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

I'm very pleased to have Roivant here and CEO, Matt Gline. So I mean, obviously, there has been -- there have been a lot of developments this year to the positive. The company has clearly been executing across the pipeline, including deals that have been done.

So maybe to level set everybody here in the room. Just remind us of all of the different developments and updates that you guys had this year? And sort of how should we think about the outlook through the end of the year?

Yes, perfect. It's actually a nice bookend because I just think back to literally a year ago at this conference. And a year ago at this conference, the biggest things in our world is we had recently announced preclinical data for our next-generation anti-FcRn antibody. And what I knew, but nobody else did is that we were on the cusp of acquiring an anti-TL1A antibody. We have not yet generated any atopic dermatitis. We had obviously not yet generated any data in UC, et cetera. So over the past 12 months, we've generated 2 great Phase III data sets in atopic dermatitis and VTAMA. We've continued to progress that launch. We generated 2 truly fabulous data sets in ulcerative colitis for anti-TL1A antibody, one at 14 weeks and one at 56 weeks. We generated some first in human data for our next-generation anti-FcRn antibody IMVT-1402, that showed, we think, potentially best-in-class profile with very deep IgG suppression and no impact in albumin and LDL. We culminated with a transaction just 1.5 weeks ago, just 2 weeks ago maybe, where we sold the anti-TL1A antibody program. We did not yet have in our portfolio as of a year ago today for $7 billion in aggregate, of which about $5.5 billion to Roivant in a deal that should close this quarter or next.

Right. The shape of the company a year ago in London is very, very different from what it is today.

That's correct.

You guys brought in the TL1A Immunovant data was really strong, et cetera, et cetera. So maybe talk about now that the TL1A has been sold off to Roche and you guys have a $6.5 billion or $7 billion of cash on the balance sheet. A lot of people are wondering how Roivant is going to deploy that capital over the couple of years. So maybe help frame that opportunity for investors?

Yes. We've noticed that people are wondering that question. We've noticed it because we get the question. We noticed it because our stock has traded under cash since the deal, which I admit I find offensive. And I'll note that we have tools for addressing that particular situation, which is that we have the capital to return and if our stock trades poorly, we can always buy back, but that's not actually top of our capital prioritization. That's just an option on the table given where the market has gone. Look, the first thing is again, it feels funny because we didn't even get to talk about the anti-TL1A program at a Jefferies conference. But having said all of that, we have a pipeline that we are truly super excited about. We've got the anti-FcRn franchise, which we think is a potentially best-in-class franchise. And clearly target that matters a tremendous amount, right? [indiscernible] a $30 billion company. There's so many indications and having a molecule that feels best-in-class there, is a real source of pride for us and something that is a use of capital to a great set of positive potential outcomes. On top of that, we have Brepocitinib, our dual inhibitor of JAK1 and TYK2, where I think the profile has actually really come into relief. Here as we've seen TYK2 space play out. We've seen Roivant continue to do so well with JAK, and we started to see some of the puts and takes between SLE, which is reading out soon dermatomyositis, and I use some of the other possible indications, HS, obviously, [indiscernible] data in the field this year. So as a use for capital, the first thing is just a lot of great places to deploy it in our existing pipeline. I think in the next bucket, a year ago, we didn't have an anti-TL1A antibody. I'm excited for whatever we're going to be talking about a year from now that we don't have today. And this is one of the best environments we have ever been in for the kind of work through pipeline expansion, right? Many of our drugs come from large pharma companies that have just an embarrassment of riches to too many great programs, and they have to make strategic decisions based on P&L pressure, and all of big pharma has P&L pressure associated with LOEs. And so we just see a huge opportunity to go in and continue to do what we've always done to find late-stage programs that we really care about that we think are great and to partner with great people on them. And so I think that's probably sort of bucket number two is that. There's a lot of other possible permutations of that. I get asked a lot, are we going to go out and buy a lot of public biotech companies and things like that. I think the truth is like very unlikely. It's just hard for us to find value in that category of activity, never say never. Something is trading deeply under cash or whatever. But I think like in general, I would expect our BD to look in the future a lot like historical BD, but with the confidence of knowing that for bringing in something like TL1A that has a 9-figure development path ahead of it that we're going to be fully capitalized, pursue that path. And then the third bucket is sort of everything else bucket. It's return of capital to shareholders to the extent that there's access to return. I think among that, thinking about using some of that cash to clean up the concentration at the top of our cap table is definitely on our list. Thinking about VTAMA and exactly what the right size capital deployment is for VTAMA is that opportunity continues to present itself sort of also in that third bucket.

