Investors for months were anxiously awaiting the first-ever clinical data from Dice Therapeutics (DICE) . The results didn't disappoint them.
The company's lead drug candidate, DC-806, aced a small phase 1 study focused on psoriasis. No development-derailing side effects for any dose levels tested occurred.
And although the clinical trial wasn't designed to evaluate efficacy, an exploratory endpoint suggests that the asset could be competitive with other orally administered autoimmune treatments.
Shares of Dice Therapeutics, South San Francisco, rose nearly 60% on the announcement, which came less than a month after Bristol Myers Squibb (BMY) shook up the competitive landscape.
What's next for the young drug developer – and can it hold its own against better-funded competition?
Early Data Suggest Good Things Ahead
Autoimmune diseases such as psoriasis and rheumatoid arthritis are usually treated with injectable drugs such as AbbVie's (ABBV) Humira or Novartis's (NVS) Cosentyx.
After a brief initiation phase, patients may require an injection only once a month. Most important, the drugs can help improve symptoms by at least 75% in 70% to 90% of psoriasis patients. This is measured using the Psoriasis Area and Severity Index and is referred to as PASI-75.
But even given the injectable products' infrequent dosing and strong efficacy, many patients prefer to take a twice-daily oral drug called Otezla, which is half as effective. Amgen's (AMGN) Otezla helps only about 35% to 40% of individuals achieve significant symptom improvement after 16 weeks of treatment.
In September 2022, Bristol Myers Squibb earned Food and Drug Administration approval for Sotyktu to treat psoriasis. The oral therapy is taken only once daily. Importantly, it helped between 53% and 58% of individuals achieve a score of PASI-75 after 16 weeks of treatment.
Dice Therapeutics reported that the highest dose of DC-806 helped 44% of individuals achieve PASI-75 after four weeks of treatment. That's exciting because more patients might benefit from longer-duration treatment.
In other words, a study observing individuals taking the drug candidate for 16 weeks could see more than 44% achieve significant symptom relief. It's already in the ballpark of Sotyktu after just four weeks, so there's potential to be competitive with the soon-to-be market leader.
The company plans to initiate a Phase 2b clinical trial in the first half of 2023 to explore more doses over longer periods in more patients. Those data will help to inform a final Phase 3 study, assuming the midstage trial succeeds.
What Comes Next For Dice Therapeutics?
Are the Phase 1 results for DC-806 encouraging and exciting? Yes, absolutely. But investors need to acknowledge the long road ahead. A few things to keep in mind:
- Study size and duration: It's important to stress that the Phase 1 clinical trial wasn't designed to understand efficacy. The exploratory efficacy data point suggesting 44% of individuals achieved PASI-75 was only for the highest dose of DC-806, which included just eight patients. The drug candidate was administered to only 21 patients, which isn't enough to understand all side effects the molecule might cause. That includes safety concerns that may arise only after four weeks of treatment. For perspective, Sotyktu's approval was based on two studies including more than 1,600 patients, half of whom received Sotyktu.
- David vs. Goliath: The Phase 1 results suggest Dice Therapeutics has a valuable technology platform, but it still has to go up against some of the largest pharma companies on the planet: AbbVie, Novartis and Amgen. The company may need to find a deep-pocketed partner (or may need to be acquired) to realize its true potential.
- Development timeline: If a Phase 2b study starts enrolling patients by mid-2023, then Dice Therapeutics may not begin a Phase 3 clinical trial until late 2024 or early 2025. It may not earn FDA approval for DC-806 until 2026. The wait could be worth it, but investors will certainly need to remain patient.
Public Offering to Raise at Least $287.5M
Dice Therapeutics didn't let the nearly 60% leap in the share price go to waste. The drug developer immediately announced a public offering of common stock to raise at least $287.5 million in gross proceeds.
Given the excitement and strong initial data, investors may not be surprised to see the company raise even more from investment banks eager to grab shares of the young company.
Padding the balance sheet now will help the drug developer navigate mid-stage development for DC-806 and other assets in the pipeline.
That includes two early-stage assets that work similarly to the lead drug candidate, but could avoid predicted side effects or be dosed once daily -- just in case DC-806 encounters a setback. The next year or two are derisked from a financial standpoint.
Nonetheless, investors should remember that there's a long way to go and that some artificial factors helped propel Dice Therapeutics to a $1.5 billion market cap.
The company had about 17% of its float sold short leading up to the Phase 1 data readout. (Short sales are bets that a stock price will drop.) That means short covering added to the volatility, but it also suggests that the shares may cough up some of their recent gains.
The current premium valuation might be earned and deserved one day, but it could also fall apart if development encounters any delays or setbacks. After all, the company is still wholly dependent on the lead drug candidate.
DC-806 is at least a few years away from hitting the market, even in a best-case scenario, and the competitive landscape is chock full of competition from industry titans.
Then again, there's an obvious multibillion-dollar market opportunity ahead. Perhaps the latest data make Dice Therapeutics an attractive acquisition target.
