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Teva puts rival to Prometheus, Pfizer drugs at center of turnaround plans

The race to develop the next blockbuster anti-inflammatory disease drug is heating up. In recent months, Merck & Co. and Pfizer have both made moves to advance a new type of experimental medicines for autoimmune conditions, and now Teva is putting research money behind its own candidate.

At a Thursday event pitching investors on a turnaround plan, Teva executives said their drug targeting the protein TL1A will help the company sustain sales growth as it adds branded drugs to its core generics business.

Called TEV-48574, the drug missed its primary goal in an asthma trial last year. However, the Israel-based company has initiated a Phase 2 trial in ulcerative colitis and Crohn’s disease, and executives are touting the drug as the best of its kind because of the potency and selectivity they’ve seen in laboratory tests.

Teva may need a better drug, as it could be one to two years behind rival therapies that originated in the laboratories of Pfizer and Prometheus Biosciences, both of which have completed some mid-stage tests. Prometheus recently agreed to be acquired by Merck for $10.8 billion, while Pfizer joined with Roivant to create a company to advance its candidate.

TL1A dealmaking may not be over. At least one other company made a non-binding bid to buy Prometheus, and two other companies remained in talks with Prometheus as Merck was preparing to make a bid.

“This is a bit of the talk of the town right now,” Teva CEO Richard Francis said.

During the presentation, Teva medical chief Eric Hughes justified his company’s best-in-class claims by showing data from laboratory tests, which used a comparison test drug derived from patent filings. According to Teva, TEV-48574 blocked TL1A-stimulating proteins on more cells and didn’t bind to a related protein that helps clear TL1A. Teva is also developing a subcutaneous version of the drug to keep up with Roivant, while its Prometheus’ is intravenous.

The Phase 2 trial has enrolled 280 patients, half with ulcerative colitis and half with Crohn’s disease, and is testing three different doses of the drug verus a placebo. All patients are on background treatment for the disease. Interim data aren’t due until the second half of 2024, at which point Teva will be able to discuss the design of a Phase 3 trial. The company doesn’t expect any sales until 2028, however.

The emerging data from the TEV-48574 program was one factor cited by Evercore ISI analyst Umer Raffat in upgrading his rating on Teva shares to “outperform.”

But Jefferies analyst Dennis Ding believes Roivant’s lead in developing the Pfizer-developed drug will give it a lasting advantage. “This does not change our fundamental positive views on [Roivant’s] own TL1A, which is one to two years ahead and will be starting Phase 3 soon,” Ding wrote in a client note.

Among the other factors cited by Raffat in upgrading Teva shares were milestones cited by executives at the investor presentation. The company has nearly halved its debt load from $34 billion in 2017 — amassed after it bought the Allergan generics unit in 2015 for more than $40 billion — as well as reached settlements with governments over opioid-related claims and stabilized its generics business.

These milestones could help it reinvest in its business, such as acquiring companies or licensing new drugs, as well as expand its R&D spending. CFO Eli Kalif told investors the company expects to expand the share of the R&D budget it spends on innovative drugs from 40% now to at least 60% in 2027.

“I think many of you over the last four years have questioned the ability to get back to growth,” Francis said. “I believe we’re at a turning point, because some of the uncertainties we’ve had in the company are starting to become uncertainties in our history.”