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Bryan Garnier sets 155p fair value target on Summit Therapeutics, offering around 550% upside

The analysts said "we have established a fair value for Summit which we believe more accurately reflects its fundamental value than the current share price of 24p”
Antibiotic
They noted that Summit currently has two new mechanism antibiotic candidates in the pipeline, ridinilazole and SMT-571

Bryan Garnier & Co. has initiated coverage on Summit Therapeutics PLC (LON:SUMM) (NASDAQ:SMMT) with a fair value target of 155p, offering around 550% upside to the innovative biotech firm’s current share price of 22.50p.

The French broker was appointed Summit’s joint corporate broker, joining N+1 Singer back in November 2018, pointed out that the Oxford-based company is focused on developing novel, best-in-class antibiotics with new mechanisms of action specific for bacteria such as C.difficile, N.gonorrhoea, and others.

WATCH: Summit Therapeutics to begin Phase 3 studies of ridinilazole this quarter

In a note to clients, Bryan Garnier’s analysts said: “In this era of growing threats to health and medical practice coming from ever more resistant super strains of antibioticresistant bacterial, it is timely that Summit Therapeutics is driving new mechanism antibiotics into clinical development.”

They added Summit’s novel antibiotics targeting specific pathogens are being developed in clinical trials designed to deliver ‘superiority’ data to support their use as first-line treatments.

The analysts pointed out that Summit’s proprietary antibiotic discovery platform, Discuva, identifies new targets critical for bacterial survival and appropriate drugs against them.

Two antibiotic candidates in the pipeline

They noted that Summit currently has two new mechanism antibiotic candidates in the pipeline, ridinilazole and SMT-571.

Ridinilazole, now in Phase 3 development with the first patient dosed - announced 13 February - is a targeted treatment for C.difficile aiming to replicate Phase 2 results showing superiority over standard of care, vancomycin, in the cure and reduced recurrence of C.difficile infection.

SMT-571, a novel candidate to treat N.gonorrhoea infections, is expected to enter Phase 1 in H2 2019.

Alongside this, Summit plans to undertake new preclinical testing on new compounds for the treatment of the highly resistant ESKAPE pathogens over the next year. Summit is currently focusing its discovery and development efforts on WHO priority pathogen-targeted antibiotics with novel mechanisms of action. 

The analysts said: “With an estimated £26mln of cash plus non-dilutive funding (BARDA and CARB-X) and having just commenced a phase 3 programme of ridinilazole, we have established a fair value for Summit which we believe more accurately reflects its fundamental value than the current share price of 24p.”

They concluded: “On the basis of our risk-adjusted SOTP model, we value Summit at 155p per share (£249mln) making now an excellent entry point.”

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