Right? The core to Roivant is indeed ROI.

That's right...

You're not going to go out and spend $3 billion on a biotech company because that's kind of very different from what you guys have done in the past and that just makes more sense to kind of a small amount to develop it and then et cetera, et cetera.

That's right. I think just in general, we have found it hard to find the kind of deep value that we look for in those kinds of acquisitions historically.

So can you help frame what sort of areas that could be interesting for you guys in 2024. You mentioned late-stage, mid-to late-stage assets. But what areas are interesting to...

Yes. I mean, first of all, I'll say it one of the things about us is we're pretty agnostic. We're agnostic [indiscernible]. We're generally agnostic to stage. We're agnostic to modality. We'll do creative things in all different directions if they look appealing and mostly, it's about value to patients and therefore, value to other stakeholders. That said, I think it's -- there are some things that it's less likely we will do. One of them is what I've been calling capital O, oncology, just like the heart of the oncology area. So much of that these days involve combination therapy development with multiple drugs. And given that we pick one thing up from here and one thing up from here to have a portfolio of things that make sense to develop in combination with one another. It's just like not that likely, right? It's not that likely that you're going to find the 2 exact right opportunities in 2 separate places at the same time. So I think that's probably a little bit less likely. Again, if we saw the right thing or the right portfolio of things we do it, it's just a little bit less likely from that perspective. And then from a modality perspective, I think like we have -- we've tried lots of things in our life. And I think one thing we've learned is that manufacturing in general is just like way harder than anyone gives a credit. And in particular, when you look at things like gene therapy, we like lots of the therapies, and we like some of the value available in some of those areas, gene therapy, CRISPR, et cetera. But I think we are unlikely to do deals in those areas unless the deal comes with a very high conviction path on manufacturing the thing like tech tranche has already taken place or the partners can do manufacturing, and we believe in them because I think those are things that we just like CMC in those areas is very, very difficult.

Right and there are lots of different modalities that kind of fall into that bucket, right? You've mentioned gene therapy, but also things like cell therapy, even radiotherapy, there's a lot of capital required to build out that infrastructure and it may not make sense for Roivant given the amount of money that it will take to.

Yes, honestly, it's sort of similar to the capital oncology point. If you're not going to do 5 programs in gene therapy being an expert on gene therapy manufacturing doesn't wind up being worth the investment. And so for us to do a gene therapy program or a CRISPR program or whatever, I think like it's just got to be where like that expertise is sorted out some way or shape in the transaction already. But that happens all the time, right? People want to partner with us and they're willing to pinner off is manufactured by GSK and parts. So like people are willing to do that work.

So then in terms of 2024, the expectations that you guys would do probably at least.

Yes, for sure at least, extremely likely.

We'll hear more about it. I think everybody in this room is really looking forward to that given how the stock has been trading at people, and I feel like want that sort of visibility, especially for 2024. So if we kind of switch gears over to Immunovant. You guys reported some really strong Phase I data in September. There's going to be a 600-milligram update in November. Talk a little bit about that about your confidence going to that readout.

Yes. And look, I think Immunovant talked a fair amount about this as well as an institution. The short answer is we feel like the data that we shared in -- Immunovant in September, the single-ascending dose data, especially the subcu data and the multiple ascending dose at 300 is very derisking, right? It establishes parameters that like we were able to suppress IgG as batoclimab, and we did not see any impact in albumin and LDL in that data set. And so I think like that gives me a great deal of comfort. I think it's -- at this point, the envelope of risk on LDL is pretty narrow, right? Like we've already seen pretty high concentrations in the IV set and so on. So it's just like a relatively narrow envelope of risk. We'll see. I'm not a superstitious person, but it's hard to call it until we actually have the data in hand. That said, my biggest "fear" about the 600 day has nothing do with the profile of the drug itself. It's the same thing I was worried about going into the [indiscernible] data that we already presented. LDL is a noisy measure. We showed about a 16% standard deviation in the LDL measurements in the base data we already presented. And so like we could totally be in a situation where LDL bounces around a little bit. Maybe there's an up 10 reading, maybe there is down 10 reading. Albumin bounces around a little bit. Maybe this is an up 5 reading, maybe there's down 5 reading and like there's no time course to it. There's no relationship between the 2, but there's noise. There's a little bit sort of -- that requires interpretation and the benefit of the doubt. I think the quality of the data we've already presented should have owned us that benefit of the doubt. But that's probably the sort of fear that is highest on my mind. And again, I'm just not that worried about it...

