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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation 2016 Long Term Incentive Plan In September 2020, in conjunction with the Redomiciliation, the 2016 Long Term Incentive Plan, (the "2016 Plan") and the Company's outstanding restricted stock units ("RSUs") were assumed and adopted by Summit Therapeutics Inc., and all awards were exchanged with replacement awards issued. Subsequent to the Redomiciliation, no additional grants will be made under the 2016 Plan and any outstanding awards under the 2016 Plan and RSUs will continue with their original terms. The Company concluded that the adoption of the 2016 Plan and RSUs and issuance of replacement awards was a modification but with no change in the material rights and preferences and therefore, no recorded change in the fair value of each respective award is needed. 2020 Stock Award Plan In September 2020, the Company’s Board of Directors approved the 2020 Stock Incentive Plan (the “2020 Plan”), which became effective on September 21, 2020. The 2020 plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Upon the effectiveness of the 2020 Plan, the Company ceased granting awards under its 2016 Plan. A total of 8,000,000 shares of common stock were initially reserved for issuance under the 2020 Plan. Additionally, up to 5,000,000 shares of common stock, including RSUs can be added to the 2020 Plan for future issuance from options that expire, lapse unexercised or are terminated from the 2016 Plan or any other predecessor plans. The number of shares of common stock that may be issued under the 2020 Plan will automatically increase on each January 1, beginning in 2021 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 6,400,000 shares of common stock, (ii) 4% of the common shares outstanding on the final day of the immediately preceding calendar year and (iii) an amount as determined by the Company’s Board of Directors. As of December 31, 2021, there are 2,293,700 shares available to be issued under the 2020 Plan. 2020 Employee Stock Purchase Plan The 2020 Employee Stock Purchase Plan (the "2020 ESPP") was adopted by the Board of Directors and approved by the Company's shareholders on July 17, 2020 and approved by the predecessor company shareholders on August 19, 2020. The 2020 ESPP initially authorized the issuance of up to 1,000,000 shares of common stock to participating employees. The number of common shares that may be issued under the 2020 ESPP automatically increases on each fiscal year commencing January 1, 2021 and continuing for each fiscal year until, and including the fiscal year commencing on, January 1, 2030 equal to the least of (i) 1,600,000 shares of common stock, (ii) 1% of the common shares outstanding on such date and (iii) an amount as determined by the Company’s Board of Directors. As of December 31, 2021, there were 1,825,750 shares available to be issued under the 2020 ESPP. The first offering period of the 2020 ESPP plan consists of seven months, commenced on August 2, 2021 and will terminate on February 28, 2022. Offering periods thereafter will be six months in duration and will commence immediately proceeding the end of the previous offering period, unless otherwise determined by the Board of Directors or Compensation Committee. The next offering period commenced on March 1, 2022. Under the 2020 ESPP, eligible employees can purchase shares of common stock through payroll deductions of up to 15% of their compensation received during the plan period or such shorter period during which deductions from payroll are made, up to a defined maximum amount. The option price is determined based on the lesser of the closing price of common stock on (i) the first business day of the plan period or (ii) the exercise date, or shall be based solely on the closing price of the common stock on the exercise date; provided that such option price shall be at least 85% of the applicable closing price. In the absence of a determination by the Board of Directors or the Compensation Committee, the option price is 85% of the lesser of the closing price of the common stock on (i) the first business day of the plan period or (ii) the exercise date. The closing price is the (a) the closing price (for the primary trading session) on the Nasdaq Global Select Market or (b) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in the Wall Street Journal or another source selected by the Board or the Committee. Stock Option Valuation The Company estimates the fair value of stock options granted to employees and directors using the Black-Scholes valuation model. Stock options granted under the 2016 and 2020 Plans generally vest over three or four years and expire after ten years. This valuation methodology utilizes several key assumptions as highlighted below. The assumptions used in the Company's valuation are summarized as follows, presented on a weighted average basis:
|  | Year Ended December 31, 2021 |  | Year Ended December 31, 2020
Risk-free interest rate |  | 1.05 | % |  | 0.29 | %
Expected term (in years) |  | 5.7 |  | 5.9
