Summit Therapeutics Surges on Trial Results: Time to Buy?

Key Points

• Summit Therapeutics has surged almost 100% this week, driven by positive Phase III trial results for its cancer therapy Ivonescimab. 
• Summit's Ivonescimab reduced disease progression by 49% compared to Merck's Keytruda, signaling potential as a more effective lung cancer treatment.
• Following the positive trial results, multiple analysts significantly raised their price targets and maintained a firm Buy rating.

Summit Therapeutics Inc. NASDAQ: SMMT has seen a meteoric rise this month, surging over 106% after releasing positive clinical trial results for its experimental cancer therapy. Year-to-date, the stock is up a staggering 769%. 

This sharp uptick in share price was driven by the results of a Phase 3 study presented on September 8 at the 2024 World Conference on Lung Cancer in San Diego, which suggests its lead drug candidate, Ivonescimab, could significantly outperform the current standard of care for lung cancer patients, Merck's NYSE: MRK Keytruda.

So, given the potentially groundbreaking results and surge in SMMT, should investors take notice and look to buy shares in the biotech stock? Let's take a closer look.

Getting to Know Summit Therapeutics

Summit Therapeutics is a biopharmaceutical company focused on developing and commercializing innovative therapies across the U.S. and U.K. Its lead candidate, Ivonescimab, a bispecific antibody combining PD-1 blockade with anti-angiogenesis (inhibition of VEGF), caused this week's excitement.

The Phase 3 Harmoni-2 trial results showed that Ivonescimab reduced the risk of disease progression in newly diagnosed lung cancer patients by 49% compared to Merck's Keytruda, which is currently the top-selling cancer treatment globally.

Keytruda, a $25 billion annual revenue generator, has been the standard of care, particularly for first-line lung cancer patients. However, the dual-action mechanism of Ivonescimab appears to offer enhanced efficacy, potentially paving the way for it to become the new go-to treatment for this critical patient group. If Ivonescimab is ultimately approved by the FDA, the drug could mirror Keytruda's commercial success, providing a significant revenue boost for Summit.

Analyst Reactions

Analysts have taken note of the trial's success, with several raising their price targets on Summit. Citigroup raised its target from $13 to $19, while Stifel Nicolaus increased its target from $14 to $25, noting the potential for Ivonescimab to become a leading treatment option. HC Wainwright took a more bullish stance, setting a price target of $30.

Despite the inherent risks of biotech stocks, analysts agree that the potential upside for Summit is substantial if Ivonescimab continues to perform in trials and receives regulatory approval.

Momentum is Firmly to the Upside, but Caution is Warranted

There's no denying the positive momentum behind Summit Therapeutics, both in terms of its recent clinical trial results and the stock's remarkable performance this week. With the stock now up over 1300% from its 52-week low and trading just 1.7% below its all-time high, the momentum is clearly to the upside. Adding to the positive momentum is the lack of insider selling and steady insider purchasing over the previous twelve months. Three insider purchases have occurred during this period, totaling $5.54 million, with no insider selling occurring during the same period. 

However, the stock is currently stretched, with an RSI over 80, signaling that a pullback or consolidation could be imminent. Additionally, there's the potential for a capital raise, as Summit may need to secure additional funds for its operations and continued drug development.

It's also important to acknowledge the risks inherent in biotech investing, especially regarding phase 3 trials and regulatory approvals. While Ivonescimab has shown promise, it's not yet a guarantee. Harmoni-2 was conducted in China, and although the drug earned approval there, the U.S. FDA requires more extensive trials involving U.S. patients or trials conducted across multiple countries before granting approval.

Summit has already begun a global phase 3 study, Harmoni-3, but its outcome remains uncertain as it will compare Ivonescimab plus chemotherapy to Keytruda plus chemotherapy. Investors should be mindful of these risks while considering Summit's potential.