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

All right. I think we should get started. So for those of you who don't know me, my name is Dave Risinger, I'm responsible for diversified biopharmaceuticals research coverage at Leerink Partners. And it's very much my pleasure to welcome Roivant to our conference. So with me, I have Richard Pulik, who is the company's CFO. And it's very interesting time for the company because they had promised on their 4Q call action by the timing of the 1Q call. So I'm not expecting any disclosures today, but looking forward to the discussion. So I thought it would be helpful for you, Richard, to frame the company vision and how you see its prospects. Clearly, the company has created a lot of value and made a lot happen in a short period of time. And I know that there are aspirations for even bigger and better things over the long term. So I would love to hear you describe the vision and the corporate agenda.

Great. Thanks so much for having us. Look, in May, we're going to be celebrating our 10-year anniversary. I think it's pretty incredible what the company accomplished in its 10-year history here with 6 FDA approvals, now $6.7 billion in cash as of the last quarter and lots of late-stage programs in play with many data readouts coming this year. Look, just as you said, you cover diverse biopharma. Our vision is to be a large diversified biopharmaceutical company. I think we have a lot. We have now an approved product in psoriasis with AD coming towards the end of the year, that file is now complete. And we have 55% of Immunovants. So a broad anti-FcRn portfolio with 10 additional trials expected by the fiscal year of 2025, 4 or 5 of those being pivotal. So it's a lot more breadth around the anti-FcRn platform in terms of ongoing trials. So we expect to have the readout on the NIU [indiscernible] this month. So obviously, as we look at that data, we will have a discussion to think about do we take this forward into an additional indication with brepocitinib, that's currently underway for Phase III in dermatomyositis. And certainly, I think given some of the HS data that would be another place to potentially go. And then we have an Anti-GM-CSF inhibitor in sarcoidosis that data reads out Phase IIb at the end of the year. And then as we're approaching FcRn data, we obviously have CIDP, Q2, Q3, that is a Phase II study. And then we have a Phase III in myasthenia gravis at the end of the year, and a Phase III TED study in the first half of 2025. So lots of important catalysts before we can get this additional spend on the $6.7 billion.

Phenomenal. That's a great start. So considering the discount that the stock is trading ahead of future capital deployment and strategic action, could you just characterize the components of the company as you see it? I mean, obviously, there are a lot of places of value. But if you could frame it as you see it, that would be helpful.

Yes. So cash, obviously, the first one of $6.7 billion, then we have a 55% stake of Immunovant. That's a publicly-traded company. And if you add those up, you're much at a current market cap. And so take any of the components that I talked about with the additional data reads out. I didn't even mention the LNP litigation where we have the results of the Markman hearing expected around April. But as you take, there's a very clear basis here in terms of cash plus a liquid stake. And so you do a lot of work on the other pieces here to fund the significant value.

Makes sense. And I was obviously kidding upfront about when you'll take action because you obviously have to take action when assets are available for sale and when it's the right time for the company to act, and you obviously don't move too quickly and pursue something and maybe end up passing up an opportunity that comes 6 months later that you don't quite see yet. So how do you balance that? How do you think about the timing of capital deployment?

So we're, with this economic, I think, look, the feedback at this conference and others from multiple investors has been looked as an unprecedented position to be in. We know you guys well. We like the types of deals you do. Usually, these are fairly small upfronts. We then generate data as we get to usually in a small trial to prove the [indiscernible] indication we want to go into, and then we talk about it publicly. So I think the DNA of our deal appetite hasn't changed just because we have a lot of cash. I don't -- look, I spent 10 years of my life being an M&A banker, I don't necessarily want to be paying M&A premium and doing those types of deals. I feel like the bread and butter still here is from the types of deals we did before. And then in terms of, look, share buybacks, I think one of the top holders has been talking publicly about needing to sell their shares. Certainly, very happy to have the discussion at the right price. And I think ultimately, that's the key driver, we think about that. So -- and then we have data being generated for NIU and other places where we could spend money on the internal portfolio. Of course, we're going to have a very lengthy discussion around, what's the competition? How does this data compare to HUMIRA? How does it -- what do we think about the market potential here? And how that interplays with our other indication that's in the Phase III? So we have very lengthy discussions around data that we done and just because I have lots of cash doesn't mean that we're going to approve something here. I mean, I think the high bar remains to make sure that we get the right drugs to patients and their meaningful additions to standard of care.

