Trending on the US stock market! Wall Street is actually this crazy! In the US stock market last week, a stock called Summit Therapeutics (SMMT.US) rose unexpectedly, not only experiencing a surge of 160% itself, but also pulling up biomedical technology companies such as BioNTech and Instil Bio. From the beginning of the year, Summit Pharmaceuticals started at less than $3 and kept rising to $31.93 at the end of this week, with an astonishing increase of 1,123.37%, bringing its market cap to $23.1 billion. Both its weekly and yearly gains outperformed Nvidia, and SMMT has become the hottest topic on Wall Street and popular among major US financial media outlets.

What exactly is SMMT? With a 1,123% increase in a year, it has become a hot topic on the US stock market.

In the past week, Summit has become a well-deserved star company, with a stock price increase of 160% and a market cap surpassing $23 billion.

This significant leap in stock price is due to the announcement of the HARMONi-2 study results.

Compared to Pembrolizumab (K drug), Ivosidenib can further reduce the risk of disease progression or death for 49% of patients (significant improvement in PFS, HR 0.51). In previous combination therapies, none of the clinical trials had a PFS HR value lower than 0.6. Ivosidenib achieved a median PFS of 11.14 months, the longest in history, an improvement of 5.3 months compared to before.

Previously, SMMT reported the preliminary analysis data of the Phase III HARMONi-2 study, comparing its investigational antibody Ivonescimab (SMT112) with Merck's blockbuster drug Keytruda (Pembrolizumab), commonly known as the 'K drug,' in certain non-small cell lung cancer (NSCLC) patients. The study data showed that compared to Keytruda, the drug reduced the risk of disease progression or death by nearly half. These data are consistent with the preliminary results reported by SMMT in May, where treatment with Ivonescimab showed statistically and clinically significant improvements in the primary endpoint of PFS.

The median PFS of patients receiving SMMT treatment was 11.14 months, while the median PFS of patients receiving MRK drugs was 5.82 months. This difference indicates that ivonescimab reduces the risk of disease progression or death by 49% compared to Keytruda. The overall response rate of patients treated with this drug was 50%, while the overall response rate of patients treated with Merck drugs was 38.5%. The disease control rate of patients treated with ivonescimab was 89.9%, while the disease control rate of patients treated with Keytruda was 70.5%.

According to SMMT and its Chinese partner Akeso, positive data from their Phase 3 HARMONi-2 study have just been released. This study used their PD-1/VEGF bispecific antibody, ivonescimab, to treat locally advanced or metastatic non-small cell lung cancer (NSCLC) patients with PD-L1 positive squamous cell carcinoma. This is the first candidate drug to be pitted against Merck's Keytruda in this patient population. In other words, ivonescimab is the first drug in a Phase 3 study to achieve clinically meaningful benefits compared to Keytruda, and it has the ability to treat NSCLC patients. This bispecific antibody is becoming a very powerful drug that may ultimately capture a significant market share from Keytruda.

Why are investors so bullish?

Another reason investors are interested is that this is specifically for PD-L1 positive tumors in patients with advanced metastatic disease. There is now an opportunity to initiate another Phase 3 trial to use this drug to treat first-line PD-L1 high advanced NSCLC patients. This late-stage study is expected to begin in early 2025. The fact is, this particular clinical candidate has already shown success in other subgroups of NSCLC patients in other combinations. The positive data demonstrates the clinical significance of ivonescimab compared to Keytruda, coupled with the ability to expand the use of the drug to other types of cancer patients, it is believed that investors can benefit from any potential gains that may be realized here.

Summit Therapeutics and its partners have announced positive results from the Phase 3 trial called HARMONi-2. This specific late-stage study compared monotherapy ivonescimab with monotherapy Keytruda for the treatment of PD-L1 positive non-small cell lung cancer (NSCLC) patients. Before discussing this particular program and any other catalysts that may arise from it, it is first important to understand what NSCLC is and what its potential market opportunities are. Lung cancer is a cancer characterized by the formation of malignant cells on the inner walls of the lungs. That being said, patients may have two types of lung cancer, which are classified as follows:

Non-small cell lung cancer

Small cell lung cancer

It is worth noting that non-small cell lung cancer (NSCLC) is more common than small cell lung cancer (SCLC). In fact, NSCLC accounts for approximately 85% of all lung cancer cases. On the other hand, it is said that SCLC accounts for approximately 15% of all lung cancer cases. Regardless of the type, lung cancer patients may experience some of the following symptoms:

Chest pain.

