Instil Bio Inc Expected To Post A Loss Of $2.11 A Share - Earnings

Summit Therapeutics SMMT is set to report third-quarter earnings on Oct. 30, before the opening bell. Since the company does not have any marketed drug in its portfolio, we do not expect it to record revenues. The Zacks Consensus Estimate for earnings is pegged at a loss of 7 cents per share.

Estimates for 2024 and 2025 loss per share have remained consistent at 27 and 29 cents, respectively, in the past 60 days. The company reported an earnings surprise of 16.67% in the last reported quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Earnings Whispers on SMMT’s Upcoming Results

Our proven model does not predict an earnings beat for the stock this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not thecase here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Summit has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping SMMT’s Upcoming Results

Without any approved/marketed product in its portfolio, the focus will likely be on updates related to ivonescimab, the only investigational drug in SMMT’s pipeline. The drug is being developed in collaboration with China-based Akeso, also the drug's original developer. Summit acquired an exclusive license from Akeso in 2022 to develop and market ivonescimab in the United States, Canada, Europe and Japan. The company expanded its licensing deal in June that now also covers Latin America, the Middle East and Africa.

Last month, Summit reported additional results from the HARMONi-2 study, which evaluated ivonescimab against Merck’s MRK blockbuster oncology drug Keytruda in patients with locally advanced or metastatic NSCLC whose tumors have positive PD-L1 expression. Data from the study showed that the treatment with the drug cut the risk of disease progression or death by nearly half compared to Merck’s drug.

This data conforms with the initial results (reported by SMMT in May), wherein treatment with ivonescimab demonstrated a statistically significant and clinically meaningful improvement in the primary endpoint of progression-free survival.

Unlike Merck’s Keytruda, which targets the PD-1 protein, the Summit drug is a first-in-class bispecific antibody that targets two proteins, namely PD-1 and VEGF. Management believes that this dual mechanism differentiates ivonescimab from currently available therapies for solid tumors as there is a potentially higher expression of both PD-1 and VEGF in tumor tissue compared to the normal tissues in the body.

Based on HARMONi-2 results, Summit announced plans to sponsor a late-stage study called HARMONi-7 across several countries, expected to start in early 2025. This study will compare ivonescimab with Merck’s Keytruda in patients with metastatic NSCLC whose tumors have high PD-L1 expression. Based on details posted on a government website, data from this study can be expected in 2027.

Summit is currently conducting two late-stage studies, HARMONi and HARMONi-3, evaluating ivonescimab in separate settings for metastatic NSCLC indication. Earlier this month, management announced that the HARMONi study has completed enrolment. Data from the study is expected in mid-2025. The HARMONi-3 study is currently enrolling patients. Management is also exploring opportunities to expand the drug’s development across several oncology disease areas.

Investors would likely seek an update from management on the progress of the above two studies and its plans to start any other new study on the drug.

A single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether it would be a prudent move to buy, sell, or hold the stock at present.

SMMT’s Stock Price Performance & Valuation

Year to date, thestock has surged 667.4% against the industry’s 2.4% decline. The stock has also outperformed the sector and the S&P 500. Shares of the company are also currently trading above its 50-day and 200-day moving averages.

SMMT Stock Outperforms Industry, Sector & S&P 500

The company is trading at a premium to the industry. Going by the price/book ratio, the stock currently trades at 74.39, trailing 12-month book value, higher than 1.33 for the industry.

Our Investment Thesis on SMMT Stock

We are concerned about Summit’s dependence on just one product. Any development/regulatory setback could mar the stock’s growth prospects. Until now, all results reported by the company were from partner Akeso’s sponsored studies, which are being conducted mainly in China. The FDA is unlikely to accept results from such studies due to the absence of a diverse patient population. Summit is yet to report data from any of its sponsored studies. The data is not expected until next year.

Also, SMMT is not the only company developing a dual bispecific antibody for oncology indications. Some companies like BioNTech BNTX and Instil Bio TIL are also developing their respective PD-1/VEGF targeting antibody candidates, namely BNT327 and SYN-2510. While SMMT’s therapy is ahead in terms of clinical development, the BNTX and TIL candidates are not too far away. They are in early-stage or mid-stage development across multiple solid tumors. One of these candidates even carries an edge over ivonescimab. Instil Bio’s SYN-2510 has shown the potential to block both VEGF-A and VEGF-B compared to ivonescimab, which blocks only VEGF-A.

Short-Term Investors Should Sell SMMT Stock

At this point, we would advise investors to steer clear of this Zacks Rank #4 (Sell) company. Although ivonescimab is the first drug to demonstrate a clinically meaningful advantage over Keytruda in a late-stage NSCLC study, the company has its fair share of problems. It lacks a regular/stable stream of income. The stock is significantly overvalued when compared to the industry. We would recommend investors to wait and watch for a couple of pipeline updates from the company’s own sponsored studies before investing in it.

