GLP-1 Drugs Are Huge. These 2 Stocks Are Tapping Into an Even Bigger Opportunity

The GLP-1 market is booming. It may be one of the fastest-growing areas in the pharmaceutical industry, as medicines in this category are showing the potential to treat many conditions beyond diabetes and weight management, including obstructive sleep apnea, osteoarthritis pain, metabolic dysfunction-associated steatohepatitis, and others. It's no wonder investors are looking to capitalize on this by backing companies developing promising GLP-1 drugs.

However, oncology remains the largest therapeutic area by sales, and important breakthroughs are underway in that market. Summit Therapeutics (NASDAQ:SMMT) and Revolution Medicines (NASDAQ:RVMD) are two biotechs that could make important contributions to oncology. But are these stocks worth investing in?

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1. Summit Therapeutics

Summit Therapeutics licensed its leading candidate, ivonescimab, from a Chinese drugmaker called Akeso (OTC:AKESF). Ivonescimab is a bispecific antibody, a newer class of medicines that can target two antigens at once, potentially leading to greater efficacy than older monoclonal antibodies. Ivonescimab showed promise, performing well in a phase 3 study conducted in China, where it was pitted against the world's best-selling cancer drug, Keytruda, in patients with non-small cell lung cancer (NSCLC). Summit Therapeutics requested regulatory approval in the U.S. for ivonescimab in some patients with NSCLC based on data from another clinical study.

The U.S. Food and Drug Administration could issue a decision by mid-November. If approved, this medicine is poised to generate well over $1 billion in annual sales, especially given that it could be a pipeline-in-a-drug and earn approval for many indications in the oncology market. Summit Therapeutics estimates that ivonescimab could rack up over than $15 billion in annual revenue by 2033.

However, there are several factors to consider before deciding to purchase the company’s shares at this time. The most important may be the following. Summit Therapeutics requested U.S. approval for ivonescimab for patients with NSCLC, despite the medicine failing to demonstrate a statistically significant improvement in overall survival (OS) in the relevant clinical trial. But the U.S. Food and Drug Administration explicitly requested robust OS data to support approval.

The health regulatory agency may still grant ivonescimab its blessing, but there is also a good chance it won't do so for this indication, delaying the drug's launch in the U.S. Summit's shares will likely soar if it can earn this first approval for ivonescimab in the U.S., but they will plunge otherwise.

With that said, is the stock a buy right now? If the medicine can indeed reach $15 billion in revenue by 2033, its current market cap of roughly $10.5 billion makes the stock look cheap, but there is significant uncertainty. So, in my view, investors with an appetite for risk should consider initiating a small position in this healthcare stock and progressively add more as ivonescimab earns various indications in the U.S.

2. Revolution Medicines

Revolution Medicines has an exciting approach to treating cancer. Here are the basics of it. Some cancers depend heavily on certain proteins in the body to grow. Medicines often treat them by "disabling" these proteins and slowing down the growth of the cancer. However, the RAS family of proteins, linked to certain cancers, baffled researchers for decades because they had not found a way to shut it off. Until now.

Revolution Medicines' candidates have shown the ability to treat some of these cancers, previously considered "undruggable," in clinical trials. In one phase 3 study, the company's leading candidate, daraxonrasib, posted outstanding results in patients with metastatic pancreatic cancer. Daraxonrasib was pitted against the current standard of care, cytotoxic chemotherapy, in this study. Daraxonrasib was associated with a median OS of 13.2 months, versus 6.7 months with cytotoxic chemotherapy. Revolution Medicines' leading candidate could become the new standard of care in this niche.

The biotech will also target several other indications with daraxonrasib, and it is developing additional therapies that should contribute over the medium term. But is Revolution Medicines attractive at current levels? The company's current market cap is $45 billion. That's almost unheard of for a clinical-stage biotech, reflecting the market's confidence in Revolution Medicines' approach to treating cancer. However, my view is that the stock is a bit too expensive at current levels, and there may not be that much upside left. Investors should wait for a pullback before initiating a position in this otherwise promising biotech company.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Summit Therapeutics. The Motley Fool has a disclosure policy.