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Cantor Fitzgerald predicts another strong year for oncology mergers and acquisitions, with companies focused on antibody drug conjugates, radiopharmaceuticals and T-cell promoters expected to attract more attention from major drugmakers looking to reconstitute the pipelines.
The upcoming patent cliffs will be big motivator for offers. According to Cantor, about $182 billion in revenue is at risk over the next four years due to patent expiration, with oncology products accounting for 42% of that figure.
Many of the industry’s largest companies will lose patent protection by 2029, including Bristol Myers (BMY) Yervoy, Pomalyst and Opdivo; Imbruvica by Johnson & Johnson (JNJ); Keytruda by Merck (MRK); Ibrance by Pfizer (PFE); and Roche’s (OTCQX:RHHBY) Perjeta, according to Cantor.
Meanwhile, the global oncology drug market is expected to grow from $180 billion in 2022 to $323 billion in 2028, a rate “unprecedented compared to other therapeutic areas,” Cantor said. In comparison, the global biopharmaceutical market is expected to grow from $978 billion in 2022 to $1.39 trillion in 2028.
Cantor estimates the industry is expected to close between five and 17 acquisition deals this year, noting that three have already been announced so far: J&J/Ambrx (AMAM), Merck/Harpoon (HARP), and Novartis (NVS)/Morphosys ( MOR).
The investment bank also highlighted that the pool of potential buyers is quite large as virtually all major drugmakers are present in the oncology sector, with Novo Nordisk (NVO) being a notable exception.
So, what kind of resources will Big Pharma look for?
Cantor still sees a preference for lower-risk assets, but noted that trial data for oncology drugs can often be obtained in Phase 1/2 trials. Drug candidates targeting larger markets, such as breast, lung or colorectal cancer, should be particularly attractive to potential buyers.
While small molecule candidates will likely account for about 50% of deals, Cantor says complex biologics are gaining popularity. The bank believes assets such as antibody drug conjugates, radiopharmaceuticals and T-cell stimulators are particularly attractive acquisition targets this year, while synthetic lethality and TCR therapies may also see growing interest.
Cantor sees several companies in his coverage universe as potentially attractive suitors this year, including Kura (NASDAQ:KURA), Bicycle (NASDAQ:BCYC), Immunonucleus (NASDAQ:IMCR), ALX Oncology (NASDAQ:ALXO), Arvinas (ARVN), Immatics (IMTX), Verastem (VSTM), Oric (ORIC) and CG Oncology (NASDAQ:CGON).
Potential targets outside of its coverage include Day One (DAWN), Deciphera (DCPH), Erasca (ERAS), Exelixis (EXEL), Fusion (FUSN), Geron (GERN), Ideaya (IDYA), Karyopharm (KPTI) , Janux ( 2013). JANX, Legend Biotech (LEGN), Merus (MRUS), Nuvalent (NUVL), Olmea (OLMA), PMV (PMVP), Relay Therapeutics (RLAY), Revolution Medicines (RVMD), Syndax (SNDX) and SpringWorks Therapeutics (SWTX) . ), UroGen (URGN) and Zentalis (ZNTL).