Zacks Investment Research

Shares of Summit Therapeutics SMMT have soared 689% year to date, significantly outperforming the industry’s 2.5% decline. The stock has outperformed the sector and the S&P 500 during the same period. SMMT’s shares are also trading above the 50-day and 200-day moving averages.

SMMT Stock Outperforms Industry, Sector & S&P 500

This uptick in stock price started in May after the company reported that its lead pipeline drug ivonescimab outdid Merck’s MRK blockbuster oncology drug Keytruda in a head-to-head phase III HARMONi-2 study in certain patients with non-small cell lung cancer (NSCLC).

Let’s delve into the company’s strengths and weaknesses to gain a better understanding of how to play the stock amid this price surge.

SMMT Boasts Ivonescimab Efficacy Over Keytruda

The HARMONi-2 study evaluated ivonescimab against the Merck drug in patients with locally advanced or metastatic NSCLC whose tumors have positive PD-L1 expression. The study was conducted in China with Summit’s collaboration partner, Akeso, also the drug's original developer. Summit in-licensed the right to develop and market the drug in 2022 across several territories, including the United States and Europe.

In May 2024, Summit reported positive results from the Akeso-sponsored phase III HARMONi-2 study, which showed that treatment with ivonescimab led to statistically significant and clinically meaningful improvement in the primary endpoint of progression-free survival. Management also reported additional results from this study last month, which showed that ivonescimab also cut the risk of disease progression or death by nearly half compared to Keytruda.

A clinically meaningful benefit of the drug was also seen across multiple clinical subgroups, including those with PD-L1 low and high expression, squamous and non-squamous histologies, and other high-risk patients.

Unlike Merck’s Keytruda, which targets the PD-1 protein, the Summit drug is a first-in-class bispecific antibody that targets two proteins, namely PD-1 and VEGF. Management believes that this dual mechanism differentiates ivonescimab from currently available therapies for solid tumors as there is a potentially higher expression of both PD-1 and VEGF in tumor tissue compared to the normal tissues in the body.

Lack of Marketed Products: A Concern for SMMT

With no approved product in its commercial portfolio, Summit lacks a source of regular income. With no marketed drug in its portfolio, the company has to shoulder significant cash burn due to ongoing clinical studies. Besides ivonescimab, SMMT has no other investigational drug in its pipeline. Delayed approvals or development setbacks would negatively impact the stock.

Competition in Targeted Markets Poses Threat to SMMT

While we acknowledge that Summit’s pipeline drug has demonstrated encouraging results in clinical studies, the company faces stiff competition in its targeted markets. If ivonescimab is approved in the licensed territories, Summit will compete directly with pharma big-wigs like AstraZeneca, Bristol Myers, Roche and Merck. These companies not only market the standard of care medications in the oncology space but also develop innovative and novel therapies in this field. Also, they have a well-established distribution and supply-chain infrastructure, which SMMT lacks.

Also, Summit is not the only company developing a dual bispecific antibody for oncology indications. Some companies like BioNTech BNTX and Instil Bio TIL are also developing their respective PD-1/VEGF targeting antibody candidates, namely BNT327 and SYN-2510. While SMMT’s therapy is ahead in terms of clinical development, the BNTX and TIL candidates are not too far away. They are in early-stage or mid-stage development across multiple solid tumors. One of these candidates even carries an edge over ivonescimab. Instil Bio’s SYN-2510 has shown the potential to block both VEGF-A and VEGF-B compared to ivonescimab, which blocks only VEGF-A.

SMMT Stock Valuation & Estimates

The company is trading at a premium to the industry. Going by the price/book ratio, the stock currently trades at 76.47, trailing 12-month book value, higher than 1.33 for the industry.

Estimates for Summit’s 2024 and 2025 loss per share have been consistent at 27 and 29 cents, respectively, in the past 60 days.

How to Play SMMT Stock?

Though ivonescimab is the first drug to have shown clinically meaningful benefit over Keytruda in a phase III study in NSCLC, Summit still has a long way to go. As the HARMONi-2 study was conducted solely in China, the FDA is unlikely to accept the results, given the lack of a diverse patient population. This is a major reason for management to sponsor a similar study of its own, called HARMONi-7, across several countries. It is expected to start early next year. Data from this study is expected in 2027.

At this point, we would advise investors to steer clear of this Zacks Rank #4 (Sell) company. The company’s dependence on just one product poses a serious concern. Any development/regulatory setback could mar the stock’s growth prospects. Also, Summit has yet to report data from any of its own sponsored studies. Until now, all results reported by the company are from partner Akeso-sponsored studies.

While SMMT has started two late-stage studies of the drug, data from any of these studies are not expected until next year. We would recommend investors to wait and watch for a couple of pipeline updates from its own sponsored studies before investing in SMMT. The company’s valuation also suggests that the stock is significantly overvalued when compared to the industry.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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