Why Shares of Summit Therapeutics Slumped on Tuesday

What happened

Shares of Summit Therapeutics (NASDAQ:SMMT) were down more than 13% on Tuesday. The biotech company's shares have been trending downward since it released first-quarter earnings late last week. On top of that, the market was down in general on Tuesday.

So what

Summit spent big on its collaboration and licensing agreement with Akeso to market ivonescimab, a bispecific antibody being tested in two phase 3 trials to treat non-small cell lung cancer (NSCLC). In its quarterly report, Summit said it lost $542.4 million, compared to a loss of $21.4 million in the same period a year ago, citing $520.9 million of expenses of in-licensing ivonescimab from Akeso.

Summit gained the rights to market the therapy, which it calls SMT-112, in the U.S., Canada, Europe, and Japan while Akeso retains the marketing rights for the therapy elsewhere, including in China. Apparently investors thought the price was too high to pay on a drug that had not yet been approved.

Summit said it plans to dose patients in a HARMONI-3 trial of ivonescimab during the second half of the year. The trial will be to test the drug, combined with chemotherapy, in patients with epidermal growth factor receptor (EGFR)-mutated, locally advanced, or metastatic non-squamous NSCLC who have advanced after a treatment of third-generation EGFR tyrosine kinase inhibitor.

Now what

The company said it has $246.9 million in cash, enough to fund operations into the second half of 2024. Investors will wait to see how the company's trials fare on ivonescimab. The only other drug in its pipeline, SMT-738, is being examined against drug-resistant infections, but is in no active trials. The company has a long way to go to get approval for the drug and it will likely need to raise cash in the meantime.

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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Summit Therapeutics. The Motley Fool has a disclosure policy.