The potential $25 billion market opportunity for this emerging cancer treatment has already attracted significant M&A activity.

• Targeted radiopharmaceuticals has caught the eye of big pharma.
• By attaching a radioactive particle to a targeting molecule, the therapy delivers radiation directly into tumors.
• RBC Capital Markets sees a $25 billion market opportunity for the space.

The pharmaceutical industry is investing heavily in a new generation of cancer treatments, which some financial analysts consider a lucrative prospect.

Targeted radiopharmaceuticals deliver radiation directly into tumors by attaching a radioactive particle to a targeting molecule.

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

According to Gregory Renza, M.D., in a February note, the development of TRT is still in its early stages, and advanced technologies that enhance therapeutic effectiveness and target a broader range of cancers could drive value creation in the industry.

In recent months, four acquisitions were made in the space industry, with the most recent being by a company that already has two targeted radiotherapies available. Pluvicto is used to treat a specific type of advanced prostate cancer, while Lutathera targets neuroendocrine tumors.

Pluvicto, which experienced supply issues last year, is on track to become a blockbuster with $980 million in sales by 2023. By 2028, the combined revenue from the two drugs is projected to reach $5 billion, according to Renza.

A market leader with 'an aggressive strategy'

This month, Novartis announced an agreement to acquire Mariana Oncology for $1 billion. The preclinical-stage company specializes in developing radiopharmacutical programs, or radioligand therapies, for the treatment of breast, prostate, and lung cancers. One of its candidates, MC-339, is being studied for small cell lung cancer.

"Oppenheimer analyst Jeff Jones stated that "They're clearly the market leader in this space with an aggressive strategy, both successfully commercializing their products, expanding the market opportunities for those products, and having a pipeline behind that." He added, "Acquiring Mariana ... gives them even greater discovery capabilities.""

The average analyst rating for the stock is hold, with an 8% increase to the average analyst price target, as per FactSet.

Piper Sandler analyst Edward Tenthoff describes Novartis' success as "FOMO," or the fear of missing out, among its competitors.

He stated that he believed it was happening and big pharma was acquiring abilities in this new approach.

In December, Point Biopharma, which has gained from the enthusiasm in the GLP-1 market with its diabetes medication Mounjaro and weight-loss treatment Zepbound, was acquired by the company that completed a $1.4 billion acquisition.

In a phase three trial for metastatic castration-resistant prostate cancer, Point Biopharma's targeted radiation drug, PNT2002, met its primary endpoint just before the deal closed.

This week, Eli Lilly announced a $60 million deal with Aktis Oncology to utilize its innovative miniprotein technology platform to develop anticancer radiopharmaceuticals.

Eli Lilly's average analyst rating is overweight, with an 8.3% upside to the average analyst price target, according to FactSet. Despite this, shares have already risen nearly 38% so far this year.

According to Dan Lyons, a portfolio manager and research analyst at Janus Henderson Investors, investors are highly focused on obesity at present. However, with their acquisition, they have opportunities on the supply side, which is one of the challenges facing radiopharma companies.

RayzeBio's pipeline, including its late-stage targeted radiopharma therapy, RYZ101, for gastroenteropancreatic neuroendocrine tumors, has been acquired by the company that also joined the fray in February. The company is currently in a phase one trial for small cell lung cancer.

In December, Bristol-Myers Squibb announced a deal to spend $14 billion on buying out schizophrenia drug developer Karuna Therapeutics. Following this announcement, William Blair analyst Matt Phipps stated that the deals demonstrate Bristol's urgency to acquire new products as some of its older therapies are set to lose their patent protections in the coming years.

The big pharma company has experienced a decline in its stock performance, with a year-to-date loss of over 18%. According to FactSet, its average analyst rating is hold.

In March, announced plans to purchase clinical-stage biopharmaceutical company Fusion for $2.4 billion. Fusion is currently conducting a phase two clinical trial for a potential new treatment, FPI-2265, for patients with metastatic castration-resistant prostate cancer.

According to FactSet, AstraZeneca shares have an average analyst rating of overweight and a nearly 6% upside to the average analyst price target.

"According to Jefferies analyst Andrew Tsai, these companies have manufacturing capabilities, either established or in the process of being established, and will soon become operational on a commercial scale. This is likely what big pharma was looking for."

Although not many, there are still some publicly-traded biopharma companies remaining.

Several private companies in the space have been attracting private investors, especially recently. Radiopharmaceutical drugs secured $518 million in venture financing last year, a massive 722% increase from the $63 million they received in 2017, according to GlobalData's Pharma Intelligence Center Deals Database.

At some point, both public and private names could be suitable for acquisition, according to Janus Henderson's Lyons.

"Some large pharma companies without radiopharma programs may be interested in this space, while players with existing programs may seek additional targets and pipeline programs to enhance their portfolio."

'Massive opportunity'

Big pharma and everyone else are working on enhancing current treatments or exploring new ways to target different cancer tumors.

In April, Novartis obtained FDA approval for Lutathera for pediatric patients. Additionally, the company announced last month that it plans to submit a label expansion for Pluvicto in the treatment of prostate cancer at an earlier stage.

Jones stated that Novartis has a distinct plan and approach to increase the market potential for those two products.

Some companies, such as Bristol's RayzeBio, are exploring the use of an alpha emitter like actinium instead of the beta emitter lutetium, which is currently used by Pluvicto and Lutathera for targeting cancer cells.

Tenthoff of Piper Sandler stated that these alpha emitters possess a significantly stronger impact and are precisely concentrated within a cell length.

Other treatments, including immunotherapy, are being combined with radiopharmaceuticals for potential use.

The therapy could potentially be used to treat various cancers, including ovarian, breast, and brain, according to the researcher.

Radiation therapy can be effective for radiosensitive tumors, even if it is not used in a targeted approach, according to Tenthoff.

Jones suggested that companies can utilize the decades of research they have already conducted in the field to discover new opportunities.

By utilizing the research conducted on cancer over the past 30 to 40 years, we can identify targets on cancer cells that are not expressed or highly expressed compared to normal cells, which presents an opportunity for targeted radiotherapy.

"He stated that there is a significant opportunity for targeted radiotherapies, with two products and two targets available, and the entire universe of cancer research and cancer targeting at our disposal."