Summit Therapeutics: Is the Hype Warranted?
Introduction
Summit Therapeutics Inc. (NASDAQ:SMMT) is currently one of the most rapidly growing biotech/healthcare research companies. Over the past year, Summit Therapeutics has grown at a steady pace, however in the past couple of months, the company’s growth ballooned to growing over 280% in the last 3 months. The company’s latest research in lung cancer and other drugs leads me to believe Summit Technology has the potential to grow in the market making a great long-term investment.
Company Overview
Summit Therapeutics is a biopharmaceutical company focused on discovering, developing, and commercializing medicinal therapies. Its mission is to resolve serious and unmet medical needs for overall human health. Recently, following its mission, Summit has developed a new drug, Ivonescimab, which reduces risks of lung cancer progression, and was 2x more efficient when compared to competitor Keytruda.
Future Growth Catalysts
Summit Therapeutics growth is driven by several key factors that positions this company to continue expanding its market share:
- Further research and development of the drug Ivonscimab will only increase demand and market value for Summit Therapeutics. This increased demand will allow for more specialized research in reducing the chance of lung cancer progression even shorter. With Summit remaining dominant in the market and the bonus of the company having advanced research, Summit will be able to update and increase the potential of its new drug. Therefore, as demand increases, the company will hopefully expand its offerings to improve drug efficiency and market new, influential drugs for other health issues
- As medical developments undergo and more incorporation of this drug is used, Summit Therapeutics manages to advance their products much faster than its competitors. Previously Keytruda was the dominant power in the biotechnology industry and also focused on lung cancer. However, with Summit’s new drug outperforming Keytruda, Summit has placed itself on the pedestal in the market. Summit’s success proves as a differentiator for the future capabilities in the growing biotechnology market.
- With Summit Therapeutics being steps ahead of its competitors, now is the best time for producing new drugs. Summits Growth can truly be accomplished with a diversity of drugs that benefit health. Keytruda and Summit Therapeutics have started research on developing a new drug to target protein PD-1 which is a primary antibody designed to fend off cancer in the immune system. With the success in Ivonscmab bringing Keytruda down, this serves as the best time for Summit Therapeutics to focus on this issue and have a chance to completely stop cancer from spreading serving as the edge of medical innovation.
Financials
Summit has been overlooked in its true value in the market, holding a QoQ (quarter-over-quarter) revenue growth of 5.99% from Q1 2024 to Q2 2024. Regarding its operating income in Q2 of 2024 being -143,736, which is quite alarming, however it is important to note that not much monetization of their products, mostly research and developments are conducted. Valuation wise, the company’s P/E ratio of 22.50x which is slightly higher than industry average P/E ratio of 20.94x. Which makes the current price of Summit Therapeutics of $31.93 to be reasonable and affordable.
Risks
In order for a biotechnological company to maintain relevance and for Summit Therapeutics to become a long-term investment, it must use the time it has to improve or develop more drugs to help maintain proper health. As competitors start them ascend to compete with Summit Therapeutic Level, its going to be necessary for the company to evolve. Another matter to address is the negative operating income. As most of the research is expensive and takes time, having a negative income is not a good sign for the business. Working on ways to distribute more rapidly and successfully monetize these drugs will allow for the company to regain importance and continue to grow. However, developments to address these concerns will take tremendous amounts of time, the lack of diversity and lack of positive income are a risk for Summit Therapeutics that doesn’t have a clear mitigant at this time.
Conclusion
Even with the issues regarding income, I personally believe in Summit Therapeutics. With the stock price rising an extraordinary 160.23% in a matter of five days, it’s important to remember there is still time to invest and that Summit Therapeutics has proved itself to be a great long-term investment. With the necessity to help lives and those who suffer from cancer, investing in Summit is a way to help their mission. Taking advantage of the strong biological innovations in research and developments, with Ivonscimab, I still see Summit as an investment with tons of room to grow.
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