Coughing up blood.

Cough.

Difficulty breathing.

Weight loss.

By 2031, the global non-small cell lung cancer (NSCLC) market is projected to reach $36.9 billion. This is a significant market opportunity for Summit, but it is important to consider the two specific patient populations that it focuses on for NSCLC. The first subgroup of lung cancer patients is those with locally advanced and/or metastatic disease. It is estimated that approximately 70% of NSCLC patients have this type of disease at diagnosis. The proportion of patients who are PD-L1 positive is then considered. That is, the number of tumor patients with a tumor proportion score (TPS) >1%. To assess this, it is important to note the proportion of patients with TPS <1%, which is approximately 48% of patients according to real-world studies. Therefore, the other half of NSCLC patients will have a TPS >1%.

Therefore, in order to determine whether monotherapy with ivonescimab is the best treatment for NSCLC with TPS >1% as compared to monotherapy with Keytruda for locally advanced or metastatic NSCLC, Summit conducted the phase 3 HARMONi-2 trial in collaboration with its partner, Akeso. This particular trial recruited a total of 398 patients who were randomly assigned to receive intravenous ivonescimab or intravenous Keytruda over a period of 2 years. The primary endpoint of this post-trial was progression-free survival (PFS). Additionally, as part of this study, other secondary endpoints such as overall survival (OS), duration of response (DOR), and objective response rate (ORR) were evaluated. The most important finding was that the PFS endpoint for patients receiving this PD-1/VEGF bispecific antibody greatly exceeded that of patients receiving Keytruda as a single therapy. The PFS for patients treated with ivonescimab as monotherapy was 11.4 months, compared to 5.82 months for patients receiving standard care (SOC) monotherapy with Keytruda. The significance of this data is that it was achieved across all NSCLC groups, regardless of whether they were PD-L1 high or PD-L1 low, essentially across all etiologies. The question is whether Summit's drug is sufficient in terms of clinical significance only in terms of PFS compared to Keytruda, but it is able to surpass Keytruda in the other two efficacy endpoints. That is, it achieved excellent percentages in terms of ORR and disease control rate (DCR).

Although the positive data from the phase 3 HARMONi-2 trial is favorable in terms of stock price increase, I believe it is more important to consider the two expansion opportunities it now presents. The first expansion opportunity is the ability to extend the use of monotherapy with ivonescimab to early-stage patients. What do I mean by this? Well, a milestone is expected to occur early next year. It is expected that Summit will initiate the phase 3 HARMONi-7 trial in collaboration with its partner Akeso, which will use ivonescimab to treat first-line PD-L1 high late-stage NSCLC patients. The second expansion opportunity for this clinical candidate drug is to target cancers other than lung cancer. That said, another milestone is the update on the clinical development plan for other cancers. For example, looking at its pipeline, it also uses this PD-1/VEGF bispecific antibody to target other types of cancer such as gynecological tumors, liver cancer, triple-negative breast cancer, head and neck squamous cell carcinoma (HNSCC), and some others.

In addition, Evosi has shown benefits in all subgroups, and its safety is also very good. Although the results of overall survival (OS) have not been announced yet, numerous signs indicate that the prospects of Evosi are increasingly bullish. As a result, the market's pursuit of Summit is becoming more enthusiastic.

After the data was released, Citigroup expressed its appreciation for this data in a new report and recommended Summit Therapeutics as the preferred stock. The new data also prompted a 56% increase in the stock price of the drug developer last Monday. Citigroup analysts said, 'Summit's candidate drug decisively beat Keytruda and exceeded nearly all clinical expectations of the current 'gold standard immune therapy' Keytruda, indicating that it is a reliable emerging flagship drug.

As a revenue pillar of Merck, Keytruda has not only opened a new era of tumor immunotherapy, but also become the cornerstone of cancer treatment, gradually growing into one of the highest-selling drugs globally. In the first half of 2024, Keytruda's global sales reached $14.2 billion, and it is expected to exceed $30 billion for the whole year, accounting for 45% of Merck's total revenue. Keytruda's success is due to its expanding indications, currently approved for approximately 40 indications.

Therefore, Citigroup has raised the target price for the stock from $13 to $19 and stated that it is expected that Summit will continue to rise due to positive data and investors' pursuit of the company. The investment bank currently estimates that the peak sales in the United States and Europe, after adjusting for risks, will be approximately $7.8 billion, higher than the previous estimate of $5.3 billion.'

