterparties to be creditworthy. We consider the credit risk for each of our counterparties to be low and do not have a significant concentration of credit risk at any of our counterparties. We had $0.3 million of accounts and other receivables outstanding at December 31, 2020, due primarily from BARDA. This amount was collected subsequent to the period end.

Liquidity Risk

We have funded our operations since inception primarily through the issuance of equity and debt securities. We have also received funding from our license and commercialization agreement with Eurofarma and our former license and collaboration agreement with Sarepta (now terminated), as well as philanthropic, non-government and not for profit organizations and patient advocacy groups and grant funding from government entities, including BARDA, CARB-X, Innovate UK, Wellcome Trust and a number of not for profit organizations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are included to this Report. An index of those financial statements is found in Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) under the supervision and the participation of the company’s management, which is responsible for the management of the internal controls, and which includes our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable level of assurance.

Management's Report on Internal Control Over Financial Reporting and Attestation Report of Registered Public Accounting Firm

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed, under the supervision of the Chief Executive Officer (our principal executive officer) and the Chief Financial Officer (our principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Moreover, projections of any evaluation of the effectiveness of internal control to future periods are subject to a risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

Our management has assessed the effectiveness of internal control over financial reporting as of December 31, 2020, based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013. Based on this assessment, our management has concluded that our internal control over financial reporting as of December 31, 2020, was effective.

This report does not include an attestation report of our registered public accounting firm as we are a non-accelerated filer and a smaller reporting company.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred after the fiscal year ended December 31, 2020, and through the date of this Report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART IIIs

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2021 Annual Meeting of Stockholders, which we intend to file with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules

(1) Financial Statements

As part of this Report, the consolidated financial statements are listed in the accompanying index to financial statements on page F-1.

(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not required, or the information required is shown in the consolidated financial statements or the notes thereto.

(3) Exhibits

The exhibits filed as part of this Report are listed below.

Exhibit No. Description

21.1* List of Significant Subsidiaries

23.1* Consent of PricewaterhouseCoopers LLP

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

# Indicates management contract or compensatory plan or arrangement.

Item 16. Report Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SUMMIT THERAPEUTICS INC.

By: /s/ Robert W. Duggan

Name:Title: Robert W. DugganChief Executive Officer; Executive Chairman

Date: March 31, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Robert W. Duggan

Michael Donaldson

/s/ Mahkam Zanganeh Director March 31, 2021

Mahkam Zanganeh

/s/ Rainer Erdtmann Director March 31, 2021

Rainer Erdtmann

/s/ Ujwala Mahatme Director March 31, 2021

Ujwala Mahatme

/s/ Manmeet Soni Director March 31, 2021

Manmeet Soni

/s/ Michael Wang Director March 31, 2021

Michael (Luhua) Wang

SUMMIT THERAPEUTICS INC.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations and Comprehensive (Loss)/Income F-5

Consolidated Statements of Stockholders' Equity (Deficit) F-6

Consolidated Statements of Cash Flows F-7

Notes to the Consolidated Financial Statements F-9

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To theBoard of Directors and Stockholders of Summit Therapeutics Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Summit Therapeutics Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and December 31, 2019, and the related consolidated Statements of Operations and Comprehensive (Loss) Income, of Stockholders' Equity (Deficit) and of Cash Flows for the year ended December 31, 2020, the eleven month period ended December 31, 2019 and fiscal year ended January 31, 2019 including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and December 31, 2019 , and the results of its operations and its cash flows for the year ended December 31, 2020, the eleven month period ended December 31, 2019 and fiscal year ended January 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-2

Table of Contents

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued and Prepaid Research and Development Costs

As described in Notes 3 and 14 to the consolidated financial statements, 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. Included within prepaid expenses at December 31, 2020, is $8.5 million of prepayments relating to research and development expenditure. Included within accrued liabilities at December 31, 2020 is $1.5 million relating to research and development expenditure. 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. However, prepaid expenses decrease, and accrued liabilities increase as the activities progress, and if actual costs incurred exceed the prepaid expense, an accrual will be recorded for the liability. The key sensitivity is the estimated current stage of completion of each study or activity, which is based on information received from the supplier and the Company’s operational knowledge of the work completed under those contracts.

