An emerging cancer treatment could represent a $25 billion market opportunity

Big Pharma is betting billions on a new class of cancer treatments, which some on Wall Street are calling a “huge opportunity.”

It is called targeted radiopharmaceutical therapy. It basically delivers radiation directly to tumors by attaching a radioactive particle to a target molecule.

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

“We believe that TRT development is still in its early stages, and that next-generation technologies that enable improvements in therapeutic efficacy and address a broader range of cancer targets have the potential to catalyze value creation in this area,” wrote analyst Gregory Renza, MD. In a February note.

Four acquisitions have been announced in this space in just the past few months. The latest was by Novartis, Which already has two targeted radiotherapies on the market. Belovecto treats a certain type of advanced prostate cancer, while Luthera targets neuroendocrine tumors.

Lovecto, which faced some supply constraints that have now been resolved in 2023, is close to breakout status, with $980 million in sales in 2023. By 2028, the two properties combined are expected to generate $5 billion in revenue, Renza said.

Earlier this month, Novartis said it had entered into an agreement to acquire Mariana Oncology for $1 billion. The company's preclinical phase is focused on developing radiopharmaceutical programs, also known as Radioligand therapeutics, that treat breast, prostate and lung cancer. One candidate, known as MC-339, is being investigated for the treatment of small cell lung cancer.

“They are clearly a market leader in this space with an aggressive strategy, where they have successfully commercialized their products, expanded the market opportunities for those products, and have a pipeline behind it,” Oppenheimer analyst Jeff Jones said. “Having Mariana…gives them greater detection capabilities.”

Shares are up about 1% year to date. The average analyst rating is flat, with an 8% upside from 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 fear of missing out.

“I think that's what's happening, and that big pharma is pooling capabilities in this new way,” he said.

Eli Lillywhich capitalized on excitement in the GLP-1 space with diabetes drug Mounjaro and weight loss treatment Zepbound, completed its $1.4 billion acquisition of radiopharmaceutical company Point Biopharma in December.

Just before the deal closed, Point Biopharma's targeted radiation drug, known as PNT2002, reached the primary endpoint in a phase III trial for metastatic castration-resistant prostate cancer.

Additionally, Eli Lilly announced earlier this week that it will pay Aktis Oncology $60 million to use its new small protein technology platform to produce anti-cancer radiopharmaceuticals.

Eli Lilly has an average analyst rating of Overweight and an 8.3% upside to the average analyst price target, according to FactSet. Shares are already up about 38% so far in 2024.

“Obviously investors are very focused on obesity right now, I think, but we think that with their acquisition, they will certainly have opportunities on the supply side, which is one of the challenges that radiopharmaceutical companies face,” said investor Dan Lyons, a portfolio manager. and Research Analyst at Janus Henderson Investors.

Bristol Myers Squibb It also joined the fray, completing its $4.1 billion acquisition of RayzeBio in February. The company now has a RayzeBio pipeline, including a late-stage targeted radiotherapy, RYZ101, for gastrointestinal neuroendocrine tumors. It is also in a phase I trial for small cell lung cancer.

The deal was announced in December shortly after Bristol-Myers Squibb announced it would spend $14 billion to buy schizophrenia drug developer Karuna Therapeutics. At the time, William Blair analyst Matt Phipps said the deals showed the urgency for Bristol to bring in more products, as some of its older treatments are set to lose their patent protection later this decade.

Shares of the major pharmaceutical company have seen a string of losses, falling more than 18% year to date. It has an average analyst rating of Hold, according to FactSet.

Most recently, in March, AstraZeneca Announced plans to acquire a clinical-stage biopharmaceutical company Pharmaceutical fusion For $2.4 billion. Fusion is currently conducting a phase 2 clinical trial of a potential new treatment, called FPI-2265, for patients with metastatic castration-resistant prostate cancer.

AstraZeneca shares have an average analyst rating of Overweight and a roughly 6% upside from the average analyst price target, according to FactSet.

“All of these companies have had a manufacturing presence, in one form or another, or are in the process of being built and operating very soon on a commercial scale,” said Andrew Tsai, an analyst at Jefferies. “They shut that down, and I think that's, in part, what Big Pharma wanted.”

There are also some smaller publicly traded biopharma companies still around, although not many.

In addition, there are many private companies in this field that are attracting private investors, especially recently. Innovative radiopharmaceuticals took in $518 million in venture funding last year, a whopping 722% increase from the $63 million they received in 2017, according to GlobalData's Pharma Intelligence Center deal database.

These public and private names may be up for grabs at some point, said Lyons of Janus Henderson.

“There are several major pharmaceutical companies that do not yet have radiopharmaceutical programs that might be interested in this area,” he said. “In addition, I think some players who already have programs will be interested in finding additional targets and programs in the pipeline to increase their portfolio.”

Everyone, including major pharmaceutical companies, is either working to improve existing treatments or looking to expand into attacking various cancers.

For example, Novartis received FDA approval in April for Lutathera to treat sick children. It also said last month that it would file an application to expand the label for Pluvicto in the early treatment of prostate cancer.

“There is a clear path and strategy on Novartis' part to expand the market opportunities for these two products,” Jones said.

Then there are companies developing treatments against those same targets. Some, like Bristol's RayzeBio, are turning to using an alpha emitter such as actinium rather than the beta emitter lutetium used by Pluvicto and Lutathera.

“These alpha emitters have a much stronger strength and are very localized, literally, along the cell,” said Piper Sandler's Tenthoff.

The use of radiopharmaceuticals in combination with other treatments, such as immunotherapy, is also being considered.

He said that depending on the results of current and future clinical trials, the treatment could also eventually be used to treat any cancer, including ovarian, breast or brain.

“Anywhere radiation therapy is used, but not necessarily in a targeted approach, it makes a lot of sense because these tumors are sensitive to radiation,” Tenthoff said.

Companies can also use the decades of research they've already done 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 that are much more expressed on cancer cells versus normal cells — and really, any Of these cells, he said: “It is an opportunity for targeted radiotherapy.”

“I see tremendous opportunity for targeted radiation therapies,” he added. “We have two products today, two targets, and you basically have the entire world of cancer research and cancer targeting.”