Half-year report

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This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR).

Other operating income was £4.1 million for the three months ended 31 July 2019, as compared to £2.7 million for the three months ended 31 July 2018. Other operating income was £9.0 million for the six months ended 31 July 2019, as compared to £6.2 million for the six months ended 31 July 2018. These increases resulted primarily from the recognition of operating income from Summit’s funding contract with BARDA for the development of ridinilazole, which was £3.5 million for the three months ended 31 July 2019 as compared to £2.0 million for the three months ended 31 July 2018 and £8.1 million for the six months ended 31 July 2019 as compared to £5.3 million for the six months ended 31 July 2018. To date, an aggregate of £23.0 million ($30.1 million) of the total committed BARDA funding of $53.6 million has been recognised.

The Group also recognised operating income related to the Group's CARB-X award supporting the development of SMT-571 for the treatment of gonorrhoea of £0.1 million during the three months ended 31 July 2019 as compared to £0.2 million for the three months ended 31 July 2018 and £0.4 million during the six months ended 31 July 2019 as compared to £0.3 million for the six months ended 31 July 2018.

Revenue was £0.1 million for the three months ended 31 July 2019 compared to £38.0 million for the three months ended 31 July 2018. Revenue was £0.4 million for the six months ended 31 July 2019 compared to £41.8 million for the six months ended 31 July 2018.

Revenue of £0.1 million recognised during the three months ended 31 July 2019 and £0.2 million recognised during the six months ended 31 July 2019 related to the receipt of a $2.5 million (£1.9 million) upfront payment in respect of the licence and commercialisation agreement signed with Eurofarma Laboratórios SA in December 2017 for the exclusive right to commercialise ridinilazole in specified Latin American and Caribbean countries.

The decreases in revenue recognised are principally due to the reduction in revenue related to the Sarepta licence and collaboration agreement following the Group’s decision to discontinue development of ezutromid in June 2018. Revenue relating to the cost-share arrangement under the Sarepta agreement recognised during the three months ended 31 July 2019 amounted to £nil and during the six months ended 31 July 2019 amounted to £0.1 million, as compared to total revenues relating to the upfront payment, development milestone payment and cost-share arrangement recognised during the three months ended 31 July 2018 of £37.8 million and during the six months ended 31 July 2018 of £41.3 million. Effective as of August 2019, the agreement with Sarepta has been terminated with no material ongoing obligations for either party.

Research and development expenses decreased by £0.7 million to £9.2 million for the three months ended 31 July 2019 from £9.9 million for the three months ended 31 July 2018. Research and development expenses decreased by £3.9 million to £17.5 million for the six months ended 31 July 2019 from £21.4 million for the six months ended 31 July 2018. These decreases reflect decreases in both Duchenne muscular dystrophy ('DMD') clinical programme costs, as a result of the discontinuation of the development of ezutromid in June 2018, and research and development related staffing costs, offset by increased CDI clinical programme costs.

Expenses related to the CDI programme increased by £4.1 million to £12.5 million for the six months ended 31 July 2019 from £8.4 million for the six months ended 31 July 2018. This increase primarily related to clinical operations and supply manufacturing activities related to the ongoing Ri-CoDIFy Phase 3 clinical trials of ridinilazole that commenced in February 2019.

Investment in the Group's preclinical antibiotic pipeline was £1.2 million for the six months ended 31 July 2019 compared to £0.4 million for the six months ended 31 July 2018. This increase primarily related to preclinical development activities for SMT-571 for the treatment of gonorrhoea and the DDS-04 series for the treatment of Enterobacteriaceae infections.

Expenses related to the DMD programme decreased to £0.2 million for the six months ended 31 July 2019 from £7.8 million for the six months ended 31 July 2018. The Group does not expect to incur further significant costs for this programme.

Other research and development expenses decreased by £1.2 million to £3.6 million during the six months ended 31 July 2019 as compared to £4.8 million during the six months ended 31 July 2018, which was driven by a decrease in staffing and facilities costs reflecting the implementation of cost-cutting measures following the decision to discontinue development of ezutromid in June 2018.

General and administration expenses decreased by £1.1 million to £1.2 million for the three months ended 31 July 2019 from £2.3 million for the three months ended 31 July 2018. General and administration expenses decreased by £1.8 million to £2.9 million for the six months ended 31 July 2019 from £4.7 million for the six months ended 31 July 2018. These decreases were driven by a reduction in staff and facilities related costs and legal and professional fees, as well as a net positive movement in exchange rate variances.

Finance costs recognised during the three and six months ended 31 July 2019 relate to lease liability interest payable and the unwinding of the discount associated with provisions. Finance costs were £0.1 million for the three months ended 31 July 2019 compared to £0.2 million for the three months ended 31 July 2018. Finance costs were £0.1 million for the six months ended 31 July 2019 compared to £0.4 million for the six months ended 31 July 2018. This decrease relates to the cessation of the unwinding of the discount following the remeasurement of the financial liabilities on funding arrangements relating to DMD-related US not for profit organisations to £nil in June 2018.

The income tax credit for the three months ended 31 July 2019 was £1.1 million as compared to a net income tax expense of £0.5 million for the three months ended 31 July 2018. The income tax credit for the six months ended 31 July 2019 was £1.9 million as compared to £0.5 million for the six months ended 31 July 2018. These changes in income tax during the three and six months ended 31 July 2019 as compared to during the three and six months ended 31 July 2018 were driven by the Group's de-recognition of its accrued UK research and development tax credit during the three months ended 31 July 2018, as it was not certain that the Group would have sufficient losses in the prior year to remain eligible to receive this research and development tax credit. The Group's current net tax credit for the periods reflects the accrued UK research and development tax credit based on management's estimate of the qualifying expenditure relating to research and development activities carried out by the Group, the taxes relating to the US operations and the release of deferred tax liabilities associated with the amortisation of intangible assets.