The principal considerations for our determination that performing procedures relating to accrued and prepaid research and development costs is a critical audit matter is (i) the significant judgment by management in determining the prepaid or accrued costs and (ii) high degree of auditor judgment and subjectivity and effort in performing procedures and evaluating audit evidence for these accrued or prepaid costs and the factors related to progress towards or the estimated current stage of completion of the research and development activities or studies, invoicing to date under the contracts, and communications from the research institution, or other companies, of any actual costs incurred during the period that have not yet been invoiced.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating the appropriateness of the method used by management to develop the estimates, (ii) testing the completeness and accuracy of the data inputs to the estimates, including total costs included within executed contracts and actual billed expenses under these contracts and the mathematical accuracy of the accrued expense calculation (iii) evaluating the reasonableness of the assumptions used in developing the estimates (including the progress towards completion of specific tasks and the associated cost incurred for services the Company has not yet been invoiced or otherwise notified of the actual cost at period end) by obtaining external confirmation with significant contract research organizations to confirm the costs incurred to date on purchase orders and total amount of invoices raised, and (iv) considered whether evidence contained was consistent with understanding obtained through discussion with the research and development team.

/s/PricewaterhouseCoopers LLP

Reading, United Kingdom

March 31, 2021

We have served as the Company's or its predecessor’s auditor since 2013.

F-3

Table of Contents

Summit Therapeutics Inc.

Consolidated Balance Sheets

(in thousands, except share data)

ASSETS

Current assets:

Accounts and other receivable 331 541

Research and development tax credit receivable 9,856 5,084

Property and equipment, net 725 518

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Other current liabilities 729 366

Contingent consideration — 105

Non-current liabilities

Deferred revenue and income 569 493

Other non-current liabilities 2,511 2,703

Commitments and contingencies (Note 21)

Stockholders' equity:

Accumulated other comprehensive loss (3,794) (4,764)

Total liabilities and stockholders' equity $ 102,498 $ 96,248

The accompanying notes form an integral part of these Consolidated Financial Statements.

F-4

Table of Contents

Summit Therapeutics Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share amounts)

Operating expenses:

Impairment of goodwill and intangible assets 859 — 5,290

Benefit (charge) from income taxes 213 (36) 1,786

(Loss) earnings per share:

Weighted-average shares used to compute (loss) earnings per share:

Other comprehensive (loss) income:

Change in foreign currency translation adjustment 970 51 (496)

The accompanying notes form an integral part of these Consolidated Financial Statements.

F-5

Table of Contents

Summit Therapeutics Inc.

Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share and per share data)

Shares Amount

Issuance on common stock from exercise of share options 73,584 1 132 — — 133

Stock-based compensation — — 6,295 — — 6,295

Foreign currency translation adjustment — — — (496) — (496)

Issuance on common stock from exercise of share options 24,390 — 2 — — 2

Stock-based compensation — — 845 — — 845

Foreign currency translation adjustments — — — 51 — 51

Fractional shares issued from reverse stock split 3 — — — — —

Issuance on common stock from exercise of share options 426,947 4 595 — — 599

Stock-based compensation — — 1,766 — — 1,766

Foreign currency translation adjustment — — — 970 — 970

The accompanying notes form an integral part of these Consolidated Financial Statements.

F-6

Consolidated Statements of Cash Flows

(in thousands, except share and per share data)

CASH FLOWS FROM OPERATING ACTIVITIES

Gain on remeasurement of liabilities (480) — (4,410)

(Gain) loss on recognition of contingent consideration payable (102) 2 1,001

Unrealized foreign exchange (gain) loss (278) 423 —

Depreciation of operating lease right-of-use assets 451 347 443

Loss on disposal of assets 2 13 55

Impairment of goodwill and intangible assets 859 — 5,290

Deferred income taxes — — (1,906)

Other adjustments (58) — —

Changes in operating assets and liabilities:

Research and development tax credit receivable (4,381) 3,154 (2,216)

Contingent consideration paid — (703) —

Other liabilities — — (235)

CASH FLOWS FROM INVESTING ACTIVITIES

Contingent consideration paid — — (167)

Purchase of property and equipment (421) (205) (157)

Purchase of intangible assets — (136) (7)

Net cash used in investing activities (421) (341) (331)

CASH FLOWS FROM FINANCING ACTIVITIES

Transaction costs from the issuance of common stock (48) (912) (1,707)

Proceeds from exercise of share options 599 2 133

Effect of exchange rates on cash and cash equivalents 556 190 (2,323)

Cash and cash equivalents at beginning of the period / year 63,842 35,245 28,495

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Supplemental Disclosure of Cash Flow Information

Cash (received) paid for income taxes $ (70) $ 63 $ 72

The accompanying notes form an integral part of these Consolidated Financial Statements.

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Table of Contents

Notes to Consolidated Financial Statements

1. Nature of the Business

Summit Therapeutics Inc. ("Summit" or the "Company") is a biopharmaceutical company focused on the discovery, development and commercialization of novel antibiotics for serious infectious diseases. Summit is conducting a Phase 3 clinical program focused on the infectious disease C. difficile infection, or CDI. It is also seeking to expand the product candidate portfolio through the development of new mechanism, precision antibiotics using the proprietary Discuva Platform.

