| Basis of Accounting | Basis of Accounting The unaudited condensed consolidated interim financial statements of Summit Therapeutics plc ('Summit') and its subsidiaries (together, the 'Group') for the three months ended April 30, 2019 have been prepared in accordance with IAS 34 'Interim Financial Reporting' , other International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee (‘IFRIC’) interpretations as issued by the International Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS including those applicable to accounting periods ending January 31, 2020 and the accounting policies set out in Summit’s consolidated financial statements. There have been no changes to the accounting policies as contained in the annual consolidated financial statements as of and for the year ended January 31, 2019 other than as described below. These condensed consolidated interim financial statements do not include all information required for full statutory accounts within the meaning of section 434 of Companies Act 2006 and should be read in conjunction with the consolidated financial statements of the Group as at January 31, 2019 (the ‘2019 Accounts’). The 2019 Accounts, on which the Company’s auditors delivered an unqualified audit report, are available on the Group's website at www.summitplc.com and will be delivered to the Registrar of Companies following the 2019 Annual General Meeting. The auditor’s report did not contain any statement under section 498 of the Companies Act 2006 but did contain a statement from the auditors drawing the shareholders’ attention to the Group’s need to raise additional capital as noted below. These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on June 12, 2019. The interim financial statements have been prepared assuming the Group will continue on a going concern basis. Based on management's forecasts, the Group's existing cash and cash equivalents, anticipated payments from BARDA under its contract for the development of ridinilazole and anticipated payments from CARB-X under its contract for the development of its gonorrhea antibiotic candidate are expected to be sufficient to enable the Group to fund its operating expenses and capital expenditure requirements through January 31, 2020. The Group will need to raise additional funding in order to support, beyond this date, its planned research and development efforts, potential commercialization related activities, if any of its product candidates receive marketing approval, as well as to support activities associated with operating as a public company in the United States and the United Kingdom. Should the Group be unable to raise additional funding, management has the ability to take mitigating action to fund its operating expenses and capital expenditure requirements in relation to its clinical development activities for only a short period beyond 12 months from the date of issuance of these financial statements. These circumstances represent a material uncertainty which may cast and raise significant doubt on the Group’s ability to continue as a going concern. The interim financial statements do not contain any adjustments that might result if the Group was unable to continue as a going concern. The Group is evaluating various options to finance its cash needs through a combination of some, or all, of the following: equity offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations and patient advocacy groups, debt financings, and marketing, distribution or licensing arrangements. Whilst the Group believes that funds would be available in this manner before the end of January 2020, there can be no assurance that the Group will be able to generate funds, on terms acceptable to the Group, on a timely basis or at all, which would impact the Group’s ability to continue as a going concern. The failure of the Group to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Group’s business, results of operations and financial condition. The Group’s activities and results are not exposed to any seasonality. Adoption of IFRS 16 ' Leases' IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. The standard is effective for reporting periods beginning on or after January 1, 2019 and replaces the accounting standard IAS 17 ' Leases' . Two adoption methods are permitted for transition: retrospectively to all prior reporting periods presented in accordance with IAS 8 ' Accounting Policies, Changes in Accounting Estimates and Errors' , with certain practical expedients permitted; or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. 1 . Basis of Accounting (continued) Accounting policy At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognizes a right-of-use asset within property, plant and equipment and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method. The lease term includes periods covered by an option to extend if the Group is reasonably certain to exercise that option and periods covered by an option to terminate if it is reasonably certain not to exercise that option. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method and is remeasured when there is a change in future contractual lease payments or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. The Group adopted this new standard effective February 1, 2019, as required, using the full retrospective transition method in accordance with IAS 8 ' Accounting Policies, Changes in Accounting Estimates and Errors' . Under this method, the Group will adjust its results for the years ended January 31, 2018, and 2019, and applicable interim periods, as if IFRS 16 had been effective for those periods. The Group has assessed the effect of adoption of this standard as it relates to its UK leased properties in Oxford and Cambridge and has concluded that any other contracts are not within the scope of IFRS 16 or are of low value, for which the Group has elected not to apply the requirement of IFRS 16. Due to the adoption of IFRS 16, the Group has recognized both right-of-use assets and lease liabilities related to its UK leased properties. The Group no longer recognizes a lease incentive accrual and has reclassified some costs from research and development expenses and general and administration expenses to finance costs, being the interest expense on lease liabilities. In addition, some amounts previously presented as cash outflows from operating activities in the Group's Consolidated Statement of Cash Flows are now presented as cash flows from investing or financing activities. This change in accounting policy has been reflected retrospectively in the comparative Statement of Financial Position for the year ended January 31, 2019, the comparative Statement of Comprehensive Income, Statement of Cash Flows and Statement of Changes in Equity for the three months ended April 30, 2018 , including the opening accumulated losses reserve at February 1, 2018 and February 1, 2019. During the year ended January 31, 2019, the Group re-assessed the allocation of staff related expenses, amounts totaling £0.3 million , previously reported as general and administration expenses during the three months ended April 30, 2018. These are now presented as research and development expenses. The impact of the change in accounting policy to IFRS 16 and the allocation of the staff related expenses discussed above on the comparatives to the unaudited condensed consolidated interim financial statements is disclosed in the following tables. Impact on the Unaudited Condensed Consolidated Interim Original Adjusted Statement of Financial Position £000s £000s £000s Non-current assets Property, plant and equipment 616 1,540 924 Current assets Trade and other receivables 13,547 13,491 (56 ) Non-current liabilities Lease liabilities — (647 ) (647 ) Current liabilities Trade and other payables (8,865 ) (8,733 ) 132 Lease liabilities — (358 ) (358 ) Equity Accumulated losses reserve (76,092 ) (76,097 ) (5 ) 1 . Basis of Accounting (continued) Impact on the Unaudited Condensed Consolidated Interim Original Adjusted Statement of Financial Position £000s £000s £000s Non-current assets Property, plant and equipment 809 2,067 1,258 Current assets Trade and other receivables 11,134 11,087 (47 ) Non-current liabilities Lease liabilities — (962 ) (962 ) Current liabilities Trade and other payables (8,932 ) (8,825 ) 107 Lease liabilities — (324 ) (324 ) Equity Accumulated losses reserve (93,957 ) (93,925 ) 32 Impact on the Unaudited Condensed Consolidated Interim Original Three months ended April 30, 2018 Adjusted Three months ended April 30, 2018 Impact Statement of Comprehensive Income £000s £000s £000s Operating expenses Research and development (11,254 ) (11,590 ) (336 ) General and administration (2,669 ) (2,328 ) 341 Operating loss (6,594 ) (6,589 ) 5 Finance costs (188 ) (200 ) (12 ) Loss for the period (5,835 ) (5,842 ) (7 ) Impact on the Unaudited Condensed Consolidated Interim Original Three months ended April 30, 2018 Adjusted Three months ended April 30, 2018 Impact Statement of Cash Flows £000s £000s £000s Loss before income tax (6,781 ) (6,788 ) (7 ) Adjusted for: Finance costs 188 200 12 Depreciation 77 160 83 Increase in trade and other receivables (1,434 ) (1,426 ) 8 Increase in trade and other payables 3,019 3,007 (12 ) Financing activities Repayment of lease liabilities — (84 ) (84 ) Impact on net cash flows — The Group will continue to monitor interpretations released by the IFRS Interpretations Committee and amendments to IFRS 16 and, as appropriate, will adopt these from the effective dates. For additional details regarding the Group's lease agreements see Note 9 ' Leases '. |
