While the idea of getting rich quick is always appealing, it's seldom as straightforward as it sounds. Still, shares of Summit Therapeutics (SMMT -5.55%) are up by more than 989% in the last 12 months as I write this, and that's reason enough for investors to wonder if it might be a stock that's capable of making them millionaires in a relatively short time, and without much fuss.
So is the bright glitter of opportunity here worth staking your money on in hopes of a big return?
This biotech has no shortage of growth opportunities
There are expected to be 234,000 new cases of lung cancer in the U.S. this year, with about 80% to 85% being non-small cell lung cancer (NSCLC). Lung and bronchus cancer represents 11.7% of all new cancer cases in the U.S. And, despite improvements over the last several decades in survival rates, it's still an incredibly dangerous illness, with many different subtypes and complications that each imply subtle differences in the design and application of interventions.
Therefore, rather than attempting to develop a one-size-fits-all therapy for NSCLC, which may not be possible, Summit Therapeutics is taking a more targeted approach by testing its lead candidate, a biologic called ivonescimab, in a pair of phase 3 clinical trials for specific patient populations.
Unlike other biotechs, the content of its pipeline is contingent on the output of its main collaborator, a cancer drug biotech in China called Akeso. It's licensing ivonescimab for commercialization in the U.S., pending the successful completion of those two trials, but Akeso is itself running a slew of early-, mid-, and late-stage clinical trials in China and Australia in hopes of getting approval to market the candidate for many different indications within NSCLC and other cancers, too.
If those efforts bear fruit, Summit will likely try to pick up additional licenses and do more late-stage confirmatory trials in the U.S. As Akeso has so many different irons in the fire, as well as three commercialized therapies in China, it is very probable that at least a couple of those efforts will be worth Summit's onboarding. And that means the biotech might have a shot at continuously adding to ivonescimab's approved list of indications over time, assuming it gets approval for its first couple of indications.
The company, in theory, has the potential to grow by a large amount. That's especially true considering that it has no revenue or products today. So, for the prospects of it making millionaires out of shareholders, at least superficially, the outlook looks good. Assuming everything works out well, which is never guaranteed.
The math means this stock simply won't make you a millionaire
Unfortunately, digging a tad deeper quickly reveals that this stock likely won't be a road to riches.
Summit's market cap today is close to $15 billion and shares trade for about $19 each, up 989% over the past year. For anyone who buys the stock today to become a millionaire, it'll take a huge amount of growth, unless they can commit unrealistically large amounts of capital up front.
Let's look at an optimistic scenario to show why this is the case.
Per Fortune Business Insights, the global market for NSCLC therapies will be worth roughly $95 billion by the close of 2032. While its candidate won't be able to access all of the segments within that market right away if it gets approved, and it doesn't yet own the rights to commercialize it in any geographical area outside the U.S., Summit can credibly make headway on both of those constraints if it can commercialize ivonescimab for one indication and start generating some profits.
For this made-up scenario, let's assume that the biotech is capturing a hearty portion of the predicted NSCLC market and has $9.5 billion in revenue in 2032. In this scenario, it would have ivonescimab commercialized for multiple major indications within several of the eligible patient populations with NSCLC as a result of licensing additional programs from Akeso, with approvals in the U.S. as well as in the E.U., the world's richest markets for cancer therapeutics.
Under today's conditions, the average price-to-sales (P/S) multiple of a biotech stock is near 10. That implies Summit would have a market cap of $95 billion, or 533% higher than it is today. Even then, you'd need to invest $187,500 right now for your money to grow to be worth $1 million.
Very few people have that kind of money lying around, and it's also prohibitively large to dollar-cost average (DCA) into. And there's no guarantee that the company would be able to actually capture 10% of the global market for NSCLC therapies, nor is there a guarantee that its valuation would remain the same.
So if you're looking for quick riches, this isn't the stock for you, as there's not any real hope of it minting millionaires from those with little to invest. On the other hand, if you're a bit more patient, it's probably worth buying shares, especially if you're looking for a biotech stock that's slightly less risky than the average for its category.
