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Investor interest in anti-obesity drugs sometimes seems all-consuming. However, weight loss treatments are not the only source of excitement in the world of pharmaceutical research.
A class of molecules known as antibody-drug conjugates (ADCs) is generating a stir. These use antibodies to deliver chemicals directly to tumors, turning them into the guided missiles of the cancer world. Invented decades ago, they have recently improved so much that developers like AstraZeneca are talking about them. replacing conventional chemotherapy. When the British company and its Japanese partner Daiichi Sankyo revealed impressive breast cancer trial results for its Enhertu ADC in 2022, The oncologists broke out in a standing ovation..
Daiichi Sankyo is expected to be the ADC leader in 2028 with nearly $10 billion in sales, according to Evaluate. It trades at a price/earnings multiple of 50 times, the kind of hefty multiple typically associated with fat stocks. Novo Nordisk has a multiple of 37 times and Eli Lilly has 59 times. Some estimates of long-term market potential suggest parallels with obesity drugs. Morgan Stanley estimates the ADC market could be worth more than $140 billion.
That bullish estimate is based on a one-for-one shift from conventional chemotherapy, which accounts for more than 37 percent of cancer prescriptions in the United States. Healthcare funders might resist this on cost grounds; Most chemotherapies have lost patent protection and are relatively inexpensive. In April, access to Enhertu in England Was blocked for value for money reasons, although it got the green light in Scotland.
Investors should also worry that the market is becoming saturated. Roche, Johnson & Johnson and Denmark’s Genmab have signed deals this year, following nearly $100 billion in ADC-focused M&A transactions and partnerships last year. This included Merck’s deal with Daiichi Sankyo worth up to $22 billion, Pfizer’s acquisition of loss-making Seagen for $43 billion, and AbbVie’s acquisition of ImmunoGen for $10.1 billion. The latter represented a 95 percent premium over the unaltered price.
The deal with ImmunoGen came four decades after the company began work on the first generation of ADCs. Some of the current hopes for ADCs, including their use to treat bacterial infections and autoimmune diseases, could fail or take a long time to come true.
The money being poured into ADCs is a reminder of how important oncology is to pharma, even as obesity steals the show. It is the industry’s largest source of sales, with projected 2028 revenue of $440 billion, says data provider IQVIA. It appears that drugs that precisely target cancer cells will play a crucial role in treating the disease, triggering another wave of oncological growth.