Novartis blazed a trail for treating cancer with targeted radiopharmaceuticals, a treatment that sends radiation directly to cancer cells. The Swiss drugmaker's success has caught Big Pharma's attention, sparking an M&A spree that sent some biotech stocks soaring.
Novartis' prostate cancer drug, Pluvicto, which kills cancer cells and limits damage to healthy tissues, saw sales skyrocket 262% to $980 million last year. Other drugmakers are following Novartis' lead by snapping up companies focused on the groundbreaking approach to cancer.
Eli Lilly paid $1.4 billion to buy Point Bio, Bristol Myers Squibb put up $4.1 billion in its takeover of RayzeBio and AstraZeneca just pledged up to $2.4 billion for Fusion Pharmaceuticals.
"The stable of large pharma seems to be growing," Sandesh Seth, the chief executive of Actinium Pharmaceuticals, told Investor's Business Daily. "It's interesting to see the companies that were bought prior to data or their assets were early stage. They were bought more for their labs and capabilities."
Biotech Stocks: A Groundbreaking Cancer Treatment
Novartis won Food and Drug Administration approval for Pluvicto in 2022. The prostate cancer treatment uses radiation to target a specific antigen only present on cancer cells.
The technology isn't brand new, says Citeline analyst Dana Gheorghe. But with recent clinical data showing promise, the medical approach seemed poised to make progress in treating cancer.
And though first-quarter Pluvicto sales came up short — $310 million vs. Street projections for $327.7 million — sales growth is still bullish. Pluvicto sales soared 47% in the March quarter.
"Radiopharmaceuticals have been around for a very long time," Gheorghe told IBD. "The question is: Can they make them better? And I think they can. They are using targets that have been used in the past, but they are making them better — more target-specific with less side effects."
Biotech Stocks Soar On Radiopharmaceuticals Deals
Think of radiopharmaceuticals like smart bombs for radiation. Instead of using radiation — which carries the risk of systemic effects like fatigue, loss of appetite and hair loss — radiopharmaceutical drugs send that radiation directly to the cancer cells.
This is an "engineering feat," Matt Furlow, an associate principal with consulting firm ZS, told IBD. "There are a lot of scientific problems that have to be solved to make this molecule in the first place."
That could be why the first generation of radiopharmaceuticals were flops, Seth, the Actinium CEO, said. Actinium is working on a radiopharmaceutical-based treatment for acute myeloid leukemia. But more recent success has enthused the market, he said.
Biotech stock Actinium has been rocked by recent news in the radiopharmaceuticals space, however. Shares have a Relative Strength Rating of 79 out of a best-possible 99. That's down from 87 a week ago and 93 a year ago. This means Actinium stock currently outranks more than quarter of all stocks in terms of 12-month performance, according to IBD Digital.
It's important to note Actinium is a dollar stock.
The Challenge For Radiopharmaceutical Drugs
Part of the challenge for radiopharmaceuticals is they involve radioactive material.
Biotech stock experts consider Pluvicto to be a commercial success today. But that wasn't always the case. In fact, the FDA classified Pluvicto as being in shortage until October 2023. The company says it worked hard to increase capacity and bolster its supply chain.
Radioactive materials tend to be scarce, says Citeline's Gheorghe. Oftentimes, they are a byproduct of something else.
Another challenge lies in how fast radiopharmaceuticals must be administered, says Sankalp Sethi, a principal with ZS. Pluvicto, for example, must be given within five days of the time it was made, according to a March 2023 report from CBS News.
"You can't store this product indefinitely or even for weeks," Sethi told IBD. "Given that kind of half-life, the dosage for which you manufacture has to take into account how much time you're going to spend between manufacturing and delivery and you're manufacturing a specific dose based on that."
A New $25 Billion Market For Biotech Stocks?
Despite the challenges, the enthusiasm remains. Analysts expect Pluvicto sales to peak at roughly $4 billion in 2028, RBC Capital Markets analyst Gregory Renza said in a February report. Analysts polled by FactSet expect $3.66 billion in 2029.
Novartis also makes a radiopharmaceutical-based treatment for some neuroendocrine tumors called Lutathera. Sales growth has been less impressive than Pluvicto, but the market is smaller. In the first quarter, Lutathera sales climbed more than 13% to $169 million.
The Street expects Lutathera sales to hit their highest point at $725 million in 2028, FactSet shows.
Renza expects the radiopharmaceuticals space to be worth up to $25 billion over time. Over the past decade, Big Pharma has spent $15 billion in acquisitions of radiopharmaceuticals companies. On top of that, venture capital firms have invested about $1.5 billion, he said.
"We also see a surge in investor interest, likely attributed to the near-blockbuster status of Pluvicto (after less than two years approval)," he said.
Pluvicto Led The Way
Pluvicto "paved the way," says David Song, of Tema ETFs. Tema owns the biotech stock, Fusion, and Novartis through its Tema Oncology exchange traded fund.
But he cautioned that even as Big Pharma companies buy into the space, they will still have to compete with other targeted cancer approaches like antibody drug conjugates, or ADCs, and T-cell engagers. The former sends chemotherapy directly to cancer cells. Pfizer bought Seagen to get into this space. Genmab just announced its takeover of ProfoundBio.
"There is a burgeoning pipeline of companies on the private side," Song told IBD. "I would advocate for selectivity at this point. And know there's a little catch-up for Big Pharma. I think there will be opportunities for public investors to really invest in this space. It will only get bigger."
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