On September 18, 2020, Summit, a Delaware corporation, became the successor issuer to Summit Therapeutics plc, a public limited company incorporated under the laws of England and Wales with the Registrar of Companies of England and Wales, United Kingdom, for certain purposes under both the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such succession occurred pursuant to a statutory scheme of arrangement under U.K. law pursuant to which all Summit Therapeutics plc outstanding ordinary shares were exchanged on a five-for-one basis for newly issued shares of Summit common stock and Summit became the holding company of Summit Therapeutics plc (the predecessor registrant and former holding company) and its subsidiaries, which is referred to as the Redomiciliation Transaction. Concurrently, Summit Therapeutics plc was converted into a private limited company under the laws of England and Wales and renamed Summit Therapeutics Limited. In addition, the warrants and stock options to purchase shares of Summit Therapeutics plc were canceled and replacement warrants and stock options to purchase common stock in Summit Therapeutics Inc. were issued. The scheme of arrangement was accounted for as an exchange of equity interests among entities under common control. All assets and liabilities of Summit Therapeutics plc were assumed by Summit, resulting in the retention of the historical basis of accounting as if they had always been combined for accounting purposes and the historical consolidated financial statements of Summit Therapeutics plc became the historical consolidated financial statements of Summit Therapeutics Inc.

During the first quarter of 2020, there was a global outbreak of a novel coronavirus, or COVID-19, which was subsequently declared as a pandemic by the World Health Organization. The global impact of the outbreak rapidly evolved, triggering a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions.

Management believes the estimates and assumptions underlying the consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ongoing impact COVID-19 will have on the global economy generally makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent of the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

2. Going Concern

The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of the business. As of December 31, 2020, the Company had cash and cash equivalents of $66.4 million and an accumulated deficit of $210.9 million. During the year ended December 31, 2020, the Company incurred a net loss of $52.7 million and used $48.1 million of cash in operating activities. The Company expects to continue to generate operating losses for the foreseeable future. Until such time as the Company can generate substantial revenue and achieve profitability, the Company will need to raise additional capital.

On March 25, 2021, the Company’s Board of Directors approved a rights offering available to all holders of record of the Company’s common stock, as of the close of business on April 9, 2021. The terms of this rights offering are more fully described in Note 23 – Subsequent Events. Assuming the rights offering is fully subscribed, the Company will receive gross proceeds of up to $75.0 million, less expenses related to the rights offering. Mr. Robert W. Duggan, the Executive Chairman and Chief Executive Officer and primary stockholder, has given his commitment to the Board that he will subscribe for at least the full amount of his basic subscription rights. Upon the successful completion of the rights issue, the Company will repay the unsecured promissory note of $55.0 million received from Mr. Duggan on March 24, 2021 (see note 23 - Subsequent Events). This promissory note will mature and become due upon the earlier of (i) the consummation of a registered public offering with net proceeds of no less than $55.0 million, or (ii) 13 months from the date of issuance of the promissory note. The Company's existing cash resources, funding agreements, receipt from the promissory note and research and development tax credits receivable, are expected to be sufficient to enable the Company to fund its current operating plans until the second quarter of 2022. If the Rights Offering is fully subscribed at $75.0 million, the Company expects to be able to fund its current operating plan until the fourth quarter of 2022.

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Table of Contents

The Company continues to evaluate options to further finance its 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 patient advocacy groups, and marketing, distribution or licensing arrangements. While the Company believes that funds would be available in this manner before the second quarter of 2022, there can be no assurance that the Company will be able to generate funds, on terms acceptable to the Company, on a timely basis or at all, which would impact the Company’s ability to continue as a going concern.

3. Summary of Significant Accounting Policies

The significant accounting policies adopted by the Company in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Certain prior period amounts within the consolidated statements of operations and comprehensive (loss) income have been reclassified to conform to the current period presentation. Specifically, foreign currency losses of $1.3 million during the eleven months ending December 31, 2019 and foreign currency gains of $0.6 million during the year ending January 31, 2019, were included within general and administrative expenses and have now been reclassified to be presented as part of other income (expense), net in conformity with the current period presentation.

