Cancer care's next chapter

The future of cancer treatment looks very different from the past—and Wall Street is already placing bets on potential winners.

There’s a pharmaceutical revolution underway as companies make strides in cancer treatments, and Revolution Medicines is at the center of it. The biotech company is focused on therapies for pancreatic cancer (one of the deadliest cancers), and investors cheered after the company reported that its daraxonrasib pill nearly doubled survival rates compared with chemotherapy in a late-stage trial.

The drug works by targeting RAS mutations, which appear in roughly 90% of pancreatic tumors. But RAS mutations also drive cancers in the lung and colorectal areas, and RevMed is already generating promising early data there too, opening the door to a much larger opportunity. Shares have surged 87.66% YTD.

There’s also Natera, which doesn’t treat cancer, but keeps it at bay: The company builds personalized blood tests that look for cancer recurrence, and it has a near-monopoly over the minimal residual disease (MRD) testing market. Shares have soared 292% over the past three years.

A long road ahead

For companies like these, the path forward is often murky. Natera still has significant room to grow, with Leerink Partners estimating MRD testing could become a $20 billion market in the US alone. But maintaining its rapid growth will likely be a long and expensive process.

That’s why the pharma industry often follows a familiar pattern: Small biotech firms specialize in innovation and develop breakthrough drugs, then large pharmaceutical giants with the manufacturing, regulatory, and distribution scale needed to commercialize treatments acquire their smaller peers. This cycle is accelerating as Big Pharma companies feel the pressure of major patent expirations, which could lead to a loss of $300 billion in annual drug sales by the early 2030s.

But as shares of biotech companies like Revolution Medicines and Natera surge, they are becoming too expensive to acquire. Revolution Medicines reportedly explored talks with Merck and AbbVie earlier this year at roughly a $30 billion valuation, but after the stock’s recent rally, a takeover would now likely cost more than $40 billion.

That’s led some on Wall Street to think that Revolution Medicines will remain independent, and are betting that the biotech company will grow into a leader in the cancer treatment space. It would be a long, bumpy road to get there, but the long-term returns could prove healthy.—SY