It's not unusual for promising drug developers to be acquired for head-turning premiums. It's very unusual for a drug candidate still being evaluated in clinical trials to grab a multi-billion cash payment.
Privately-held Nimbus Therapeutics managed to pull off such a deal this week. Takeda (TKPHF) , which has been under pressure to boost growth and diversify its late-stage drug pipeline, handed the startup $4 billion in cash for full rights to NDI-034858. The immunology drug candidate hasn't even started phase 3 clinical trials yet.
The deal sent shares of competitor Ventyx Biosciences (VTYX) over 20% higher on Tuesday. The pre-commercial company is developing a drug candidate in the same class as NDI-034858, although it only started a phase 2 clinical trial earlier this month.
Is the company worthy of the pop?
This Little TYK is Growing Up Fast
One of the dominant themes in biotech in 2022 – an otherwise forgettable year for biotech investors – was the emergence of TYK2 as a validated molecular target. Suppressing the protein can help to control inflammation responses that drive autoimmune disorders such as plaque psoriasis.
Drug developers hope drugs targeting TYK2 can offer safety advantages over closely-related protein targets such as JAK1. The FDA has required warning labels on drug products that inhibit JAK proteins over concerns they can increase the risk of developing certain types of cancer. As such, the industry is racing to develop new drug candidates that are highly selective for TYK2 and barely tickle JAK1, if they do at all.
There are other advantages. TYK2 inhibitors can be administered orally, which is more convenient for patients than the injectable autoimmune drugs designed to suppress inflammatory proteins IL-17 and TNF-alpha. Despite the inconvenience, these targets have given rise to some of the world's bestselling drug products including Cosentyx and Humira, respectively.
Convenience can be more important than efficacy for patients. In plaque psoriasis, efficacy is measured using the Psoriasis Area and Severity Index (PASI) scale, with PASI-75 corresponding to a 75% reduction in symptoms.
Whereas 77% to 90% of individuals taking Cosentyx achieve PASI-75 and roughly 71% taking Humira reach the same outcome, Otezla only helps about 33% of patients achieve relief. However, it's an oral drug. That alone has catapulted it to blockbuster status, with $1.67 billion in global revenue during the first nine months of 2022 – making it the third-best selling product for Amgen (AMGN).
Clinical data generated to date suggest TYK2 inhibitors can offer the convenience of Otezla with the efficacy of injectable counterparts, which helps to explain the excitement this year.
Can Ventyx Biosciences Stand Out?
The competitive landscape in TYK2, and oral autoimmune drugs broadly, is becoming increasingly crowded. That could make it difficult for Ventyx Biosciences to stand out, especially against better-funded peers.
Bristol Myers Squibb (BMY) took the pole position in the drug class when it earned FDA approval for Sotyktu as a treatment for plaque psoriasis in September 2022. The once-daily pill helped 53% to 58% of individuals achieve relief using the PASI-75 benchmark, easily outperforming Otezla.
Nimbus Therapeutics is close behind with NDI-034858, which is expected to begin phase 3 clinical trials in plaque psoriasis in 2023. Takeda purchased full rights to the drug candidate for a whopping $4 billion, although that high value is partially to offset the fact it won't have to pay royalties on future sales. Instead, if the drug candidate eventually reaches the market and generates $5 billion in annual revenue, then the startup would earn another $2 billion in milestone payments.
Ventyx Biosciences is a little further behind. The company's TYK2 inhibitor, VTX958, only announced results for a phase 1 clinical trial in mid-August 2022. The first patient in a phase 2 clinical trial was enrolled at the beginning of December 2022.
That means the drug candidate probably won't be submitted for FDA approval until 2025 at the earliest. That would place it a few years behind Sotyktu and NDI-034858. Although the company claims it could have the most selective TYK2 inhibitor in the industry, investors don't yet have mature data to support it.
On the one hand, the market for plaque psoriasis and other autoimmune disorders that could be treated with TYK2 inhibitors is large enough to support multiple drug products. On the other hand, Ventyx Biosciences sure could use a deep-pocketed partner to help smooth out the development, regulatory, and commercial process.
Whether the company was interested in partnering the asset before, the gargantuan Takeda deal with Nimbus Therapeutics may have reset the market to a level that's too good to pass up – even if Ventyx Biosciences retains certain rights. Investors shouldn't be surprised if an industry titan comes knocking, which could support and increase the company's $2 billion valuation.
