Roivant Sciences Ltd. (ROIV) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Roivant's update regarding Initiation of Patent Litigation Against Moderna Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Davis. Please go ahead.

Great. Good morning, and thank you for joining today's call to discuss the initiation of patent litigation against Moderna by Genevant and its licensor Arbutus. I'm Paul Davis, the Head of Communications at Roivant. On the call today, we have Roivant's CEO, Matt Gline; and Dr. Pete Lutwyche, CEO of Genevant. For those dialing in via conference call, you can find the slides being presented today on our IR website at www.investor.roivant.com. We'll also be providing the current slide numbers as we present to help you follow along. We will end the call with a Q&A session. I'd like to remind you that we will be making certain forward-looking statements during today's presentation that reflect our current views and expectations. We encourage you to review the information on Slide 2 as well as other materials we filed with the SEC for more information regarding these forward-looking statements and related risks and uncertainties. And with that, I'll turn it over to Matt Gline.

Thanks, Paul, and good morning, everyone. Before I start, I want to acknowledge it's a difficult moment in the world, and while we're here today to provide an update on a corporate matter, we're also watching the situation in Ukraine closely and hoping dearly for peace. With that, I'll begin my presentation this morning on Slide 4. This morning, Genevant and Arbutus jointly filed a complaint against Moderna in the U.S. District Court in Delaware, asserting infringement of 6 patents licensed by Genevant. Now before we get into the rest of today's call, I just want to start by saying very clearly that we're not seeking an injunction and that we do not wish to impede in any way Moderna's COVID-19 vaccine for reaching as many people as possible. We felt it was very important to make a clear upfront. We want to recognize the important work that Moderna has done to develop a vaccine with record speed, and we are also proud of the significant contributions of Genevant's LNP technology to the vaccine's success. Before we go into details on today's filing, we want to provide some background on Genevant and its technology. And for that, I'll hand it over to Pete.

Thank you, Matt, and good morning, everybody. So if we move to Slide 5, Genevant is a leading nucleic acid delivery solutions company with world-class technology platforms, a robust patent portfolio, including key patents licensed broadly from Arbutus and decades of expertise and experience in nucleic acid drug delivery and development. Now vaccines and other medicines using RNA or other nucleic acid technologies are an emerging frontier that has enormous potential. Historically, though, these medicines have been challenging to develop. Firstly, nucleic acids need to get into target cells to exert their effects but being large hydrophilic molecules, they do not readily cross most cell membranes. Secondly, they're highly sensitive to nucleases, and without adequate protection are susceptible to being degraded in the human body. For decades, the need for a delivery technology capable of delivering RNA cargo intact to its intended target has been one of the most significant challenges in the development of RNA-based medicines. The solution for this long-standing problem is now commonly referred to as lipid nanoparticles or LNP. And this was developed by scientists at Arbutus and predecessor company and several of these scientists are now at Genevant. LNP generally consists of a carefully selected mixture of specialized lipids, a conjugated lipid, which is commonly a polyethylene glycol or PEG conjugate, an ionizable or cationic lipid, a phospholipid and cholesterol or other amphipathic lipid. These lipids form a particle that encapsulates the nucleic acid payload to protect it from degradation and facilitate its uptake into the target cell, then enabling endosomal release of nucleic acid into the cytosol where it can exert its effect. So Genevant's technology became the first LNP to be part of an FDA-approved RNA product and this being Alnylam's ONPATTRO in 2018. And today, LNP has become the primary means of delivering messenger RNA and an emerging approach for gene editing applications as well. And the Genevant team is committed to advancing the technology still further to enable novel approaches to addressing unmet medical needs. We have several active collaborations and some of these are shown on Slide 6. So if we go to Slide 6, I won't read through all of these, but the slide reflects, I think, our approach to selective partnering with leading pharma and biotech companies who have innovative technologies that can benefit from our delivery technology and expertise. We're working in very broad and diverse areas, from our efforts to deliver gene editing constructs to muscle with Sarepta; to stellate cell-targeted LNPs for fibrosis with Takeda; hepatocyte delivery for rare diseases, again, with Takeda also with 2seventy bio; and then oncology applications with Gritstone and BioNTech. We are, of course, working in the area of mRNA vaccines, including for COVID, where we've partnered several times with some of our collaborations focused on bringing a solution for low- and middle-income countries, and in at least one case, where we've worked to transfer our efficient and scalable manufacturing process to enable local production of the vaccine. So with that short introduction, I'll turn it back over to Matt.