Revision and Immaterial Correction of an Error in Previously Issued Financial Statements

During the quarter ended December 31, 2020, the Company identified a deferred tax asset relating to the acquired carried forward tax losses arising from the acquisition of Discuva Limited in December 2017 that was not included as part of the business combination accounting. Furthermore, the Company identified deferred tax assets relating to available carried forward group tax losses arising as a result of the acquisition of Discuva Limited in December 2017 that were not included in the Company's subsequent balances sheets. As a result, in the Company's previously issued December 31, 2019, January 31, 2019 and January 31, 2018 financial statements, the Company incorrectly recognized $0.4 million of goodwill and omitted the inclusion of deferred tax assets of $2.0 million, $2.2 million and $1.3 million in the balance sheets as of December 31, 2019, January 31, 2019 and January 31, 2018 respectively. Since the Company's deferred tax liabilities and deferred tax assets both arise in the U.K. tax jurisdiction, accordingly these are offset on the consolidated balance sheet. The Company has recorded a full valuation allowance against the deferred tax assets in excess of the deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences. The impact of these errors on net (loss) income was a deferred tax charge of $0.1 million for the eleven months ended December 31, 2019, and a deferred tax benefit of $1.0 million and $0.8 million for the years ended January 31, 2019 and January 31, 2018, respectively.

The misstatement had no net impact on the Company’s consolidated statements of cash flows. Management concluded that the correction was not material to previously issued consolidated financial statements. Since these errors were not material to any previously issued annual or interim financial statements, no amendments to previously filed financial statements were required. Consequently, the Company has corrected for these errors by revising the December 31, 2019, January 31, 2019 and January 31, 2018 balances herein.

Principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission.The consolidated financial statements include the accounts of Summit Therapeutics Inc and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In December 2019, the Board of Directors adopted a resolution to change the Company’s fiscal year end from January 31 to December 31, commencing December 31, 2019.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign currency translation

The financial results of the Company's activities are reported in U.S. dollars (“USD”). The statement of comprehensive income of the Company's foreign subsidiaries which have a functional currency other than USD are translated into USD using average exchange rates for the period. The net assets of foreign subsidiaries whose functional currencies are other than USD are

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translated into USD using exchange rates as of the balance sheet date. The effects that arise from translating these subsidiaries at changing rates are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity (deficit).

Revenue recognition

Effective February 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), using the full retrospective method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards.

The Company enters into out-licensing agreements within the scope of ASC 606 under which it licenses certain rights to its product candidates to third parties. Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty. Payments made by the customers may include one or more of the following: non-refundable, up-front license fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products if they are successfully approved and commercialized. Each of these payments may result in license, collaboration, or other revenue, except revenue from royalties on net sales of licensed products, which would be classified as royalty revenue.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its out-licensing agreements, the following steps are performed: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. Revenue is then recognized in respect of the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the accounting for these arrangements, the Company must use significant judgment to determine: (a) the performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the standalone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. The Company also uses judgment to determine whether milestone payments or other variable consideration, except for royalties and sales-based milestones, should be included in the transaction price, as described below. The transaction price is allocated to each performance obligation based on the relative standalone selling price of each performance obligation in the contract, and the Company recognizes revenue based on those amounts when, or as, the performance obligations under the contract are satisfied.

Exclusive Licenses

If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of progress and related revenue recognition. The measure of progress, and the resulting periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research, development and licensing arrangement. Such a change could have a material impact on the amount of revenue the Company records in future periods. Under the Company’s existing license and collaboration agreements, the Company has concluded that the transfer of control to the customer occurs over the time period that the research and development services are to be provided by the Company, and this output method is, in management’s judgment, the best measure of progress towards satisfying the performance obligation.

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Milestone Payments

At the inception of each arrangement that includes potential research, development or regulatory milestone payments, the Company evaluates whether the milestones are considered likely to be met and estimates the amount to be considered for inclusion in the transaction price using the most-likely-amount method. If it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur, the associated milestone payment value is included in the transaction price. For milestone payments due upon events that are not within the control of the Company or the licensee, such as regulatory approvals, the Company is not able to assert that it is likely that the regulatory approval will be granted and that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur until those approvals are received. In making this assessment, the Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone. There is considerable judgment involved in determining whether it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price of the arrangement. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the amounts of revenue and earnings in the period of adjustment.

Royalties

For arrangements that include sales-based royalties, including milestone payments due upon first commercial sales or based on a level of sales, that are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) the occurrence of the related sales or (ii) the date upon which the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue from any of its licensing arrangements.

Manufacturing Supply Services

Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered options.The Company assesses if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations.If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded when the customer obtains control of the goods, which is upon delivery. To date, the Company has not yet entered into any manufacturing supply arrangements

Other operating income

The Company generates income from government contracts that reimburse the Company for certain allowable costs for funded projects. For contracts with government agencies where the funding arrangement is considered central to the Company’s ongoing operations, the Company classifies the recognized funding received as other operating income.

