Up Over 600% in 2024, Can Summit Therapeutics Stock Keep Rising?

To say this has been a big year for Summit Therapeutics (NASDAQ: SMMT) would be a huge understatement. The stock has risen over 600% since the end of 2023, thanks to surprisingly positive trial results for a cancer therapy called ivonescimab.

The stock market has been pushing up Summit's stock price because there's a chance that ivonescimab could unseat Merck's Keytruda as the world's top-selling cancer treatment. Keytruda racked up a stunning $25 billion in sales last year, so there's a lot to be gained if Summit's candidate continues to succeed.

Summit Therapeutics is on the right path, but it could be too early to predict buckets of incoming revenue. Its candidate isn't even approved in the territories where Summit intends to sell it.

Why Summit Therapeutics stock soared

Despite having no products to sell, Summit's market cap shot above $23 billion in September after investors saw interim results of the Harmoni-2 trial. The study assembled hundreds of newly diagnosed lung cancer patients in China and treated them with either Keytruda or ivonescimab. Measurements taken at a planned interim checkup showed patients randomized to receive ivonescimab were 49% less likely to show signs of disease worsening.

Human immune cells come with programmed death (PD-1) receptors as a safety feature that shuts down attacks when they spill over and affect healthy tissues. Tumor cells exploit this checkpoint to evade immune attacks before they begin. Keytruda, Opdivo, and Tencentriq are all blockbuster drugs that shrink tumors by inhibiting the PD-1 checkpoint.

Ivonescimab is an interesting new double-sided protein that inhibits the PD-1 checkpoint, plus it blocks vascular endothelial growth factor (VEGF) from increasing a tumor's blood supply. Summit's stock price has soared because investors think it can become the new standard of care for first-line lung cancer patients.

Lung cancer isn't the most common malignancy but claims the most lives. For cancer therapy developers, first-line indications are precious because these patients tend to stay on therapy much longer than folks who have already relapsed.

In May, ivonescimab became the first PD-1/VEGF bispecific antibody to earn approval when Chinese regulators approved it to treat a genetically defined group of lung cancer patients. Summit licensed rights to its lead candidate from a Chinese company named Akeso. Unfortunately, the U.S. Food and Drug Administration (FDA) will not approve new cancer therapies without successful results from a trial with plenty of North American volunteers.

Summit recently completed enrollment of a phase 3 trial with second-line lung cancer patients based in the U.S. If adding ivonescimab to standard chemotherapy improves patients' odds of survival, as expected, the stock could soar.

Incoming competition?

Ivonescimab is the most advanced PD1/VEGF bispecific antibody but isn't the only one in clinical-stage testing. Last November, BioNTech (NASDAQ: BNTX) licensed BNT327 from a clinical-stage company called Biotheus.

In a phase 2 trial, a combination of standard chemotherapy plus BNT327 shrank tumors for 54.7% of lung cancer patients who progressed after their first treatments.

Ivonescimab could eventually compete with Instil Bio (NASDAQ: TIL) and its China-based partner ImmuneOnco Biopharmaceuticals. Together, the pair are developing an experimental PD1/VEGF treatment called IMM2510. In the U.S., Instil intends to begin midstage clinical studies with lung cancer and triple-negative breast cancer patients by the end of the year.

Time to buy?

Stocks don't get much riskier than Summit Therapeutics. At recent prices, the pre-commercial company boasts a $14.6 billion market cap. That's a lot to pay for a clinical-stage drugmaker with no recurring revenue yet.

In early 2023, it handed Akeso $500 million upfront for exclusive rights to ivonescimab outside of China. Akeso is still eligible to receive up to $4.5 billion in potential milestone payments, plus a royalty percentage in the low double-digits.

Commercial-stage biotech stocks generally trade for mid-single-digit multiples of annual revenue. When you add up the milestones and royalties that Summit could owe Akeso, it looks like the market is already pricing in a speedy FDA approval and a rapid ascent to several billion in annual sales.

Summit Therapeutics stock could produce market-beating gains, but only if ivonescimab continues producing dramatic clinical-trial success stories. Starting a new position at recent prices would be a little too risky right now. It's probably best to wait for more data or a lower market valuation.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Summit Therapeutics. The Motley Fool recommends BioNTech Se. The Motley Fool has a disclosure policy.