Ventyx Stock: Focusing On Competitive Differences Will Help (NASDAQ:VTYX)

Ventyx Biosciences, Inc. (NASDAQ:VTYX) is a developer of small molecule drug candidates for inflammatory diseases. The pipeline looks like this:

The pipeline is early stage; the company just recently published phase 1 data from VTX958 targeting Psoriasis, psoriatic arthritis, Crohn’s disease. Lead candidate appears to be VRX002 targeting Ulcerative Colitis, which will report topline phase 2 data this year.

The entire pipeline targets a large total of $50bn market. The company provides a list. Psoriasis has around 8 million U.S. patients and is a $24bn market. Crohn’s disease has around 700K U.S. patients and is a ~$14bn market. Ulcerative colitis is a ~$7bn market with some 1 million U.S. patients. Psoriatic arthritis has 1 million U.S. patients and the market is roughly $4bn. SLE has some 500,000 U.S. patients and the market size is $1bn.

VTX958 is an oral, selective allosteric inhibitor of tyrosine kinase 2. This is a well-validated target. In September 2022, the FDA approved deucravacitinib (Sotyktu), a first-in-class oral, allosteric tyrosine kinase 2 (TYK2) inhibitor for moderate-to-severe plaque psoriasis. Phase 1 data has shown VTX958 to have high selectivity, a solid safety profile, and potentially class-leading target coverage. Selectivity is important because less selective TYK2 inhibitors may also inhibit IL-6, IL-10, IL-22 and other pathways that may cause unintended adverse events. VTX958 strongly inhibits IL-23, which is implicated in psoriasis and related diseases.

In phase 1 trial, VTX958 achieved TYK2 IC90 coverage of IL-12, IL-23 and IFNα for up to 24 hours with no dose-limiting toxicities. The company compares this with first generation TYK2 inhibitors, whose exposures were limited by toxicities. Deucravacitinib 6mg QD achieved just IC50 coverage, not IC90, and that too for ~9 hours. A number of safety issues – skin toxicities (acne, rash) etc. – happened at high exposures, limiting coverage. Another molecule, ​​ NDI-034858 (TAK-279) achieved 24 hours IC50 coverage but merely 5 hours IC90 coverage. However, IC50 or half-maximal inhibitory concentration may often be adequate for a drug’s efficacy in many indications. IC90 may or may not be overkill, and will require other factors to be considered. Also in psoriasis, high response rates of 90% are seen from biologics, while response rates for oral TYK2 and PDE4 inhibitors are much smaller. Ventyx Biosciences, Inc. thinks that with its higher exposure, VTX958 may approach biologics in their response rates, but there is no such data available to validate that claim as of now.

In their earnings call, the company discusses some of these competitive differences. Given the approval of sotyktu, focusing on these differences – especially where sotyktu, unlike biologics, does not have a black box warning – will be critical:

So in terms of how we differentiate from competitor compounds and we’ve shown the differentiation on a molecular basis with Deucravacitinib.

So we’ve shown extremely high selectivity of 4,000 fold more selective for the TYK2 alisteric domain. We’ve shown how this translates into selectivity for TYK2 pathway. So we hit all pathways robustly, 12, 23 and interferon alpha. We have no interaction with JAK1 pathways. We have no interaction with — no innovation of IL-10, IL-22, IL-4, IL-6 and interferon gamma.

So we’ve shown the molecular differentiation with Deucravacitinib. More importantly, we’ve shown clinical differentiation in terms of target coverage, as well as the safety, which is the key to achieve meaningful coverage of IC-50 and IC-90 and Bill, during the Phase 1 data dissemination actually compared with Deucrava and the competitor compound in terms of what has been seen across head-to-head trials in Phase 1, in terms of significant effects on dermatological effects as well as other hematological effects as well.

VTX002 is a selective S1P1R modulator like Bristol-Myers Squibb’s (BMY) ozanimod which has been approved for UC, thus validating the pathway. Other molecules targeting the same pathway are approved in MS, or are running through clinical trials right now. The company claims a number of differences for VTX002. Here’s a list:

Some of these measures have been observed in the phase 1 trial. A phase 2 trial is ongoing, and will topline this year. The trial may serve as one of two pivotal trials required for registration.

VTX2735 selectively targets NLRP3 Inflammasome. Some of the potential indications include cardiovascular, metabolic, hepatic, renal, and rheumatologic diseases. A phase 1 trial has been completed, and has shown “attractive safety/tolerability profile and evidence of pharmacodynamic activity.” A phase 2 trial is being planned this year.

Financials

VYTX has a market cap of $1.9bn and a cash reserve of $412mn. Last month, they filed for a $150mn mixed shelf offering. Before that, in September, the company did a $176mn private placement of common stock. R&D expenses were $25.5 million for the quarter ended September 30, 2022, while G&A expenses were $6.0 million. That rate gives them a cash runway of over 12 quarters, excluding the shelf offering.

The company has been able to raise these funds because the market recently turned bullish on TYK2 inhibitors after the FDA approved BMY’s Sotyktu (deucravacitinib) for plaque psoriasis without a black-box warning. The space was also buoyed by Takeda’s $4bn acquisition of Nimbus Lakshmi’s assets, which include NDI-034858 (TAK-279).

Bottom Line

Lacking a lot of data, this is just another overview article of Ventyx Biosciences, Inc. I plan to follow the company closely and watch for patient data before taking a call. Ventyx Biosciences, Inc. has gone up a lot in recent months, and such spikes in emerging biopharma scare me. I will need to see a lot of de-risking before I make the plunge.