Excellent. And so I guess I'd like to go into some of the Immunovant readouts ahead. But maybe we could talk about other FcRns and their readouts that you're also watching that could influence relative positioning for Immunovant.

So look, I think everybody wants to hear, well, which indication -- I mentioned 10 indications, which indications? We've seen sort of positive data now for J&J on Sjogrens. I think -- what last I heard is that they were going to show detailed data of that at an upcoming medical conference. So whatever that means. And we're going to see the CIDP label from argenx probably this year. And then some additional indications. So I think like there's sort of post-COVID indication that's upcoming and a few others. Ultimately, this is a field that I think last I checked, has around 22 different indications in play. We are the only company that has 2 antibodies that suppress IgG at 80% at the high dose. It was engineered to be subcu and can be putting into an auto-injector. So we probably have ultimately sitting where we are today, the best, most convenient form of delivery. And we've now generated data that shows that for TED, we've seen almost doubling of responses in the 680 versus 340-milligram dose batoclimab, in Graves', we announced data, again, that we saw meaningful efficacy deltas across the 680 and 340 dose. And then some of our competitors as well have, if you look at the UC IgG data, you can see that there's a clear dose response as IgG is suppressed further where you have increase in platelet count and important markers that suggest better efficacy. So look, stay tuned in terms of where we go. I think given competitive nature here, we're being -- holding, I would say, the next indications close to just here. And we have a lot of flexibility in different places to go, not to mention the ongoing Phase IIIs that it will be potentially viable as [ MG data ], a TED readout in short order.

Excellent. And obviously, the batoclimab CIDP data is quite important. Could you shed some more light on that? And what you're hoping for?

Look, we designed this to be at the 680 and 340 doses for 12 weeks. So that's the data you're going to see in Q2, Q3. The idea to see similar to what we did with Graves' some -- pointing at efficacy delta. I mean I think the question is like given this heterogeneous disease and will it play out the same way as 12 weeks enough to show efficacy delta? So look, it's -- it's not too far away, and we'll also have the data point of the argenx CIDP, then we'll be able to think through, as we think about whether we want to move this into a pivotal trial.

Got it. And then just -- how should we think about doing any cross-trial comparisons or, let's say, benchmarking when we [ see the ] data?

I mean, look, I think all of these -- I would put the typical caveats here on cost comparisons, but I don't think that, obviously, everybody is going to look at this data compared to the other data that we've seen and...

You're talking about the argenx data?

Yes. And even for other indications. So like, for example, in our Phase III MG data reads out, I'm sure people are going to look at that versus the J&J data, which we should probably see at some point this year, there wasn't too much in their PR. And it would be hard to believe that everybody is now going to put this side by side and to try to sort of think through does -- do we really have the best-in-class efficacy profile? I think given what we've seen on a few of these indications, that's what we're seeing on TED and Graves', and I feel confident there. And as we get data for other indications. I'm sure people will make a similar comparison.

Yes. Makes sense. Okay. And then you had highlighted it or you, I guess, ran through it, but I was hoping you could just add a little bit more color on some of the other big read outs in the company over the next year or so?

So this month, NIU. So, I think we will look at that data and make a decision, do we invest into a pivotal trial here or do we really focus on DM in Phase III? And that was the initial hypothesis for doing this. And probably...

This is on brepo?

Yes, brepocitinib, JAK1/TYK2 inhibitor, maybe also do -- show a little bit on. We always get asked about HS as well. So that will be another indication to think through. So that's going to happen this month. Then in April, we will get likely a decision on the Markman hearing. So it usually takes a few months for the judge to response, so that I can shed a bit of color on the various patents and how they're being viewed. And that's for the Moderna case. Then in Q2, Q3, we're going to get the CIDP anti-FcRn data, which we talked about. And then end of the year, you're going to get the sarcoidosis data, Phase IIb, the MG Phase III. And then in the first half of next year, 2025, you're going to get the TED Phase III data for the anti-FcRn. And in 2025, you're going to get the brepocitinib dermatomyositis' Phase III readout. So obviously, we'll look at that and see whether we should file and to what sort of an agency.

Excellent.

And I missed VTAMA, we've already filed. So that would be approved at the end of the year. So that would expand the market potential roughly fourfold. We see what there's like 450,000 weekly scripts, topical scripts, mainly steroids. So take a modest share of that, apply our current [ 2 ] price and 50% growth now, which we think we can eventually get to and you get to $1 billion in sales.

I'm sorry, what penetration or...