Thanks, Pete. So moving on to Slide 7. I'll start by talking a little bit about the sort of backdrop IP portfolio. So as you may know, Genevant has a robust intellectual property portfolio with approximately 700 LNP-related patents and pending patent applications. Today, we're focusing on 6 specific patents shown on the table on the slide. The first 5 are particle composition patterns, which describe the compositions and ratios or relative amounts of various types of specific lipids included in each LNP. At the bottom of the table, we also referenced a 651 patent, which describes certain LNP compositions in which mRNA is encapsulated. We'll talk more about each of these on the slides to come. I'll note that some of these patents refer to lipid vesicles or nucleic acid lipid particles, but for simplicity's sake and for the purpose of today's presentation, we're going to generally refer to them as lipid nanoparticles or LNPs. So on Slide 8, I'm going to now talk about some of the particle composition patents, and in particular, some of the public disclosures that support Moderna's infringement of the Genevant and Arbutus patents. So as you'll see here, and I'm on Slide 8, Moderna has made statements regarding their vaccine in multiple contexts, including a 2020 preprint of an academic publication that describes the molar ratios of the LNP of their vaccine candidate used in preclinical work. A separate preclinical study of their vaccine, published in the New England Journal, confirmed that the mRNA was encapsulated in an LNP, "as described previously," citing that earlier Moderna publication describing the same older ratio as the preprint that I mentioned. Moderna also filed a patent application describing that same older ratio as "used in the Phase I trial of mRNA-1273 and in a sworn affidavit from their Deputy GC declared that the lipid carrier particle using their Phase I study is the same as the one that was ultimately approved for using their product." So the table on the slide shows the molar ratios disclosed by Moderna as well as certain quantitative aspects of the patents that served in today's complaint. The overlap is evident. I also want to highlight specifically the 378 patent, all the way to the right, which has no quantitative limit for the cationic lipid, meaning that it covers certain LNPs with cationic lipid molar concentration below 50%. I'll also note that while Moderna has denied infringement, they have refused multiple requests to provide information on their vaccine formulation to Genevant, even under a confidentiality agreement, and Moderna has specifically obscured details of the LP composition of their commercial product in regulatory filings. So moving on to Slide 9. I just want to take a minute to talk a little bit more about the 651 patent. So 651 has a different subject matter from particle composition patents. As shown on this slide, it covers: one, lipid vesicles comprising a cationic, amphipathic and PEG lipid; and two, mRNA at least 70% of which is fully encapsulated in the lipid vesicles. So we know that Moderna's vaccine includes these lipids, and from Genevant's experience, we believe at least 70% of the mRNA is fully encapsulated in the lipid vesicles. And most notably, this patent has no quantitative constraints on the molar ratios of these types of lipids. So on Slide 10, I want to highlight that Moderna has long been aware of Geneva's patent portfolio going back at least to 2016. Moderna's CEO has dismissed the LNP technology issue and the needs for rights under these patents, while claiming that Moderna has developed their own LNPs. Despite these assertions, beginning in 2018, Moderna sought to invalidate some of the U.S. patents through the IPR or Inter Partes Review process with the patent trial and appeal board. Moderna was largely unsuccessful as the PTAB upheld key claims of the 435 patent as patentable in 2019 and all claims of the 069 patent as patentable in 2020 -- excuse, in 2021, and this received some recent attention. The Federal Circuit rejected and dismissed Moderna's respective appeals of these PTAB decisions. So finally, on Slide 11, I'll wrap up by saying a few words on next steps. As is the case with any litigation, it's difficult for us to comment on specifics. But that said, we do expect that Moderna will respond to this complaint within the next several months, and pending Moderna's response, the court will set a schedule for further proceedings in the case. We expect that litigation with Moderna could take at least 2 years, but again, there are many factors that could affect that time line. Before I go to Q&A, I want to remind everyone that we're really excited about the breadth and strength of Genevant's LNP technology platforms, both in the context of the mRNA COVID vaccines as well as in other therapeutic areas and modalities. Genevant's scientific team has worked very hard on this over many years, and it's great to see that work come to fruition. I'd now like to turn to Q&A, noting there will likely be some things that we won't be able to address here, but we're happy to take whatever questions that we can. Thank you very much. And with that, I'll ask the operator to please open the line for questions.

[Operator Instructions] Our first question is from Dennis Ding with Jefferies.

I'll ask 2 questions, if I may. Number one, can you just comment on your confidence level around the positive outcome with this case? And more specifically, what a positive outcome would look like? And number two, -- can you please provide your thoughts on some of the technologies used by other mRNA players in this space? And what those technologies also potentially infringe upon some of these patents?

