Shares of Summit Therapeutics (SMMT +5.42%) recently jumped in response to positive clinical trial results for its experimental cancer therapy. Results of the phase 3 Harmoni-2 trial suggest newly diagnosed lung cancer patients are better off with its cancer drug candidate, ivonescimab, than the current standard of care, Keytruda from Merck (MRK 0.82%).
With global sales that rose 19% last year to $25 billion, Keytruda is the world's top-selling drug. It's approved to treat lots of different cancer patients, but first-line lung cancer is the indication most responsible for its success.
NASDAQ: SMMT
Key Data Points
Is Summit Therapeutics a good investment now? While ivonescimab beat the pants off of Keytruda in Harmoni-2, there are lots of ins and outs when it comes to determining the trajectory of new cancer drug launches.
Reasons to buy
Keytruda and ivonescimab both act on PD-1, but ivonescimab is a bispecific antibody that also inhibits vascular endothelial growth factor (VEGF). This dual action appears to keep tumors from growing more effectively than a PD-1 treatment on its own. At a planned interim update, investigators found that patients treated with ivonescimab were 49% less likely to have worsened than the group randomized to receive Keytruda.
If the benefit reported for disease progression leads to a strong overall survival benefit, ivonescimab could become the new standard of care for many first-line lung cancer patients. Given Keytruda's $25 billion haul in 2023, it isn't unreasonable to expect a similar sales trajectory from ivonescimab if it's approved by the U.S. Food and Drug Administration (FDA).
Summit's stock price has been all over the map lately, but as of 10:30 a.m. ET on Monday, Sept. 9, it had a market cap of around $13 billion. Commercial-stage drugmaker stocks tend to trade at mid-single-digit multiples of total sales, suggesting this stock could more than double your money -- if all goes well.
Summit Therapeutics' CEO Robert Duggan isn't a trained scientist, but his track record is remarkable. As the former CEO of Pharmacyclics, he made many investors rich when AbbVie spent about $21 billion to acquire his company and Imbruvica, its groundbreaking blood cancer therapy.
Reasons to remain cautious
There's still a lot that can go wrong for Summit Therpeutics. Successful phase 3 trials generally lead to FDA approvals, but Harmoni-2 was conducted in China by Summit's partner Akeso. Ivonescimab earned marketing approval from Chinese regulators in May, but the U.S. FDA won't approve new cancer therapies without a pivotal trial that includes U.S. patients or at least multiple foreign countries.
Summit began a global phase 3 study with frontline lung cancer patients in October 2023 called Harmoni-3. Predicting the outcome is tricky because it will compare ivonescimab plus chemotherapy to Keytruda plus chemotherapy.
Keytruda also has a tendency to come from behind when it comes to overall survival, which is the gold standard when it comes to evaluating a cancer therapy's efficacy. In the Keynote-042 trial, Keytruda monotherapy initially underperformed chemo regarding disease progression. It was months later when we learned that Keytruda actually reduced patients' risk of death by 19%, compared to chemo.
The Harmoni-3 study is a step in the right direction, but investors need to know how well ivonescimab stands up against Keytruda plus a separate VEGF inhibitor such as Avastin. The combination is already used to treat some lung cancer patients.
Lower-cost biosimilar versions of Avastin are available now, and Keytruda could also lose market exclusivity not long after Summit gets its first chance to market ivonescimab. Launching an expensive new bispecific antibody when a combination of two traditional antibodies does the same job could be a big challenge.
A buy now?
Big pharmaceutical companies tend to go all in for new cancer drugs. AbbVie bought Pharmacyclics for about $21 billion even though Johnson & Johnson already owned rights to about half of Imbruvica's revenue. Summit Therapeutics has rights to ivonescimab outside of China and Australia, so a potential buyer wouldn't have to share very much.
While this stock could deliver big gains, it probably isn't worth the risk right now. With a market cap above $10 billion at recent prices, Summit Therapeutics stock could drop a long way if the stock market begins to worry about ivonescimab's future.
There's too much we don't know about overall survival for patients treated with ivonescimab, versus standard care. Instead of opening your brokerage application to buy this biotech stock at its recently inflated valuation, it may be better to watch from a safe distance until we have more data or its market cap falls below $10 billion again.