What is the relationship between SMMT and Akeso?

So what is the relationship between this drug and SMMT and Akeso? In fact, as early as 6th December 2022, Akeso and Summit Therapeutics Inc. (NASDAQ stock code: SMMT) entered into a cooperation and license agreement. According to this agreement, Akeso will grant Summit the exclusive license to develop and commercialize its breakthrough bispecific antibody, Evosi (PD-1/VEGF, AK112), in the United States, Canada, Europe, and Japan. Akeso will retain the rights to develop and commercialize Evosi in regions outside of Summit's licensed areas. In addition, Akeso will have the rights to co-brand the product in Summit's licensed areas.

As a condition of this exchange agreement, Akeso will receive an upfront payment of $0.5 billion and a total transaction amount of up to $5 billion, including milestone payments for product development, registration, and commercialization. The company will also receive a low double-digit percentage of net sales as royalties for the use of the product's licensing rights. In conjunction with the execution of the license agreement, Dr. Xia Yu, Chairman, Executive Director, CEO, and President of the company, will be appointed as a member of Summit's board of directors.

Akeso granted the commercialization rights in the United States, Canada, Europe, and Japan markets to SMMT for this Evosi monoclonal antibody at a maximum price of $5 billion. A similar case happened before when Boji Tianheng granted the commercialization rights of BL-B02D1 to Bristol-Myers Squibb (BMS) for up to $8.4 billion, receiving an upfront payment of $0.8 billion. It is also a promising innovative cancer drug, and the company announced a net profit of $5 billion in the first quarter of this year (the first milestone payment is included in the net profit).

These cases show that promising innovative drugs, especially anti-cancer drugs, are very profitable, especially foreign pharmaceutical companies are willing to pay high prices for commercialization rights. However, the premise is that there is real potential and progress, not just fundraising stories.

It is because of this announcement of the transfer that Summit's stock price has risen from $0.785 to the current $31.93, a 40-fold increase, with a market cap of $23.13 billion.

It is worth noting that Boss Robert W. Duggan's shareholding ratio is 78.2%, with a market value of $18.01 billion, which means that the related rights and interests of Iovance have brought Duggan investment returns of more than $15 billion, equivalent to over 100 billion RMB.

Founder Duggan, a legendary figure in the biomedical industry.

How can a U.S. agency have a market cap higher than our leading innovative drug company? This has puzzled many investors. What is the background of SMMT's founder Duggan?

Duggan began his mining journey during his college years, investing in stocks. He has founded companies such as home sewing tool companies, chain biscuit companies, and computer network companies. It may be because Duggan's son suffered from tumors and passed away that Robert entered the medical and health field for the first time in the 1990s. He invested in surgical robotics company Computer Motion and served as CEO. In 2003, he sold the company to Da Vinci Surgical Robotics for $0.15 billion, and his personal assets reached $65 million. He subsequently invested in the R&D of innovative drug company Pharmacyclics.

Initially, Pharmacyclics' core focus was on the research drug motesanib-gadolinium (trade name Xcytrin) as a radiosensitizer. Initially, CEO Richard Miller introduced three research drugs, including the BTK inhibitor ibrutinib, from Celera for $6.6 million in 2006. At that time, ibrutinib mainly explored the direction of self-immunity. Although it discovered ibrutinib and recognized its potential value in treating blood tumors, it faced difficulties in early development due to animal models and other issues and incurred heavy financial burden. In addition, motesanib-gadolinium encountered setbacks in applying for FDA approval for listing at that time, and the founder left. In 2008, Pharmacyclics' stock price plummeted to its lowest point, with a market cap of only several tens of millions of dollars.

As an excellent investor, Duggan bought more as the stock price fell, and his shareholding ratio approached 30%. Eventually, he took over Pharmacyclics as CEO. He accepted the advice of the expert committee and suspended the development of Xcytrin, focusing on the development of the more promising ibrutinib. He also negotiated excellently and reached a cooperation with Johnson & Johnson on ibrutinib in 2011, receiving a $0.15 billion upfront payment while retaining the rights in the US market, laying the foundation for AbbVie's acquisition of Pharmacyclics for $21 billion in 2015. After the acquisition, the revenue from ibrutinib increased year by year, reaching its peak in 2021. As of the first half of 2024, AbbVie's total revenue from ibrutinib reached $33.142 billion.

