Eli Lilly: Acquisition of Dice Therapeutics Yields Midstage Oral Psoriasis Drug at a Fair Price

Eli Lilly’s announced acquisition of Dice Therapeutics for $2.4 billion doesn’t have a major impact on the company’s fair value estimate or wide moat rating largely due to the smaller size of the deal. However, the planned acquisition will provide Lilly with an interesting midstage oral IL-17 drug (DC-806) for psoriasis. In a phase 1 study, DC-806 supported a 44% reduction in psoriasis (as measured by the PASI score) in the high dose group. Importantly, the drug didn’t appear to cause any major safety issues. While the study was small, with less than 50 patients, the early-stage data is encouraging. 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. We expect phase 2 psoriasis data for DC-806 in mid-2024, which should provide a better perspective on the true potential of the drug. The oral convenience of the drug could be a differentiator as most psoriasis drugs are injectable. Also, the drug’s mechanism of action is different than the oral psoriasis drugs from Amgen (Otezla) and Bristol (Sotyktu), which provides a unique potential for Eli Lilly.