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

Good morning. My name is Dennis Ding, Biotech Analyst here at Jefferies, and welcome to the Jefferies 2024 Healthcare Conference in New York. I have the great pleasure of having Roivant Sciences, CEO, Matt Gline here with this -- with us today. And obviously, Matt, there's been a lot of interest in the stock over the last 12 to 24 months.

Maybe talk about what happened last year, specifically around TL1A, and now that we're pretty much halfway through 2024, talk about how you are thinking about the outlook, especially in terms of BD and things like that.

Sure. Thanks, Dennis. Thanks for having me. It's great to be here. Thank you all for spending time with us this morning. So yes, look, it's been a wild -- I mean we said at this conference a year ago, preparing to unveil the long day -- the long duration data from the TL1A program to broad speculation of what it might be. And so to be here 12 months later that with $6 billion in the bank on the back of that sale, feels like it's been a bit of a whirlwind. Look, we have never felt better about where our business is than we do right now. We have capital in an environment where capital is, maybe more available than it was 6 months ago, but not plentiful. We have an opportunity to bring in new programs. For those who don't sort of know what we do, we are a late-stage developer of drugs. And this is among the best environments ever for a late-stage developer of drugs to find great programs to work on. So we feel really good. In terms of sort of what's happening right now, we are hunting the world over. We're having phenomenal conversations with a bunch of different kinds of folks. I'd say we're in mid- to late-stage economic discussions on multiple programs we like from a variety of sources. And we're hoping to announce things in the coming weeks or months. It's hard to know exactly.

Weeks or months Okay. Great. And I can -- you can surely appreciate that a lot of the platform at Roivant comes from the ability to do BD and to in-license assets or programs that could create value over the long term. So talk about what you think are interesting therapeutic areas, modalities, things like that? And what is high up on your priority list in terms of finding things that could be interesting for investors?

Yes, great. Look, I get a question a lot like, I get the versions of this question. What sort of what do you do? Are you an immunology company. And what I would say is our document basically is that we have no document, that we're incredibly flexible in what we'll work on as long as it's interesting. I'd say the sort of part of what we're looking at is generally late stage, often in or about to be in pivotal studies, especially with big pharma, that's kind of the heart of what we talk about. We'll certainly do some earlier things, I say that's like the meat of it. And then from a therapeutic area perspective, we're pretty much agnostic. We've said in other forms. There's a couple of things that we're less likely to do. Capital O like core oncology is a little bit less or thing. Mostly because if you pick up a program from here and a program from here, it's hard to build exactly the right combo portfolio. And so we do it never say never, but it's a little bit less heart of our mission than some of these other areas, but other areas, immunology, pulmonology, cardiology, cardiometabolic, I should say, probably not obesity, just because of the competitive environment, although got these days, I wish we could just point something in our portfolio and say we're developing it for obesity guys, but we're not. And then rare disease and some other things, all sort of on the table for us. And those are probably the areas where we currently have mid- to late-stage discussions ongoing mostly.

Okay. And the expectation, I guess, over the next 6 months is for you guys to disclose more details for you guys to announce one deal or at least one deal.

Yes. Well, so I can say with confidence, later this summer, early this fall, we've already gotten one deal. It's an asset that will be in a Phase II study later this year, and we will talk more about it later this year. We haven't disclosed the identity of the asset because it's a competitive target. There's one other program at least that we're aware of. That program is at a big pharma company and a different indication, and we're going to start our Phase II study sort of mid-year. We want to get that study up and running before we talk a lot about it publicly. So that one, I'm confident we can disclose. It's already in hand. And then we're looking at a bunch of other things. And I would say of that bunch, my expectation is that we'll be able to talk about 1 or 2 more over the next 6 months for sure.