Duggan invested approximately $50 million in Pharmacyclics and made a profit of $3.5 billion. At the time of the trade with Akeso, Summit's market cap was only $0.158 billion, with even less cash on hand - $0.12 billion. As a major shareholder and CEO of the company, Duggan provided $0.5 billion in cash to the company, essentially solving the prepayment issue. At the same time, Duggan further ensured his absolute controlling stake in Summit, with a 78.2% shareholding.

In March 2023, Akeso received the full $0.5 billion prepayment (including $25.1 million in Summit company stock), enabling the smooth advancement of the ivonescimab to global phase 3 clinical trials. Previously, Akeso had just received $0.5 billion in funding from the Guangzhou High-Tech Zone Group to promote the commercialization of the company's first PD-1/CTLA-4 bispecific antibody and the listing process for broad indications.

How to evaluate Summit's market cap?

The exciting point on Wall Street is that this result signifies a huge commercial opportunity. In addition to lung cancer, the approved indications for K drug include more than a dozen types of cancer. According to statistics, the global sales of K drug reached $25.011 billion in 2023, surpassing Simeglutide to become the "global king of drugs".

The achievement of ivonescimab not only signifies the huge potential of this drug, but also opens up the imagination of the entire market for PD-1/VEGF bispecific antibodies - how much is a company worth with a new drug that brings in billions of dollars in annual revenue?

The management of Summit Therapeutics revealed that it is currently conducting over 20 clinical trials in collaboration with Chinese partners.

On Thursday, Summit Therapeutics announced the completion of a new round of $0.235 billion financing - selling 10.3 million shares of stocks at a price of $22.70 per share to "leading biotechnology institutions and individual qualified investors". The management team and members of the board of directors purchased 3.48 million shares. This news has driven another round of increases.

Summit Therapeutics and its partner Akeso are undoubtedly on the right path in developing ivonescimab for the treatment of lung cancer patients. What I mentioned in this article was only related to the development plans of the drug targeting two NSCLC subgroups, which are first-line locally advanced or metastatic NSCLC patients with PD-L1-positive tumors, followed by first-line advanced NSCLC patients with high PD-L1 tumors.

Since obtaining the license for ivonescimab, it has been able to initiate two additional late-stage studies. One is a Phase 3 trial called HARMONi, which combines the drug with chemotherapy to treat patients with EGFR-mutated, locally advanced or metastatic non-squamous NSCLC who have progressed after treatment with third-generation tyrosine kinase inhibitors [TKIs]. Another ongoing Phase 3 study is called HARMONi-3.

This particular late-stage trial uses ivonescimab in combination with chemotherapy to treat first-line metastatic squamous NSCLC. Based on the achievements of Summit and its partners so far, especially the demonstration that ivonescimab as a monotherapy can outperform Keytruda in treating locally advanced or metastatic NSCLC patients with positive tumor PD-L1 expression, it definitely has the potential to ultimately capture this multi-billion-dollar indication for NSCLC.

Investment risks

Investors should be aware of some risks before investing in Summit Therapeutics.

The first risk to consider is the positive data just obtained from the Phase 3 HARMONi-2 study, which used ivonescimab to treat first-line locally advanced or metastatic NSCLC patients with PD-L1 positivity. This is because even if the company's drug has been shown to reduce the risk of disease progression or death by 49% compared to Keytruda, it still needs to be submitted for regulatory review. It cannot be guaranteed that this drug will be approved for use as a monotherapy for this specific subpopulation of lung cancer patients.

The second risk would be the first expansion opportunity for ivonescimab, targeting first-line PD-L1 high late-stage NSCLC patients. While the use of this bispecific antibody has shown promise in assessing multiple efficacy measures in various types of cancer, there is no guarantee that a trial specifically targeting PD-L1 high patients will achieve similar success.

The third risk is the potential for a second expansion opportunity for ivonescimab. This is because the company plans to announce in early 2025 its plans to use this clinical candidate against other types of cancer, which is a milestone. It cannot be guaranteed that ivonescimab will be successful, nor can it be guaranteed that the primary endpoints of another study targeting a completely different indication will be met.

The fourth risk is regulatory in nature. This is because most of the trials are being conducted in China. Therefore, in order to eventually expand the use of ivonescimab to treat NSCLC and other cancer patients, it may need to be conducted and complete late-stage studies in the United States. Although meaningful clinical data has been obtained with the use of this PD-1/VEGF bispecific antibody in China, it does not mean that positive results will be achieved in the United States as well.

This article is republished from the official account "US IPO". Edited by Chen Wenfang from Zhitong Finance.