Summit Therapeutics' (NASDAQ: SMMT) shares are up by more than 1,060% in the last 12 months, thanks to the market's exuberant reaction to the latest sets of clinical trial data produced by the company and its main collaborator. Now the question is whether Summit can continue wowing investors as its candidates approach their shot at commercialization.
But you might look at its pipeline and conclude that the biotech is a one-trick pony, as its lack of diversification is acute. So is this stock's value a bubble that's just waiting for a setback before it pops and crashes, or is it capable of bringing home the bread?
There's a lot to like about this business
At the moment, Summit is running a pair of phase 3 clinical trials to see whether its biologic called ivonescimab is useful to treat two subsets of non-small cell lung cancer (NSCLC).
One of those programs, intended for use in metastatic squamous NSCLC, could become a first-line treatment; the other, targeted at advanced or metastatic NSCLC that resisted treatment with an epidermal growth factor receptor tyrosine kinase inhibitor (EGFR-TKI) therapy, is intended for second-line use. Both are being tested for their efficacy in combination with chemotherapy.
There's ample reason to believe that these two programs could be proven effective and eventually commercialized, which would lead to the company realizing sales revenue for the first time. In a parallel phase 3 study conducted by a collaborator in China, patients with advanced NSCLC saw their chance of disease progression or death decrease by 54% when treated with chemotherapy and ivonescimab, compared to those treated with chemotherapy plus a placebo.
But focusing on just two of ivonescimab's potential uses is missing the forest for just two of the trees. The positive data the business has produced so far obscures the impressive results of its key benefactor.
Summit is closely partnered with Akeso, a biotech in China that ran the early-stage clinical trials for ivonescimab, as well as doing the research and development (R&D) work of designing it. Akeso already has a trio of medicines commercialized in China, and it has ongoing collaborations with high-profile companies like Pfizer and AstraZeneca. It's also running a slew of clinical trials in every stage of the process, testing ivonescimab for a handful of other segments within NSCLC, as well as for additional indications like metastatic colorectal cancer and recurrent ovarian cancer.
If Akeso's data on those programs is to be believed, ivonescimab could be wonderfully effective for as many as 19 different oncology indications.
So Summit is likely not as risky as other pre-revenue biotech stocks, as it has a proven partner that did most of the riskiest early-stage legwork. Furthermore, it will almost certainly have the opportunity to license, or possibly even collaborate on, late-stage development for a bunch of other programs via its relationship with Akeso. And Summit won't be the one taking the risks of advancing those programs through the most difficult parts of the process.
The takeaway is that you can't necessarily view Summit Therapeutics through the same lenses that make sense for evaluating other young biotechs.
There's even more to like, despite the risks
Summit's financial position is fairly strong. As of the second quarter, it reported $325.4 million in cash, cash equivalents, and short-term investments. At that point, management thought it had enough cash to last it through the fourth quarter of 2025.
Then, in mid-September, after receiving an offer for its shares from a moneyed group of institutional investors, Summit sold $235 million of its common stock in a capital raise. It intends to use the proceeds for clinical development costs, so it should have plenty of cash for the near term.
Another bullish factor is that industry insiders are interested in large blocks of its shares based on its clinical trial data.
The risks associated with buying Summit today are fairly typical for a biotech at its stage of development. The clinical trials could fail, harming the stock price. But because Akeso paved the way and put in a lot of work in parallel, the magnitude of those risks is significantly mitigated. Early-stage safety testing has been performed in so many different cancer contexts that a surprising safety issue is very unlikely.
Proving a candidate's efficacy for a specific indication is never guaranteed, and Akeso's data may not meet the evidentiary standards of Western regulatory bodies. But it's difficult to avoid the conclusion that ivonescimab is probably a potent intervention, especially when used in conjunction with common cancer therapies.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer and Summit Therapeutics. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
