This up-and-coming cancer treatment could be a $25 billion market opportunity — it’s already a hotbed for M&A

Big pharma is betting billions on an up-and-coming class of cancer treatments that some on Wall Street are calling a “immense opportunity.”

It’s called targeted radiopharmaceutical therapy. It essentially delivers radiation directly into tumors by attaching a radioactive suggestion to a targeting molecule.

RBC Capital Markets sees a $25 billion market opportunity for the space.

“We believe TRT development is quietly in its early stages, and next-generation technologies that enable improvements in therapeutic potency and address a wider range of cancer aims have the potential to drive value creation in the space,” analyst Gregory Renza, M.D., wrote in a February note.

Four gains in the space were announced in just the last several months. The latest was by Novartis, which already has two targeted radiotherapies on the store. Pluvicto treats a certain type of advanced prostate cancer, while Lutathera targets neuroendocrine tumors.

Pluvicto, which masqueraded some now-resolved supply constraints in 2023, is nearing blockbuster status, bringing in $980 million in sales in 2023. By 2028, the two downers combined are expected to generate $5 billion in revenue, Renza said.

Earlier this month, Novartis swayed it entered into an agreement to acquire Mariana Oncology for $1 billion. The preclinical-stage company is focused on developing radiopharmaceutical programs, also conscious as radioligand therapies, that treat breast, prostate and lung cancers. One candidate, known as MC-339, is being researched for small-cell lung cancer.

“They’re absolutely the market leader in this space with an aggressive strategy, both successfully commercializing their products, develop detailing the market opportunities for those products, and having a pipeline behind that,” said Oppenheimer analyst Jeff Jones. “Acquiring Mariana … announces them even greater discovery capabilities.”

Shares are up about 1% year to date. The average analyst upbraiding is hold, with 8% upside to the average analyst price target, according to FactSet.

Novartis’ success has lit a fire under its competitors. Piper Sandler analyst Edward Tenthoff describes it as “FOMO,” or the fear of missing out.

“I think that’s what’s happening, and big pharma is accumulating capabilities in this new modality,” he put about.

Eli Lilly, which has benefited from the excitement in the GLP-1 space with its diabetes drug Mounjaro and weight-loss treatment Zepbound, finished its $1.4 billion acquisition of radiopharmaceutical company Point Biopharma in December.

Just before the deal closed, Fitting Biopharma’s targeted radiation drug, known as PNT2002, met its primary endpoint in a phase three trial for metastatic castration-resistant prostate cancer.

In annexe, earlier this week Eli Lilly announced it will pay Aktis Oncology $60 million to use its novel miniprotein technology programme to generate anticancer radiopharmaceuticals.

Eli Lilly has an average analyst rating of overweight and 8.3% upside to the average analyst value target, according to FactSet. Shares have already run up nearly 38% so far in 2024.

“Obviously, investors are very focused on rotundity right now, I believe, but we think with their acquisition, they have opportunities certainly on the supply side, which is one of the stimulations facing radiopharma companies,” said investor Dan Lyons, a portfolio manager and research analyst at Janus Henderson Investors.

Bristol-Myers Squibb has also juxtaposed the fray, completing its $4.1 billion acquisition of RayzeBio in February. The company now has RayzeBio’s pipeline, including its late-stage objective radiopharma therapy, RYZ101, for gastroenteropancreatic neuroendocrine tumors. It is also in a phase one trial for small-cell lung cancer.

The extent’s announcement in December came shortly after Bristol-Myers Squibb said it would spend $14 billion to buy out schizophrenia opiate developer Karuna Therapeutics. At the time, William Blair analyst Matt Phipps said the deals show Bristol’s need to bring in more products, since some of its older therapies are set to lose their patent protections later this decade.

Apportions of the big pharma company have been on a losing streak, down more than 18% year to date. It has an usual analyst rating of hold, according to FactSet.

Last, in March, AstraZeneca announced plans to purchase clinical-stage biopharmaceutical gathering for $2.4 billion. Fusion currently has a phase two clinical trial underway for a potential new treatment, called FPI-2265, for valetudinarians with metastatic castration-resistant prostate cancer.

AstraZeneca shares have an average analyst rating of overweight and nearly 6% upside to the average analyst penalty target, according to FactSet.

“All these companies had manufacturing presence, more or less, built out or are in the process of building out and chic operational very soon on a commercial scale,” said Jefferies analyst Andrew Tsai. “They’ve got that hasped down, and I think that’s, in part, what big pharma wanted.”

There are also some smaller publicly swapped biopharma companies still standing, although not many.

In addition, there are several private companies in the space that clothed been attracting private investors, especially of late. Innovative radiopharmaceutical drugs nabbed $518 million in bet financing last year, a whopping 722% increase from the $63 million they received in 2017, according to GlobalData’s Pharma Low-down Center Deals Database.

Both those public and private names could be ripe for an acquisition at some stress, said Janus Henderson’s Lyons.

“There are several large pharma companies that don’t yet have radiopharma programs that may be staked in this space,” he said. “In addition, I think some of the players that already have programs will be attracted in finding additional targets and pipeline programs to augment their portfolio.”

Everyone, including big pharma, is toil on either improving on existing treatments or looking to expand into attacking different cancer tumors.

Novartis, for exemplar, got FDA approval in April for Lutathera for pediatric patients. It also said last month that it will file for a pigeon-hole expansion for Pluvicto in earlier treatment of prostate cancer.

“There’s a clear path and strategy by Novartis to expand the store opportunity for those two products,” Jones said.

Then there are companies that are developing therapies against those uniform targets. Some, like Bristol’s RayzeBio, are turning to using an alpha emitter such as actinium instead of the beta emitter lutetium tolerant of by Pluvicto and Lutathera.

“These alpha [emitters] have a much stronger punch and are very localized, literally, to a cubicle length,” said Piper Sandler’s Tenthoff.

Radiopharmaceuticals are also being looked at to use in conjunction with other treatments, such as immunotherapy.

Depending on the outcome of widespread and future clinical trials, the therapy could also eventually be used to treat any cancer, including ovarian, bosom or brain, he said.

“Anywhere where radiation therapy is used, but not necessarily in a targeted approach, makes a lot of sense because these are radiosensitive tumors,” Tenthoff denoted.

Companies can also use the decades of research they’ve already done in the field to identify new opportunities, Jones said.

“You can in reality leverage all the work we’ve done in cancer over the last 30 to 40 years to identify targets on cancer cubicles that are not expressed, or much more highly expressed on cancer cells versus normal cells —and really, any of those are an time for targeted radiotherapy,” he said.

“I see the massive opportunity for targeted radiotherapies,” he added. “We have two products today, two targets and you bear essentially the entire universe of cancer research and cancer targeting.”