Right. Because what you guys have shown in September with some of the multi-dose data, it does leave you a little bit more incrementally positive appreciating that 600 milligram, there could be more accumulation more potential for these excursions.

Exactly. I think what would to me indicate a problem is if we saw a time course of data, if we saw albumin decreasing over time sort of monotonically in the study if we saw LDL increasing over time monotonically in the study, if we saw those things moving in the same direction, right, like albumin definitively down, LDL definitively up. Or like, I think that combination of facts would be bad for us.

Up versus baseline or versus placebo?

Up Versus baseline. Placebo is noisy. I think it's hard to read.

And then in terms of BD regarding the FcRn, talk about why you think that given the cost requirements to run all these different Phase IIIs for the FcRn. Why the FcRn would be in the best hands of Immunovant or Roivant. Why not Roivant?

I think the first thing is the combination of the TL1A transaction and just like who Roivant does an enterprise, we are well set up to prosecute this. We have the capital required, which is important, right? It's a intensive R&D program across multiple studies. And then even as like -- again, we've talked about this from the other direction before as to why there were benefits in keeping the TL1A. The TL1A clinical program was very straightforward, right? It was a Phase III program that we were -- a lot of work but going to be able to prosecute and it was replicating a Phase IIb study. The complexity around TL1A was that the commercial landscape was more complicated, right? It's a great target. The data is fantastic, but you're going up against S1Ps and JAKs and in other TLAs and biosimilar Humira and IL-23 and all these other things. And like, again, I think Roche will do a phenomenal job and they're armed with a great data package in Phase II to do a phenomenal job with it. But that is a -- it's a thing they're going to have to do successfully in order to win. The FCR inside is a little bit different. The commercial picture is actually quite clean, right? The only thing really that cuts across the FcRn indications is IVIg. Other than like idiosyncratically, you run up against Tepezza and Ted or you run up against like whatever you might up against JAKs in certain indications. But like in general, the FcRn indications are clean if competitive pressures beyond that other than the other FcRns. But the -- which from a commercial launch perspective, when we get there, is good for us, right? Like we're not necessarily the best positioned company in the world to be making a launch in a competitive commercial space with lots of other entrants. The clinical program is very complicated, right? You're picking lots of different indications. The choice of indications matters, sequencing of indication matters, the structure of the trial within each indication, the choice of endpoints, how you approach FDA and what order all of these things are important. And the one thing I'll say is like that is definitely a challenge that Roivant's history has better prepared us for like we've run lots of clinical trials. We've run complicated clinical trials. We've run programs in multiple clinic trials at the same time. And so I feel like as we think about the challenge that we've taken on whether -- whatever it's all considerations. At least I feel like we have a challenge in front of us that we are well equipped to do. And I think what that means is we can approach FcRn from existing strength. Immunovant has the operational capabilities together with Immunovant, Roivant and Immunovant have the strategic capability together with Immunovant, Roivant Immunovant have the financial capability. And that means we can build a real argenx competitor. We can build like a big lasting important immunology company around this program. And that means, in turn, if transactions present themselves, if pharma companies approach and they're excited about the target, we only ever have to have those conversations from a position of absolute strength knowing that we can do it ourselves the entire way and win ourselves the entire way if that was the better answer.

So in terms of cash and pipeline for Immunovant, I mean, batoclimab is obviously in Phase III, but a ton of interest is around 1402. So how do you think about Immunovant in the path forward given that you guys have these 2 franchises, it will take a lot of money to run all these Phase IIIs. Would you prefer to move 1402 forward like on its own? Or would you still take a two-pronged approach for the..?