So roughly like -- with roughly 6% penetration at $1 billion sales. So huge amount of...

$1 billion would be the 2 indications combined or...

So 450 is AD. So psoriasis is around 80,000 scripts per week, some adding the AD piece to that. So...

At fourfold. Got it.

And right now, we're running about -- so last two check, we were kind of like 4,900 scripts out of 80,000 in psoriasis.

Got it. Very helpful context. And then just in terms of dermatomyositis for brepocitinib next year, do you have any color on how we should think about with that relative to Pfizer's to [indiscernible], which they retain, that's in Phase III as well?

I recall that a I -- think that's an IV every 4 weeks. That's interferon beta. And there was, what, roughly less than 50 patients looked interesting. I think, look, we are -- this is our molecule, JAK1/TYK2. We -- JAK1/TYK2 hit interferon beta alpha, IL-12, IL-23 like a lot of important cytokines here that we think better in DM. So I think from a mechanistic perspective, I feel like we have a lot of breadth here to make a difference for these patients. [indiscernible] data looks interesting. I mean we're in a Phase III study and have the data in 2025, there was sort of early data, and there's a big need here for patients. So I'm sure that as we were looking at this from a competitive perspective, there's a big need and...

Yes, there's nothing approved.

Yes. So like IV -- different mechanism. I'm sure we'll be welcome if they're successful there. And I think there will be room for both. So I wish them lots of success on that.

Okay. That's very helpful. Why don't we pivot to the financials. So could you just remind us about the cash burn rate of the company. Obviously, that's not really relevant considering the valuation of the cash you have. But I'm just curious what that run rate is and how that might evolve. I know that you rationalized the company in recent years, and you have opportunities and are going to create more to build upon the pipelines, it would be, I guess, helpful to just have a baseline for thinking about the current cash burn?

Yes. So I mean I kind of roughly think about it as $200 million or so per quarter. I would say you have -- that doesn't include the additional spend on the anti-FcRn programs that we talked about, that gets fully consolidated into my P&L. So that certainly will be an uptick there. Then you have some of the 1401 spend, right, because you have MG reading out at the end of the year, and then TED first half, so that would be going down eventually as 1402 ramps up. And then for the VTAMA, majority of my SG&A, if you take out the stock-based comp, it drives the immune events sort of sales force and DTC. And so as we launch AD, you probably want to expand sales of roughly 25 people from the 100 and lean into DTC a bit more, right? So that would get approved towards the end of the year. And then you probably start hiring as that approaches and do some DTC campaign development. And then as we look at the NIU data, if we like that, that will be probably a pivotal trial. This -- let's see then how the discussion with the agency and me patient. But again, that will be another piece of spend. And then as CIDP data reads out, there'll be another thing to think through, do we want to do a pivotal there? And sarcoidosis lastly because that's a Phase IIb, so that would most likely require another trial at the end of the year. So lots of different moving pieces. We know with additional potential spend. I would say the bar certainly didn't change, given our cash balance and we are ruthless about prioritizing these assets and making sure that we have the similar high standard for return on capital that we had when we didn't have the [indiscernible] cash.

That's helpful. And can you talk about the deal environment more generally. It seems to get better and better, meaning big companies are facing cliffs. They're doing deals and they have to reprioritize their portfolio. So Pfizer has been cutting spending recently. Bristol disclosed on a sell-side call, I think last Monday or the Monday before that they, in the wake of doing a number of acquisitions, recently they're going to be exiting certain development efforts, which could create opportunities as well. And then there are still a lot of large global companies that are not optimized in terms of their -- certain areas of therapeutic focus, which may be whatever, sixth or seventh on their list or may be candidates to exit. So considering all that, could you comment from your vantage point?

