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

I think we can go ahead and get started with our next session. So my name is Ally Bratzel. I'm 1 of the senior analysts here at Piper Sandler, and it's my pleasure to introduce Matt Gline, CEO of Roivant.

Thank you for having me.

Yes. So thanks for joining us. And also just for the audience, if anyone has any questions, feel free to either just raise your hand or shoot me an e-mail, and I'll be sure to ask it. But yes, I have a bunch of questions, so I'm going to go ahead and get us started off. So Matt, maybe starting off high level, it's fair to say that the world we're living in today looks a lot different than even than it did this time last year across Roivant. The Telavant transaction, proof-of-concept data for 1402, the successful Phase III AD readouts at Dermavant which all are arguably transformative developments crammed in 12 months. So can you just kind of help us understand what you envision for Roivant, Telavant family over the next 12, 24, 36 months, 2023 an anomaly is that part for the course in terms of transformative events for Roivant?

Yes. Look, 2023 was a very busy year for us. You listed a good portion of the things that happened. It was like a year ago, maybe like today or something like that, that we announced that we were in-licensing the anti-TL1A antibody. And 1.5 months ago that we announced we were selling it. So it's been a busy year. Not every year is going to be that, but we have some really exciting ideas for things to do in '24. We've obviously got an extraordinary position in terms being fortunate from a capital perspective at a time when very few have been. And so we feel great about all that. And then there's a whole bunch of data coming in our pipeline between a bunch of stuff in Immunovant, I know he is going to be on -- I think this stage in half an hour and some more data from brepocitinib and NIU and some progress on some of our other projects. And so it is a pretty exciting year next year, even sort of absent secret unannounced plans.

Yes, a little bit of an unfair question. But maybe another kind of high-level question before we get into some of the specifics. It's just in terms of your therapeutic focus, I think -- you've built a really broad immunology pipeline. It doesn't necessarily mean you need to be siloed in immunology. So I guess, thinking now -- just what are your thoughts on that? What therapeutic areas do you find most compelling? Or do you see as having the most opportunities?

Yes. I mean I guess sitting here this morning, I wish we were an EDC company. Look, I -- we've been really pleased with what we've been able to build in immunology. We obviously have worked over the past 12 months on 2 of the most important immunology targets in FcRn anti-TL1A and FcRn we think is just an unbelievable opportunity to the extent of which I think we as a field are even like just scratching the surface, to be honest. So we're excited about our positioning there, and we see things in immunology that we continue to like. We've always been intentionally agnostic on therapeutic area because so much of our opportunity comes from other people having firm views on what they want to do that if we said we're only going to do immunology or we're only going to do whatever area, we would miss out on opportunities that we think are really great. So we're generally flexible. We're looking to chase the opportunities where they are, chase the biology and science where we can find it and that's always kind of been our approach. There are a couple of things that I think are probably slightly further from top of mind for us, and it's like easier to state what those are. First of all, -- and both of these are never say never kinds of things. But like I think capital low oncology, like sort of heart of oncology. The problem there is so much of our sort of BD pipeline construction strategy involves kind of finding things where they are. And because a lot of oncology involves combination therapy and development of a portfolio, it's just hard to imagine stumbling on 4 or 5 different building blocks all at once. It could happen maybe to the whole portfolio for sale, but like not the kind that is as close to top of mind for us. And then we've experimented in the past with, let's say, difficult to manufacture modalities. And I think our conclusion has been -- that's hard. And we're going to do stuff like that, it's got to come with a clear answer as to how those challenges are being addressed because we don't have -- we're not a gene therapy company. We're not even mRNA company. And so like some of these modalities where manufacturing expertise really matters. I think we'd like to only work on those programs if we have a partner or a manufacturing partner who is really solid because I'm not sure we're going to build that sort of bolus of expertise in-house.

Okay. Excellent. Maybe pivoting to just the Telavant deal. I think that has to go down as 1 of the highest ROI sales maybe we'll ever see you in biotech. And I guess my question is not can you do that again?

