Several mid-market biotech companies are showing promise with targeted cancer therapies-treatments, as discussed most recently at the 2014 American Society of Clinical Oncologists (ASCO) annual meeting at McCormick Place in Chicago from May 30-June 3.

This new class of cancer immunotherapies are known for going directly after the cause of the malignancies in patients. The approach differs from more traditional oncology regimens, such as chemotherapy, which kill fast-dividing cells indiscriminatley while seeking to shrink tumors. With these innovative drugs passing muster in clinical trials, companies including Epizyme Inc. (Nasdaq: EPZM) are drawing the attention of acquisitive biopharmaceutical players eager to bring new medicines to market.

"There's this idea that we're getting close to cracking the code in the treatment of cancer, and people are positioning themselves to be at the doorstep-they really want a key into the party," says Gregory Wade, an executive vice president at biopharmaceutical Pharmacyclics Inc. (Nasdaq: PCYC). "There are lots of targets, and so companies are picking and choosing."

Among the potential acquisition candidates, Wade says, are companies known for combating genetically-defined cancers, or subtypes of more common cancers such as acute myeloid leukemia and non-Hodgkin's lymphoma.

Epizyme, for example, operates in a field of biology that explores ways to turn off the activity of a specific enzyme that causes multiple genes and proteins to spin out of control in cancer patients. Other companies involved in this particular segment of cancer treatment include Clovis Oncology Inc. (Nasdaq: CLVS) and Loxo Oncology-each developing drugs expected to have a broad effect against the disease.

Positive responses to Epizyme's therapies were seen in some patients with leukemia, which led to the Cambridge, Massachusetts, company earning a $25 million milestone payment from Summit, New Jersey-based Celgene (Nasdaq: CELG) in January. Epizyme hauled in more than $88.7 million for its initial public offering in June 2013.

"Epizyme could be acquired even at an early stage of development," says David Nierengarten, managing director at Wedbush Securities. The path of getting targeted therapies to market is considered more straightforward and the investment involved is lower, he adds.

Epizyme and other companies dealing in genetically defined cancers are known to have smaller clinical trials, and the path to approval is quicker than, for example, a broad-based cancer drug in chemotherapy.

Clovis Oncology, a Boulder, Colorado, company, announced in May that its lung cancer treatment CO-1686 received breakthrough therapy status from the U.S. Food and Drug Administration. This indicates that the drug demonstrates substantial improvement over existing therapies, so the company is on a faster track to bringing it to market.

There's also fledgling drug developer Loxo Oncology, which in May secured a $24 million B round of venture capital, led by New Enterprise Associates, and moved LOXO-101-a drug that aims to inhibit genes that have the potential to cause cancer-into clinical trials. Early backers of Stamford, Connecticut-based Loxo include Aisling Capital and OrbiMed Advisors.

The results of these clinical trials are crucial and play a major role in whether a drug company is purchased.

Endocyte Inc. is believed to be one of the latest experimental cancer treatment companies to catch the eye of some potential acquirers.

The Lafayette, Indiana-based company is known for a drug called vintafolide, which targets characteristics of cancer cells to better direct chemotherapy and slow the cancer's progression. A likely suitor for Endocyte is Merck & Co. Inc. (NYSE: MRK), Nierengarten says. Whitehouse Station, New Jersey-based Merck currently has rights to sell vintafolide through a partnership with Endocyte, but doesn't have a claim to the target's next-generation treatments nor the technology used to develop them.

But since vintafolide is currently in clinical trials, and Endocyte controls the underlying technology and all future therapies developed with it, Merck may wait until it is approved.

"For an acquisition, a company might be much more inclined to just essentially buy an already approved drug and plug it into their sales and marketing efforts," Nierengarten adds, citing Bayer AG, which completed the $2.6 billion purchase of Norwegian cancer-drug maker Algeta ASA in February, but only after the company's drug was approved.

Edward Tenthoff (pictured), an analyst with Piper Jaffray & Co. (NYSE: PJC), agrees. Should a drug fail a clinical trial phase, a big-name buyer is likely to shy away from a deal, he explains.

This may be the scenario for Merck and Endocyte. The two companies announced that a review of the results from a clinical trial using vintafolide as an ovarian-cancer treatment fell short of the study's goals. The Data Safety Monitoring Board recommended that the trial be stopped because the drug didn't show enough efficacy.

However, Endocyte says it will continue to test vintafolide as a treatment for non-small-cell lung cancer, where the data is more favorable so far.

"There's still a chance," Tenthoff says, referring to a potential deal between Merck and Endocyte. "It's obviously early stage, so we're waiting to see if Merck would walk away from this deal or not."

Meanwhile, Merck remains on the hunt for early-stage biotechnology companies specifically aimed at experimental cancer treatments, and it has plenty of competition.

Bristol-Myers Squibb Co. (NYSE: BMY) and Roche Holding AG, like Merck, are busy developing drugs in an emerging category of cancer treatment known as immune checkpoint inhibitors, which seek to leverage the body's immune system to attack tumor cells.

Like vintafolide, these new drugs have shown promise in lung cancer, melanoma and prostate cancer.

Bristol-Meyers has announced plans to complete by year-end an application for regulatory approval of nivolumab, a treatment designed to target an immune-cell pathway known as PD-1 (programmed death receptor 1). When cancer cells latch on and use PD-1 to escape destruction by the body's immune system, nivolumab blocks that interaction, thus allowing the immune system to function normally and fight the disease.

In January, Bristol-Myers reported a better-than-expected 6 percent rise in fourth-quarter revenue and a 9 percent rise in adjusted earnings, benefiting from a portfolio of cancer therapies the company said it was interested in expanding.

Genentech-which Roche bought for $46.8 billion in 2009-is developing a similar drug that targets the substance on cancer cells that interacts with PD-1 on immune cells.

Other strategic companies are known to wield M&A to keep up with the quickening pace of medical advancements, including Agenus Inc. (Nasdaq: AGEN). The Lexington, Massachusetts-based company paid $40 million for biopharmaceutical firm 4-Antibody AG, which aims to help regulate immune response to cancers and other diseases.

Gilead Sciences Inc. (Nasdaq: GILD), Biogen Idec Inc. (Nasdaq: BIIB) and Amgen Inc. (Nasdaq: AMGN) are also considered active buyers, especially when it comes to cancer treatments that achieve success within patient studies, Tenthoff says.

"They need to buy these drug programs to augment their pipelines," he adds. "I think we'll continue to see increased M&A and more partnerships for targeted oncology companies."