There's a revolution in immunology that could spark a paradigm shift in treating patients with inflammatory bowel disease. Big Pharma is pouring billions into it – and investors in biotech stocks are paying close attention.
Major deals underlined the trend in 2023. Merck spent $10.8 billion to acquire biotech stock Prometheus Biosciences for its experimental treatment for gastrointestinal diseases. Then, Sanofi partnered up with Teva Pharmaceutical for its rival approach in a deal worth up to $1.5 billion. Roche rounded out the deal news with a $7.1 billion takeover of Roivant Sciences' and Pfizer's joint project, Televant.
The deals focused a key asset: a drug that blocks TL1A, a protein that shows up in patients with immunological diseases.
Companies believe blocking TL1A could have a profound impact on, initially, ulcerative colitis and Crohn's disease. But experts say it could reach far beyond stomach diseases and into arthritis, skin conditions and lung diseases. Teva Chief Executive Richard Francis believes the company's TL1A drug could be a "multibillion-dollar blockbuster. That could help soften the expected financial blow from soon-to-expire patents protecting some of the industry's biggest moneymakers.
A Significant Breakthrough
Komal Gurnani, a principal partner with consulting and technology firm ZS, described TL1A drugs a huge leap forward in medicine.
"That is such a significant breakthrough," Gurnani told Investor's Business Daily. "If, for 25% to 30% of patients I can absolutely know that this drug is going to work and we have about 40% chance of hitting remission, that's a big, big breakthrough I would say vs. the current standard of care."
These drugs are still in the earliest stages of human testing. If successful, they likely won't launch until the latter half of the decade or later. But the results so far show potentially transformative effectiveness. In one study, the Prometheus drug helped more than a quarter of ulcerative colitis patients and almost half of the Crohn's disease group reach remission after 12 weeks. The Televant drug helped more than a third of ulcerative colitis patients stay in remission after 56 weeks of treatment.
Patients with these diseases are known to cycle through drugs. So, the initial results in ulcerative colitis and Crohn's disease made biotech stock investors' heads turn. Gurnani, of ZS, says targeting TL1A could be a game-changer in immunology.
"It's also pushing significantly the boundary on remission rates which is essentially what so many patients living with immunological diseases want," she said. "They're not just looking for a mediocre response. They want to experience life as if they were living without the disease. So, remission is an important lever where I'm seeing TL1A actually push the boundary a lot."
A New Biomarker To Watch?
Experts expect TL1A to play a key role in treating inflammatory bowel disease. The protein is considered a potential biomarker, an early indicator of the disease in a patient.
This means the protein shows up in measurable levels in the blood. Bullishly for biotech stocks, that could help doctors identify which patients are most likely to respond to treatment.
Perhaps the most famous example of a biomarker is PD-1 and PD-L1. Cancer drugs like Merck's Keytruda and Bristol Myers Squibb's Opdivo seek out the PD-1 protein on cancer cells. Roche's Tecentriq looks for a similar protein called PD-L1. The drugs block those proteins, helping the immune system spot the hiding cancer cells. Patients with higher levels of PD-1 and PD-L1 usually respond better to these drugs.
Similarly, patients whose blood carries TL1A are expected to have better responses to the new class of drugs. The biomarker approach isn't new in immunology, but it's new in inflammatory bowel disease, says Shaju Backer, Sanofi's global franchise head of immunology.
"It helps us raise the (effectiveness) bar once again," Backer told IBD. "You can identify the right patient for the right biomarker and match them to the right therapy. But there's a lot of room to go even with early data from TL1A."
3.1 Million U.S. Adults
The market for inflammatory bowel diseases is, admittedly, crowded. But it's also huge. The Centers for Disease Control and Prevention estimates 3.1 million adults in the U.S. have inflammatory bowel disease, the umbrella term for Crohn's disease and ulcerative colitis.
Investors in biotech stocks know treating inflammatory bowel disease is a tricky proposition. The disease is caused by different problems in different patients. So, while medicines from big names like AbbVie and Johnson & Johnson might work for some patients, they won't help all.
