Eli Lilly is acquiring clinical-stage Dice Therapeutics in a $2.4 billion deal that brings drug candidates in patient-friendly pill formulations that could become successors to infused or injected biologic medicines, including one that’s currently a blockbuster seller for the pharmaceutical giant.

Lilly announced Tuesday that it has agreed to pay $48 cash for each share of Dice, a 41.8% premium to the biotech’s closing stock price last Friday. Shares surged last fall after the South San Francisco-based company reported human proof-of-concept data from a Phase 1 test of its lead program in psoriasis. When Dice went public in 2021, the then preclinical-stage biotech priced its shares at $17 apiece, raising $204 million.

Many immunological disorders are treated with large molecule drugs made up of antibodies and other proteins. These biologic medicines don’t hold up well in the digestive environment and they can’t be absorbed by the gut. That’s why biologic drugs are administered by infusion or injection. Dice is one of several biotechs developing small molecule alternatives that can be taken as pills. The company’s technology platform, Delscape, analyzes proteins in order to identify the small molecules capable of modulating protein interactions in ways that are just as effective as biologic medicines.

Lead Dice program DC-806 is in Phase 2 development as a potential treatment for psoriasis. The small molecule is designed to block interleukin-17 (IL-17), a signaling pathway that’s associated with the inflammatory skin condition as well as several other immunology disorders. IL-17 is already addressed by Novartis’s Cosentyx and Eli Lilly’s Taltz, both of which are blockbuster antibody drugs that are dosed as subcutaneous injections. Bausch Health is also in the mix with Siliq, an antibody that blocks the IL-17A receptor. UCB aims to get a piece of the IL-17 psoriasis market with its subcutaneously injected antibody, bimekizumab.

Dice’s DC-806 is a twice-daily pill. In results from a Phase 1 test enrolling fewer than 50 patients, the biotech reported the drug led to a nearly 44% reduction in psoriasis severity in the high dose group. No safety problems were reported. A Phase 2b test is ongoing. Another Dice program, DC-853, also addresses IL-17 but is designed with improvements to its potency and stability. DC-853 is now in Phase 1 testing.

Oral psoriasis drugs area already available and new ones are coming, albeit for different targets. Amgen markets Otezla, a small molecule that blocks an enzyme called PDE4. Last September, the FDA approved Bristol Myers Squibb’s Sotyktu for treating psoriasis, making the once-daily pill the first small molecule in a new drug class that hits a target called TYK2. Takeda Pharmaceutical aims to offer a dosing edge and perhaps superior efficacy in psoriasis with its TYK2-targeting pill, TAK-279. In March, Takeda reported the positive Phase 2 data that led the Japanese pharma giant to pay $4 billion to acquire the small molecule. The once-daily oral drug is being readied for Phase 3 testing.

In a research note, Morningstar analyst Damien Conover wrote that the market for injectable IL-17 drugs tops $6 billion annually and the overall psoriasis market has the potential for more than $40 billion in annual sales.

“The oral convenience of the [Dice] drug could be a differentiator as most psoriasis drugs are injectable,” Conover said. “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.”

By acquiring Dice, Lilly gains more than IL-17-targeting psoriasis drugs. The company’s technology has also yielded small molecules that address other targets with potential applications in inflammatory bowel disease, fibrosis, and immuno-oncology. Those programs are still in the discovery stage. In a prepared statement, Dice CEO Kevin Judice said his company’s research will benefit from Lilly’s resources and global reach.

“Our novel approach to discovering and advancing oral, small molecules against validated protein-protein interaction targets has even greater potential with Lilly’s industry-leading clinical development capabilities to get these medicines to patients suffering from autoimmune diseases,” Judice said.

The acquisition has been approved by the boards of directors of both Lilly and Dice. It still requires the majority of Dice shareholders to tender their shares. The companies expect the transaction to close in the third quarter of this year.

Photo by Flickr user Paul Sableman via a Creative Commons license