Loss before income tax was £6.2 million for the three months ended 31 July 2019 compared to a profit before income tax of £27.1 million for the three months ended 31 July 2018. Loss before income tax was £11.1 million for the six months ended 31 July 2019 compared to a profit before income tax of £20.3 million for the six months ended 31 July 2018.

Net loss for the three months ended 31 July 2019 was £5.2 million with a basic loss per share of 3 pence compared to a net profit of £26.6 million for the three months ended 31 July 2018 with a basic earnings per share of 32 pence. Net loss for the six months ended 31 July 2019 was £9.2 million with a basic loss per share of 6 pence compared to a net profit of £20.8 million for the six months ended 31 July 2018 with a basic earnings per share of 26 pence.

The profits recorded during the three and six months ended 31 July 2018 were due to the recognition of all remaining deferred revenue related to the Sarepta agreement following the Group's decision to discontinue the development of ezutromid.

The Group had a net cash outflow of £7.3 million for the six months ended 31 July 2019 as compared to a net cash outflow of £3.8 million for the six months ended 31 July 2018.

As at 31 July 2019, total cash and cash equivalents held were £20.9 million (31 January 2019: £26.9 million).

The Group believes that its 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 gonorrhoea antibiotic candidate, will be sufficient to enable the Group to fund its operating expenses and capital expenditure requirements through to at least 31 January 2020.

Glyn EdwardsChief Executive Officer11 October 2019

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

For the six months ended 31 July 2019

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

For the three and six months ended 31 July 2019

Whilst the financial information included in this announcement has been prepared in accordance with IFRS and 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, this announcement does not itself contain sufficient information to comply with IFRS.

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 gonorrhoea antibiotic candidate are expected to be sufficient to enable the Group to fund its operating expenses and capital expenditure requirements through to at least 31 January 2020. The Group will need to raise additional funding in order to support, beyond this date, its planned research and development efforts, its preparatory commercialisation related activities should ridinilazole receive marketing approval, as well as to support activities associated with operating as a public company in the United States and the United Kingdom.

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 organisations 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.

Management has identified specific mitigating actions which it would be required to take in the near future should the Group be unable to raise additional funding, including, amongst others, a slow-down of its ongoing Phase 3 clinical trials and suspending its Discuva Platform activities and associated research programmes. Should the Group be required to take these steps, it is currently expected that its current and anticipated cash and cash equivalents would be sufficient through to at least 31 October 2020. The failure of the Group to obtain sufficient funds on acceptable terms when needed would therefore have a material adverse effect on the Group’s business, results of operations and financial condition.

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 financial information for the three and six month periods ended 31 July 2019 and 2018 are unaudited.

Solely for the convenience of the reader, unless otherwise indicated, all pound sterling amounts stated in the Consolidated Statement of Financial Position as at 31 July 2019, the Consolidated Statement of Comprehensive Income for the three and six months ended 31 July 2019 and Consolidated Statement of Cash Flows for the six months ended 31 July 2019 have been translated into US dollars at the rate on 31 July 2019 of $1.2220 to £1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into US dollars at that or any other exchange rate as at that or any other date.

The Board of Directors of the Company approved this statement on 11 October 2019.

The Group adopted this new standard effective 1 February 2019, as required, using the full retrospective transition method in accordance with IAS 8 '. Under this method, the Group will adjust its results for the years ended 31 January 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 recognised both right-of-use assets and lease liabilities related to its UK leased properties. The Group no longer recognises 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 31 January 2019, the comparative Statement of Comprehensive Income, Statement of Cash Flows and Statement of Changes in Equity for the six months ended 31 July 2018, including the opening accumulated losses reserve at 1 February 2018 and 1 February 2019.

The impact of the change in accounting policy to IFRS 16 discussed above on the comparatives to the unaudited condensed consolidated interim financial statements is disclosed in the following tables.

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.

The calculation of (loss) / earnings per share is based on the following data:

* See Note 1 - ‘Basis of Accounting - Adoption of IFRS 16 ‘’’

Basic (loss) / earnings per ordinary share has been calculated by dividing the (loss) / profit for the three and six months ended 31 July 2019 by the weighted average number of shares in issue during the three and six months ended 31 July 2019. Diluted earnings per ordinary share has been calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares represent the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to share options in-the-money compared with the number of shares that would have been issued assuming the exercise of share options in-the-money.

IAS 33 ‘Earnings per Share’ requires the presentation of diluted earnings per share where a company could be called upon to issue shares that would decrease net profit or loss per share. As the Group reported net losses for the three and six months ended 31 July 2019, the weighted average number of ordinary shares outstanding used to calculate the diluted (loss) / earnings per ordinary share is the same as that used to calculate the basic (loss) / earnings per ordinary share, as the exercise of share options would have the effect of reducing loss per ordinary share which is not dilutive.

On 23 April 2019, 104,877 ordinary shares were issued following the exercise of restricted stock units ('RSUs'). This exercise of RSUs raised net proceeds of £1,049.

The new ordinary shares issued in connection with the RSUs exercised rank with existing ordinary shares.

As of 31 July 2019, the number of ordinary shares in issue was 160,494,758.

-END-

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Globe Newswire: 12:00 GMT Friday 11th October 2019

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