Thanks, Dennis. Thank you very much for listening, and obviously, thanks for following this situation. So on your first question about confidence and about what an outcome might look like, I guess I'll say, first of all, I think the complaint speaks for itself in terms of our level of confidence and the evidence that we have. And in terms of what a positive outcome might look like, I think it's difficult to speculate on damages. But in fact infringement case damages, I think you know, are calculated on the basis of a reasonable royalty which is a legal term of ours that requires consideration of various factors. So I can't comment super specifically on our litigation strategy outside of what's in the complaint, but we think the circumstances here are unique and these factors support significant damages, potentially, frankly, well beyond what we have seen speculated in certain places publicly. So Genevant is a willing collaborator. And as we show on Slide 6 of the presentation, we've done a lot of deals, including several early preclinical COVID vaccine deals, which were entered into under very difficult circumstances than those that apply to Moderna and which may or may not prove relevant here. And then I'd also like to remind everyone that Moderna has repeatedly acknowledged the importance of LNP technology to their vaccine. Without the technology, our technology, Moderna's vaccine wouldn't work, and Moderna wouldn't have received their profits from sale. So then on your other question about other mRNA vaccine manufacturers, I can't comment today on our litigate strategy aside from what's in the complaint, other than to say, we're committed to defending our technology against parties that fringe or induce infringement of our patents broadly. And yes, so I think that covers kind of the various avenues that we might pursue.

Our next question comes from Robyn Karnauskas with Truist Securities.

All right. So I'll be quick on 2 points. So I know people have asked about patent infringing under EUA versus non-EUA, and I know there's precedence for filing a patent infringement lawsuit if no drug is improved under EUA. What are the different options for how this court case could go if, in fact, they decide that there is a difference between products sold under those terms? That's the first question. And second, I know they failed their IPR, but just curious if Moderna does explain they have a different cationic lipid, which they have said in various points, when would we learn that? Would you learn that in the filing -- their next filing when they argue what their rebuttal IP to this? And I'm not a chemist, do you think unskilled in the art would feel like that different, cationic would still fall under the 069 patent?

Thanks, Robyn. Those are all good questions. So on the first one, in terms of the possible ways this could go from a sort of litigation perspective, it's hard to predict exactly what the paths are. But I don't know that we think, for example, the fact that it's under EUA affects our strategy particularly much. So I don't know that, that makes a big difference to us. And then on the chemistry question, I guess what I would say is -- so Moderna has a proprietary cationic lipid that they disclosed, they call it SM-102. We believe it to be in the category of lipids covered by our patent claims, ionizable cationic lipids. And so in short, I think all of the claims of our patents for the ionizable cationic lipids are to cover that lipid.

Our next question comes from Neena Bitritto-Garg with Citi.

I was just wondering if you could talk a little bit about any interactions that you've actually had with Moderna since the December appeal's decisions came through? I know in the complaint it does say that you have tried to negotiate with them privately in the past. I'm just curious if you have had any discussions since then.

Yes. So we haven't commented on the specific sort of character or time line of our interactions with Moderna over time, other than to say that we've had some discussion with them. I think it's probably best not to go into the details of that time line right now, but we have consistently communicated with them and with other parties who might be interested in licensing our technology.

Our next question comes from Yaron Werber with Cowen.

Great. Maybe, Matt, first of all, can you discuss a little bit your patent portfolio in Europe? What is your thoughts about Europe? And then secondly is, at this point, is your expectation that they're still going to try to invalidate the 651 and some of the other patent portfolio? Or that you think mostly is off the table following the federal appeals court's decision?

Yes. So as far as -- and thank you, Yaron, for the questions, and thanks for joining. As far as Europe is concerned, some of our patents, especially some of the particle composition patents, have European analogs. We haven't said anything about our litigation strategy as it pertains outside the U.S. or otherwise. But as I said to an earlier question, we do intend to pursue any possible avenue to defend our own intellectual property rights. So I think that sort of covers the Europe question. And then the other question was -- sorry, can you just repeat the second question...

Yes. I mean, obviously, after the federal appeals court, most of the patents cannot be invalidated, but so is the -- do you think there's a few patents that are still going to try to argue or obviously invalidate? Or do you think this is going to ultimately be on composition and merits of the patents versus their composition?

Thanks, Yaron. It's a great question. Sorry, I couldn't remember it. I think the first answer to the question on what Moderna will try to do is, you should probably ask Moderna what they'll try to do. I don't know for sure. I think we feel like we have a broad patent estate. We think it's robust. We think it has already withstood the challenges that they've made, and we're prepared for whatever else they want to try.

Maybe just slightly from you, our understanding from Pfizer and BioNTech is that they're not, they were using the Acuitas' LNP technology. Is that your understanding as well?

