Summit Therapeutics Inc. (SMMT) is a biopharmaceutical company that engages in the discovery, development, and commercialization of medicines to treat infectious diseases in the United States and Latin America. The company conducts clinical programs focusing on Clostridioides difficile infection (CDI).
This month, SMMT’s Co-CEO & Executive Chairman, Robert Duggan, bought $92 million worth of stock at $0.97, which boosted his holding by 140%. However, this purchase was made well below the current stock price. Company executives Ankur Dhingra and Maky Zanganeh also bought shares of the company recently.
Over the past year, The stock has declined 85.2%. It has declined 56.1% year-to-date. However, it has gained 8.6% over the past five days to close its last trading session at $1.18. SMMT declined 9.2% intraday.
Here are the factors that could affect SMMT’s performance in the near term:
Recent Rights Offering
On August 9, SMMT announced the successful closing of its fully-subscribed $100 million rights offering. The rights offering led to the sale of approximately 103 million shares of the company’s common stock, par value $0.01 at a price of $0.97 per share. The company received net proceeds of about $99.90 million from the offering.
High Valuations
SMMT’s trailing-12-month EV/Sales multiple of 101.43 is 2,215.1% higher than the industry average of 4.38. In terms of its trailing-12-month Price/Sales, the stock is trading at 56.55x, 1,073.7% higher than the industry average of 4.82x.
Negative Profit Margins
SMMT’s trailing-12-month ROE, ROTC, and ROA of a negative 99.41%, 50.19%, and 88.66% are lower than their respective industry averages of a negative 38.42%, 21.26%, and 29.64%.
POWR Ratings Reflect A Bleak Outlook
SMMT’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SMMT has a Quality grade of D, in sync with its bleak profit margins.
The stock has a C grade for Stability, consistent with its five-year monthly beta of 1.04.
In the 174-stock Medical – Pharmaceuticals industry, it is ranked #125. The industry is rated F.
Click here to see the additional POWR Ratings for SMMT (Growth, Value, Momentum, and Sentiment).
View all the stocks in the Medical – Pharmaceuticals industry here.
Bottom Line
The insider purchases reflect the executives' confidence in the company and buoyed its stock recently. However, its negative profit margins are concerning. Moreover, the $430 billion Inflation Reduction Act to change climate, health, and tax policies poses a risk of a decrease in drug prices. Hence, I think the stock might be avoided now.
How Does Summit Therapeutics Inc. (SMMT) Stack Up Against its Peers?
While SMMT has an overall POWR Rating of D, one might consider looking at its industry peers, Johnson & Johnson (JNJ) and Novartis AG (NVS), which have an overall A (Strong Buy) rating, and Supernus Pharmaceuticals, Inc. (SUPN) and Eli Lilly and Company (LLY), which have an overall B (Buy) rating.
SMMT shares were trading at $1.14 per share on Friday morning, down $0.04 (-3.39%). Year-to-date, SMMT has declined -57.62%, versus a -12.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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