This up-and-coming cancer treatment could represent a $25 billion market opportunity

Big pharmaceutical companies are betting billions of dollars on up-and-coming cancer treatments that some on Wall Street are calling “big opportunities.”

This is called targeted radiopharmaceutical therapy, and it basically involves attaching radioactive particles to targeted molecules, which then delivers radiation directly to the tumor.

RBC Capital Markets sees a $25 billion market opportunity in this area.

“We believe that the development of TRT is still in its early stages. 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 field. ,” analyst Gregory Renza, M.D., wrote in a February note.

Four acquisitions have been announced in this space in recent months, the latest being Novartis, The company already has two targeted radiation therapies on the market: Pluvicto, which treats certain types of advanced prostate cancer, and Lutathera, which targets neuroendocrine tumors.

Pluvicto is on track to become a blockbuster product, bringing in $980 million in sales in 2023 once some supply constraints are lifted. By 2028, the two drugs are expected to generate $5 billion in combined revenue, Renza said.

Novartis announced earlier this month that it had signed an agreement to acquire Mariana Oncology for $1 billion. The preclinical-stage company is focused on developing radiopharmaceutical programs (also known as radioligand therapy) to treat breast, prostate and lung cancer. One of its candidates, MC-339, is being studied as a treatment for small cell lung cancer.

“Both companies have successfully commercialized their products, expanded market opportunities for those products, have pipelines behind them, and have aggressive strategies to develop their products,” said Oppenheimer analyst Geoff Jones. We are clearly the market leader in our field.” “Acquiring Mariana gives us even greater discovery capabilities.”

The stock is up about 1% so far this year. Analysts have given it an average rating of unchanged, and the upside to the average analyst price target is 8%, according to FactSet.

Novartis’ success has stoked a fire in competitors that Piper Sandler analyst Edward Tenthoff describes as “FOMO,” or fear of missing out.

“I think that’s what’s really happening. Big pharma is building up capabilities in this new approach,” he said.

Eli Lillyhas benefited from a rise in the GLP-1 sector led by diabetes drug Mounjaro and weight-loss treatment Zepbound, and in December completed its $1.4 billion acquisition of radiopharmaceutical company Point Biopharma.

The deal came just before Point BioPharma’s targeted radiation therapy drug PNT2002 met its primary endpoint in a Phase 3 trial for metastatic castration-resistant prostate cancer.

Additionally, earlier this week, Eli Lilly announced it would pay Actis Oncology $60 million to use its new mini-protein technology platform to produce anti-cancer radiopharmaceuticals.

Eli Lilly has an average analyst rating of Overweight, according to FactSet, and is 8.3% above analysts’ average price target. The stock is already up nearly 38% so far in 2024.

“Obviously, I think investors are very focused on obesity right now, but we think this acquisition certainly creates an opportunity on the supply side, which is one of the challenges that radiopharmaceutical companies face,” said Dan Lyons, portfolio manager and research analyst at Janus Henderson Investors.

Bristol-Myers Squibb entered the fray, completing its $4.1 billion acquisition of RayzeBio in February. The company currently has RayzBio’s pipeline, which includes RYZ101, a late-stage targeted radiopharmaceutical therapy for gastrointestinal and pancreatic neuroendocrine tumors. A phase 1 trial targeting small cell lung cancer is also underway.

The deal was announced in December, shortly after Bristol-Myers Squibb said it was buying schizophrenia drug developer Karuna Therapeutics for $14 billion. At the time, William Blair analyst Matt Phipps said the deal showed Bristol’s urgency to introduce more products, as some of its older therapies are set to lose patent protection this decade.

Shares of major pharmaceutical companies are on a losing streak, down more than 18% since the beginning of the year. The average analyst rating is a “hold,” according to FactSet.

Finally, in March, AstraZeneca Announces plans to acquire clinical-stage biopharmaceutical company Fusion Pharmaceuticals The acquisition was valued at $2.4 billion. Fusion is currently conducting Phase 2 clinical trials of a potential new treatment, called FPI-2265, for patients with metastatic castration-resistant prostate cancer.

According to FactSet, analysts have an average rating of “overweight” on AstraZeneca shares, giving the stock an upside potential of nearly 6% above its average target price.

“All of these companies have, or are building, more or less manufacturing facilities and expect to be operating at commercial scale soon,” said Andrew Tsai, an analyst at Jefferies. “They’ve definitely secured that, and I think that’s part of what Big Pharma wanted.”

A few small, publicly traded biopharmaceutical companies still exist, although not in large numbers.

Additionally, there are several private companies in the space that have been attracting private investors, especially recently: Innovative radiopharmaceuticals garnered $518 million in venture financing last year, a staggering 722% increase from the $63 million they garnered in 2017, according to GlobalData’s Pharma Intelligence Center Deals Database.

Janus Henderson’s Lyons said all of these companies, both public and private, could be ripe for takeovers at some point.

“There are several large pharma companies that don’t already have radiopharmaceutical programs that could be interested in this space,” he said. “In addition, I think some of the players that already have programs would be interested in finding additional targets and pipeline programs to strengthen their portfolios.”

All companies, including major pharmaceutical companies, are working to improve or expand existing treatments to attack a variety of cancer tumors.

Novartis, for example, received FDA approval in April for Lutasera for pediatric patients. Last month, the company also announced that it would apply to expand the indication of Purvict in the early treatment of prostate cancer.

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

And some companies are developing treatments for the same targets. Some companies, like his RayzeBio in Bristol, use alpha emitters such as actinium instead of the beta emitter lutetium used by Pluvicto and Lutathera.

“These Alphas [emitters] It has a much stronger punch and is very localized literally to the length of the cell,” Piper Sandler’s Tensoff said.

Radiopharmaceuticals are also being considered for use in combination with other treatments, such as immunotherapy.

Depending on the results of current and future clinical trials, the treatment could eventually be used to treat any cancer, including ovarian, breast and brain cancer, he said.

“Wherever radiation therapy is used, it doesn’t necessarily have to be a targeted approach, but it makes a lot of sense because it’s a radiosensitive tumor,” Tensoff said.

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

“We can actually leverage all the research we’ve done on cancer over the last 30 to 40 years to identify targets on cancer cells that are not expressed or that are more highly expressed in cancer cells compared to normal cells. That’s the opportunity for targeted radiation therapy,” he said.

“We think there is a huge opportunity for targeted radiotherapy,” he added. “Currently, we have two products, two targets, essentially covering the entire spectrum of cancer research and targeted cancer therapy.”