Teva stock dipped Wednesday after the company announced it would partner with Sanofi to develop a potential blockbuster immunology drug.
The drug belongs to the emerging TL1A class. In an interview with Investor's Business Daily, Teva Pharmaceutical Chief Executive Richard Francis said he has high hopes the drug will be a "pipeline in a product." Sanofi is the perfect partner in this effort, he added. The company has already co-developed Dupixent for several immunological conditions with Regeneron Pharmaceuticals.
Terms of the deal with Sanofi demonstrate Teva's commitment to the product, Francis said. Sanofi will pay Teva $500 million upfront and up to $1 billion in development and launch milestones. Both companies will share equally in development costs as well as profits and losses in major markets.
"We've got probably the No. 1 immunology company in the world that wants this asset," he said. "That validates the science and the quality of the data. The second thing I would highlight is Teva is committed to our strategy to grow. We haven't sold the asset. We've partnered it 50/50. So, we believe in it. We believe it can drive long-term growth for the company and be an active brand for us."
But on today's stock market, Teva stock slipped 4.3% to close at 9.19. Shares of Sanofi rose a fraction, ending the regular session at 53.83.
Teva Stock: Blocking A Key Ligand
TL1A is a ligand, or a chemical messenger, associated with inflammation. Researchers theorize that blocking TL1A — by using a drug to deliver antibodies — could ease symptoms of gastrointestinal diseases in people whose bodies make too much of it. The companies are studying their TL1A drugs in ulcerative colitis and Crohn's disease.
The class caught fire last December after Prometheus Bio said more than a quarter of patients with ulcerative colitis and almost half of the Crohn's disease group entered remission after 12 weeks of treatment with its drug. This year, Merck spent $10.8 billion to buy Prometheus.
Pfizer is also partnering with Roivant Sciences on another TL1A drug.
Though the Prometheus news didn't send Teva stock soaring — unlike Prometheus stock which nearly tripled — Teva's drug could become the "best-in-class option" for people with serious gastrointestinal diseases, Sanofi Chief Executive Paul Hudson said in a statement.
Francis, Teva's CEO, doubled down on that view. He acknowledged Teva and new partner Sanofi are behind their rivals in the TL1A drug class. But, in laboratory testing, he said Teva's drug has come out ahead on three parameters: potency, selectivity and immunogenicity.
"It can actually be quite beneficial to have a number of companies come into an area which is under-treated because of a lack of innovation," he said. "It drives more treatment, it drives more patients into the clinic, it drives more physicians to think about alternative treatment options and it grows the whole market."
Teva Hopes To Grow Again
Teva's drug is currently in midstage testing, but could begin final-phase testing in 2025.
Francis says the drug fits into Teva's "pivot to growth" strategy. This includes delivering on its growth engines — drugs called Austedo, Ajovy and Uzedy. Teva also hopes to step up innovation, and this includes the TL1A-blocking drug. Teva also plans to bolster its generic drugs business and focus the business and allocate capital accordingly.
The company's focus on innovation is expected to accelerate growth beyond 2025, he says. Teva, which is known mainly for its generics business, developed the TL1A drug in-house.
"We've always been innovative," he said. "We just want to leverage that capability even more. And, yes, leverage it and grow it more. We'll be a company that has been recognized as a generics powerhouse, but also be recognized as an innovative powerhouse."
Teva stock has fallen recently, however. Shares broke out of a cup-with-handle base with a buy point at 9.99 on Sept. 11, according to MarketSmith. After spending some time in the buy zone, shares have since fallen below their entry. On Wednesday, Teva stock toppled as much as 9.4% below its entry. Savvy investors are encouraged to cut their losses when a stock falls 7%-8% below its buy point.
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