Income from government grants is recognized as the qualifying expenses related to the contracts are incurred, provided that there is reasonable assurance of recoverability. If the government agency approves the project proposed by the Company, the government agency funds the project upon receipt of the support for the costs incurred up to the contract limit. Income recognized upon incurring qualifying expenses in advance of billing is recorded as accrued income, a component of other current assets, in the consolidated balance sheet.

Grant income is not recognized as deductions of research and development costs because the Company acts as the principal in conducting the research and development activities and these contracts are central to its ongoing operations. The funds received through these means are held as deferred income in the consolidated balance sheets and are released to the consolidated statement of operations and comprehensive (loss) income as the underlying expenditure is incurred and to the extent the conditions of the grant are met. The related costs incurred by the Company are included in research and development expense in the Company’s consolidated statements of operations and comprehensive (loss) income.

The Company benefits from two U.K. R&D tax credit cash rebate regimes: Small and Medium Enterprise, or SME, Program and the Research and Development Expenditure Credit, or 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 the Company does not receive commercial or other funding income. Credits related to the SME Program and RDEC are recorded as other operating income in the consolidated statements of operations and other comprehensive (loss)/income. Under both schemes, the Company receives cash rebate payments ranging from 9.7% to 33.4% of eligible research and development expenditure, these payments are not dependent on the Company’s pre-tax net income levels.

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Business combinations

Business combinations are accounted for under the acquisition method. Acquired assets and assumed liabilities are measured at their fair values at the acquisition date. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within general and administrative expenses.

Goodwill

Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is assigned to reporting units and evaluated for impairment on at least an annual basis, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).

Intangible assets

Intangibles assets include patents, licenses, an option over non-financial assets and a research and development discovery platform ("Discuva Platform").

Patents, licenses, and the option over non-financial assets are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives (see below). The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows.

The intangible asset relating to the Discuva Platform capitalized as part of the acquisition of Discuva Limited in December 2017 is a software based platform and is available for alternative use. As such, it is subject to amortization over the period of the relevant associated patents.

Other intangible assets are amortized in equal installments over their useful estimated lives as follows:

Software licenses 3-5 years

Option over non-financial assets Over the period of the relevant agreement

Amortization of intangible assets is included as part of the research and development expense line shown on the face of the consolidated statement of operations and comprehensive (loss) income.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Cost comprises the purchase price plus any incidental costs of acquisition and commissioning.

Depreciation is calculated based on cost, less residual value, in equal annual installments over the estimated useful lives of the assets. The residual value, if not insignificant, is reassessed annually.

Laboratory equipment 2-10 years

Office and IT equipment 3-5 years

Depreciation is recognized as part of the general and administrative and research and development expense lines shown on the face of the consolidated statement of operations and comprehensive (loss) income depending on the nature of the underlying assets.

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Expenditures for repairs and maintenance are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations.

Leases

The Company determines if an arrangement is a lease at inception. At the lease commencement date, the Company measures and recognizes a lease liability and a right of use ("ROU") asset in the financial statements.

ROU assets represent the Company's right to use an underlying asset for the lease term, and the lease liabilities represent the Company's obligation to make lease payments arising from the lease. Lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. ROU asset is measured at the initial measurement of the lease liability, plus any lease payments made prior to the commencement date and any initial direct costs incurred, less any lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the periods in which they are incurred.

The Company has lease agreements with lease and non-lease components. For all leases with non-lease components the Company accounts for the lease and non-lease components as a single lease component. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for its short-term leases on a straight-line basis over the lease term.

Financial liabilities on funding arrangements

When entering into funding agreements with charitable and not for profit organizations, management is required to assess whether, based on the terms of the agreement, it can avoid a transfer of cash by settlement using a non-financial obligation. Under U.S. GAAP, when such arrangements also give the counterparties rights over unexploited intellectual property, all or part of the funding agreement should be accounted for as a financial liability recognized in the balance sheet rather than as a charitable grant.

Financial liabilities are initially recognized at fair value using a discounted cash flow model with the difference between the fair value of the liability and the cash received considered to represent a charitable grant. The financial liabilities are subsequently measured at amortized cost using discounted cash flow models which calculate the risk adjusted net present values of estimated potential future cash flows for the relevant project. The financial liabilities are remeasured when there is a specific significant event that provides evidence of a significant change in the probability of successful development such as the completion of a phase of research or public reporting of significant interim data and changes in use or market for a product. The model is updated for changes in the clinical probability of success and other associated assumptions with the discount factor remaining unchanged within the model.

Research and development costs

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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.

Stock-Based Compensation

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. 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:

•Expected term—The expected term represents the average period that the stock-based awards are expected to be outstanding and is based on a method that considers historical information of stock option exercise patterns and post-vesting termination behavior.

