Biotech acquisition trend: radiopharmaceuticals

In our wrap up from JPM 2024 back in January 2024, we highlighted some therapeutic areas, modalities and antibody formats that the smart money is tipping as hot areas for investors and acquirers in 2024.

One area we didn't mention (it was in the draft but got edited out for reasons of space and left on the cutting room floor!) was therapeutic radiopharmaceuticals for oncology indications. A big mistake, as this modality has built up real traction in the market and AstraZenica's acquisition of Fusion last month and Novartis acquisition of Mariana Oncology announced on 2 May have continued the trend. Ross McNaughton and Sarah Cole covered the Fusion deal briefly in their March biotech deal update, but there is lots more that could be said to place the deal in context. This comment isn't intended to be a deep dive, but just to flag some key points of interest:

• Radiopharmaceuticals are drugs that contain radioactive forms of chemical elements called radioisotopes. These radioactive drugs can be used for the diagnosis and, increasingly, for the therapy of diseases (depending on the type of radiation that those radioisotopes produce). The applications range from imaging of many different organs, such as brain, heart, kidney and bone, to the treatment of cancer and hyperthyroidism. Specialised safety protocols are in place in most countries to protect patients and health professionals from any side-effects of these drugs. Radiopharmaceuticals are given to patients by injection, or by mouth.

• In diagnostic use, radiopharmaceuticals are used to produce images of organs or tissues of interest, a process called scintigraphy. A type of medical device known as gamma camera is able to detect the gamma rays emitted by the radioisotope. It generates, in a non-invasive manner, images that reflect the function of the organ or tissue under investigation.

• This diagnostic use is well-established. However, the wave of recent innovation and market activity relates to the use of radiopharmaceuticals as therapeutic drugs (ie to treat disease, rather than to diagnose it).

• Radiopharmaceuticals are generally made up of three components: a targeting ligand; a radioisotope payload protected by a chelator (used to reduce blood and tissue levels of the radioisotope and to limit retention time); and a linker that binds the radioisotope and ligand together. 

• In diagnostic use, the radioisotope is a low-energy gamma-emitting diagnostic / imaging radionuclide, such a Gallium-67 or Technetium-99m. In therapeutic use, the same ligand can be 'armed', in place of the low-energy gamma-emitting radionuclide, with a high-energy cell-killing emitter, such as Lutetium-177 (a medium-high energy beta-emitter) or Actinium-225 (a high energy alpha emitter) or Lead-212 (which has high-energy alpha-emitting Bi-212 in its decay chain).

• The targeting ligand delivers the radioisotope directly to a specific organ, tissue or cell that expresses the target, while avoiding normal tissues that do not express its target.

• There are many analogies with antibody drug conjugates, which similarly have three components (a ligand, a linker and a cytotoxic moiety). ADCs have really taken off as a modality over the last 24 months with sky-rocketing interest from big pharma. (Please see our JPM 2023 and JPM 2024 updates, and monthly biotech deal updates for more comment). However, there are some unique features that are not shared with ADCs. For example:

  (i) the ligand in a radiopharmaceutical can be a small molecule or a peptide, not just a monoclonal antibody

  (ii) the radiation emitted by the radioisotope portion has the potential to damage non-cancer cells

  (iii) just-in-time manufacturing is required (due to the relatively short half-life of the radioisotope moiety) which means manufacturing, distribution and point-of-care operations are quite different to typical biologics. So whilst investor due diligence in a biotech company often focuses on questions such as "what's your biology to prove that mechanism", "how are you differentiated if there are already got other modalities in play", for radionuclide companies the questions are more likely to be "how are you going to manufacture this?", "how do you deploy this?" And "how do you do quality control?”

  (iv) Upstream supply of radioisotopes can be hard to secure (suppliers are few and far between and some form of nuclear reactor is required) and ensuring continuity of supply of the therapeutic product (a regulatory obligation in many jurisdictions) has proved problematic.

• An early precursor of the current trend was the 2013 acquisition by Bayer of Algeta, a Norwegian biotech, for USD2.9 billion. This followed FDA and EMA approval for Algeta's prostate cancer drug XOFIGO™ (alpharadin, or radium Ra 223 dichloride). XOFIGO™ was the first alpha-emitter authorised by the FDA. It is authorised for the treatment of bone metastases in castration-resistant prostate cancer, and is delivered once a month via injection. As Ra-223 has natural bone-seeking properties, it does not require a binder (targeting agent) or a linker. Algeta had partnered with Bayer in the development of XOFIGO™, so the acquisition price reflected a buy-out of Algeta's share of profits and royalties under collaboration deal.

