Certain older radiotherapies and chemotherapies have been the mainstays of cancer treatment for literally decades. But now, a new generation of radiotherapies are redefining cancer care. These therapies have the promise of destroying cancer cells while leaving healthy cells relatively unscathed.
Instead of delivering the radiation from outside the body, by combining a nuclear isotope with an antibody, the microscopic drugs — known as radioligands — deliver a toxic payload directly to cancer cells, minimizing damage to other tissue.
Major pharmaceutical companies - including Eli Lilly (LLY), AstraZeneca PLC (AZN), and Bristol-Myers Squibb (BMY) - have spent almost $8 billion to scoop up companies developing radiopharmaceuticals in the past several months.
The industry has drawn increasing interest since 2021, when data from Novartis (NVS) showed that its radiopharma drug, Pluvicto, extended survival for prostate cancer patients.
This highly targeted form of radiotherapy could become the next big innovation in cancer care if supply chain challenges - shortages of isotopes like actinium-225 - are overcome. Its “punch” of radiation and just an 11-day half-life make it an ideal cancer treatment.
Radioactive isotopes can be produced in a nuclear reactor, but there are a very limited number of providers. Stringent regulatory requirements around manufacturing further limit companies’ options. And when the products are made, they need to get to patients in a matter of days.
With half of all cancer patients receiving traditional radiation therapy, radioligands have the potential to offer a more powerful treatment, with fewer side effects. It therefore could become a mainstream therapy for the big “traditional” cancers that make the disease the leading cause of death worldwide. Morgan Stanley analysts forecast the radiopharma market will be worth $39 billion in sales by 2032, up from just $7 billion in 2022.
A great way to invest into this new-ish segment of cancer treatments is through the aforementioned AstraZeneca, which specializes in cancer therapies. In 2023, AZN generated $17 billion and 37% of its sales from oncology products.
AstraZeneca and Radiopharmaceuticals
It’s not surprising that the company decided to expand even further into radiopharmaceuticals. On March 19, AstraZeneca announced a deal to buy Canada’s Fusion Pharmaceuticals for $2.4 billion.
Fusion Pharma’s most advanced therapy is called FPI-2265, which is currently in a mid-stage trial to treat patients with metastatic castration-resistant prostate cancer.
A key aspect of AstraZeneca’s agreement to purchase Fusion Pharmaceuticals was gaining access to that company’s manufacturing and supply-chain capabilities. Fusion already has access to actinium through existing agreements with key suppliers.
AstraZeneca has been working on other approaches to develop more targeted cancer treatments, including antibody-drug conjugates. After the Fusion deal was announced, JPMorgan analysts wrote in a note to clients: "The deal has solid strategic logic, potentially allowing Astra to combine its existing antibody portfolio with radioconjugate payload."
Susan Galbraith, executive vice-president of oncology research and development at AstraZeneca, said “This is an investment to build on the capability to deliver multiple medicines over a 10- to 15-year period. We’re well positioned to be leaders in the broader field [of radioconjugates].”
AsztraZeneca’s Promising Future
Of course, there is a lot more to AstraZeneca than just radiopharmaceutcals. Let’s take a peek at its outlook.
A decade ago, AstraZeneca was a stock market dog. Its growth forecasts were often derided, but eventually its stock did benefit on the upside when the company started to deliver.
Now, it is the UK’s most valuable company with a recently hit market capitalization of £200 billion ($257 billion), and has become one of the darlings of the European pharma sector.
That leads to high expectations. That’s why CEO Pascal Soriot set a target in May to nearly double revenues to $80 billion by the end of the decade.
The next year or so will be crucial to AstraZeneca in hitting that target. The company expects more than 40 results from phase 3 trials by the end of 2025. Successful medicines from these trials could generate $20 billion in revenue by 2030.
Half of the 20 new medicines AstraZeneca expects to launch by the end of the decade will come from its biopharma division. This business is often overlooked in comparison with its high-profile oncology business. But it is where AstraZeneca’s best-selling drug, Farxiga, comes from.
The diabetes treatment generated nearly $6 billion in sales in 2023. Farxiga starts to lose patent protections from 2026, but AstraZeneca hopes to use it in combination with other drugs — to preserve kidney function for patients with chronic kidney disease, for instance — to avoid revenues falling off a cliff.
Finally, the company is also moving into new treatment areas, including weight loss. AstraZeneca plans to announce data from its experimental oral GLP-1 drug later this year.
Buy AZN Stock
The company’s stock has risen by almost 24% this year, as investors grow more optimistic the company will reach $80 billion in annual revenue by 2030.
I believe it will hit that target. The company has already received multiple product approvals in recent months, including for treatments targeting lung cancer, breast cancer, and type 2 diabetes.
CEO Soirot focused the company on research and development after a failed 2014 takeover attempt by rival Pfizer (PFE). He completely transformed the company - from a legacy respiratory, primary-care company into an oncology powerhouse.
Under Soriot, AstraZeneca has developed a series of blockbuster treatments for cancer and diabetes. I clearly see a promise of future earnings in the company’s pipeline of advanced oncology drugs.
AZN posted strong total revenue growth in the second quarter, up 13% or 17% year-over-year at a constant exchange rate. I expect total revenue to grow by 13% in 2024, driven by continued product sales growth.
And there is much more growth to come in the years ahead. AZN stock is a buy up to $87.
