Recently, one area of the oncology market called radiopharmaceuticals has received a number of attention. The goal of this therapy is to destroy cancer cells by binding a radioactive particle to a goal molecule after which delivering it directly into the tumor. There are currently two Novartis products available on the market and various clinical trials underway. Interest is so high that the product has been the main target of a flurry of acquisition announcements from major pharmaceutical firms over the past 12 months. The latest got here from Novartis earlier this month, when it struck a deal to amass Mariana Oncology for $1 billion. Novartis already has two therapies available on the market: Pluvicto, which treats a form of advanced prostate cancer, and Lutathera, which targets neuroendocrine tumors. Eli Lilly accomplished its $1.4 billion acquisition of Point Biopharma in December, and Bristol-Myers Squibb accomplished its $4.1 billion acquisition of RayzeBio in February. In March, AstraZeneca announced that it could buy the biopharmaceutical company Fusion Pharmaceuticals for $2.4 billion. “Any large pharmaceutical company with an existing presence in oncology probably wants to get into this radiopharmaceuticals business because the data already looks pretty good,” said Jefferies analyst Andrew Tsai. “What you see is that these companies [are] This is not necessarily about acquiring the core assets of these companies, but rather the manufacturing and know-how. It seems very complicated to do it yourself,” he added. A growth opportunity for the subsequent decade. But radiopharma is barely one a part of each company's larger portfolio. Novartis is a frontrunner on this field, with its two therapies already available on the market and a number of other clinical trials underway. “The acquisition of Mariana … gives them even greater discovery opportunities,” said Oppenheimer analyst Jeff Jones. But Novartis shares have underperformed the market. The stock is up about 1% year-to-date, and the typical analyst rating is “Hold.” Analysts are forecasting about 8% upside based on the typical price goal reported by FactSet. Investors' attention is on Eli Lilly, which is up 38% year-to-date, thanks largely to its diabetes drug Mounjaro and its weight-loss drug Zepbound. Meanwhile, Bristol-Myers Squibb shares have struggled, falling 18% thus far this 12 months as investors give attention to the lack of patent protection for a few of its older drugs later this decade. AstraZeneca, however, is up 17% year-to-date. It has a mean analyst rating of “Overweight” and nearly 6% upside from analysts' average price goal, in accordance with FactSet. Analysts consider the massive pharma acquisitions are only the start, as each the larger firms and smaller biotechs work to enhance current therapies and discover recent ones. The final result might be higher efficacy and a bigger variety of tumors that will be treated with the therapy. William Blair said investing within the sector will likely provide investors with a secular growth opportunity well into the subsequent decade. Read more on this trend: This emerging cancer treatment might be a $25 billion market opportunity – it's already a hotbed for mergers and acquisitions “Owning isotope production could be viewed as a significant competitive advantage from a big pharma perspective,” analyst Andy Hsieh wrote in a March note following AstraZeneca's announcement. “After achieving a stable, robust and redundant supply chain, the next focus will likely be on optimizing modalities (radioligands, engineered peptides/proteins, nanobodies or antibodies) for specific targets (preferably beyond PSMA and SSTR2) and tumor indications, which we believe could lead to sustained investor engagement and innovation in the radiopharmaceutical space over the long term,” he added. A $25 Billion Market Meanwhile, RBC Capital Markets sees a $25 billion market opportunity for the space. “We believe TRT development is still in its infancy, and next-generation technologies that enable improvements in therapeutic efficacy and address a broader range of cancer targets have the potential to drive value creation in this space,” analyst Gregory Renza, MD, wrote in a February note. One place to look is the clinical-stage biotech firms operating within the space that might be prime candidates for an acquisition. These stocks might be an interesting investment for those willing to tackle some risk. One name Jones likes is Perspective Therapeutics, which he rates as above-average. The company is approaching a $1 billion valuation and is currently valued at around $888 million. Shares are up 280% year-to-date, which Jones said is driven by enthusiasm for the space. CATX 1Y Mountain Perspective Therapeutics because the starting of the 12 months Cantor Fitzgerald can be optimistic in regards to the name. “Although the stock has done well this 12 months … we still see room for price increases. Our [discounted cash flow] The evaluation involves an equity value of over $4 billion, in comparison with its current market cap of ~$1 billion,” analyst Louise Chen wrote in a note last week. The company has remained somewhat under the radar of big pharma since its reverse merger to go public last year, Jones pointed out. Perspective is currently conducting trials to target neuroendocrine cancer and melanoma with alpha emitters instead of beta emitters used in Novartis' treatments. “Alpha emitters [emitters] have a much stronger punch … and are rather more targeted. So it's really a super profile,” said Edward Tenthoff, an analyst at Piper Sandler who does not cover Perspective Therapeutics. Dan Lyons, a portfolio manager and research analyst at Janus Henderson Investors, is bullish on Perspective and its opportunities. “They have a protracted history of radiopharmaceuticals,” he said. He also likes and holds Novartis and Eli Lilly in the big-cap space, as well as biotech company Immunome, which has a market cap of $865 million. Immunome is in the discovery phase of a targeted radioligand therapy for certain solid lung, breast and esophageal tumors. Then there's Lantheus Holdings, which describes itself as a radiopharmaceutical-focused company and has a market cap of $5.6 billion. “Lantheus Holding is an organization that's firmly entrenched in diagnostics. [and] “We are moving toward therapeutics,” Jones said. The company's diagnostic imaging methods are used at the side of Novartis' Pluvicto. On the therapeutic side, Lantheus collaborated with Point Biopharma on a targeted radiation therapy for metastatic castration-resistant prostate cancer. In December, the treatment met its primary endpoint in a Phase 3 trial, shortly before Eli Lilly accomplished its acquisition of Point Biopharma. LNTH YTD Mountain Lantheus Holdings YTD The company also entered into several strategic agreements with Perspective Therapeutics in January, including an choice to exclusively license Perspective's clinical-stage Alpha Therapy to treat neuroendocrine tumors and an choice to co-develop certain early-stage therapeutic candidates to treat prostate cancer. In addition, Lantheus agreed to buy as much as 19.9% of Perspective's outstanding common stock, and Perspective will acquire assets and the related lease of Lantheus' radiopharmaceutical manufacturing facility in New Jersey. The average analyst rating on the stock is a buy, in accordance with FactSet. Among those that like the corporate is Leerink Partners analyst Roanna Ruiz. She has a $106 price goal on the stock, suggesting over 30 percent upside from Wednesday's closing price. She expects recent merger and acquisition activity to proceed to intrigue investors. “We believe this further validates Lantheus' recent partnership with Perspective Therapeutics … as Lantheus has the right to match any bid price for Perspective, as well as the opportunity to sign on,” she wrote in a May 2 note.
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