•Expected volatility—The expected volatility was calculated based on historical volatility of the Company's share price.

•Risk-free interest rate—The risk-free interest rate is based on the United States Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

•Expected dividend—The Company has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The Company accounts for estimated expected forfeitures as compensation cost for stock-based awards is recognized. Stock option and restricted stock unit awards have been granted at fair value to nonemployees, in connection with research and consulting services provided to the Company, and to employees, in connection with Stock Purchase and Restriction Agreements. Equity awards generally vest over terms of three or four years.

Income Taxes

The provision for income taxes is determined using the asset and liability approach. Tax laws may require items to be included in tax filings at different times than the items are reflected in the financial statements. A current asset or liability is recognized for the estimated taxes receivable or payable for the current year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are initially recognized at enacted tax rates in force at the time of initial recognition and are subsequently adjusted for any enacted changes in tax rates and tax laws. Subsequent changes to deferred taxes originally recognized in equity are recognized in income. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company has recorded a full valuation allowance against the deferred tax assets in excess of its deferred tax liabilities, as the deferred tax liability represents future reversals of existing taxable temporary differences. These deferred tax balances both arise in the U.K. tax jurisdiction, accordingly these are offset in the consolidated balance sheet. The Company records interest and penalties related to income tax matters as part of income tax expense.

Concentration of credit risk and of significant supplier

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of short-term cash deposits and accounts and other receivables. The Company's cash and cash equivalents are comprised of short-term cash deposits at a variety of financial institutions with strong credit ratings in amounts that may exceed federally insured limits and has not experienced any losses on such accounts. Cash balances maintained during the year have been principally held with reputable U.K.-based and U.S.-based banks and building societies. The Company does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

As of December 31, 2020 and December 31, 2019 the majority of cash and cash equivalents were placed with HSBC Bank plc.

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The credit risk with respect to customers and funding bodies is limited as the Company has only a small number of these arrangements, including with Eurofarma, BARDA and Carb-X.

The Company relies, and expects to continue to rely, on a number of vendors to conduct its clinical trials and preclinical studies, manufacture drug product and supply clinical trial and preclinical study materials for its development programs. These programs could be adversely affected by a significant interruption in these services or the availability of materials.

Financial instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets: quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Assumed Contingent Liabilities

Warrants

Warrants issued by the Company are recognized and classified as equity when, upon exercise, the Company would issue a fixed amount of its own equity instruments (common stock) in exchange for a fixed amount of cash or another financial asset.

Consideration received, net of incremental costs directly attributable to the issue of such new warrants, is shown in equity. Such warrants are not remeasured at fair value in subsequent reporting periods.

Warrants issued in which external services are received as consideration for equity instruments of the company should be measured at the fair value of the goods or services received. Only if the fair value of the services cannot be measured reliably would the fair value of the equity instruments granted be used. The fair value for the warrants is calculated using the Black-Scholes formula and charged to the Consolidated Statement of Operations and Comprehensive (Loss) Incomeon a straight-line

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basis over the period of the consulting services. If the services are terminated prior to the end of the consultancy agreement, the warrants cease vesting and any unvested portion of the warrants will lapse immediately.

The warrants in issue are classified within stockholders’ equity as they are indexed to the Company's own shares of common stock and require settlement in its shares of common stocks with no provision for any cash settlement.

4. New Accounting Standards

Recently adopted accounting standards

In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update introduces the current expected credit loss ("CECL") model. Under this model, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, since the Company has immaterial amounts of accounts and other receivables, all of which are considered fully recoverable.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, as the value of financial instruments with Level 3 inputs was $nil as of December 31, 2020.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). Under the guidance, public companies will be required to capitalize implementation costs incurred in a cloud computing arrangement that is a service contract. This update became effective for the Company on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements, since the Company acquired immaterial amounts of software licenses during the year ended December 31, 2020.

Recent accounting standards not yet adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issues ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update simplifies the accounting for goodwill impairments by removing the requirement to determine the fair value of individual assets and liabilities in order to calculate a reporting unit’s “implied” goodwill under the current guidance. This update will be effective for the Company for fiscal years beginning after December 15, 2022. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical corrections to the FASB ASC), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to have a material impact on the Company's consolidated financial statements.

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Table of Contents

5. Segment Reporting

.Operating segments are defined as components of a business for which separate discrete financial information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company and its chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manages its business as a single operating segment, which is the discovery, development and commercialization of novel antibiotics for serious infectious diseases.

The Company operates in 2 geographic regions: the United Kingdom and the United States. Substantially all of the Company's long-lived assets are held in the United Kingdom.