Judy Chou, chief executive of immunology-focused AltruBio, estimates 40% to 50% of patients don't respond to the bestselling immunology treatment, Humira. In Chou's earliest days as a researcher, she worked on the molecule that eventually became Humira.
"Immunology is a crowded space, but there's still a gap for patients," she told IBD.
Naimish Patel, head of global development for immunology and inflammation at Sanofi, says 20% of ulcerative colitis patients enter remission within eight weeks. But half of those will stop responding by a year. Another estimate, from Sanofi's Backer, suggests two-thirds of patients will respond to their initial treatment. But half of those will drop off after a year.
"This is one of the biggest scientific puzzles of our times," ZS' Gurnani said. "I've been focused on immunology for more than seven years and (I have yet) to hear a single rheumatologist tell me, 'I think I have all the (mechanisms of action) I need. I think I exactly know what to do with every patient out there and we don't need any more scientific innovation.' "
Pipeline In A Product
There's also hope that the medical advances related to TL1A would lead to other breakthrough treatments, a "pipeline in a product,"
Sanofi, one of the biggest immunology companies on the planet, is well-versed in this strategy. Its Regeneron Pharmaceuticals-partnered drug, Dupixent, first proved effective in treating eczema.
It turned out the underlying biology of eczema for some patients is the same for other allergic conditions like asthma and nasal polyps. Today, Dupixent is a major moneymaker. It's expected to generate $11.35 billion in sales for Sanofi this year, accounting for almost a quarter of revenue.
Biotech stock investors are hoping for a repeat performance from the suite of TL1A drugs.
Proving The Drug's Merit
First, the companies are looking to prove the drugs' merit in ulcerative colitis and Crohn's disease. So far, that venture has paid off handsomely for the biotech stocks involved.
But companies are looking to move into other areas like respiratory and fibrotic conditions, asthma and other inflammatory diseases, says Francis, Teva's CEO.
Gurnani, of ZS, says it's possible blocking TL1A could have an impact on rheumatological diseases like arthritis and even skin conditions.
The pattern from testing in patients with ulcerative colitis suggests there could be a biological connection between the TL1A protein and other immunological conditions, says Mayukh Sukhatme, chief investment officer for Roivant.
But the theory still needs to pan out in additional testing. For example, at one point, researchers thought blocking an inflammatory cytokine called IL-17 would work in inflammatory bowel disease. Instead, it made the condition worse.
"Immunology is a surprising field and immunology is super complicated," he said. "Biology has a way of humbling everyone. We're very excited obviously. Roche and others in this field now are really excited about the extensibility of the drug into other indications and I think that the data set we have so far certainly encourages blue-sky thinking, but the experiments have to be run."
Biotech Stocks: Perils Of A Patent Cliff
The advances related to TL1A are important given a notable development in the biopharma industry in the coming decade. Some major pharmaceutical companies will see key patents expire which would likely mean a dramatic drop in revenue, a phenomenon referred to as a "patent cliff."
In fact, biotech stock investors worry looming Medicare negotiations could permanently ding drug prices.
That's why new breakthroughs, like the treatments focused on TL1A, are important.
Experts following biotech stocks say it doesn't matter who hits the market first. The market in inflammatory bowel disease, alone, is big enough to make the billions spent to buy in worthwhile. Francis, Teva's CEO, says the market is worth $28 billion.
Teva expects to have the interim results from its study in ulcerative colitis and Crohn's disease in the second half of 2024. The company hopes to begin a Phase 3 study in 2025. Sanofi's Backer says that drug could hit the market in 2030. Gurnani, the ZS partner, expects the Merck and Televant drugs — the latter soon to be acquired by Roche — could hit the market in 2027 or 2028.
Teva's Francis suggests the competition will likely lead to many winners. "Whether we're first, second or third, we'll do extremely well," he told IBD in an interview.
KT Park, of Genentech, underlined this point, noting many drug classes that treat immunological conditions face competition. Genentech is a Roche subsidiary. Park leads the company's gastroenterology, hepatology and metabolism clinical development.
"We anticipate there will be enough room for more than one approved TL1A," he said in an interview.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
