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

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Roivant Sciences Investors Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Stephanie Lee. Please go ahead.

Good morning, and thanks for joining today's call to review the acquisition of Telavant. I'm Stephanie Lee with Roivant. Presenting today, we have Matt Gline, CEO of Roivant. For those dialing in via conference call, you can find the slides being presented today as well as the press release announcing these updates 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. I'd like to remind you that we'll be making certain forward-looking statements today during the presentation. We strongly encourage you to review the information we have 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.

Thank you, Steph, and thank you, everybody, for joining this morning. I really appreciate it. I know it was on short notice. I'm excited to be here today. This is going to be a relatively short call from a content perspective, but wanted to make sure we share a few things on this occasion and had a chance to take questions, if there are any. I'll start on Page 3 of the deck that's already up on our website. With -- I think, a lot of this is now in the public domain. But so, we're here to announce and we're very excited about this that Roche is acquiring Telavant, our anti-TL1A antibody program from us, for $7.25 billion, comprising $7.1 billion upfront and a $150 million milestone that's payable on the initiation of a Phase III study in UC next year. The deal includes everything that's in Telavant, including development rights to RVT-3101 in the U.S. and Japan as well as the option to collaborate with Pfizer on the next-generation bispecific p40/TL1A antibody. The proceeds that we expect to us, remember that Pfizer owns 25% of this collaboration. The proceeds that we expect to us are $5.2 billion on deal close, plus $110 million from that milestone that I mentioned, then we expect to qualify for an exemption from tax. Pfizer will keep commercial rights to RVT-3101 outside of the U.S. and Japan, and we expect the deal to close either this quarter or next quarter. So I want to talk just a little bit about the why on the transaction on Slide 4. And really, there's 3 prongs to it. The first is just for the sake of the program and the patients. Look, I'm incredibly proud of our team at Roivant for everything that we've accomplished here in the last year on this program and all of our programs, and I believe that we could have succeeded with this in our hands. But there is no question that the breadth and expertise that Roche brings to the table will maximize the patient opportunity for this program fully. They will get the indications beyond IBD and the indications including IBD, but we believe they'll make it a great success for the field, and we're very proud for the role that we will play in advancing it while we've had it in our hands. So that's the first thing for us is that we want to make sure we're doing the right thing with a program like this with this opportunity for patients, for investigators, for their families. From a value generation perspective, we think this is a full value deal. We think $7.25 billion reflects the large-scale TL1A opportunity. We think it is comparable to the other large transaction in this space when you adjust for the fact that we don't have European geographic rights. We think it's a tremendous value for a tremendous opportunity. And it represents a high degree of capital efficiency for us, which we think reflects on the quality of the data generated over the course of the past 12 months and the development progress that we've made with the program in our hands is rapidly moving forward towards the Phase III program. And then finally, and I suspect this is obvious to some degree, this capital infusion creates enormous opportunities for us. We -- as a result of being able to wait until after we saw the Immunovant data, we know that we have a best-in-class anti-FcRn antibody, which is a huge opportunity. We're incredibly excited about brepocitinib and other things in our portfolio. We're excited about what we see in the world in terms of new programs to bring in and opportunities to expand our pipeline. We just feel like we have a ton of places to go with this. And the one thing that actually was the single most important reason for my perspective to hold this call is I'm sure we're going to get a lot of questions today and in the coming days about what exactly our plans are for the capital, how we're going to deploy, what we're going to spend it on, what new deal we're going to do. And the one thing I'll say is, especially in the current market, but just generally, we think it is very important for us to be patient and thoughtful in making decisions around the allocation of this capital, and we're going to take our time. And we think one of the things this deal affords us is the luxury of making those decisions after measuring price. And so we expect to do that from a position of strength, and we look forward to sharing those updates today and in the future as we're ready. On Slide 5, just a reminder, we have a great portfolio here that we're excited to invest in. We have our commercial franchise at Dermovant with VTAMA. We have brepocitinib, which is hard to believe we still have more important data coming this year, but brepocitinib has important SLE data coming this quarter as well as data coming in 2025 in dermatomyositis, and sooner than IU. We've got data in Batoclimab and in IMVT-1402. This is a very data-rich period for that. And we've got other programs in our portfolio as well. So a pipeline that we're very proud of today and excited for what we're going to be able to achieve there. And then lastly, on Slide 6, I just want to take a little bit of a victory lap, honestly, for what we said was going to be an amazing year for us. 2023 has been wild. We started this year with sort of a quarter on VTAMA, where we talked about expanding coverage, and we're really happy with where we're from a coverage perspective. And believe it or not, the AD data with this year, reading out our entire Phase III program for VTAMA and atopic dermatitis, which is an approval coming for us, we hope next year following the submission with FDA. We read out data both at the beginning of this year and the middle of this year on RVT-3101, the transaction, the program that's the subject of today's transaction. And it was just a month ago, we read out our positive data on our next-generation anti-FcRn antibody, IMVT-1402, which we think largely cements our position there as the best-in-class in the anti-FcRn antibodies, and puts us in a very strong position. And as I mentioned just previously, still to come is our data on our TYK2/JAK1 brepocitinib in SLE, which should be coming between now and the end of the year and which we're excited to share when we have it. We have a number of other catalysts in our existing pipeline on Slide 7, which I won't go through all of, but we're excited to sort of see them all play out. And the one thing I'll say, as I'm sort of wrapping on the presentation portion of this is, just as a reminder, a year ago today, if we were getting on the phone, IMVT-1402 had only been publicly announced about a month ago. It was still not in human studies. And we did not even have the anti-TL1A antibody program in hand. So what I hope is that when we get on the phone next year, to announce something in November, we'll be talking about programs as significant as important to things that are not yet public or not get in our portfolios. So we're excited for developments to come, and we think there's the last to hear. Before I turn it over to Q&A, and that's really all I wanted to say. I just want to -- I want to thank a bunch of people that are important to thank here. First of all, I want to thank Roche, who is an important partner on this program, and who has worked with us tirelessly to understand it, and who we believe will do a phenomenal job as stewards of it. Second of all, I want to thank Pfizer, who invented the program, who brought it up to the level where we were able to take it on, who has been a fantastic collaborator to us on this program and others, and which stands to, we believe, benefit enormously from this transaction as well. And we're deeply grateful for their partnership. We're grateful for their work for patients. We're really appreciative of the deal they did with us and the value they entrusted with us to do right by name and right by this program. I want to thank the entire Roivant team. There are too many people to name individually here, but between the work required to bring this in, the dead sprint that the team has been in to continue to progress the program since the day we brought it in. And many of you know this when the dead sprint involves in putting a transaction like this together, there are a lot of people who were required, and I just want to say thank you to all of them. And then I want to say thank you to our investors and shareholders who have been with us on a pretty interesting journey over the last 12 months, and we're excited to take it again from here. So thank you, everybody. With that, I'm going to turn it over to Q&A. Thank you, operator.