• This was followed by Novartis' twin acquisitions of France-based Advanced Accelerator Applications in October 2017 for USD3.9 billion and US-based Endocyte in October 2018 for USD2.1 billion. These deals really ignited the space. The AAA acquisition brought LUTATHERA™ into the Novartis stable. LUTATHERA™ is a radiopharmaceutical incorporating a peptide binding agent and Lutetium-177 (a beta-emitter) for the treatment of somatostatin receptor 2-positive (SSTR2) neuroendocrine tumours (in pancreas or gastrointestinal tract). The centrepiece of the Endocyte acquisition was PLUVICTO™, a radiopharmaceutical incorporating Lutetium-177 and a small molecule ligand targeting Prostate Specific Membrane Antigen (PSMA). It was then in Phase III trials.

• PLUVICTO™ was approved by the FDA in 2022. Despite some supply problems that hampered the initial growth of sales, Novartis' latest guidance is already for sales to hit USD1 billion+. This forecast made the market sit up and has demonstrated the commercial potential of radiopharmaceuticals as a class. PLUVICTO™ is generating strong data, showing enough tumour residence time to be effective, but clearing out quickly from the kidneys.

• Taking advantage of this uptick in market interest, RayzeBio went public on NASDAQ in September 2023, raising USD340 million. RayzeBio has an actinium-based radiopharmaceuticals development platform. Its current pipeline programs are targeting the treatment of solid tumours, including gastroenteropancreatic neuroendocrine tumours (GEP-NETs), small cell lung cancer, hepatocellular carcinoma and other cancers. Although some of these indications could overlap with LUTATHERA's label, RayzeBio is hoping that its alpha-emitter radioisotope will prove to be clinically superior to LUTATHERA's beta-emitter, allowing it to position the product as best-in-class. Shortly after the IPO, in December 2023, BMS agreed to buy RayzeBio for USD3.1 billion. 

• Also in Q4 2023. Eli Lilly announced the acquisition of Point BioPharma for USD1.4 billion. Point has development programmes for lutetium-based radiopharmaceuticals targeting PSMA (partnered with Lantheus Bio) and SSTR2, both in Phase III.

• There have also been some notable recent VC financings in the field, including by Belgian biotech Precirix which raised an EUR80 million Series B round in March 2022 from INKEF, Jeito Capital, Forbion and existing investors. Precirix' lead programme is cutting edge in various ways: it involves a novel binder (single domain monoclonal antibodies/camelid antibodies) to aid deep penetration into solid tumours; a novel target, at least for the radiopharmaceutical modality (HER-2); and a new radioisotope moiety (Iodine-131).

• March 2024 brought news that AstraZeneca was acquiring Canadian biotech Fusion Pharmaceuticals for USD2.5 billion (see our March 2024 biotech deal update). Fusion is developing novel linker technology, for use with alpha-emitters, to improve the safety of radiopharmaceuticals and reduce off-target effects on health tissue.

• And most recently, on 2 May 2024, Novartis announced that it was stepping back into the market to acquire Mariana Oncology for USD1 billion upfront and up to USD750 million in potential milestone payments. Boston-based Mariana was founded just in 2021 by Atlas Venture, Access Biotechnology and RA Capital Management, and has raised additional funds from other top investors including DeepTrack Capital and Forbion. It is developing a pipeline of peptide-based radiopharmaceuticals designed to maximise tumour penetration of solid tumours while minimising toxicity. 

• This is clearly a big pharma land grab, just like we have seen for ADCs and, before that, in the tyrosine kinase inhibitor space.

• However, it is interesting to ponder what big pharma is buying in these transactions. Current innovation clusters around the only two targets with commercial proof of concept: SSTR2 and PSMA. It is unclear to many observers whether radiopharmaceuticals as a modality will be able to move outside these two targets (and the couple of tumour types for which they are relevant, notably prostate cancer). And demonstrating best-in-class status will be challenging for the new programmes coming to market in these established indications, as that would require all three components to be improved and the data for the first-to-market products is so strong. Big pharma seems to be betting that: (i) the market will be big enough to support multiple products in the established indications; and (ii) there is enough of a chance that radiopharmaceuticals will become a platform modality, able to expand to address significant new targets, new tumour types and new patient populations for them not to want to risk being left behind.

• As mentioned above, the discovery, development and distribution system and know-how is orthogonal to anything that most big pharmas have internally. So they seem to be thinking that acquisition is the right way to build as opposed to trying to create this expertise internally. 

Another factor to watch in this field is whether CDMO capacity will develop as the field matures. To date, venture-backed companies in this space have had to make early investments in their own manufacturing facilities, given the unique manufacturing challenges for radiopharmaceuticals. There are close parallels in this regard with early cell- and gene-therapy companies, which had to build out their own commercial-scale manufacturing facilities given the difficulties in scale-up from clinical scale facilities and tech transfer between different manufacturing locations. Over time, specialist CDMOs have emerged such as Oxford BioMedica, eXmoor pharma and Cellular Origins in the UK and Force Biologics in the US, who are able to provide commercial scale manufacturing facilities for cell- and gene-therapy companies. Will the same happen for radiopharmaceuticals?