Why Summit Therapeutics Stock Slipped Today

Summit Therapeutics (NASDAQ: SMMT) stock did better than a lot of other equities during an otherwise forgettable trading session on Wednesday. In contrast to other titles that fell notably, Summit more or less kept pace with the S&P 500 (SNPINDEX: ^GSPC), managing to dip by a relatively modest 2.25% in price. Some investors, at least, were cheered by an analyst's recommendation upgrade on the stock.

The high potential of a licensed drug

Well before market open, Citigroup pundit Yigal Nochomovitz changed his recommendation on Summit's shares to buy from neutral. Accompanying this was a generous price target increase; the analyst's fair value assessment is now $35 per share, where formerly it stood at $23.

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According to reports, Nochomovitz wrote that his move was based on a concentrated analysis of the prospects for ivonescimab. This is a rather promising cancer drug Summit has licensed from Chinese peer Akeso. The pundit feels that the coming readout of the medication's Harmoni-2 late-stage clinical trial has a 70% chance of indicating a favorable result with overall survival rates.

Ivonescimab has already attracted much notice after Akeso divulged the results of a clinical trial pitting it against 2024's top-selling drug, Merck's blockbuster Keytruda, for the treatment of non-small cell lung cancer (NSCLC).

Uncertainty reigns

The recommendation upgrade is certainly heartening, but there are two factors mitigating this just now. First, as ever in the biotech world, a company's success depends on it bringing medications to market; ivonescimab's promise is only that at the moment, and much work still needs to be done before it can win potentially win approval from top regulators (let alone succeed as a commercialized product).

Second, there is still much uncertainty swirling around the tariffs President Trump aims to impose on certain trade partners next week. He has specifically mentioned the pharmaceutical sector as a target for such levies; however, his administration hasn't yet proffered many details of the extra costs importers will have to pay.

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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Summit Therapeutics. The Motley Fool has a disclosure policy.