Summit Therapeutics Inc. (SMMT) Earnings Call Transcript & Summary

Hi, everyone, and welcome to the 41st Annual JPMorgan Healthcare Conference. My name is Natalie Collins, and I'm an associate in the JPMorgan Healthcare Investment Banking team. Just a reminder, we'll follow a 20-minute presentation format, followed by 20 minutes of Q&A. And with that, I'm thrilled to introduce the CEO, Bob Duggan; and co-CEO, Maky Zanganeh of Summit Therapeutics.

Thank you, [ Shelly ]. Good afternoon. My name is Maky Zanganeh, the co-CEO at -- and President of Summit Therapeutics. I would like to thank JPMorgan team today, especially Mike Gaito for inviting us to present our company, Summit Therapeutics. These are our forward-looking statements. We take no responsibility in updating any forward-looking statements that we will make in this presentation. I would like to start to give you an update about our Summit company. Summit became a U.S. entity in 2020, listed on NASDAQ. And we moved our headquarter office from United Kingdom to United States. Bob Duggan became the CEO and Chairman of the Board in April 2020, and I joined the company in November 2020. The year 2021 was an incredible journey of transformation for Team Summit. We assembled a world-class team of executives and scientists, who have tremendous accomplishment in the world of biotech and biopharma as well as medical devices, health care, IT and other health care-related fields. In this year, we focus our efforts on new classes of antibiotic. And through this work, we showed the importance of evaluating and understanding the impact of the microbiome when developing antibiotics. In the year 2022, we decided to focus our attention into the field of oncology. As I mentioned, most of our leadership came from an oncology background. We focus our attention on business development. Our goal was to find a product or drug in the late stage of clinical development in the area of treating solid tumors. After reviewing a substantial number of opportunities in 2022, we signed an agreement with Akeso and in-licensing its breakthrough bispecific antibody, ivonescimab on December 5, 2022. With that, let's have a look to what we are doing at Summit. Who we are? Our leadership truly has game-changing experience. Our leaders have globally oncology drug development experience, coupled with the ability to execute at the speed of light. We have demonstrated and have a proven track record in clinical development, regulatory approval and commercializations and doing so in record time for drugs that have made a significant positive difference in patients' lives. We are building a company with impact, that focus on bringing novel drugs to patients starting with ivonescimab for multiple solid tumor indications. While doing so, we are also focusing on discovering innovative oncology drug candidates to ultimately build a robust pipeline at Summit. The focus of today, however, will be ivonescimab, the novel PD-1/VEGF bispecific antibody, for which we agree to partner with Akeso in December and in-license the compound United States, Europe, Canada and Japan. Let's take a look at our partner, Akeso. First of all, I want to welcome all of our partner team, Akeso here. I would like to thank Dr. Michelle Xia, as a co-founder, Chairwoman and CEO of Akeso, who is with us today and the team. I'm proud of Team Summit, who have diligently worked this past few months to establish a strong relationship with the team at Akeso, and I would like to thank the talented team at Akeso for spending so much quality of time, creating this meaningful partnership with us. Thank you. This is a strategic partnership with an aligned mission to improve patient lives with patient-friendly therapy. We believe an aligned mission lays a foundation, on which a successful partnership it's built. We have significant work to do, but Summit and Akeso are committed to bring ivonescimab into the hands of patients who need it most. As you know, Summit will develop SMT112 in United States, Canada, Europe and Japan, and Akeso retained the right to AK112 in China and the rest of the world outside of Summit territories. Akeso is a Chinese company cofounded in 2012 by Dr. Michelle Xia, Co-Founder, listed on the Hong Kong Exchange. And as of today, they have a value roughly around $5 billion. They have over 2,300 employees. They complete in-house different functions from discovery, development, commercialization. They have a big facility in manufacturing and capacity in manufacturing. They have one of the richest and the most diversified antibody drug pipeline in China, over 30 internally developed candidates, including 6 bispecific antibody. More than 80 clinical trials for 17 drug candidates and 15 pivotal Phase III trials. I just want to let you know that Akeso already has an approved drug in the market using same technology platform as ivonescimab, the name is cadonilimab, is a PD-1 CTLA-4 bispecific. Let's focus our attention on the product ivonescimab. Ivonescimab is a novel potential first-in-class bispecific antibody. It combines the action of 2 of the most established mechanisms in oncology into a very uniquely designed single molecule -- immunotherapy from blocking PD-1 with anti-angiogenesis effect associated with blocking VEGF. The molecule was designed with the intention to provide effects that cannot be achieved by separately administering an anti-PD-1 agent and an anti-VEGF agent. Let's walk through how this affects our belief to occur. As you know, the tumor environment is comprised of immune cells and factors that support blood vessel growth or angiogenesis. PD-1 act as a checkpoint on T cells that slows down the T cell ability to attack and kill cancer cells. Blocking PD-1 with checkpoint inhibitors has been a major advancement in oncology over the past decade. Further, the formation of new blood vessels promoted by VEGF allows for the tumor to grow by supplying the cancer with blood and nutrients. In addition, VEGF also promote an immunosuppressive tumor microenvironment. Blocking VEGF not only inhibit the creation and maintenance of the blood vessel, but may lead to a tumor more receptive to the immune system and to checkpoint inhibitors. When combined SMT112 allows for both mechanisms to work in harmony via administration as a single molecule. It is our belief that the novel design of SMT112 may not only be effective in treating solid tumors but also has the potential for favorable safety profile. As mentioned, ivonescimab is the PD-1/VEGF bispecific antibody that is the most advanced in clinic and is currently in 2 Phase III clinical trials in China. The drug received Breakthrough Therapy Designation status in China for 3 indications. The first one, in combination with chemotherapy for non-small cell lung cancer, whose