Certainly. [Operator Instructions]. Now, first question coming from the line of David Risinger with Leerink Partners.

Great. So first of all, I wanted to say congrats to you, Matt and the entire team on a phenomenal transaction. I'm curious about 2 things. So first, can you talk about potential plans for redeployment of capital, how you're thinking about that at a high level and when you expect to provide more specifics? And then second. With respect to the event path ahead, obviously, you have another set of important catalysts in coming months. Could you just update us on the likely time line for the key catalysts over the next 3 months or so?

Thank you, David. I really appreciate. I appreciate both questions, and they're both things that we expect to have on our minds. So I appreciate it. On the question about redeployment, look, I recall that we just signed this. So we don't have the capital yet to deploy, but also one of the main reasons I wanted to have this call was to answer consistently. We're going to be patient with the answer to that question. We're going to be thoughtful with the answer to that question. And we're not going to rush to any specific answer. The cash capacity, I want to say this clearly, is definitely sufficient to fund our existing programs through profitability. It definitely gives us flexibility to do with things that I hope people will now give us the benefit of the doubt on, which is to find great opportunities that we think we can make a difference by developing. And we expect to keep expanding our pipeline. We see other opportunities for investments that we're constantly looking at. And some of them, we haven't made for capital reasons before. And so we're just going to be thoughtful there. And we also obviously have the potential to return capital to shareholders. So we've got lots of flexibility in terms of the timing of it. I think we'll probably give another update when the deal closes. But fundamentally, we expect to be very patient here. And no promises on a specific timeline to an answer. And then on timeline for the coming catalysts, I think there's a handful of things here that we've guided to this quarter. There's data on the 600-milligram multiple ascending dose cohort at Immunovant, which I think we said will be this -- will be in November, is what we've said. And then there's the data in brepocitinib in SLE, which we've said will be the fourth quarter. And there's data in Graves' disease at Immunovant. So in short, I think the data on the 600-milligram MAD dose as Immunovant has guided will be in November. My expectation is that the brepocitinib data will be sometime in the middle of the quarter. And that the Graves' data will be a little later in the quarter. But I don't know exactly. And obviously, these are all sort of live programs that are in sort of the final stages of collecting data and cleaning data's. So we'll report that when we've got it.

