SUMMIT THERAPEUTICS: CAN LIGHTNING STRIKE TWICE?

In life, it is rare for lightning to strike a person. According to the National Weather Service, your odds of getting hit by lightning are 1 in 15,300. Pretty darn rare. But there is actually one phenomenon that is even more rare: to get hit by two separate lightning bolts. The odds are so long, in fact, that it is hard to find any reliable data on people who are this unlucky. 

When Bob Duggan and his team managed to sell Pharmacyclics, a previously obscure biotech firm, for $21,000,000,000 in 2015, that was the equivalent of getting hit by lightning. Duggan’s team had achieved this shocking success against long odds. Now it looks like the Duggan team is on the verge of doing it all over again with Summit Therapeutics. It’s improbable enough to beat the odds once, but could Summit investors possibly reap outsize rewards all over again?

By the Sick Economist 

Everything about Bob Duggan and his business career is an anomaly. In an industry stocked with MD’s and Phd’s, Duggan doesn’t even hold a bachelor’s degree. In an industry filled with lifers who have been playing with test tubes since they were fifteen years old, Duggan has a broad and varied business background that includes time spent as a cookie mogul. In an industry where founders are lucky to hold on to 2% of the companies they found, Duggan is always the controlling shareholder, owning well more than 50% of his publicly listed firms. Duggan is a rare man who has achieved rare results. 

Duggan gained fame with the publication of the book, “For Blood or Money: Billionaires, Biotech and the Quest for a Blockbuster Drug.”  This book weaves a compelling yarn detailing Duggan’s first big win; the transformation of Pharmacyclics Inc from a marginal biotech penny stock into a preeminent pioneer in the battle against blood cancer. 

This surprise transformation certainly seemed like a “once in a lifetime” score. But now it seems like he may be on the verge of repeating his last impressive feat. 

Summit v. The King 

For millions upon millions of cancer patients around the world, the current standard of care is treatment with Keytruda. The introduction of Keytruda more than a decade ago changed the game in oncology. Instead of highly destructive chemotherapy, which was the chemical equivalent of carpet bombing cancer into remission, Keytruda helps the body’s own immune system to identify cancer as a foreign body that should be attacked. Keytruda was the first viable immunotherapy to gain widespread acceptance in the world of oncology. This has led to the widespread use of Keytruda for dozens of different indications and a whopping $25 billion in sales in 2023.  That being said, the medication still leaves a lot to be desired. Depending on the indication and the setting, the medication still works for less than 50% of patients, and many patients develop resistance to the medication over time. Keytruda represents a huge step forward in oncology, but it’s far from a “cure for cancer.” 

Against this backdrop, Duggan’s new company, Summit Therapeutics, made a huge splash with data released in September of this year. Summit’s agent DOUBLED the progression free survival time versus Keytruda, and generally reduced the progression of patients’ cancer by 49% versus Keytruda. If confirmed, this is a big deal, and would mean that Keytruda could be replaced as the standard of care for lung cancer, and perhaps beyond. 

IF

“IF” however, is still a big word. Although these data certainly look appealing, a potential Summit investor still faces risks. 

The first risk would be the unusual nature of the data. Summit only holds the license for the new agent, but did not conduct this initial research. Rather the molecule was created by Akeso, which is a Chinese company, and this exciting data were produced by research done only in China. 

This carries two risks. The first risk is that, China is a black box. As a communist country with strict controls on the media, there is little to no transparency about what goes on in the country. Nothing happens without the approval and involvement of the Chinese Communist Party, and this adds an element of unpredictability and opacity to any business dealings. Just ask former super tycoon Jack Ma. 

The second risk is that, even if the data are legitimate and fully above board, all studies were conducted on Chinese people. The Chinese are extremely genetically homogeneous, so we may not be able to duplicate exactly the same results on the heterogeneous populations of America and Europe. 

These questions will soon be resolved. Summit currently has two different phase III trials underway in America. It is expected that these results will be announced in June of 2025. If Duggan and Co are able to repeat anything close to the Chinese results in America, Summit shareholders will have a bonanza on their hands. 

Valuation

Immediately after the news broke, Summit’s market capitalization sky rocketed to a breathtaking $25 billion dollars. After the media hype crested, the valuation has coasted down to a more comfortable $15 billion. 

Even $15 billion may seem like a mighty lofty valuation for a biotech company with zero revenue and no American data on hand, but given the context, the number may seem very reasonable to the seasoned biotech investor. Remember, Keytruda, the competitor that was just beaten in the Chinese trials, sold $25 billion in product last year, and has racked up sales well in excess of $100,000,000,000 over its lifetime. According to the NYU Stern School of Business, biotech companies are often valued at 6 times their annual sales on the stock market. Of course, Summit currently has $0 in annual sales. But if we assume that one day Summit’s new molecule at least matches Keytruda, a valuation of even $30 billion might seem like a steal for Summit. In other words, investors could easily double their money in just a few years, or even a few months, if Summit is able to duplicate that Chinese data in June of ‘25. 

The Duggan Difference

Before buying in, one thing that investors should consider is that Summit is just different from other biotech companies. The difference comes down to Bob Duggan himself; his particular tactics and his overall situation. 

First of all, unlike most speculative biotech companies, Summit is totally controlled by Bob Duggan and Bob Duggan alone. He owns more than 70% of the shares. Another large chunk is controlled by Duggan’s management team. In other words, the general public is invited to go along for the ride, but Summit is firmly controlled by team Duggan. 

Many people would see this as a big “plus,” for a few reasons. First, Duggan and his team are really putting their money where their mouths are. After the big announcement, Summit announced a capital raise. Not only did Duggan put MORE of his own money into the company, but ALL of his 16 top executives also chose to use their own funds to double down on the biggest career bet of their lives.  This might help assuage fears about the veracity of the Chinese data. We still can’t say definitively whether or not the Chinese data is legitimate, but it certainly appears that Duggan and his whole team are believers. 

The other important fact about Duggan is his advancing age. Despite a shockingly youthful appearance, super entrepreneur Bob Duggan is now an octogenarian. This means that his end goal is very likely to sell the company for boku bucks, just like he did for his last company, Pharmacyclics. It took years to fully develop the Keytruda platform, and it would be reasonable to assume the same would be true for Keytruda’s replacement. Bob has a lot of very positive assets on his side, but years is not one of them. Investors purchasing shares of Summit today are aiming to be bought out at a profit at some time over the next few years. 

If Bob Duggan manages to pull this off, the feat really will be one for the biotech history books. It’s hard enough to pull one blockbuster drug from obscurity but to do it twice, would be the stuff of legend. The business equivalent of getting hit by lightning twice. 

This play would not be without risk for investors, but who wants to miss an electrifying opportunity?