I think, yes.

Okay. Yes. I guess what gives you confidence that those kind of opportunities are out there that you -- your team at Roivant can locate and find and act on those opportunities repeatedly in the future?

Yes. Look, yes, it was a glib answer to that question in the sense that -- the thing that I think will have proven unusual about TL1A is the rapidity of the turnaround of it. The thing that is not unusual in our history and will not be unusual in our future is our ability to access that sort of kind of opportunity, important late-stage programs with potentially broad sort of therapeutic implications. I think that stuff we have, at this point, a long track record of finding. And frankly, I've never been more excited than at the present moment for what that opportunity space looks like. A big slice of that, certainly, there's lots of places to look for things right now. Look, Immunovant came from South Korean biotech company, TL1A came from Pfizer, brepocitinib came from Pfizer, some of our earlier programs came from Merck or from Takeda or whatever, like we've done a wide variety of things. Big pharma right now looks like a rich opportunity set for us because so many big pharma companies have a problem to solve, a challenge ahead of them that we can help with. And that is they are going through these seismic shifts in portfolio construction. They're facing LOEs in many cases that are going to dramatically reshape their sort of growth picture. And what are they trying to do? They're trying to acquire programs that meets, that match their therapeutic focus that match the stage that they're looking for. And in parallel, they're trying to trim their budgets and manage their earnings. And there aren't that many tools that a big pharma company has to manage R&D expense. And the biggest by far is to take a look at their late-stage portfolio, where they have expensive Phase III programs coming and to pick the things that are the odd man out not necessarily because they're not a good programs, but because they don't fit with their commercial apparatus or whatever. And so we are here to help them solve that problem. We are here to look at those programs and to bring them in and to develop them and to share back end as we did with Pfizer in a way that we think can really be a benefit. And the truth is, first of all, by and large, these big pharma companies don't have capital problems, it's not like they're trying to solve for a cash need. So a big upfront check is not what they're solving for. And there are not that many other people at this point who can show up, partner on a program and be trusted to spend the dollars and do the work to run a successful late-stage development program, which something we've done many times. And so I think that unique ability puts us in a great position right now. And I think there's a ton we're excited about in portfolios of large and midsized pharma companies.

Excellent. I think the next question is I think been asked every which way, I'm going to ask it again anyway, just about plans for the proceeds from the Telavant sale. Can you talk -- just talk about your priorities and how you weigh your path to deploying this? What options are on the table? And how does some of the other recent data events like in the last week, the SLE data for brepo, the 1402 success, how does that factor into your thinking on deploying that?

Yes. Look, I'll say a few things. One is a perennially unpopular answer, which is we are in an extraordinary position, which is that we have the ability to be flexible, to be thoughtful and to go after opportunity where we find it. And I appreciate that we're going to be patient is not what people want to hear, but it is actually a tremendous source of value for us that we can give that answer and mean it. And so again, that's sort of the unpopular part of the answer. I guess, like to the more popular part. First of all, I think this question is actually not that complicated. There are fundamentally 3 buckets. There's the existing pipeline. Obviously, FcRn largest among it, but with brepocitinib and the other programs are also important, and some of those programs are thirsty, and we are now capitalized way more than sufficiently capitalized to just sprint at those opportunities and to win in a big way where we have the best broker. There is [ BB ] question, which we've hinted at already in this conversation, which is obviously bucket 2. And then there is a question of what excess looks like, how much capital we have beyond those 2 buckets and what we're going to do with it. And I think there's some competing priorities. There's a question about exactly how much we want to continue to deploy on Dermavant which I'm sure will come to later in this conversation. And then there's the truth that we look to be incredibly efficient stewards of capital generally, and we would certainly actively consider returning capital to shareholders. And bluntly, look, I think we're trading below the aggregate value of our cash [indiscernible] that is moderately offensive, but it creates an opportunity for us in that if we want to be out in the market returning capital. There's a clear path, which is to go buy stock at this stu*id price. And so at some point, that's on the table.