And our next question coming from the line of Brian Cheng with JPMorgan.

Congrats on the deal on TL1A. Maybe just one quick question on the capital deployment here. We saw that on your most recent deck, you guided that you're looking to in-license mid to late-stage assets. On the back of this deal, now that capital is not going to be an issue, are you planning to accelerate process on that front? And can you give us some color on what thematic areas that will make sense here? And do you think that this transaction today, will have any read through on your way of thinking about your Immunovant ownership? And I have a quick follow-up.

Yes. So on the first question on deploying capital against late-stage opportunities. I guess what I'd say is, first of all, I appreciate it. This sentence will be hard to believe now, and I don't know when I'll be -- we'll be through this as a team. But we see things in the world that are every bit as exciting as the anti-TL1A antibody that we believe we can add to our portfolio. And we expect to keep looking for those things and seeking value wherever we can find it. I don't think our standards for deals are going to change as a consequence of having extra capital that is I think we're still going to be rigorous and thoughtful and move at the pace that is appropriate for us. But that said, even the TL1A deal was frankly a little bit scary for us when we brought it in at first because of the capital required to develop program in UC. And I think, certainly, if we were doing that deal again tomorrow, it would be a little bit less scary as a result of this transaction. So I think it's helpful from that perspective. In terms of whether this changes the way we think about Immunovant, I guess I want to say a few things. But most importantly, the answer is no. That is, I think, we will continue to be ruthlessly economic around how we think about our ownership stake in Immunovant. The only thing that I think is different is the bar is higher. We're operating from a position of greater strength. We have a best-in-class anti-FcRn antibody in our opinion. That class will be large. The competitive landscape is, on the one hand, somewhat intense in the sort of immediate proximity, but on the other hand, actually not that intense in terms of the amount of white space across indications. And we want to develop our program in a way that let's us get to many places, first let's just stay near the front of the line, and let's just sort of run with the best of those programs and beyond. And I think we're capitalized to do that successfully now. But that said, we will continue to be value oriented in the same way that I think we've been here with the TL1A program in evaluating anything that comes our way in the coming months.

Great. And then on the milestone near term, what is that milestone anchored on?

That milestone is anchored on the initiation of the clinical trial in UC next year. In order for it to be paid, that initiation has to happen next year. We have a high degree of confidence that it will in Roche's hands. And to be honest, I think the reason for that milestone is that our team is going to have to continue to work with Roche on the advancement of that program and getting the trial started. And I think Roche wanted to make sure that we had full incentive to work hard with them alongside those, which, obviously, we would have done anyway given the importance of the program.

Congrats.

Thank you. I appreciate it.

And our next question, coming from the line of Yatin Suneja from Guggenheim.

First of all, congratulations. Significant amount of value creation for Roivant and Roche in this short amount of time. Maybe one question I think that's probably the feedback we're getting from investors is, I think from an investor perspective, I think you're now more reliant on VTAMA and also the pipeline asset. So just curious to understand, I mean, how does that -- what is the value for VTAMA to you? And then if you are saying anything about brepo in terms of your expectation for the upcoming catalyst, which I think, again, is a very important asset for the company.

