Summit Therapeutics (SMMT 3.46%) has risen in prominence in the past two years thanks to a promising pipeline candidate, ivonescimab, a potential cancer treatment. The company's shares are up by 340% since January 2023. The market has high hopes for the biotech. It doesn't have a single drug on the market, yet it boasts a market capitalization of $14 billion.
Finding clinical-stage biotechs with market caps above $10 billion is rare. Will Summit Therapeutics live up to investors' expectations? Let's discuss how things could evolve for the biotech over the next half-decade.
Some background on ivonescimab
Technically, ivonescimab is already approved in at least one country: China. Akeso Biopharma, a company based in China, originally developed it. Summit Therapeutics entered an agreement with Akeso that granted the former the right to commercialize ivonescimab in most countries outside of China, including the U.S., Canada, Japan, South and Central America, Africa, the Caribbean, and the Middle East.
Before Summit can launch the medicine, it must conduct clinical trials that will be acceptable to regulatory authorities in each region. Summit Therapeutics is running a pair of phase 3 clinical trials in the U.S. to support ivonescimab's approval in the country. The company is going after an important target: non-small cell lung cancer (NSCLC). In a late-stage study conducted in China, ivonescimab performed better than the market leader, Merck's Keytruda, in treating patients with first-line NSCLC with a PD-L1 protein overexpression.
NASDAQ: SMMT
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Summit Therapeutics' path to the riches
Summit's ivonescimab received the fast-track designation from the U.S. Food and Drug Administration (FDA) for the treatment of metastatic non-squamous NSCLC. The fast-track program is designed to speed up the development of promising medicines that fill a high unmet need. Summit will release top-line data from its phase 3 study in metastatic NSCLC next year. It also plans to start other late-stage trials.
In the next five years, the company could start many more studies in the U.S. and see many positive results since ivonescimab is targeting well over a dozen indications. These results could lead to approvals and label extensions for the medicine, which will almost certainly go on to generate well over $1 billion annually. Will that happen by 2030?
My view is that it will. Ivonescimab could earn its first approval within the next two-and-a-half years. From there, ivonescimab's uptake should be pretty quick. There is already significant data on the efficacy of the medicine, albeit from studies in China.
It's always hard to extrapolate results from trials across borders, but data from other countries is a lot better than no data at all. Furthermore, there will be more clinical-trial results from ivonescimab from China and the U.S. within a couple of years. The market is valuing Summit Therapeutics at rare levels for clinical-stage biotech companies for a good reason. Drugmakers in this class generally have candidates with limited (at best) clinical data supporting their efficacy.
Is Summit Therapeutics a buy?
Ivonescimab's positive phase 3 results and approval in China mitigate the risks associated with investing in Summit Therapeutics. That also means the company has less upside since the market has already factored some of that into the stock price. However, there is plenty of upside left. If ivonescimab records consistent positive results in clinical trials in the U.S., especially those where it will go head-to-head against Keytruda (it is running one such study in the U.S. right now), the market should reward the stock.
Of course, there is always the risk that Summit will run into clinical or regulatory headwinds, a reality every biotech stock faces. Still, there is a good chance Summit will be generating over $1 billion in annual sales by the end of the decade while still running plenty of clinical trials for ivonescimab. The company should generate solid returns between now and then. So, Summit Therapeutics' looks like an attractive stock to hold for the next five years.