For details of revenue from external customers by geography refer to Note 6.

6. Revenue

(in thousands)

Analysis of revenue by category:

Research collaboration agreement — — 327

Revenue recognized during the year ended December 31, 2020 consists only of amounts received from the license and commercialization agreement with Eurofarma Laboratórios S.A. Revenue recognized during prior periods also includes amounts received from a license and collaboration agreement with Sarepta Therapeutics, Inc. (which was terminated in August 2019) and the a research collaboration agreement with F.Hoffmann-La Roche Ltd (which ended in February 2018).

(in thousands)

Analysis of revenue by geography:

The analysis of revenue by geography has been identified on the basis of the geographical location of each collaboration partner.

Eurofarma Laboratórios S.A.

On December 21, 2017, Summit announced it had entered into an exclusive license and commercialization agreement with Eurofarma Laboratórios S.A. ('Eurofarma'), pursuant to which the Company granted Eurofarma the exclusive right to commercialize ridinilazole in specified countries in South America, Central America and the Caribbean. The Company has retained commercialization rights in the rest of the world.

Under the terms of the license and commercialization agreement with Eurofarma, the Company received an upfront payment of $2.5 million from Eurofarma in December 2017. In February 2020, the Company reached the first enrollment milestone and received $1.0 million. The terms of the contract have been assessed under ASC 606 and currently only the upfront payment and the first enrollment milestone payment are included in the transaction price. These payments were initially reported as deferred revenue in the balance sheet and are being recognized as revenue ratably over the performance period.

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In addition, the Company will be entitled to receive an additional $2.75 million in development milestones upon the achievement of staged patient enrollment targets in the licensed territory in one of the two planned Phase 3 clinical trials of ridinilazole. The Company is eligible to receive up to $21.4 million in development, commercial and sales milestones when cumulative net sales equal or exceed $100.0 million in the Eurofarma licensed territory. Each subsequent achievement of an additional $100.0 million in cumulative net sales will result in the Company receiving additional milestone payments, which, when combined with anticipated product supply transfer payments from Eurofarma paid to the Company in connection with a commercial supply agreement to be entered into between the two parties, will provide payments estimated to range from a mid-teens to high-teens percentage of cumulative net sales in the Eurofarma licensed territory. The Company estimates such product supply transfer payments from Eurofarma will range from a high single-digit to low double-digit percentage of cumulative net sales in the licensed territory.

7. Other Operating Income

(in thousands)

Analysis of other operating income by category:

Income on remeasurement of financial liabilities on funding arrangements — — 715

Other income — — 8

BARDA

In September 2017, the Company was awarded a funding contract from the Biomedical Advanced Research and Development Authority ("BARDA"), an agency of the US government's Department of Health and Human Services' Office of the Assistant Secretary for Preparedness and Response, to fund a specified portion of the clinical and regulatory development activities of ridinilazole for the treatment of C. difficile infection ("CDI").

Under the terms of this contract, the Company was initially eligible to receive base period funding of $32 million. In addition, the contract included three option work segments that, if exercised in full by BARDA, would increase the total federal government funding under the contract to approximately $62 million. In August 2018, BARDA exercised one of the option work segments worth $12 million. In June 2019, BARDA increased the total value of the funding contract to up to $63.7 million; at this time, BARDA also exercised a second of the option work segments worth $9.6 million to bring the total amount of committed BARDA funding to $53.6 million. In January 2020, BARDA increased its award by $8.8 million to bring the total amount of the funding contract to $72.5 million and the total amount of committed BARDA funding to $62.4 million. The remaining federal government funding is dependent on BARDA in its sole discretion exercising the final independent option work segment, upon the achievement by the Company of certain agreed-upon milestones for ridinilazole. As of December 31, 2020, an aggregate of $53.3 million of the total committed BARDA funding had been received and the Company has recognized $46.2 million of cumulative income since contract inception.

CARB-X

Grant income includes income from funding arrangements with CARB-X for the Company's antibiotic pipeline research and development activities. In July 2018, the Company was granted a sub-award of up to $4.5 million from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program, or CARB-X, to help fund the selection of a preclinical candidate from the Company's lead gonorrhea series of clinical candidates and support the development of the selected candidate through the end of a Phase 1 clinical trial. Under the award, the Company received an initial $2.0 million in funding from CARB-X in July 2018. In February 2020, CARB-X increased the value of the initial funding by $1.2 million. The Company recognized income of up to 70% of eligible research and development expenditures which are funded by CARB-X, up to the maximum award. In the third quarter of 2020, the Company decided not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhea program based on toxicology data from preclinical studies. It is expected CARB-X will cover its remaining share of the work that has been funded under the award.