Okay. Very interesting. And you talk about the fact that the environment has been very conducive to BD. And I feel like you've had a very similar comment over the last 12 months, yet nothing -- or obviously, nothing felt like there hasn't been anything significant that has materialized despite the fact that we are in this great environment. So is it -- how -- what are your comments on that? Is it because Roivant is a very ruthlessly economic type of company and you guys aren't willing to pay too much for a certain amount of asset? Or is there anything else that we may be missing?

I think, really, we've been talking about the quality of the BD environment and our aggressive appetite since the TL1A deal. The TL1A deal closed in December. So I think we're really looking at like maybe 6 months. And I think the short answer to that question is we're choosy. We have an unprecedented opportunity with the amount of capital on our balance sheet to put together a portfolio that is unique and path changing for us. And I think our view is this is a measure many times, cut once kind of a situation. And we certainly could have done half a dozen deals in the last 6 months that would have been pretty good and well received by the Street. But I think it's way more important to us to do the kind of program that we're going to be excited to talk about 3 years from now, then the kind of program that happens to be on trend now. And so I think those discussions just take longer and merit a little bit of consideration. So I don't think that necessarily at this point means I'm advocating for patients, I think we're going to get some stuff done in the relative linear horizon. But I think it would be a shame in my opinion, to waste this quality environment on a high quantity of bad deals when we could do a small quantity of really, really good ones.

Sure. So then what is your definition of a good deal? Maybe talk about because you did mention you're looking for things that are mid- to latte-stage, perhaps with some kind of proof-of-concept data, some kind of Phase I BD data like...

We're looking for things where we can write checks that are at the very highest in the very low 9 figures upfront and probably less for drugs where there is good, either direct clinical proof of concept or proof by proxy that we feel really, really good about in indications that matter where we have a development strategy that we think incredibly buys us data that will mean something over a reasonable time horizon in a big indication. I think that's like -- that's the bar that we've set for ourselves, and then I'm confident we will clear multiple times.

Does it matter to the company or how important is it that any of these new licensing deals are in a commercial white space with very little competition versus going into an area where there is a lot of competition from Pharma?

Yes. I mean, I think, most of the programs we are looking at are not like me too mechanisms, where there's like a bunch of other drugs in the same mechanism unless we have some incredibly novel approach to developing it that like sets us apart. I don't think we have a high opinion of our own ability to compete head on with AbbVie or something like that. Like I just think that's like a tough bar and most biotech companies failed to clear it. So I think we're looking for places where we think we can carve out space for ourselves, either by being a first-in-class in an interesting new mechanism or a commercial area that doesn't have the same competitive intensity. Now I think the one thing I'll say because I don't know how much time we're going to spend in FcRn and again, but I think like, for example, I think there is a debate about the competitors. There's a debate in the world about the competitive intensity of like B-cell immunology or something like that. And I think that debate is misplaced fundamentally. I think it is a big tent and FcRn has proven itself many times to be a foundational mechanism. And so I'll say, like, I have no qualms about being an FcRn and investing heavily there despite the "competitive intensity" So I think sometimes, we're open to a healthy debate about how competitive space is. But in general, we're looking for spaces where we have conviction that we are going to be best and able to win.

Sure. And I think that's a great segue into immuno and some of the recent updates there. Can you just remind us what happened in terms of batoclimab versus 1402 and some of the updates over the last few weeks?

