This emerging cancer treatment could have a market potential of $25 billion – it’s already a breeding ground for mergers and acquisitions

Big pharmaceutical firms are betting billions on a brand new class of cancer treatments that some on Wall Street are calling a “huge opportunity.”

This method is known as targeted radiopharmacology. It essentially delivers radiation directly into tumors by binding a radioactive particle to a goal molecule.

RBC Capital Markets sees a market potential of 25 billion US dollars for this area.

“We believe that TRT development is still in its infancy and that next-generation technologies that enable improved 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.

In the previous couple of months alone, 4 takeovers have been announced on this area. The last one was by Novartis, The company already has two targeted radiotherapies available on the market. Pluvicto treats a particular style of advanced prostate cancer, while Lutathera targets neuroendocrine tumors.

Pluvicto, which struggled with some supply bottlenecks in 2023 which have since been resolved, is approaching blockbuster status and can generate sales of $980 million in 2023. The two drugs combined are expected to generate sales of $5 billion by 2028, Renza said.

Earlier this month, Novartis announced that it had entered into an agreement to acquire Mariana Oncology for $1 billionThe preclinical-stage company is concentrated on developing radiopharmaceutical programs, also called radioligand therapies, to treat breast, prostate and lung cancer. One candidate, generally known as MC-339, is being investigated for the treatment of small cell lung cancer.

“They are clearly the market leader in this space with an aggressive strategy that includes both successfully commercializing their products, expanding the market opportunity for those products and developing a pipeline behind them,” said Oppenheimer analyst Jeff Jones. “The acquisition of Mariana … gives them even greater discovery opportunities.”

Shares are up about 1% year-to-date. The average analyst rating is “Hold,” with an 8% upside from the typical analyst price goal, in keeping with FactSet.

Novartis' success has caused turmoil amongst its competitors. Piper Sandler analyst Edward Tenthoff calls this “FOMO” – the fear of missing out.

“I think that's what's happening right now, and the big pharma companies are gathering capacity in this new modality,” he said.

Eli Lillywhich has benefited from the joy within the GLP-1 space with its diabetes drug Mounjaro and weight reduction drug Zepbound, accomplished its $1.4 billion acquisition of the radiopharmaceutical company Point Biopharma in December.

Shortly before the transaction closed, Point Biopharma's targeted radiation drug PNT2002 met its primary endpoint in a Phase 3 study in metastatic castration-resistant prostate cancer.

In addition, Eli Lilly announced earlier this week pay Actis Oncology $60 million to make use of its novel miniprotein technology platform to provide radiopharmaceuticals against cancer.

Eli Lilly has a mean analyst rating of “Overweight” and an upside of 8.3% from the typical analyst price goal, in keeping with FactSet. Shares are already up nearly 38% through 2024.

“I think investors are clearly focused on the obesity issue right now, but we think they certainly have opportunities with the acquisition on the supply side, which is one of the challenges facing radiopharmaceutical companies,” said investor Dan Lyons, portfolio manager and research analyst at Janus Henderson Investors.

Bristol-Myers Squibb has also entered the fray, completing its acquisition of RayzeBio for $4.1 billion in February. The company now owns RayzeBio's pipeline, including the targeted radiopharmaceutical therapy RYZ101 for late-stage gastroenteropancreatic neuroendocrine tumors. It can be in a Phase 1 trial for small cell lung cancer.

The deal's announcement in December got here shortly after Bristol-Myers Squibb said it might buy schizophrenia drug developer Karuna Therapeutics for $14 billion. At the time, William Blair analyst Matt Phipps said the deals showed Bristol's urgent have to bring more products to market as a few of its older therapies lose patent protection over the course of this decade.

The pharmaceutical giant's shares have been on a losing streak, losing greater than 18% because the starting of the 12 months. The company has a mean “hold” rating, in keeping with FactSet.

Last in March AstraZeneca announced plans to buy clinical stage biopharmaceutical company Fusion Pharmaceuticals for $2.4 billion. Fusion is currently conducting a phase two clinical trial for a possible latest treatment called FPI-2265 for patients with metastatic castration-resistant prostate cancer.

According to FactSet, AstraZeneca shares have a mean chubby rating and are almost 6 percent above analysts' average price goal.

“All of these companies had more or less built up or are in the process of building out manufacturing sites and will be operational on a commercial scale very soon,” said Jefferies analyst Andrew Tsai. “They have that under control, and I think that's partly what the big pharma companies wanted.”

There are also some smaller listed biopharmaceutical firms, but not many.

In addition, there are several private firms within the space which have attracted private investors, especially recently. Innovative radiopharmaceuticals received $518 million in enterprise capital last 12 months, a whopping 722% increase from the $63 million they received in 2017, in keeping with GlobalData's Pharma Intelligence Center Deals Database.

Both these private and non-private names may very well be ripe for acquisition in some unspecified time in the future, said Janus Henderson's Lyons.

“There are several large pharmaceutical companies that do not yet have radiopharma programs that may be interested in this space,” he said. “In addition, I think some of the players that already have programs will be interested in finding additional targets and pipeline programs to expand their portfolio.”

Everyone, including the massive pharmaceutical firms, is either working on improving existing treatment methods or attempting to expand their activities to combat various cancer tumors.

Novartis, for instance, received FDA approval for Lutathera for pediatric patients in April. Last month, the corporate also announced that it might seek an expanded label for Pluvicto for the early treatment of prostate cancer.

“Novartis has a clear path and strategy to expand the market opportunities for these two products,” Jones said.

Then there are firms developing therapies against these same targets. Some, like Bristol-based RayzeBio, use an alpha emitter reminiscent of actinium as an alternative of the beta emitter lutetium utilized by Pluvicto and Lutathera.

“This Alpha [emitters] have a much stronger impact and are very localized, literally to the length of a cell,” said Tenthoff of Piper Sandler.

It is also being examined whether radiopharmaceuticals can be used in combination with other treatments, such as immunotherapy.

Depending on the outcome of current and future clinical trials, the therapy could ultimately be used to treat all types of cancer, including ovarian, breast or brain cancer, he said.

“Wherever radiotherapy is used, but not necessarily in a targeted approach, it is very useful because we are dealing with radiosensitive tumors,” says Tenthoff.

Companies may also leverage the a long time of research they’ve already conducted on this area to discover latest opportunities, Jones says.

“You can really leverage all of the work we've done in the sphere of cancer research during the last 30 to 40 years to discover goal molecules on cancer cells that aren’t expressed or are expressed way more strongly than on normal cells. And each of those targets offers the opportunity of targeted radiation therapy,” he said.

“I see enormous opportunities for targeted radiotherapy,” he added. “Today we’ve two products, two targets and thus practically your entire universe of cancer research and cancer control.”