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Research and development credits

Credits from research and development ("R&D") tax credit, consists of the R&D tax credit received in the U.K. The Company benefits from two U.K. R&D tax credit cash rebate regimes: Small and Medium Enterprise, or SME, Program and the Research and Development Expenditure Credit ("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 the Company does not receive income. Tax credits related to the SME Program and RDEC are recorded as other operating income in the consolidated statements of operations and other comprehensive (loss) income. Under both schemes, the Company receives cash payments that are not dependent on the Company’s pre-tax net income levels.

Based on criteria established by Her Majesty’s Revenue and Customs, or HMRC, a portion of expenditures being carried out in relation to the Company's pipeline research and development, clinical trials management and third-party manufacturing development activities are eligible for the SME regime and the Company expects such elements of expenditure will also continue to be eligible for the SME regime for future accounting periods.

For the year ended December 31, 2020, the eleven months ended December 31, 2019 and for the year ended January 31, 2019 the Company recognized research and development tax relief in respect of the SME regime of $9.1 million, $4.7 million and $2.5 million, respectively, the remaining research and development credit related to the RDEC regime.

8. Other income (expense)

(in thousands)

Foreign currency gains (losses) $ 54 $ (1,332) $ 614

Remeasurement of liabilities 480 — 3,695

Interest income 4 5 5

Remeasurement of liabilities during the year ended December 31, 2020, relates to a revaluation of assumed contingent liabilities for potential payments to certain employees, former employees and former directors of Discuva Limited, based on specified development and clinical milestones related to proprietary product candidates developed under the Discuva Platform (see note 18 for further details). Remeasurement of liabilities during the year ended January 31, 2019, relates to the remeasurement of the Company’s financial liabilities on funding arrangements relating to DMD-related U.S. not for profit organizations following the discontinuation of the development of ezutromid in June 2018.

9. Income Tax

The components of the Company's (loss) income before income taxes for the year ended December 31, 2020, eleven months ended December 31, 2019 and year ended January 31, 2019 consisted of the following:

(in thousands)

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Significant components of the provision for income taxes are as follows:

(in thousands)

Current income tax benefit

Deferred income tax benefit

United Kingdom — — (1,906)

Deferred income tax benefit for the eleven months ended December 31, 2019 and the year ended January 31, 2019, has been revised pursuant to the information included in note 3 regarding the revision and immaterial correction of an error in previously issued financial statements.

The major components of deferred tax assets and liabilities are as follows:

(in thousands)

Deferred tax assets:

Deferred tax liabilities:

Other (71) —

Total deferred tax liabilities (2,260) (2,057)

Net deferred tax assets before valuation allowance 29,229 18,391

Deferred tax, net $ — $ —

Deferred tax liabilities as of December 31, 2019, have been revised pursuant to the information included in note 3 regarding the revision and immaterial correction of an error in previously issued financial statements.

The Company records net deferred tax assets to the extent that these assets will more likely than not be realized. In making such determination, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. Management has determined that the evidence connected with U.K. loss carryforwards and certain US federal and state loss carryforwards do not support a conclusion of being more likely than not to be fully realized. Accordingly, as of December 31, 2020, the Company recorded a valuation allowance of $29.2 million. The increase in valuation allowance of $8.8 million during 2020 was primarily due to loss carryforwards.

As of December 31, 2020, the Company had approximately $153.9 million in U.K. loss carryforwards available to use against future taxable profits on a year by year basis. To the extent that taxable profits exceed £5.0 million ($6.4 million) in each year, the loss available to utilize against profits in excess of £5.0 million will be restricted to 50%. The U.K. loss carryforwards do

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not lapse and therefore, the full amount will be relieved over time provided there are sufficient profits against which the losses can be utilized. The Company also had approximately $1.9 million of U.S. Federal loss carryforwards which can be carried forward for an indefinite period and used to offset 80% of taxable income in each year. In addition, the Company has approximately $2.3 million in U.S. State loss carryforwards which expire beginning 2019 through 2040.

In the Spring Budget 2020, the U.K. Government announced that from April 1, 2020, the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law was substantively enacted on March 17, 2020. The overall effect of the change was an increase in net deferred tax assets by $2.3 million and an increase in valuation by an equal amount.

The reconciliation between the U.S. statutory income tax rate for Summit and the effective income tax rates are as follows:

U.S. corporation tax rate 21.0 % 21.0 % 21.0 %

Effect of:

SMMT US Equity

SMMT · 10-K · period ended 2020-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Report Summary

SMMT US Equity☆

SMMT · 10-K · period ended 2020-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

Item 16. Report Summary

SMMT US Equity