First of all, we're going to sprint with 1402 into Phase III studies. And we said already, we expect to go directly to pivotal with 1402 in multiple indications both on the back of our own Phase II trials in batoclimab, like Graves disease when that trial readout later this year and then in other indications where we're watching the field for Phase II data that can inform pivotal program design in 1402. We still think bato has appeal in multiple places. We like the ongoing TED study. We think in some of the rare acute dose indications, which might command a higher price point. My personal opinion is bato a significant role to play there. How exactly the world divides between the larger set of 1402 indications and the smaller set of bato indications, depends on the data that we see from our program across these trials and depends a little bit on time lines and how things shake out with our competitors and so on. But I think we will still for the moment, be aggressively developing both drugs, at least through the readouts of the current pivotal and bato.

Would you move 1402 into MG?

I think MG is the toughest question in some ways because it is -- in most FcRn indications, there's -- people shorthand to describe us as behind. But actually, like in most of these indications, we're not behind, right? Like either engraves we're in some sense ahead -- like in other indications, like if there's an ongoing Phase II that some other company is running. Once that Phase II readout, we can likely move directly into a pivotal with our own -- with 1402. So in most indications we're not behind, we're just like in the pack. On MG, we're clearly behind right? Argenx has done a full job getting that program approved, a beautiful job with the launch. It has been wildly successful. And we're going to be competing in that playing field. And our first agent in MG is going to be bato, which we'll readout in the second half of this year. There's a version of the world in which the depth of our IgG suppression yields better efficacy by a meaningful amount in crush out comparison versus bato versus efgart and in that version of the world, I think bato has probably got an opportunity to take share. I think 1402 might make sense and would have an opportunity to take share. And then in the rest of the world where those things are closer together or I feel like probably MG is just like relative to Graves and some of the other opportunities that we have in front of us, we'll do something in MG, and we'll get meaningful share and value in MG, but we see so much value in the other indications that it's not clear in a scenario where we're closer to them in MG that MG is going to wind up being the big market for us to some of the other ones as well.

So if we kind of move on away from Immunovant and BD and things like that, talk about the catalyst path through the end of the year outside of the Immunovant data.

One of the unsatisfying questions that I've gotten in the wake of this deal is like you've done this deal, what happens -- now you've got no catalyst left, right? And the thing has been pressing me about that is there really weren't TL1A catalyst. All of our catalysts are still there. And so they are -- there's a ton of data we talked about on the FcRn side. That's obviously like a very catalyst-rich part of our pipeline. On top of that, what do we have? We have brepocitinib which is reading out an SLE Phase IIb study that will be one or 2 pivotals, we believe, this year. High [indiscernible], lupus is scary. We can talk more about that study, but that's coming soon. And if successful, is clearly potentially impactful. Next year, at the beginning of the year, we have data from a 24-patient open-label proof-of-concept study in NIU, also brepocitinib which is, again, an indication really of the kind that we brought brepocitinib in for. The sort of orphan room set of indications that we're tremendously excited about. So that's brepocitinib. Then 2025, we have the dermatomyositis data there. Other catalysts, so probably the next biggest one is we continue to make progress on the -- just like Genevant sort of prosecution of that situation. There's this claim construction hearing in February that we think will be meaningful and so far as it will give us some information about how the court thinks about the breadth of our patent claims, which I think has impact on the progression of that case. That's coming. And to talk too much about the particulars of it, but that could be interesting. And then we've got other clinical data coming too. We've got data coming in a small molecule modulator of SF3B1 and transfusion-dependent anemia and low-risk MDS patients, high risk mostly sort of underwritten on the basis of cross-trial comparisons with a small end, but if successful, could be an important program. And the same thing, we have a study ongoing with our anti-GM-CSF antibody in sarcoidosis, which again, small dollars, high-risk study. GM-CSF has been a tough target. Sarcoid has been a tough indication. But if we find the right pairing there, again, could be a major part of our portfolio on the back of it. And if not, it was high [indiscernible] to begin with. So lots and lots of clinical data coming in the next, call it, 12 to 18 months. And we're really excited to put more of it out there. And that's in addition to, again, as a reminder, a significant percentage of the catalyst that we produced over the past 12 months were not in our portfolio as a 12 months ago.

