Why Summit Therapeutics Stock Tanked Today

An analyst's downbeat new take on Summit Therapeutics (NASDAQ: SMMT) pushed its stock downward on Hump Day. At the end of Wednesday, the shares had booked a loss of over 11% in price as investors absorbed the negative take. That was a far steeper fall than the 0.3% slide of the S&P 500 (SNPINDEX: ^GSPC) that trading session.

Bearish on Summit

Well before market open that day, Leerink Partners' Daina Graybosch initiated coverage on Summit stock. This wasn't a positive appraisal, as the analyst flagged it with an underperform (read: sell) recommendation and a price target of $12 per share. That level is nearly 40% below Summit's most recent closing price.

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According to reports, Graybosch focused on ivonescimab, the high-profile cancer drug that Summit has licensed from China-based peer Akeso for jurisdictions outside the large Asian country.

Despite good results in a recent head-to-head clinical study against Merck's Keytruda, the analyst doesn't believe ivonescimab -- if approved in countries covered by Summit's license -- will grab enough market share to justify Summit's rather high valuations as a stock. She also believes that, as it's not the first drug of its kind, ivonescimab will face higher hurdles for clinical success, approval, and sales.

It will be all about ivonescimab

Like many biotech stocks, Summit's share price has been quite the seesaw, largely on ivonescimab developments. While I think Graybosch's assessment of its prospects are realistic, many types of cancer present large addressable markets, and I wouldn't necessarily count out Summit on the basis of those valuations. Much will depend, of course, on the drug's clinical trials in this part of the world.

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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.