tumors have an EGFR mutation who have progressed after the tyrosine kinase inhibitor therapy. Second one, in combination with chemotherapy for non-small cell lung cancer patients who have progressed after a prior PD-1 therapy. And finally, as a monotherapy as first-line treatment for locally advanced or metastatic non-small cell lung cancer patients with positive PD-L1 expression. Ivonescimab is currently being developed in China and Australia in multiple solid tumors, including a Phase III clinical trial in patients with non-small cell lung cancer that are positive for an EGFR mutation, whose disease has progressed after treatment with a TKI as well as Phase III monotherapy trial in locally advanced or metastatic non-small cell lung cancer patients with positive PD-L1 expression. Let's assess the clinical data for ivonescimab to provide further context as to why we are excited about the potential of this novel, innovative bispecific antibody. This are all presented at ASCO 2022 by our partner Akeso. The first trial I would like to discuss is ivonescimab as a monotherapy in a Phase Ib/II clinical trial in advanced or metastatic non-small cell lung cancer patients. The data presented here is patients who had positive PD-L1 tumors when treated in the first-line setting. If you look at the waterfall, you can see regardless of dosing, the waterfall shows that nearly all patients experienced a reduction in their tumor burden. In patients with tumors with low PD-L1 expression, dosed with a PD-L1 TPS score between 1% and 49%, patient experienced an overall response rate of 50%. In patients with tumors with high level of PD-L1 expression, those with TPS score of 50% or greater, a response rate of 77% was achieved with a single agent. Ivonescimab as a monotherapy was generally well tolerated. The next trials we will discuss is from data presented at ASCO 2022 for a Phase II trial. There are 3 cohorts within a study that use ivonescimab in combination with different chemotherapy regimens. The first cohort is for first line non-small cell lung cancer patients with locally advanced or metastatic tumors. Again, nearly all patients experienced a tumor burden reduction. The overall response rate observed in patients with squamous non-small cell lung cancer was 78% and in -- I'm sorry, the overall response rate observed in patients with squamous non-small cell lung cancer was 78%, and in non-squamous patient was 52%. The second cohort was locally advanced or metastatic patients whose tumors had an EGFR mutation and the tumor had progressed after taking a TKI therapy. We saw similar results. The majority of patients experienced a reduction in tumor burden. The overall response rate was 68% as of the time of the presentation of this data at ASCO in 2022. Currently, the standard of care for the second-line patients is in combination chemotherapy. For reference, historical overall response rate was 29% for this combination chemotherapy. Finally, the third cohort is in patients who have progressed their disease after treatment with an anti-PD-1 and chemotherapy regimens. In this cohort, patients taking ivonescimab combined with docetaxel, saw an overall response rate of 40%. The current standard of care for the second-line patients is the chemotherapy, including docetaxel alone. For reference, historical response rate was approximately 13% to 15% for docetaxel. Overall, ivonescimab was generally tolerated with various chemotherapies with 82 patients in this study. Treatment-related adverse events leading to permanent discontinuation occurred in only 4% of patients on this regimen. There was no meaningful difference in the incidence of treatment-related safety events between squamous and non-squamous tumors. Lung cancer is the leading cause of death in cancer patients in the United States. Every 4 minutes, someone dies from lung cancer in the United States. This is such a devastating statistic, and we believe the need for medical advancement is critical. As estimated, 80% of lung cancer is non-small cell lung cancer. Summit is initiating development activities for SMT112 in non-small cell lung cancer indications first. We plan to enroll the first patient by the second quarter of 2023. I want to discuss a little bit about our pipeline. Based on Akeso published data in Phase II as well as data that Akeso continue to produce, we plan to enroll our first patient by the second quarter of 2023. We plan to have multiple discussions with the health authorities in the first half of 2023. And based on the data and our evaluation of the feedback from the agency, we plan to initiate multiple trials in 2023 and 2024. We will have additional details with respect to our first planned study in the coming months. Additionally, we have internal research effort ongoing at Summit, which include 2 additional molecules in the discovery in oncology that we hope to continue to progress in the coming quarters in parallel with the work we are conducting on SMT112. We intend to bring patient-friendly therapy into Summit through our research to expand our pipeline portfolio, and we are proud to take this meaningful step toward accomplishment of this goal. To conclude our discussion, let's take a brief look at the financial details of our transaction for ivonescimab as well as current financial position. The total transaction is for up to $5 billion with an upfront payment of $500 million, a portion upfront payment to be paid via 10 million shares of Summit. As I mentioned before, Summit will develop and commercialize SMT112 in the United States, Canada, Europe and Japan. Also, we retain -- Akeso will retain development and commercialization rights for the rest of the 9 license regions, including China. In exchange for this right, Summit will make the upfront payment. Akeso will be eligible to receive milestones based various regulatory approvals of up to $1.05 billion and commercial milestone of up to $3.45 billion. Akeso will also be eligible to receive low double-digit royalties on net sales. The deal is subject to customary closing practices, including clearance under HSR Act, on which we are expecting to be informed shortly. We currently have sufficient cash on hand to continue our current and planned operations into mid-2024. Part of this comes from a loan received in conjunction with the signing of the deal with Akeso. We intend to commence a $500 million rights offering later this month to repay a large portion of this loan as well as add to our cash balance for use in our operations, such as clinical trials and general corporate purposes. Thank you very much. And with that, I would like to ask Bob Duggan, if he would like to add some words before we start the Q&A. That is my specialty. I always bring Bob either at the beginning or at the end.