Expected volatility |  | 74.5 | % |  | 71.9 | %
Expected annual dividends per share |  | — | % |  | — | %
The following table summarizes the Company's stock option activity for the year ended December 31, 2021:
|  | Number of share options |  | Weighted average exercise price |  | Weighted average remaining contractual term |  | Aggregate intrinsic value
Outstanding as of December 31, 2020 |  | 3,672,968 |  |  | $ | 2.90 |  |  | 8.9 years |  | $ | 6,641 |
Granted |  | 13,262,016 |  |  | $ | 5.76 |  |  |  |  |
Forfeited |  | (2,012,851) |  |  | $ | 3.61 |  |  |  |  |
Exercised |  | (1,124,577) |  |  | $ | 2.74 |  |  |  |  |
Outstanding as of December 31, 2021 |  | 13,797,556 |  |  | $ | 5.55 |  |  | 8.6 years |  | $ | 712 |
Outstanding as of December 31, 2021 - vested and expected to vest |  | 12,685,817 |  |  | $ | 5.51 |  |  | 8.6 years |  | $ | 709 |
Exercisable at December 31, 2021 |  | 1,598,709 |  |  | $ | 3.60 |  |  | 7.2 years |  | $ | 406 |
The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2021 and 2020 was $3.50 and $2.20, per share, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021 and December 31, 2020 was $3,744 and $857, respectively. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. As of December 31, 2021, total unrecognized compensation cost related to unvested stock option grants was approximately $27,905. This amount is expected to be recognized over a weighted average period of approximately 2.2 years. In September 2021, the Compensation Committee of the Board of Directors approved a modification to the Company's outstanding performance-based stock option awards for active employees which removed the performance-based vesting criteria from these awards. Following this modification, the option awards are subject only to previously existing time-based vesting conditions. The Company accounted for this change as a modification in accordance with the requirements of Accounting Standards Codification Topic 718. As a result, 9,250,000 options, related to twenty-five employees, that were previously authorized that had not achieved a grant date became granted on September 24, 2021 relating to the modification. The Company will recognize the newly assessed measurement date fair value of the awards as compensation expense over the remaining vesting period. The incremental compensation expense related to the modification for the year ended December 31, 2021 was $4,872. The stock option activity above incorporates the modified awards. Restricted Stock Units The Company's outstanding restricted stock units ("RSUs") consist of nominal-cost options which were granted to non-executive directors. The following table summarizes the activity relating to RSUs for the year ended December 31, 2021:
|  |  | Number of Shares |  | Weighted Average Grant Date Fair Value |
RSUs - beginning of period |  |  | 26,923 |  |  | $ | 1.60 |  |
Vested |  |  | (26,923) |  |  | $ | 1.60 |  |
RSUs - end of period |  |  | — |  |  | $ | — |  |
The aggregate intrinsic value of restricted stock units vested during the years ended December 31, 2021 and December 31, 2020 was $125, respectively. Warrants The fair value of warrants is estimated on the date of grant using the Black-Scholes valuation methodology. Expected volatilities are based on historical share price performance, weighted to exclude periods of unusually high volatility. The Company assumed the warrants to be exercised immediately on vesting. The risk-free rate is equal to the prevailing U.K. Gilts rate at grant date that most closely matches the expected term of the grant, as the warrants were issued prior to the Redomiciliation. Expected dividend yield is zero, and consistent with the Board of Directors’ view that the Company’s business model is to generate value through capital growth rather than the payment of dividends. Each warrant entitles the warrant holder to subscribe in cash for one share. Shares of common stock allotted pursuant to the exercise of the warrant will rank in full for all dividends and other distributions with a record date after the exercise date with the shares of common stock in issue at that date. As of December 31, 2021, 5,821,137 warrants were granted, of which 559,787 warrants were granted to consultants and 5,261,350 warrants were granted to investors (refer to Note 20 for further details). All warrants are considered vested at December 31, 2021, have a weighted-average exercise price of $1.56, an aggregate intrinsic value of $6,559, and a weighted average remaining contractual life of 4.0 years. At December 31, 2021, there was no unrecognized compensation expense related to warrants. Stock-Based Compensation Stock‑based compensation expense related to stock options is recorded within the consolidated statements of operations and comprehensive loss as follows:
|  | Year Ended December 31, 2021 |  | Year Ended December 31, 2020
Research and development |  | $ | 5,909 |  |  | $ | 749 |
General and administrative |  | 6,895 |  |  | 1,017 |
Total stock-based compensation |  | $ | 12,804 |  |  | $ | 1,766 |

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