So if we can kind of hone in on lupus for a little bit [indiscernible] data. That data is coming in Q4, can you refine that timing a little bit? I think before you said mid Q4, is that still?

I mean, Q4 still seems like a reasonable time frame. We'll get it when we get it. You'll recall discussions from last spring in which we said we were waiting on the TL1A data, and it was ultimately in Pfizer's hands in terms of amount of time. So remember, this is also a Pfizer partner program where Pfizer ran the program. And so we are, again, waiting for a handoff of that data from Pfizer. So it's hard to pinpoint the exact time, but it should be mid this quarter.

Lupus is obviously very tough, but still has shown some promising Phase II data, [indiscernible] some promising data. So what -- for [indiscernible], given it's JAK1, TYK2, what is the bar for efficacy that you guys want to see?

So look, the first thing is setting aside the vagaries of trial design and just like risk that is inherent to running lupus studies and those vagaries are real, that risk is real. Setting all that aside, JAK inhibitors work in lupus, right, Brepocitinib showed reasonable sort of low-teens pbo-adj delta data earlier this year. Brepocitinib in multiple studies have shown activity varied with activity. And then TYK2's work in SLE, deucravacitinib has shown good data. And so mechanistically, this drug should work in SLE, but for the things I mentioned before. What we would like to see is data that puts us in a favorable competitive position vis-a-vis specifically deucravacitinib, which we think sets the bar. Our view on the deucravacitinib data, it was about 23% at the 3 mg dose. It was like maybe 15% at the 6 mg dose or something like that. And then I think an even lower response at the highest dose. Our view is if you look at the patient baseline severity going into that data that there were significantly more severe patients on the low dose than on the other doses. And that if you blend it across that you're really looking at like a bar that is, call it, mid-teens SRI-4 delta. And so what that means to me, if we're in the mid-teens, it will be a balance of factors whether we progress the program to another Phase III study. If we are above the mid-teens, if we're in the high teens or whatever, it's pretty likely. And if we're in the 20s, it's a grand slam.

That's SRI-4?

SRI-4. Yes, that's -- and then some similar ranges exist for BICLA but to think about...

What if SRI-4 did not hit that say, but let's say there was a positive trend and BICLA was also very encouraging. Would you consider moving that forward or...

I think if the data is merely encouraging and doesn't hit stat sig, it's a hard bar because we would have to convince ourselves that one study would still be sufficient for approval on that basis. So I think that, that would really depend on the quality of the data. Certainly, there have been approvals in SLE on the basis of one endpoint hitting and not the other. So I think like we'd look at that. But I think it's going to be a balance of the factors, but also like we're looking for a big signal.

Right. And the reason why I bring up lupus is I don't think people really appreciate the opportunity there. I don't think it's in anybody's models right now so -- it could very much be a decent addition.

Look, I think between lupus and Graves, and I think Graves is a vastly underappreciated indication for FcRn. We have 2 extremely impactful data sets coming over the next 1.5 months. And I think like as much as the narrative right now is about capital deployment and what our pipeline looks like. And look, lupus might fail, Graves might be underwhelming or we may not choose to talk a lot about it. But like if both of those things work the way we want them to, I think the narrative will be about -- we squarely back on our pipeline, there's just like a real opportunity to do something quite interesting in the next 6 weeks.

And in the last minute or 2, and it would be remiss if I don't ask about the LNP litigation. But that's coming up in February to [indiscernible]. I mean what are you expecting to see? Like what would be a positive outcome.

I'm so grateful that we only have 27, that's because look, in general, it's tough to comment on ongoing litigation. It's an active discussion. For those that are not familiar with these claim [indiscernible] hearings, they really are about the court interpretation of the meaning of the actual language and the patent claim. And most of what I'll say is you can see the bid offer spreads because these grids are published, where their interpretation of the claim and our interpretation of the claim sit side by side and there's already published documents. And I think like better is more like ours and worse for us is more like theirs, and we'll land somewhere and we'll deal with the -- we'll deal with the consequences.

Okay. Got it. Well, thank you so much, Matt. I think that's all the time that we have today, but it's great to see you.

Thank you.