So -- I think what we'd like to do is open the floor to questions and then based on the questions that you have, I'll be happy to add some commentary. One of them might be, if I lead the way, why would a $5 billion 2,300-person, very prolific pipeline, want to do business with a 75-person company, at that time, $200 million market cap. And this takes me back to -- [indiscernible] and I were having dinner with Bill Weldon, he's the Chairman of the Board of Johnson & Johnson, and we were out-licensing at that time to them. And he said, now, of course, we had Johnson & Johnson have 200,000 employees. So we'll be running regulatory and commercial. And I said, " well, I'll do difference, that's not going to happen." We want to make sure that we run that. We've got the team. We've got the staff, we can do it. Bill and I have known each other. He observed us in robotics. And always retrospectively, I always wondered why he had purchased us. I said this is déjà vu. This is a chance for you to participate with us, but we're going to have to run the trial. And he said, "Well, what if I don't allow that." I said, "Well, you won't be your partner." And so we have the experience that is needed with that group of people. We ran a real class act. As you know, our last visit here was -- we were in this room doing Q&A after presenting in the ballroom. And we were just approaching $1 billion in revenues. We had $1 billion in cash. And less than a year later, we sold the company for $21 billion, having taken it over for $13 billion. Put the money aside, we were doing business with 250,000 patients and extending lives. And I bet one of the top people of [ Johnson ] just last night. We were the first thing we were both talking about the friends that we have had that got on CLL, MCL treatments and survived really well. So that's our heartbeat. That's the Akeso heartbeat. We're aligned in purpose. We're a great group. We've been working together for 6 months, I could not be more pleased to have as partners Akeso, and we're going to do everything we can to make their lives go right. So with that as a little introduction. Are there any questions that you'd like to ask?

Hi, everyone. We'll have mic runners circulating the floor. So feel free to raise your hands.

I have a couple of questions to kick it off. You spoke to an extensive business development process in your presentation. What was it about Akeso that led you to enter into an agreement with them versus other opportunities that you might have considered?