So having [indiscernible] for 10 years, I would say a lot of these decisions on [indiscernible] I mean when you're big, you obviously have a quantum of capital that's allocated in R&D, and if too many things were successful, then you need to prioritize the portfolio, right? Because it's if you typically will say like, okay, this thing is a 30% POS, it hits. And if things were really 50%, then your R&D budget goes out of control, and you're not going to hit your operating margin guidance. And there's very few levers you play with, right? Because if I play with sales, like DTC, then immediately my sales go down. if I play with the chunky things that you can potentially impact actually will drive sales decreases. And so R&D is only one of the few places that you can play with, especially if you have the success. And I would say the things that, in big pharma, we always struggle with a little bit is to what obviously many of these programs have ongoing trials. There's a lot of breadth where you can go into. And I would hope that we're all here to make great drugs for patients. And that some of these capital allocation decisions and margin pressures still drive my pharma colleagues to find great partners here. And I would say, the thing I struggled with when I was in big pharma was, how do I find a partner that actually has the capital, the breadth of experience and the track record to take on these programs? Because it's obviously a reputation risk if you get the wrong partner here. And who is flexible enough, right? I mean if you look at the way we structure many of these deals, we're very flexible and thoughtful and are very happy to have the pharma company retain economics and doing other things down the line depending on what their needs are. And Roivant, I would say, is probably clearly the only company that stands out here given the breadth, the track record and the capital runway to be able to take on these programs. And so I think that hasn't -- I think people are noticing that a lot more -- given our success that obviously drives a lot of dialogue and a lot of great choices, and it's been probably one of the best times given a lot of the companies you mentioned had management changes as well. And so that also then creates opportunities as those companies reprioritize and -- but still want these drugs to be successful and to go to patients.

Excellent. That's very helpful context. And then just maybe taking us behind the scenes a little bit. What are some of the things that the company has been working on, that maybe flying sort of below the radar screen for the investment community? Anything that you would highlight, either operationally or strategically?

I almost still want to hide them because look, given where the valuation is, it's almost just focused on big things, I mean, very, very openly. So -- but look, we -- I would say, Roivant are -- there's a very strong group of tech engineers, for example, who we kind of look and solve problems. There's a -- we've been doing small deals across HealthTech. We have a small discovery effort where we're looking at protein interaction on small molecules and trying to bind using AI and also some of the wet lab data that comes back through that to find better binding pockets and a way to do some discovery. But look, that effort has -- we've also announced a few partnerships with big pharma here on particular targets. I would say that sort of -- all of that is sort of a cherry on top. And did the big things I talked about would -- I would tell people to focus on that to really drive value and not to get too distracted around some of these other things.

Okay. That's helpful. Could you just provide a little more call on HealthTech?

So for example, there was a company that where we have a probably less than 20% ownership, now called Datavant, that essentially solve kind of like the plumbing problem of getting data between different providers that was then merged with Ciox and that's sort of like one example, right? Like so you have data, how do you connect that data and you basically have tokens to drive the exchange there. Or for example, we had thought about various -- how do we drive recruitment, and think about maximizing enrollment. And so we had sort of built something I would call, Lokavant, to think through that. I mean, these are all very small investments and to address some problems that we've seen. But look, some of these can be -- can go to meaningful stakes. I mean I would say that, that Datavant' stake is a fairly significant business year with meaningful EBITDA and eventually, that may be IPO-ed or something else down the line. That's just another piece of value that people aren't really thinking through as they look at the total value of the company.

Excellent. And then just going back to the LNP litigation you obviously can't litigate it publicly here. But if you could just talk about that. So the Markman hearing comes and that shine some more light on the strength of your case. But then there's also that side show with Moderna trying to assign liability to the government and the government potentially taking on some of that. Could you contextualize that for us, please?

So maybe stepping back, if you look at the royalties that we struck with different partners, BioNTech and others like across different non-COVID indications. Usually, these were struck at low -- sort of like mid-single digit to low teens when there is no clinical data. So obviously, there was clinical data at the time of infringement here. And the -- Moderna [indiscernible] the patents with using some of the IPR process. There's a question here in terms of like what percent of sales will be implicated, right? And so they try to partially dismiss, like exclude the sales for -- that were bought by the U.S. government to try to offset some of that liability to them to use this [indiscernible] time act that essentially removes liability for particular -- during times of distress. I mean just like at a very high level. Obviously, we think that doesn't make a lot of sense. And we have disputed that very creative solution, and we should get a decision there by probably early next year, I would suspect. And then in your model, it would be essentially, like you take all of the U.S. sales historical and forward, do you remove a portion because some of it was sold to the government? Do you like -- as you have your various scenarios, it all comes down to what quantum you apply for sales as we get more color around some of these different disputes.

Got it. And then what about with respect to Pfizer, what's the outlook there for...

That case is roughly a year behind. I would say they didn't play similar games with the statute that we just talked about. So in some ways, it will be maybe a little bit less than you are behind. And then the Markman hearing, I expect to be sometime next year. And then let's see how all of that progresses.

Great. Well, I just kept rolling with my questions. I didn't realize that we ran over time, but very helpful. Thanks so much for being with us.

Thanks so much for having me.