The FDA approval of Sotyktu for psoriasis has both ignited and dampened prospects for smaller biotech stocks.
Unlike smaller peers, the titans of the pharma industry don’t always get a share-price boost after earning an FDA approval. Bristol Myers Squibb (BMY) – Get Bristol-Myers Squibb Company Report certainly did.
The $150 billion drug developer enjoyed a 6% pop after announcing FDA approval for one of its closely-watched assets. Deucravacitinib, now branded as Sotyktu, snagged the regulatory go-ahead to begin treating individuals with plaque psoriasis. Although there’s no shortage of treatments for the autoimmune disorder that results in scaly patches on the skin, none offer the same combination of convenience and efficacy as Sotyktu.
The approval led investors to quickly reassess the competitive landscape for next-generation autoimmune treatments, which had major consequences for DICE Therapeutics (DICE) and Ventyx Biosciences (VTYX) .
Investors Take Two on TYK2
Sotyktu is the first drug in an emerging therapeutic class to earn FDA approval. The drug compound, known as a TYK2 inhibitor, interferes with certain cellular communication processes involved in inflammation and immunity. Autoimmune disorders such as plaque psoriasis are driven by the immune system incorrectly attacking a patient’s own cells.
Although it was the first next-generation drug candidate to earn regulatory approval, it likely won’t be the last. In fact, there’s hardly any elbow room in the competitive landscape when public and private companies are counted.
The emerging biotech battleground in autoimmune drugs perfectly illustrates a handful of important concepts for investors.
Safety First: Drug products must have an acceptable safety profile. Clinical trials completed to date demonstrate a relatively clean safety track record for Sotyktu, although inhibiting TYK2 may have longer term consequences. We’ll touch on that below.Deliver on Outcomes: Drug products must prove effective for the task at hand. In plaque psoriasis, efficacy is defined as helping to clear the scaly skin patches associated with the disease. It’s measured using the Psoriasis Area and Severity Index (PASI), generally requiring a 75% reduction on the scale.Molecular Targets: Drug products can take aim at any number of molecular targets. Common targets in autoimmune diseases are TNF-alpha, interleukin-17 (IL-17), TYK2, and PDE4. However, the target chosen impacts other important metrics, such as safety, efficacy, and convenience.Route of Administration: Drug products can be administered through injections, intravenous infusions, oral pills, and so on. This is one of the primary drivers of patient convenience.Dosing Frequency: Drug products can be administered at different intervals, such as twice-daily, daily, or every so many weeks. This is usually dictated by the route of administration and is important for patient convenience.
Patient convenience is always important, but it takes center stage in autoimmune disorders. Consider that injectable drugs deliver the best outcomes in psoriasis – and it’s not even close – but many patients still prefer inferior oral pills.
Cosentyx from Novartis (NVS) – Get Novartis AG Report is a once-monthly injectable drug that inhibits IL-17. After 12 weeks of treatment, it helps roughly 77% to 90% of individuals achieve relief using the PASI-75 benchmark.Humira from AbbVie (ABBV) – Get AbbVie Inc. Report is a biweekly injectable drug that inhibits TNF-alpha. After 16 weeks of treatment, it helps roughly 71% to 80% of individuals achieve relief using the PASI-75 benchmark.Otezla from Amgen (AMGN) – Get Amgen Inc. Report is a twice-daily oral drug that inhibits PDE4. After 16 weeks of treatment, it helps roughly 33% of individuals achieve relief using the PASI-75 benchmark.
Otezla is clearly not as effective as Cosentyx or Humira, but it still generated over $2 billion in full-year 2021 revenue. Patient convenience is the deciding factor.
Now consider the latest breakthrough from Bristol Myers Squibb. Sotyktu is a once-daily oral pill that inhibits TYK2. After 16 weeks of treatment, it helped roughly 53% to 58% of individuals achieve relief using the PASI-75 benchmark. Responses deepened at Week 24.
That explains why Wall Street expects Sotyktu to easily become a blockbuster drug product, especially if it earns regulatory approvals in additional autoimmune disorders. But investors should know there are challengers.
The Gauntlet Has Been Thrown
Ventyx Biosciences is developing a TYK2 inhibitor that appears to be more selective than Sotyktu. The drug candidate, VTX958, was designed to avoid interactions with other proteins closely related to TYK2. That could provide an advantage considering inhibiting those other proteins, called JAKs, is associated with elevated health risks such as the development of cancers.
Sotyktu only tickles the JAK1 protein. However, although TYK2 goes by a different name, it technically belongs to the JAK family of proteins. It’s sometimes referred to as “JAK4.”
The FDA recently forced all JAK inhibitor drug products to include a warning on their label showcasing these potential safety risks. The FDA has placed a generic JAK inhibitor warning on Sotyktu’s label. It’s unclear if VTX958, which is only in phase 1 clinical development, would be able to avoid the same fate should it be approved. Shares of Ventyx Biosciences soared over 60% this week nonetheless.
It’s important to stress that clinical studies of Sotyktu in plaque psoriasis didn’t demonstrate worrisome safety signals associated with other JAK inhibitors. Studies followed patients for up to one year. Those risks may only be quantified after long-term use.
Meanwhile, shares of DICE Therapeutics took a big hit following Sotyktu’s approval. The biotech is developing oral drug candidates taking aim at molecular targets typically only accessible by injectable treatments.
The lead drug candidate, DC-806, targets IL-17 – the same as efficacy-leader Cosentyx. The approach could prove valuable if safety concerns dampen enthusiasm for TYK2 inhibitors. However, the initial compounds being developed must be taken twice daily. That’s the same as Otezla, but now less convenient than Sotyktu.
DICE Therapeutics intends to develop once-daily drug candidates taking aim at IL-17 and possibly TNF-alpha, but they’re relatively far from clinical trials. Despite the thrashing shares took this week, the development approach still has value. Investors are being more cautious until initial clinical data are revealed later this year.
There are many unanswered questions in the biotech battleground for autoimmune diseases. Will TYK2 live up to the hype in real-world use? Can more selective drug candidates demonstrate safety or efficacy advantages? Should investors focus on other molecular targets altogether? Bristol Myers Squibb secured a key win this week, but the dust has yet to settle in the broader competitive landscape.