Do you ever wonder what America's wealthiest stock traders are buying and selling? Thanks to the Securities and Exchange Commission, you don't have to. Every three months, anyone with over $100 million in assets under management has to file a 13F form that shows everyone which stocks they've been buying and selling.
Artificial intelligence (AI) has been the stock market's dominant theme since ChatGPT began raising eyebrows a couple of years ago. From the end of 2022 through Nov. 1, 2024, shares of the AI data-mining specialist Palantir (PLTR -3.72%) rocketed 945% higher.
Citadel ended September with 91% fewer Palantir shares, despite the stock's eye-popping gains, after selling about 5.2 million in the third quarter. Citadel also hedges its common stock position with lots of put and call contracts. Overall, though, it looks like Griffin isn't expecting the AI giant's bull run to continue.
Citadel dumped shares of Palantir in the third quarter but wasn't afraid to start a new position in another high-rising stock, Summit Therapeutics (SMMT -5.55%). Shares of the clinical-stage cancer drug developer are up by over 600% in 2024, and Wall Street analysts who follow the stock expect it to climb even higher. H.C. Wainwright analyst Mitchell Kapoor recently issued a $44 per-share price target that implies a 139% gain from its closing price on Nov. 29.
Why Wall Street's bullish for Summit Therapeutics
Summit Therapeutics is developing ivonescimab for the treatment of lung cancer outside of China. Akeso, the Chinese company that owns ivonescimab, already earned approval from local regulators to market the therapy to lung cancer patients with disease that progressed following their initial line of treatment.
Ivonescimab raised a lot of eyebrows this September when Akeso unveiled surprising results from a head-to-head trial with Keytruda. Newly diagnosed lung cancer patients who received ivonescimab were 49% less likely to worsen than patients who received Keytruda.
Lung cancer isn't the most commonly diagnosed malignancy, but it is one of the deadliest. Keytruda is approved to treat over a dozen different types of cancer, but its approval to treat first-line lung cancer patients did more to push 2023 sales of the drug up to $25 billion than any other. One successful head-to-head trial against the market leader doesn't necessarily mean ivonescimab will become a $25 billion per year drug, but it's a big step in that direction.
Ivonescimab isn't approved by the U.S. Food and Drug Administration (FDA) yet. If it getrs the green light, selling it to oncologists already familiar with Keytruda could be relatively easy. Keytruda boosts the immune system's ability to attack solid tumors by inhibiting the programmed death ligand-1 (PD-1) pathway. Ivonescimab is a double-sided protein that inhibits PD-1 plus vascular endothelial growth factor (VEGF) at the same time.
Oncologists will likely feel more comfortable prescribing ivonescimab than they generally are when considering new cancer therapies. That's because combining VEGF inhibitors, such as Avastin with PD-1 drugs like Keytruda, is already a common practice.
What's next for ivonescimab and Summit?
The successful head-to-head trial between Keytruda and ivonescimab was conducted in China. The FDA won't approve a new cancer therapy for sale in the U.S. unless it's been tested on lots of North American patients.
To support applications outside of China, Summit Therapeutics is running a pair of phase 3 trials in the U.S. The Harmoni trial will test if adding ivonescimab to standard chemotherapy outperforms standard chemo plus a placebo among second-line patients. The study has completed enrollment, and top-line data is expected in mid-2025.
The Harmoni-3 trial will test ivonescimab plus chemo against Keytruda plus chemo among newly diagnosed lung cancer patients. The first-line study is still enrolling, and top-line results aren't expected until 2027. This study is far more important to Summit investors because newly diagnosed patients tend to stay on therapy much longer than folks who've already relapsed.
A buy now?
A successful result for the second-line Harmoni trial could send Summit Therapeutics stock soaring in anticipation of positive results for Harmoni-3. That said, a great deal of success has already been baked into this stock's price. Its market cap was a whopping $13.6 billion at the end of November. That's an enormous valuation for a company that doesn't have any products to sell yet.
I think ivonescimab will eventually become a popular first-line lung cancer therapy, but my risk-tolerance level isn't high enough to buy this stock. Summit won't have a recurring source of revenue until early 2026 at the earliest. If data for ivonescimab fails to excite investors when Harmoni reads out next year, anyone who bought the stock at its inflated valuation could suffer heavy losses.
For billionaire investors with an ultra-high tolerance for risk, a bet on Summit Therapeutics makes sense. For most of us, though, it's just too risky.
