1 Monster Stock in the Making to Buy and Hold

What if you had invested in any of the current leaders in the biotech industry before they established themselves as such? You'd have earned terrific returns. While we can't go back in time to do that, there are still drugmakers that have yet to rise to prominence in the industry, but could do so in the next decade or so. Investing in these companies right now might lead to superior returns over the long run.

One such corporation is Summit Therapeutics (NASDAQ: SMMT). Here's the rundown.

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An incredibly promising candidate

To be the best, you have to beat the best. In the biotech industry, that means developing medicines that prove more effective than current standards of care. That's no easy feat; the bar is much higher for brand-new therapies entering an already crowded field than it is for drugs chasing approvals in markets with high unmet needs.

And there are few therapeutic areas as competitive as oncology. The largest companies in the field dominate this market, so it's challenging for smaller players to break in. But Summit Therapeutics looks destined to do so. It licensed ivonescimab from a China-based biopharma called Akeso. Summit owns the rights to ivonescimab in most countries outside of China, where the therapy is already approved.

Summit Therapeutics will have to run clinical trials in the U.S. (and elsewhere) to support approval in these regions, but things already look highly promising. In a recent phase 3 clinical trial completed in China, ivonescimab combined with chemotherapy reduced the risk of progression or death by 40% in squamous non-small cell lung cancer (NSCLC), compared to an approved medicine called Tevimbra (with chemotherapy).

That adds to the substantial (and growing) clinical evidence supporting ivonescimab's efficacy, which includes a major win over the best-selling cancer drug in the world (or medicine of any type, for that matter), Merck's Keytruda. In a phase 3 study, ivonescimab reduced the risk of progression or death, in patients with advanced NSCLC and a PD-L1 protein overexpression, by 49% compared to Keytruda. Beating out this giant in a head-to-head study -- marking the first time any therapy had bested Keytruda in a phase 3 trial in NSCLC -- speaks volumes about ivonescimab's potential.

It might not be too late to buy the stock

In fairness, Summit Therapeutics has already benefited from the perceived success of ivonescimab. The company's shares have skyrocketed over the past three years, and its market cap of $13.9 billion is exceedingly rare for a biotech that generates no revenue and is consistently unprofitable. However, Summit isn't just any clinical-stage biotech. Most have therapies with little clinical data available, increasing the risk that they will eventually fail in late-stage studies and never generate any revenue. That's less of a problem with ivonescimab, considering it's been approved in China.

Furthermore, ivonescimab's potential in lung cancer -- the leading cause of cancer death in the world -- makes its commercial opportunity massive. Also, ivonescimab could go after many other indications outside of NSCLC; it's targeting several other forms of cancer. Summit is running a phase 3 study for ivonescimab in colorectal cancer, the second-leading cause of cancer death worldwide. Targeting these forms of cancer could make ivonescimab a commercial hit.

According to some estimates, the medicine could hit peak sales of $53 billion, a number Keytruda won't reach, given its upcoming patent cliff in 2028 and the fact that it generated less than $30 billion last year. Of course, ivonescimab will take a while to get there. And Summit won't pocket all of the revenue it brings in, although the company does have the rights to it in the most lucrative regions: the U.S. and Europe.

That's why Summit Therapeutics may not have peaked yet. The company could become a well-established, profitable drugmaker in the next decade, and deliver strong returns on its way there.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Summit Therapeutics. The Motley Fool has a disclosure policy.