Eli Lilly has agreed to acquire DICE Therapeutics for $2.4 billion, the companies said today, in a deal designed to expand the buyer’s immunology pipeline with two clinical-stage programs based on oral interleukin-17 (IL-17) inhibitors.

DICE’s lead pipeline candidate is DC-806, a mid-stage clinical treatment for psoriasis. Earlier this year, Dice dosed its first patient in a global randomized, double-blind Phase II trial (NCT05896527) designed to assess multiple doses of DC-806 compared to placebo over 12 weeks in about 225 patients with moderate-to-severe psoriasis. In addition to peak efficacy, the study is designed to determine induction and maintenance doses for Phase III development.

In releasing first quarter results last month, DICE said it plans to expand development of DC-806 into unspecified “additional indications in which the marketed anti-IL-17 injectable biologics have proven to be effective.”

That would appear to include psoriatic arthritis, ankylosing spondylitis, and non-radiographic axial spondyloarthritis—all of which are indications along with psoriasis that are approved for Novartis’ Cosentyx (secukinumab), and Lilly’s Taltz (ixekizumab). Cosentyx is also approved for active enthesitis-related arthritis (ERA) in patients four years of age and older.

Last year, Cosentyx generated $4.788 billion in net sales, up 1% from $4.718 billion in 2021 while Taltz racked up $2.482 billion, up 12% from $2.213 billion.

“With injectable drugs targeting IL-17 for psoriasis gaining over $6 billion annually and the overall psoriasis market holding over $40 billion in annual sales potential, DC-806 could be a major drug if later-stage studies are successful,” Damien Conover, CFA, director of healthcare equity research for Morningstar Research Services, wrote today in a research note.

“We expect phase [II] psoriasis data for DC-806 in mid-2024, which should provide a better perspective on the true potential of the drug,” he added.

Another approved IL-17 inhibitor, Ortho Dermatologics’ (Bausch Health Cos.) Siliq (brodalumab), is approved solely for moderate to severe plaque psoriasis in adults who are candidates for systemic therapy or phototherapy and have failed to respond or have lost response to other systemic therapies. Siliq also carries a “black box” warning of suicidal ideation and behaviors having occurred in patients treated with the drug.

Last year, DICE trumpeted positive Phase Ic data for DC-806 (formerly S011806) showing that the IL-17 inhibitor achieved proof of concept in psoriasis patients with a mean percentage reduction in Psoriasis Area and Severity Index (PASI) from baseline at four weeks of 43.7% in the high dose group (800 mg BID), compared to 13.3% in the placebo group (p=0.0008). No major safety issues were reported.

“While the study was small, with less than 50 patients, the early-stage data is encouraging,” Conover added.

The Phase I trial was conducted in the U.K. three overlapping parts: a Phase Ia single ascending dose study with 40 patients; a Phase Ib multiple ascending dose study with 32 patients; and the Phase Ic proof-of-concept study, which also enrolled 13 patients in the low dose group (200 mg BID), and 11 placebo patients.

Data readout planned

Also in DICE’s clinical pipeline is DC-853, an IL-17 inhibitor that according to the company has potentially improved potency and metabolic stability compared to DC-806. During the second half of this year, DICE is set to read out topline data from a Phase I trial of DC-853 in healthy volunteers

Both clinical-phase IL-17 inhibitors are small molecule drugs intended to treat chronic diseases in immunology. Dice developed those and other pipeline candidates using its DELSCAPE technology platform, designed to apply DNA-encoded libraries (DELs) in a novel way that according to Dice improves its ability to prosecute historically difficult targets such as protein-protein interactions (PPIs) with oral small molecule inhibitors.

“In combination with its novel technology and expertise in drug discovery, DICE’s talented workforce and passion for innovation will enhance our efforts to make life better for people living with devastating autoimmune diseases,” Patrik Jonsson, executive vice president, president of Lilly Immunology and Lilly USA, chief customer officer, said in a statement.

Rounding out DICE’s pipeline:

  • A novel scaffold program of small molecule IL-17 inhibitors for psoriasis and other autoimmune and inflammatory diseases. The program aims to identify compounds with increased structural diversity.
  • An oral α4β7 program including small molecule inhibitors of α4β7, targeting inflammatory bowel disease.
  • An oral αVβX program designed to treat fibrosis. The program includes small molecule inhibitors of αVβ1 and αVβ6 with a variety of selectivity profiles ranging from αVβ1 selective, to dual selective, to αVβ6 selective.
  • An oral PD-L1 program including small molecule inhibitors of PD-L1, designed to treat various cancers.

“Not a surprise”

Investors responded to the acquisition with a buying surge that sent DICE’s share price up nearly 37% in midday trading, to $46.44 as of 1:30 p.m. ET from yesterday’s close of $33.85.

Eli Lilly agreed to acquire DICE for $48 a share, a 42% premium above DICE’s closing share price Friday of $33.85.

“Although this is not the highest premium we have seen in recent autoimmune space M&A deals, given the relatively long wait till next major potential catalyst for DICE (Phase IIb trial readout expected in 3Q24), the valuation gap between the deal size and [Wall] Street PT [price target] consensus was not a surprise to us.

Nash downgraded Canaccord Genuity’s rating of DICE shares from “Buy” to “Hold” and lowered the firm’s price target 32%, from $71 to $48 a share.

Lilly shares inched up 1% as of 1:30 p.m. ET, to $454.01 from yesterday’s close of $447.71.

“We welcome DICE colleagues to Lilly and, together, we can tackle the challenges ahead in finding new treatments for patients with significant unmet medical needs,” Jonsson stated.

Added J. Kevin Judice, PhD, DICE’s co-founder and CEO: “We’re eager to see our pipeline, including our oral IL-17 inhibitors, DC-806 and DC-853, benefit from Lilly’s resources and global reach and I’m excited by the prospect of watching these two talented teams in a united quest for scientific innovation.”

“Our novel approach to discovering and advancing oral, small molecules against validated protein-protein interaction targets has even greater potential with Lilly’s industry-leading clinical development capabilities to get these medicines to patients suffering from autoimmune diseases,” Judice said.

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