The proposed $2.1bn acquisition of Endocyte Inc. by Novartis AG highlights the substantial opportunity for Telix in radiopharmaceuticals and prostate cancer in particular. Just one of a portfolio of clinical stage radiotherapy and radiotherapy programmes, Telix's TLX-591 promises a superior second generation product. With potentially better efficacy and tolerability compared to the Endocyte's lead product 177Lu-PSMA-617 currently in Phase III, the antibody-based TLX-591 has the potential for earlier and broader use in combination with existing androgen-depletion therapy ("ADT"), as well as the basis for more potent alpha-emitting radiopharmaceuticals. With the likes of Novartis / Endocyte blazing the trail, Telix looks well placed to take a substantial share of the growing radiopharmaceutical market. Given the $2.1bn offer for Endocyte, Telix looks dramatically undervalued. We maintain and reiterate both our OUTPERFORM recommendation and target price of AUD 2.5 per share.
