Israel Englander is a billionaire hedge fund manager and serves as the CEO of Millennium Management. During the second quarter, Millennium initiated a new position that I found to be quite curious. Below, I'm going to share one of the fund's new positions and explore the benefits and risks of investing in this particular up-and-coming biotech stock.
Millennium Management's curious move
According to Millennium's most recent 13F filing, the hedge fund bought 1,942,858 shares of Summit Therapeutics (SMMT 3.63%). So far in 2024, shares of Summit have gained 699%.
It may look a little strange for a large investment firm to buy a stock that has so much outsized momentum fueling it right now. After all, a stock that's soared at such a pace could also potentially drop like a rock at any given moment.
Let's take a look at what is fueling Summit's price action right now, and consider what factors could influence the stock positively or negatively.
Some important details to know about Summit
Summit Therapeutics is a small biotech company that does not currently generate any revenue. The company's leading candidate, ivonescimab, is a lung cancer drug. Back in September, Summit published data from a phase III clinical trial in which ivonescimab was benchmarked against Merck's blockbuster cancer drug, Keytruda.
According to the trial, patients taking ivonescimab had a median progression-free survival (PFS) of 11 months -- nearly double that of Keytruda. On the surface, it looks like Merck may have met its match. But savvy investors understand that jumping to such a conclusion would be short-sighted. There are several factors to consider when comparing ivonescimab's potential to that of Keytruda.
First, Keytruda is a very prolific drug. It has received dozens of indications from the Food and Drug Administration (FDA) and is not entirely prescribed to treat cancer patients. Additionally, Summit's phase III trial was conducted in China by the company's strategic partner, Akeso. If Summit wants to gain approval to commercialize ivonescimab in other parts of the world, the company is going to need to invest in further clinical trials with other population demographics.
So while ivonescimab may look to be a breakout cancer drug, it could be a while before it becomes a global phenomenon. Of course, the possibility of running into a snag rises as more trials take place and ivonescimab is tested on different varieties of people.
Image source: Getty Images.
Is Summit Therapeutics a good buy right now?
I'm a little torn when it comes to investing in Summit Therapeutics. On the surface, the trial data is encouraging and ivonescimab looks to have some positive momentum. Summit very well could emerge as a major player in the cancer arena should ivonescimab eventually become commercialized worldwide.
But at the same time, I find it hard to believe that ivonescimab will suddenly replace Keytruda as one of the world's most successful cancer treatments.
At the end of the day, I see Summit stock as more of a trade than an investment. A lot of the money that's been made in Summit largely has to do with owning the stock at the right time. As far as an investment is concerned, Summit still carries a decent risk profile and is more of a speculative opportunity.
Moreover, there's a legitimate argument to be made that some of ivonescimab's potential is already baked into Summit stock given how much it's run over the last several months. However, prudent investors probably don't want to blindly follow momentum.
For all of these reasons, I'd pass on Summit right now. I think the company is definitely worth monitoring and it could very well emerge as a multibagger in the long run. There will be other opportunities to buy into Summit over time as the company matures and continues conducting further trials and research.