Yatin, welcome to the call. We appreciate you're joining us. First thing, I'll say is -- you say, you think this makes VTAMA more important. I guess what I'll say is, at some fundamental level, I think this makes VTAMA and many other individual things less important in the sense that we can take our time and deploy capital carefully irrespective of any individual thing. That said, we're very excited about VTAMA as a program. We remain excited about it. We remain excited about what it has allowed us to do in terms of building a commercial footprint and relationships with payers and PBMs and so on. So I think it's been a real step forward for us. We're excited for the AD launch, that will hopefully come next year, based on the quality data we have, and we think that will be an important moment. And look, I think, at some fundamental level, in addition to everything else, VTAMA gives us a long-term opportunity for nondilutive capital, whether that winds up being in the form of partnership, or whether that winds up being in the form of a profitable program that generates free cash flow for us. And we think, we're certainly on a trajectory that will give us that outcome. We think that's a useful base layer that lets us build from there, and we're excited to watch that play through. And obviously, we see tremendous value in the pipeline beyond that. Certainly, we've talked about Immunovant here, I won't say it again, but you asked specifically about brepocitinib. Brepocitnib has -- in my opinion, has to be one of the most underappreciated drugs with, I think, 6 positive Phase II studies under its belt. We have generated some amazing data, including some of the best data of the world, seen in Crohn's disease, for example. And we're really excited to continue to progress that program. We've talked a bit about our strategy in recent quarters including sort of the focus on sort of ortho and rheumatology. Having said that, this SLE data is coming. We've been cautious around that data because SLE is a difficult indication for clinical development. And it's another study that we're running with Pfizer, that Pfizer has the keys on the study itself. But they've been a great partner to us. Having said that, the things that we're hoping to see to progress the program is the balance of totality of the data that makes it feel like it will be competitively -- yes, as good or better than deucravacitinib, which we think that bar really looks like, something like a mid-teens SRI-4 delta, is a kind of what we have in mind to beat. Obviously, the particulars of exactly what it looks like and what we will progress depend on more than just that one number. But that's a proxy for what we're looking for.

And our next question coming from the line of Louise Chen with Cantor.

Congratulations on the deal. So I wanted to ask you how Roche valued the Crohn's disease portion of the asset because that readout is coming in fourth quarter '24, so just curious your thoughts on that? And then secondly, just a follow-up on an earlier question. Are you planning to move this into Phase III while you wait for the deal to close? Or is the focus really just on deal closed right now?

On the second question, which is the easy one. We -- this is an incredibly important program. It's important to us. It's obviously now important to Roche. We're going to move full speed ahead on this transaction, on this program, as the transaction moves towards closing. We will move forward and the program will go into a Phase III study. So that's the answer is -- we're focused on closing the transaction, obviously, but we're also focused on continuing to develop the drug. And we expect the transaction to close either this quarter or next quarter. On the question of how Roche value Crohn's or anything, really, look, I think that is mostly a better question for Roche than for us. But I think you can see embedded in the transaction of this size and value, especially for U.S. and Japan on the program that they saw a lot of value in the program, and I think they agreed with us about its breadth and potential reach. But beyond that, I think that's for Roche.

Now our next question coming from the line of Dennis Ding with Jefferies.

Congratulations on the deal. Maybe I have a question on the timing of the deal. I mean, before you previously highlighted that any deal would be gated by your visibility on the mid to late-stage pipeline. And we sort of the Immunovant and multi-dose data coming up as well as the lupus data coming up, which seems to be in line -- going to be in November. But maybe talk about the timing of the TL1A deal from this morning and perhaps on -- the read through on your level of confidence heading into those 2 readouts.

Yes. Dennis, I think it's a great question. Look, I have said before, and I think we had meant it was really valuable to us to see what Immunovant had before we made a decision on this program. I think at this point, based on the data we put out last month, we in Immunovant have high conviction that 1402 ought to deliver batoclimab like IgG suppression and a clean profile on albumin LDL. Obviously, we still have the 600-milligram MAD dose out, but we view that as confirmatory. I'm not a superstitious person, I won't -- it will be what it is, but we're pretty confident about the profile that we have there. And I think, it made any decision on this easier because we knew at this point that we had, yes, a war on multiple fronts, and we had to decide how to best position ourselves to maximize the value of both of these programs. And now we knew the magnitude of the task at hand and the magnitude of the opportunity in front of us. So I think getting a good look at the Immunovant data was very valuable. Beyond that, we're going to continue to develop drugs and bring in new drugs. And obviously, we do have the lupus data coming up. We have more data coming up on Immunovant and Graves' and other places. So I think we can't wait forever to make every decision, but we felt like we had enough to know that this was the right moment. Mayukh, do you have anything to add?

No, I think you hit almost everything. No particular read through.