Immunokinase Drug Candidates: $12B in Value Creation and Counting

Immunokinase-directed therapeutics have been one of the highest returning drug classes for biotech investors in recent years.  Drugs that inhibit the JAK family, BTK, Syk, and PI3Kd have all generated impressive clinical validation in B- and T-cell diseases, and created lots of excitement on both the deal-making and stock market fronts.

The scale of value creation from immunokinases in the last few years is really quite staggering.  By my estimate, north of $10-12B in value has flowed to companies (and their shareholders) that possess hot immunokinase programs.  Here’s a brief tally and I’m sure I will have missed some:

• Private M&A deals have racked up over $1B in upfronts and potentially up to $2.6B including milestones across multiple targets, on roughly $300M in equity capital. In 2010, TargeGen was snapped up by Sanofi for its JAK2, and CGI Pharma by Genentech for its Syk and related programs.  In 2011, Gilead jumped for Calistoga’s PI3K-delta inhibitor CAL-101, and Takeda for Intellikine’s PI3K-delta and related chemistries.  And in 2012, Celgene bought Avila, in large part for its BTK program.
• Publicly-traded mid-cap stocks have appreciated by some $8B+ over the last few years.  Pharmacyclics has the lead BTK inhibitor (that it shares with J&J), and its value has risen more than 15x from ~$400M in early 2011 to over $6B today.  Infinity Pharma has appreciated 8x since early 2011, triggered in part by dropping its hedgehog program in favor of its PI3K-delta program (that it licensed from Intellikine); its now worth over $1.8B.  Incyte has gone up 10x since mid-2009 on back of Jakafi (JAK2) data, launch, and now sales; its now a $3B company.  Rigel Pharma’s stock hasn’t faired as well in recent years (largely flat), in part because of prior super high expectations for its Syk inhibitor.
• Big Pharma has seen its share of excitement as well, though harder to dissect out the value on their market cap’s: Pfizer’s JAK1/3 inhibtor Xeljanz is the first immunokinase approved outside of oncology (where it is indicated for Rheumatoid Arthritis).  Furthermore, Pharma has been very active on the licensing front: J&J, Novartis, and AZ are active partners on a number of programs listed above (where they paid considerable sums).  A slew of other interesting deals have been done, including Biogen’s deal for Portola’s Syk inhibitor, among others.

So its fair to say the past few years has been a fantastic period of value creation for those lucky or smart enough to have “hot” immunokinase assets around a small set of targets: JAK2, JAK1/3, PI3K-delta, BTK, and Syk to name the top five.

But should companies keep attacking those targets?  For high cost-of-capital venture-backed biotech companies, I’d definitely suggest against it: leave the war of attrition around differentiating in these crowded target spaces to the big R&D budgets of Pharma.

Our quick review of Thomson Pharma’s database says that there are 125 programs in the industry against those five targets above.  Nearly 80 of those are still in drug discovery and preclinical testing.  That’s a lot of early stage programs, and a lot of resources.  A good example would be JAK2, where there are dozens of programs, including ruxolitinib, SB1518, TG101348, XL019, CYT387, AZD-1480, R723, LY2784544, among many others.  PI3K-delta has 16 programs in drug discovery and preclinical today, despite half-a-dozen in the clinic already.

So if not these five, what’s next?

We think there are plenty of targets to get excited about in the field of immunokinase modulation, many with strong preclinical rationale and compelling human genetic linkages despite lacking clinical-stage pharmacologic validation.  The list of potentially “hot” immunokinases is considerable, with targets like Tyk2, ZAP-70, NIK, Fyn, Lck, among many others, and I’m sure there are many companies advocating for these and others.

One immunokinase that we believe is quite interesting is IL1-Receptor Associated Kinase 4 or IRAK4, and we’ve invested a significant portion of the resources at Atlas’ portfolio company Nimbus Discovery to design and develop inhibitors against it.  I thought sharing briefly our rationale for why we like it could be more generally instructive about how we view the field.

Like most of these next generation immunokinase targets, IRAK4 is not new to the industry: it was cloned over a decade ago at Millenium and Tularik.  Its role in lymphocyte signaling was characterized and explored through lots of cell-based and in vivo models, including RNAi and other target validation approaches.  Efficacy has been shown in arthritis, psoriasis, and gout models, among others (here).  Furthermore, a human mutation leading to IRAK4-deficient individuals has been well characterized.  IRAK4 is a critical signaling protein downstream of IL1R, IL18R, IL33R, and a set of Toll-Like Receptors.  Upon ligand engagement, these receptors in turn engage MyD88 which signals through IRAK4 to turn on a variety of pathways, including NF-kB and the secretion of pro-inflammatory cytokines.

While IRAK4 is of great interest in autoimmune diseases (e.g., lupus, psoriasis, IBD, RA, etc…) as a key node for regulating lymphocyte activity, recent data in hematologic malignancy has really put the spotlight on IRAK4: the key upstream signaling protein, MyD88, has activating mutations in 35+% of B-cell lymphomas that make those cancer cells dependent on IRAK4 signaling and therefore very sensitive to IRAK4 inhibitors (here).  Furthermore, recent data suggests that IRAK4 inhibition synergizes with inhibition of other B-cell receptor signaling pathways, like BTK (here).

These data and others have caused several companies to initiate programs against IRAK4, but few have succeeded in drugging its shallow and unique pocket.  Its been challenging to make selective, potent, and in vivo active inhibitors of the protein, and most of the early efforts failed – but it is a challenge that’s being overcome, and Nimbus Discovery is one of a small handful of companies making real progress on the target.

Five active programs exist, according to Thomson Pharma, and they are all in drug discovery or preclinical studies.  A number of the earlier attempts against the target failed to achieve cell-permeability, selectivity against IRAK4, or sufficiently clean toxicology profile.  We believe we’re on track to addressing all of those issues at Nimbus with a first-in-class program, so it is an exciting time for the company.

But stepping back from IRAK4 specifically, the “next wave” of immunokinase inhibitors are likely to remain a rich substrate to go after in terms of regulating different types of lymphocyte biology.  The key opportunity and challenge will be articulating (and demonstrating) precisely how these immunokinase signaling interventions can differentiate from the existing, precedented approaches.  While its tough to predict exactly how much value remains to be created around these more novel targets, its fair to say that if history is any guide it should make for fertile ground.  Enormous unmet medical need still exists in these pathways.

For those more interested in exploring the space, I’d suggest checking out an interesting data analytics and visualization approach from Relay Technology Management (check them out more generally, very cool interface).  The chart below is a small sampling of what they can do – it captures the “Established Target Index” and the “Therapeutic Targeting Index”.  The former reflects the steady state nature of the literature noise about a target (e.g., publications, grants, patent disclosures that mention it every year).  Targets on the left side are more emerging/novel, those on the right side are more “established” as targets of interest.  The y-axis reflects the “Therapeutic Targeting Index”, a score from 0 to 1 that reflects how often these targets appear in the literature next to words like inhibitor or drug or antagonist.  The higher the score, the more likely there are drugs being pursued against them.  This analysis reaffirms the emerging nature of IRAK4, NIK, Tyk2, ZAP-70 as intriguing targets.  A more extensive report can be found at this link, and includes a range of other analyses including publications, patents, deals, and R&D pipelines over time.