Fusion Pharmaceuticals snagged a $2 billion takeover offer from partner AstraZeneca on Tuesday, reigniting enthusiasm for the radiopharmaceuticals space and sending the biotech stock to a record high.
The company is working on targeted cancer treatments using radioactive isotopes. These drugs head directly to cancer cells, limiting damage to nearby healthy tissue. Fusion's leading asset is a potential treatment for metastatic castration-resistant prostate cancer.
"It has been our opinion that Fusion was a likely takeover target by Big Pharma given the recent deals in the radiopharmaceutical space," Wedbush analyst David Nierengarten said in a report. "With (mergers and acquisitions) momentum continuing in radiopharmaceuticals, we could see additional deals in the near-term."
Shares of Fusion Pharmaceuticals nearly doubled on today's stock market. The biotech stock rocketed 99.1% to close at 21.18. AstraZeneca stock closed roughly flat at 65.86. Fusion shares have a top-notch Relative Strength Rating of 99, according to IBD Digital. This puts the biotech stock in the top 1% of all stocks when it comes to 12-month performance.
Fusion Pharmaceuticals Deal Highlights
The Fusion deal comes on the heels of other takeovers in the radiopharmaceuticals space. Eli Lilly pledged $1.4 billion last year to buy Point Biopharma for its radioligand technology. Bristol Myers Squibb also bought RayzeBio for $4.1 billion.
Fusion owns its own isotope production facilities, giving AstraZeneca "a significant competitive advantage in the lens of big pharma," William Blair analyst Andy Hsieh said in a note.
"Upon the achievement of stable, robust and redundant supply chain, the next focus will likely be optimizing modalities for specific targets and tumor indications," he said. This could "usher continued investor engagement and innovation in the radiopharmaceutical field in the long term."
AstraZeneca is unlikely to get any pushback from the Federal Trade Commission over the deal, Leerink Partners analyst Faisal Khurshid said in a report. He also doesn't expect another suitor to emerge from the woodwork given the deal, "which we believe fairly values the company."
Khurshid downgraded the biotech stock to a market perform rating from outperform.
Biotech Stock Tied To CVR
AstraZeneca's offer values Fusion Pharmaceuticals at $2 billion upfront. It includes a contingent value right worth $3 per share, bringing the total value of the deal up to $2.4 billion. The CVR will be paid out if the Food and Drug Administration agrees to review Fusion's prostate cancer drug for approval before Aug. 31, 2029.
William Blair's Hsieh expects the prostate cancer treatment to gain approval in the fourth quarter of 2029. The company is planning to start a Phase 3 study in 2025.
"We conservatively estimate Fusion's pivotal study could initiate in the fourth quarter of 2025 with top-line results around year-end 2028," he said.
He has a market perform rating on biotech stock Fusion.
"We reiterate our bullish view on the radiopharmaceutical sector and believe investing in the modality will likely provide investors with a secular growth opportunity well into the next decade," Hsieh said.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