Okay. Maybe now touching on -- you mentioned FcRn going to that. I know you talked about your ruthlessly economic framework that you're operating from here. I guess what -- walk us through the rationale then for continued investment in batoclimab, just given the profile you've seen for 1402 at this point? And then I guess more broadly, how do you maximize the value of that FcRn franchise? Can't it be maximized with the current ownership structure?

Yes. So you're going to have an opportunity to ask Pete that question in 15 minutes now. And he's a good person to answer that question. Look, I think there are certainly arguments to be made that having a franchise of these programs and being able to take them into the best indications for each drug to be able to go after wherever more acute disease with batoclimab and to go after kind of everything else with 1402 is an attractive concept. The profile of 1402 is just coming into relief over the past couple of months. It is a phenomenal profile. Certainly, the better 1402 looks, the narrower the aperture for batoclimab necessarily in terms of like where you would take that program. And so I think that is an ongoing discussion. I'm sure people have an opinion on it. I think there are probably good places for both, but certainly 1402 is going to get the lion's share of the investment as a potentially best-in-class program. So I think that's sort of the main answer to that question. In terms of like better in our hands or somebody else's hands, I guess I go back to the ruthlessly economic comment, and I'll say 2 things. One is, certainly, we felt like we were getting a great value for the TL1A program when we sold it. But capital was a consideration for us, right? We had 2 thirsty programs, be that in the FcRn and we needed to make sure we radically set up. Now with Roivant's balance sheet, we certainly have the capital to pursue FcRn to the maximum extent. And so I think we will never sell Immunovant out of a position of weakness. But ruthlessly economic, everything has a price. There's a little bit of -- it's an ethos that we find it hard to get away from. It's just a function of like getting real value. So that's part of that question. I guess the 1 thing I'll say is a plug for Pete and Immunovant team and for Roivant as a family of companies more generally. From an execution perspective, there's a lot of clinical work to do in FcRn. There's many studies to run. And certainly, like you can imagine, press being helpful. That said, I would hold our clinical capabilities at this point against almost anybody else in the world in terms of our ability to do things, do things quickly, do things comprehensively. And I think -- look, I think Immunovant team had done something that almost no 1 ever does, which is that we had a program, it was a great program. We had a problem and we fixed it. And so I think that's just a testament to what that team is capable of.

Yes. No, absolutely. And maybe just kind of 1 more along those steam lines -- just thinking about the FcRn opportunity longer term, what -- I guess, what other modalities do you think might complement that? I know we've been hearing about IgG degraders, CAR-Ts and some of these immunology indications. Talk about your appetite for other maybe novel mechanisms? Or what do you see out there that could maybe augment or change your FcRn strategy?

So look, this is kind of a wonky point, but I think it's worth making it. FcRn is sort of unique in immunology right now in that it's so much of immunology historically has been in the category of like broad spectrum and inflammatory activity JAKs or TL1As or TNFs or IL-17s or whatever it is, and those are all great programs and many of them have become large multi-blockbuster opportunities because many immunology diseases are marked by inflammation. FcRn is not really the same thing, right? FcRn cuts across a swath of diseases sort of first tier of which are mediated by pathogenic or IgG autoantibodies. And 1 of the neat things about that is it is a uniquely shaped competitive picture. And with the exception of IVIG, which is fundamentally going after the same biology, there's really nothing that cuts across all of it with the possible asterisks of the Biohaven IgG degrader program, which obviously got a lot of attention. But in my opinion, it's early, and there's a lot of interesting questions about it. Other than that, yes, sure. I think some of the -- this week's FDA news aside some of the CAR-T approaches in immunology will be interesting in some subset of the areas where FcRn is also interesting. And inflammatories will be interesting in some subset of the answer of the areas where FcRn is interesting, specific auto antibody targeted antibodies like IGFR1 or whatever, we'll be interesting in some of the areas where FcRn is interesting, but very few of those modalities are going to cut across the entire spectrum of it. Now as a fact of matter then, what complements FcRn? Certainly a franchise of antiinflammatory something like brepocitinib complements FcRn in the sense that it is an orthogonal tangential part of immunology that will only overlap or circumstantially. And then we're interested in other approaches as they play out, they sort of cut across the same spectrum. So -- we're watching the Biohaven IgG program closely, it's core program. A lot more to come on it, obviously, before we really understand what happens there. But I think that's sort of unusual in cutting across the same spectrum.