Actually, it was -- we saw a lot of different companies. But from the beginning, we wanted to have a company with late stage development, innovative product as well as especially in the solid tumors in oncology. That was our look at the different company. When we get to Akeso, the truth is they have one of the top innovative on the bispecific antibody that really took our attention and especially in non-small cell lung cancer and other indications in solid tumors. And I can say the truth is, once we get together, the chemistry was so unbelievable, great that the team -- they said, you know what, that's it. Sometimes in your life, you just say that's it. And that was a team that we wanted to work with, most important than just the product and what we could achieve together. That is what I can say.

Yes. The key I entered this business of drug development in year 2008, it's very similar to modern times today from 2008 to 2009, September to September, there were no IPOs and no secondary offerings, raising money. It was a ghost yard or empty ground. Today is somewhat similar. The differences are that big pharma is loaded with money, but more capitalists and mutual funds have been taken a pounding lately. We wanted to deal with a group that it had multiple decades of experience not saying how old anybody in the room is, but this team has been 10, 15 years bispecific for 10. They know how to develop a drug. You cannot go to Harvard, I'll do difference to Harvard, and come out 3 years later and develop a drug. This just takes incredible amount of knowledge. They're every tiny little bit of specificity makes a big difference. You can pretty much take to the bank, the carbon-oxygen, hydrogen, oxygen and sulfur are going to make up any drug, not good luck. Alphabet has 26 letters, good luck and figuring out 500,000 words in the English language or 0 to 9 are numbers, but we can talk trillions. So it requires that we found in Dr. Xia that she is leading the team with incredible individuals that have been able to take it on their own shoulders and develop drugs that are extraordinary. So that's what we wanted to lock into. We think China is the best country in the world to be engaging in this activity. They're quick, they're fast, they're knowledgeable. And so we were just very, very pleased to have a Chinese partner. And we love the fact that Michelle and many of her team are as affluent in English as me and Maky are, although it's...

And not in China [indiscernible]. You know, you talk about yourself being smart. I speak for, but not this one.

[indiscernible]. But we -- bottom line is we've got a tremendous partner here, and we're going to do everything we can to make the most of that, and we expect to be with them and working side by side for a long time. And I don't think we could have done better. We probably approached 100 companies, got it down to a final 4 and heads above the rest are sitting right here in the room with us. The $0.5 billion was a testimony that we believe -- and this is what it takes you must believe. We have -- my center is always telling me, if you believe it's true, it's true. Yes, that's correct. If you believe it's true, it's true if you can produce to the truth that you believe in. So now we need to deliver and to execute and I believe in our ability to deliver and execute. I believe in Akeso's ability to deliver product and the patients are going to be the winners, the patients and the caregivers. So those of you that are here now, I think it's a privilege for us to be speaking to you. But if you just mark this day and follow us, you will see what it takes to make a viable company grow and expand and make a significant difference for the betterment. Maky and I've done it in robotics. We've done it in drug development. And we're now working with the team that's prolific in its development also. So these are exciting times for all of us, and we're pleased to have you here with us.

No pressure on the shoulder. And I just want to get 2 minutes if you can give to Michelle, Dr. Xia. Just say something, Michelle? Come sit here. I want to introduce you to Dr. Xia, Co-Founder and CEO of Akeso.

That's full of surprise. Hello, everyone, and I'm honored. I -- the first time, I mean, the question is why Summit choose Akeso. Actually, the question could be opposite, right? Why Akeso choose Summit. So I think both of Maky and Bob actually said exactly really what from my heart, what I want to see. So I think, first of all, we are we both are lucky. We both are lucky to meet each other because there's hundreds of the Chinese biotech and also U.S. biotech around everywhere. And they are -- some of them, they are absolutely, I believe they are good as well. They can make good drugs eventually. But the right time we meet each other. And so one thing is I believe Bob and Maky really believe we made innovative rather than just fast follow on or just something else, somebody else also have it. I think the Summit believes this is a great drug and with good efficacy and a very safety profile, and make a difference beyond the PD-1 and Avastin, beyond the VEGF and PD-1. And then from us, when we met with the team, not just -- we knew that they did a fantastic job from the BTK inhibitor, made history to finally have a very good package to [ AbbVie ], but also really is when we meet with them -- when we met with them, we believe Summit can really make this drug become a beautiful one. So yes, thank you.

Thank you, Michelle.

Thank you, Michelle.

I think, this is good enough.

You're amazing. Any other questions from the audience? Yes.