Stifel initiated coverage on Summit Therapeutics Inc (NASDAQ:SMMT), noting its main product ivonescimab, shows promising potential in two significant phase 3 trials for lung cancer treatment, with trial readouts expected in 2025.

If successful, these trials could open up a lucrative market worth billions, potentially leading to a substantial increase in the company's stock value.

Stifel analyst sees an opportunity for two updates from Akeso in 2024 in China. Stifel initiated with a Buy rating and a price target of $8.

In December 2022, Akeso out-licensed exclusive rights to ivonescimab (PD-1/VEGF) to Summit Therapeutics for a total potential deal value of up to $5 billion.

One update pertains to regulatory matters, while the other involves the release of phase 3 trial results comparing ivonescimab against Merck & Co Inc's (NYSE:MRK) Keytruda.

These developments could significantly boost investor confidence in Summit Therapeutics' phase 3 success prospects and lead to a rise in share prices before the HARMONi readouts.

The analyst's optimism about the phase 3 probabilities is based on two factors.

• The phase 1/2 data of ivonescimab consistently demonstrated superiority compared to Keytruda in various trials, with Akeso's China filing further supported this trend in phase 3.
• The choice of control groups in the trials seems favorable for ivonescimab, as placebo is used in one trial and Keytruda, which still yields poor outcomes in certain cases, is used in another trial where alternative treatments like VEGF have not been extensively studied due to safety concerns (which ivonescimab addresses).

Stifel says that though it cannot confidently assert if ivonescimab beating Keytruda, head-to-head is achievable in every scenario but says that based on the available data on ivonescimab and the approved uses of Keytruda, there are numerous significant opportunities to demonstrate its superiority.

Price Action: SMMT shares are up 13.7% at $3.73 on the last check Tuesday.

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