Yes. So we're not commenting today on other manufacturers of mRNA vaccines. But what I'll say is, I think we have a broad IP estate, including our part of the composition patents and that patent estate is independent of what other technology anyone may have licensed. But we'll comment more on that when we have an opportunity to do so.

Our next question comes from Corinne Jenkins with Goldman Sachs.

Can you just help us understand some of the key assumptions that are built into that estimate of a 2-year litigation process here? And what are some of the things that can either pull that time line forward or push it further out?

Yes. Thanks, Corinne. Yes, it's a great question. Obviously, something that's on our minds and other people's minds as well. I think it's hard to comment on those specifics. We said at least 2 years in the materials. I think we, as you might imagine, have a very strong team working with us on this, and they worked on many cases like this one before, and so I think some of that is based on the judgment of our experts and then some of it is just based on the mechanical time that it takes for responses and time that takes people to come back, et cetera. Obviously, there's lots of factors that can affect the time line of litigation, obviously, if there were any kind of agreement or license or settlement reach that would completely change the time line. So it's hard to speculate specifically, but we're going to work to get this resolved as quickly as we can.

Okay. And then maybe can you just help us understand the legal expenses you are expecting to incur, and where we'd expect to see them show up, both in timing and then where on the filing given Arbutus, Genevant and Roivant are all participating here?

Yes. Thanks, Corinne. So first of all, I'll just make a comment that everyone understands, which is that Roivant is well resourced to cover a complaint like this one. The expenses aren't going to be particularly highly material to Roivant as a whole, and that we expect to make sure that we're paying the money we need to support our intellectual property. I think the total amount and the timing, obviously, depends on the course that the litigation takes. So it depends on how long it takes. It depends on what various things Moderna attempts for the previous questions, and so it's hard to speculate on the exact numbers. Maybe when Roivant gives future guidance on total burn, you can rest assure that, that guidance will include litigation cost estimates, but as I said, I don't think they're going to be highly material. And I would expect them to accrue sort of over the course of the process. So I don't think it's going to be particularly chunky. There's work to do kind of throughout the 2-plus years of the case.

Our next question comes from Doug Tsao with H.C. Wainwright.

Just, Matt, I'm just curious how broadly do you expect sort of this type of litigation to be potentially applied? Meaning, obviously, it's very relevant for the mRNA vaccines, but this is a broadly used technology. Do you think that we should expect to see you pursue litigation on other fronts as well?

Yes. Thanks, Doug, for listening, and thanks for the question. I think the complaint we filed this morning pertains to specifically the Moderna's mRNA COVID vaccine, and that's really what we're talking about today. I think beyond that, both the patents themselves as well as the nature of the arguments made in the complaint speaks for themselves. And I think we would seek to watch for other situations in which we could support and defend our intellectual property as well. But right now, we're focused on the matter at hand.

Our next question is from David Risinger with SVB.

I have a couple of questions on the ex U.S. patent situation. So obviously, that could be a significant financial opportunity for the company as well. So could you go into some more detail than you provided on Page 7 of the slide deck. I guess specifically Page 7 highlights that patents have issued in a number of countries and the EU patent. So that's a singular patent was validated in certain major European countries, but you have many particle composition patents. So could you provide a little bit more clarity on those ex U.S. and what we might expect from a litigation standpoint ex U.S. And then if you could also comment on the 651 patent specifically and whether there is a similar patent that's been granted ex U.S.?

Yes. Thanks, David. Thanks for joining the call, and thank you for the good questions. So obviously, the ex U.S. situation is important to us, and we're sort of considering that possibility as well. The complaint we filed this morning is just a U.S. complaint and doesn't go beyond the U.S. First of all, just say, even in this complaint, we're seeking the full extensive damages permitted by U.S. law, which includes damages for any infringing act that would be committed by Moderna in the U.S. And so that would cover any doses that Moderna made here in addition to the doses that Moderna sold or offered for sale here imported in the country or were otherwise administered or used in the U.S. So that's the first thing I'll say. The second thing I'll say is -- and you sort of highlighted the comment on Page 7. We have an ex U.S. patent portfolio that is broad. It overlaps in many ways with the U.S. patent portfolio, but not in every way with the U.S. patent portfolio. So there are far in analogs to a number of our particle composition patents. They don't cover exactly the same territory, but there are interesting and end patents that we are obviously sort of thinking about. As far as the 651 patent specifically, I'll say that there is not a foreign analog to that patent specifically.

Thank you. And I'm currently showing no other questions at this time. I'd like to turn the call back over to Matthew Gline for closing remarks.

Great. Well, thank you again, everyone, for joining this morning. It's a technical subject, and so we want to make sure we get people a chance to ask questions as best we could answer them. And we really appreciate your time and look forward to talking you again soon in the near future. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.