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Big pharmaceutical companies are betting billions on an emerging class of cancer treatments that some on Wall Street are calling a “huge opportunity.”
This method is called targeted radiopharmacology. The radiation is essentially delivered directly into tumors by binding a radioactive particle to a target molecule.
RBC Capital Markets sees a market potential of $25 billion in this area.
“We believe that TRT development is still in its infancy and that 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 area,” analyst wrote Gregory Renza, MD, in a statement in February.
In the last few months alone, four acquisitions have been announced in this area. The latest was from Novartis, The company already has two targeted radiation therapies on the market. Pluvicto treats a specific type of advanced prostate cancer, while Lutathera targets neuroendocrine tumors.
Pluvicto, which faced some supply bottlenecks in 2023 that have since been resolved, is approaching blockbuster status, generating sales of $980 million in 2023. The two drugs combined are expected to generate sales of $5 billion by 2028, Renza said.
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Novartis' performance in the first year
A market leader with an “aggressive strategy”
Earlier this month, Novartis announced it had signed an agreement to acquire Mariana Oncology for $1 billion. The preclinical-stage company focuses on developing radiopharmaceutical programs, also called radioligand therapies, to treat breast, prostate and lung cancer. One candidate, known as MC-339, is being studied 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. According to FactSet, the average analyst rating is “Hold,” with an 8% increase over the average analyst price target.
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Novartis' success has caused a sensation among its competitors. Edward Tenthoff, an analyst at Piper Sandler, characterizes it as “FOMO,” or 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 LillyThe company, which has benefited from excitement in the GLP-1 space with its diabetes drug Mounjaro and weight-loss drug Zepbound, completed its $1.4 billion acquisition of 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 that the company would pay $60 million to Aktis Oncology to use its novel mini-protein technology platform to produce radiopharmaceuticals to fight cancer.
According to FactSet, Eli Lilly has an average analyst rating of “overweight” and an upside of 8.3% over the average analyst price target. Shares are already up nearly 38% so far in 2024.
“I think investors are clearly focused on the obesity issue right now, but we think with the acquisition they certainly have opportunities on the supply side, which is one of the challenges that radiopharma companies face,” said investor Dan Lyons, portfolio manager and research analyst at Janus Henderson Investors.
Bristol-Myers Squibb has also joined the fray, completing its $4.1 billion acquisition of RayzeBio in February. The company now has RayzeBio's pipeline, including its late-stage targeted radiopharmaceutical therapy, RYZ101, for gastroenteropancreatic neuroendocrine tumors. It is also in a Phase 1 trial for the treatment of small cell lung cancer.
The deal announcement in December came shortly after Bristol-Myers Squibb said it would spend $14 billion to acquire schizophrenia drug developer Karuna Therapeutics. At the time, William Blair analyst Matt Phipps said the deals showed Bristol's urgency to bring more products to market as some of its older therapies are expected to lose patent protection later this decade.
The pharmaceutical giant's shares have been on a losing streak, losing more than 18% since the beginning of the year. The company has an average “hold” rating, according to FactSet.
Last in March AstraZeneca announced plans to purchase a clinical-stage biopharmaceutical company Fusion Pharmaceuticals for $2.4 billion. Fusion is currently conducting a Phase 2 clinical trial for a potential new treatment called FPI-2265 for patients with metastatic castration-resistant prostate cancer.
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AstraZeneca’s one-year performance
According to FactSet, AstraZeneca shares have an average analyst rating of “Overweight” and are up nearly 6% from the average analyst price target.
“All of these companies more or less had a manufacturing footprint that was already built out, or are in the process of building it out and going into commercial scale very soon,” said Andrew Tsai, an analyst at Jefferies. “They have that under control, and I think that's partly what the big pharma companies wanted.”
There are also some smaller listed biopharmaceutical companies, but not many.
In addition, there are several private companies in this area that are attracting private investors, especially recently. According to GlobalData's Pharma Intelligence Center Deals Database, innovative radiopharmaceutical medicines raised $518 million in venture funding last year, a whopping 722% increase from $63 million in 2017.
Both these public and private names could be ripe for acquisition at some point, 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.”
“Huge opportunity”
Everyone, including major pharmaceutical companies, is either working to improve existing treatments or expand them to target various cancerous tumors.
Novartis, for example, received FDA approval for Lutathera for pediatric patients in April. Last month, the company also announced that it would seek an expanded label for Pluvicto for the early treatment of prostate cancer.
“There is a clear path and strategy from Novartis to expand the market opportunity for these two products,” Jones said.
Then there are companies that are developing therapies against exactly these targets. Some, like Bristol-based RayzeBio, use an alpha emitter such as actinium instead of the beta emitter lutetium used by Pluvicto and Lutathera.
“This Alpha [emitters] pack a much stronger punch and are literally limited to one cell length,” said Tenthoff of Piper Sandler.
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Bristol-Myers Squibb's one-year gig
It is also being investigated whether radiopharmaceuticals can be used in conjunction with other treatments such as immunotherapy.
Depending on the outcome of current and future clinical trials, the therapy could eventually be used to treat any type 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 can also leverage the decades of research they have already conducted in this area to identify new opportunities, Jones said.
“You can really leverage all the work we've done in cancer over the last 30 to 40 years to identify targets on cancer cells that are not expressed or are expressed much more strongly on cancer cells than on normal cells – and all of these are an opportunity for targeted radiation therapy,” he said.
“I see the tremendous opportunity for targeted radiotherapies,” he added. “We have two products today, two targets, and you essentially have the entire universe of cancer research and cancer targeting.”