Okay. And you mentioned brepocitinib. So I have a couple of questions on that if we go there. I think we had the update this week on SLE, and I think that has been pretty widely viewed as a pretty high-risk opportunity. And we were just talking before this -- I think that was kind of a holdover from Pfizer.

That's right. That was a program that Pfizer had begun before we acquired the program from them, and they did all of the execution on that study and paid for the majority of it. It's always disappointing when a trial doesn't work. The truth is -- and we're not going to pursue brepocitinib in SLE. I want to be very clear. The study failed. It was going to be 1 of the 2 pivotals if it had been successful. We're not going to go there, barring some significant change. That said, it's disappointing because look, fundamentally, brepocitinib is a drug, even having failed that study probably works in SLE, right? JAK inhibitors work and have been shown to work many times. Obviously, TYK2 put out pretty good data, TYK2s clearly work in SLE. There's nothing about brepocitinib even after this study, it just doesn't work. But I said a year ago in their view that you have to be an id*ot to not be afraid of an SLE study. And the truth is SLE -- it's a heterogenous disease, very hard to study. And we took our best shot. So that said, brepocitinib is a big gun. It's a very potent in inflammatory. It's produced extraordinary data now in 6 positive Phase II studies even in alopecia, in psoriasis and psoriatic arthritis, in UC, in HS and in Crohn's disease most recently, where we have, I think, the deepest clinical remission ever seen in a Crohn's study. So it is a very potent agent. We, Roivant are not necessarily equipped to go head-to-head with AbbVie everywhere that RINVOQ plays. I'm not sure that's our strategy. But it's a great drug. And our view all along had been in orphan immuno -- in orphan rheumatology and some of these like rare highly inflammatory diseases, there's not a lot of options and you want to bring a big gun and you want to get the commercial model right and brepocitinib is going to be, in our view, a great tool in that specific tool kit. So that's what we're excited for. DM study reads out in '25 with a proof concept study in NIU next year. We're still thinking about things like HS where we have quite good Phase II data, just a big opportunity.

Yes. And maybe kind of -- can you just explain on that? I think NIU is where we're getting data next. What's the opportunity there? What do you need to see? And then, yes, on the DM trial, what kind of enrollment dynamics you're seeing in the Phase III? What does that tell you about that the opportunity you have there?

Yes. So NIU and DM have in common that they are sort of orphan rheumatology kind of diseases with high unmet need, not a lot of other options. These patients are in a tough spot. DM is devastating disease, people that have it. The biology is relatively clear. In fact, in DM JAK inhibitors are used off-label as therapy, that there's at least 1 investigator-sponsored study, the STIR study of tofacitinib that looked interesting. So I think it should work. These are both diseases with significant patient populations in the case DM, tens of thousands, where we feel like we can make a difference. In terms of the bar for the NIU study, I think we've said a few times sort of where that is. We're looking for a reasonable responder rate in these patients clear signs of activity. It's a proof-of-concept study, so it's not going to show us much more than that, but it will hopefully guide us into a late-stage program if the data makes sense. In DM, it's a Phase III study. The hope is that it's a single registrational study, if it is successful. And we think that's 1 of these great orphan markets where if you get a new agent that offers a real opportunity to these patients, you have a huge opportunity to make a difference in their lives and that always correlates with commercial success.

Excellent. Maybe now I know we have a couple of minutes left. I do want to touch on Dermavant. It seems like this always comes up as kind of an afterthought in these kinds of conversations. But you are a commercial company. So I guess maybe just first, do you still see VTAMA as having blockbuster potential in psoriasis and atopic derm? Is there -- and is there room for multiple blockbusters in those indications, branded topicals.

