Why Summit Therapeutics is up 123% this week

Actions of Summit Therapeutics (SMMT 18.39%) rose 123.4% this week through Thursday trading, according to data from S&P Global Market Intelligence.

A growth in a biotech stock usually means that a new blockbuster drug candidate has either posted good test data or has been approved for use. That’s exactly what happened with Summit’s lung cancer antibody, Ivonescimab, this week.

Outperforming Keytruda in a Phase 3 clinical trial

Last weekend, Summit announced the results of its Phase 3 Harmoni-2 study, which was conducted in China with its partner Akeso. In the study, Summit’s new drug Ivonescimab achieved superior progression-free survival compared to Keytruda, which is the current standard of care for lung cancer patients with PD-L1 gene expression.

Following the data release, Wall Street analysts raised their price targets for Summit shares, suggesting Summit’s Ivonescimab could unseat Keytruda in a $50 billion end market for the PD-L1 lung cancer drug.

Summit stock subsequently spiked on the news and continued to rise throughout the week. Management took advantage of Wall Street’s enthusiasm to raise $235 million in a capital increase announced Thursday. Summit said it accepted an offer from “leading individual and institutional biotech investors” to sell 10.35 million shares at $22.70.

Usually, when a company sells stock to raise money, the stock goes down, because of dilution. However, Summit took another step, rising another 21% following the announcement.

This could be because investors appreciate the confidence shown by these industry-focused investors, or because Summit now has the funds to capitalize on bringing Ivonescimab to market.

Summit is a new biotech to watch

Summit is up more than 1,000% this year on the back of results for Ivonescimab.

It’s very difficult right now to know if Summit is a buy or not at this point because it’s hard to know the revenue and profit impact that Ivonescimab will have going forward. But if Ivonescimab is ultimately a more effective option for fighting this critical disease, Summit may even be undervalued, even after this great run.