So look, to be clear, I still think it has the potential to be a blockbuster in those diseases. The fundamental dynamics have not changed, right? Topicals are very widely used and they are imperfect and the current generation of novel topicals, it includes us, it includes OPZELURA, that includes Zoryve of Arcutis are better drugs than the sort of topical steroid standard of care in aggregate. And I think we have the best of that bunch taken with [indiscernible] profile. Obviously, other people have different claims. I think what we have -- we have to be realistic about what we've seen, and it is clear that converting steroid prescribers in psoriasis to novel topicals takes time. We knew it was a challenge. We hope to break through faster. I'm still optimistic that we're going to be able to do that. I think we've got enough positive feedback and enough enthusiasm from docs and frankly, enough script volume at this point. And it's clear that we can build a profitable franchise around the program. And so if the bear case is profitable and the bull case is multibillion dollars, that feels like a pretty good skew to us. That said, I think it's important for us to be very thoughtful about capital deployment right now because I think there's a concern that if we have the money, we're just going to spend it. And so I think we're being thoughtful about exactly how to deploy capital and maximize the opportunity set for us.

Yes. And I was going to ask -- it did seem like a bit of a maybe shift in tone on the last earnings call and willingness to advance VTAMA to profitability. Maybe I think you kind of covered that. I guess can you maximize value for VTAMA -- to do so, do you need to have maybe multiple product offerings in the sales rep's bag or how does that kind of factor in.

I think in the bear case scenarios that I described, where the product is not a multi-blockbuster product, I think at some point, it's going to make sense for it to get paired with other products and to take advantage of commercial synergy. I don't rush to do that, but there are many companies in the world who make their business around 9-figure selling topicals. And those companies would undoubtedly get great synergy from a product like VTAMA and many of them call us about it often because they see that opportunity. I think as we are deciding exactly what the picture looks like and whether we're shooting for that or how aggressively we're shooting for that multi-blockbuster opportunity, we'll continue to evaluate those conversations, but at the moment, we're just pretty excited about this product.

Excellent. And I think we only have a couple of minutes left. So maybe just kind of a broader question, I feel like we've only scratched the surface on the Roivant story. Lots of stuff going on we didn't touch on. What else would you be highlighting emphasizing to investors? Any new events, any other pipeline programs? Tell us about it.

I mean, look, there's some data coming in earlier programs this year. We've got Immunovant data in the MDS program. We've got maybe even a bigger opportunity this GM-CSF that we're starting in sarcoid, which sarcoid has been a tough indication in search of a target. GM-CSF has been target in certain indications. So we'll see if the match is there or not. But I think that would be a big opportunity if it were successful. I put that in a similar bucket to lupus, but obviously a small number of dollars with a big SKU, if successful. Astute readers of our 10-Q note that there's been at least 1 other in-licensing transaction that we have not talked a lot about. So there's some stuff that we're excited about. We've obviously got the LNP litigation ongoing with some updates coming as soon as February with [indiscernible] hearing. So all of that will sort of come too.

Yes. And maybe I think we have a couple of seconds left, and I know always leave -- the discussion is always left the last. But yes, what is the latest on the LNG litigation kind of -- and also, how does that kind of play into your strategic thinking of...

Yes. The beauty of only having 30 seconds left, as I can say, yes, we're not going to comment that much on an ongoing litigation. I think the [indiscernible] hearing is an important event for us in understanding how the court views the patents. And like many other things, it's high SKU. We really believe that we have the scientific team that originated that technology, and we feel very strongly about both the science that is happening at Genevant as well as about protecting the IP that we've developed, that team has developed over a 20-year period. And I think we've got a real opportunity. And obviously, those products were important, are important and have generated quite a lot of value for their marketers. And so I think we see a big opportunity for us if we're successful.

Excellent. Well, I think we are about out of time, but thanks for stopping by and telling us about the Roivant story.

Thanks for having us. Thank you.