Yes, sure. And first of all, I'll say it's something where I've actually -- I've been just like reflecting on it a lot over the last week. And I want to just like take a step back. And I think like we've been very much sucked into a mostly buy side discussion about like this mechanism versus that mechanism and how we're thinking about X, Y or Z data set that's coming in the next 2 weeks. And I think all of that fundamentally misses the point around where we are with FcRn. And I think in some ways, the sort of sequence of IL-6 and IgG degraders and all these other things has like reminded us again. FcRn as a mechanism has elegantly cleared a bar that I don't think people realize how high that bar was until other people tried and the answer is like it is a foundational mechanism in a big tent of new indications. Like someone was telling me meeting earlier today that they were struggling themselves that they've never seen an ad for CIDP before and now they're seeing these ads for VYVGART and CIDP and the truth is like why have we not seen a bunch of television ads for CIDP, it's because there was not biology that could -- with the exception of like IVIG, which is a very complicated thing. There was not novel good biology to address CIDP patients. I've never seen an ad for Graves' disease before. I've never seen -- like there's a whole bunch of biology that is addressable by these novel mechanisms that has just been unaddressable before. And I think we are just waking up to how broad that is, how foundational FcRn is as a mechanism and how big this opportunity is. And I think it is a mistake to sort of get into these little squabbles around X mechanism versus Y mechanism or 2 months here or a couple of weeks there. So that's just like a point that I've been reflecting on a lot is I feel like the conversation about this stuff, in my opinion, is much too small. And for example, and I don't totally know how I feel about this fact, but like the world has completely underestimated the importance of the batoclimab study in MG, right? That is -- think about how many other companies out there are benchmarking their own goals in MG to what argenx has delivered based on that being what FcRn can do. Imagine if we beat that bar, imagine if we add, I don't know, 1 point or 2 points to MG ADL like the bar has changed for 50 companies overnight. And so I think that people underestimate how important that sort of -- that kind of data can be for this field. So having said all of that, mechanically, what's happened in the last couple of weeks is -- so first of all, we had a really good interaction with FDA. We had a Type B meeting where we dispensed with, I would say, a bunch of the important things necessary to feel confident about our ability to advance 1402 into pivotal studies, which has been important. And so I think that gives us a lot of confidence in the pace of our development program there and has allowed us to kind of say. We said we're going to do 4 to 5 potential pivotal programs this year. I think we now see line of sight into what those programs are and how we can get them started. The other 2 things we announced. One is a, in my opinion, sort of nothing burger slight change to the MG time lines, which is MG is competitive, but actually, like we have the vast majority of patients we need enrolled in that study now, and we're happy with the quality of the patients we're getting. But in order to read out that data by the end of December, we'd have to have every patient in, call it, by mid-June, because it's a 6-month study. we're not 100% confident. We're going to have every patient in by mid-June, so it may be a little bit later than that. So we've acknowledged that it may be a little bit later than that, but nothing sort of significant is a delay there. And then the other thing that is more significant is, we made a decision in the CIDP study to add a couple of quarters of time for the study to mature. And that was really a decision that favors 1402, in particular because we may very well have enough patients in the CIDP study now to feel good about the sort of period 2 like primary endpoint. But remember, period 1 is where the dose-ranging component of the CIDP study is, and we wanted to make sure we had enough patients on drug in the dose-ranging component to get a clear read on high versus low dose in CIDP. And the truth is, and this is a lesson that argenx taught us 2 things. One good one, one not so good. The good thing they taught us is the way to run a CIDP study is to get active sick patients into the study. Those are the patients who really answer the question. It just turns out there's a lot of patients walking around with CIDP diagnosis who don't really have CIDP and it's hard, it's a hard disease to diagnose. And so I think we've done a -- I'm proud. We've done a good job of adjudicating for those patients and have brought them into the study. The problem with those patients is the way our study works is there's a 12-week washout of existing therapy followed by a 12-week period on drug. If you're a sick CIDP patient on stable IVIG and you're told to wash out for 12 weeks, it turns out that really s****. IVIG works for you. And so we are losing patients before they're ever dosed basically batoclimab or before they've received any significant amount of batoclimab because they're just going through that washout. And frankly, I think we've got more of those very sick patients in our study than we expected based on precedents, and so we've lost more patients as a consequence, which matters for the in on drug as between the 1402 and the battle arms in that period. And so we basically decided to add some time to mature, mostly patients who were already in because remember, if you're talking about reading out 2 quarters later, every patient -- in order to read out a patient in 6 months, they basically have to already be washing out now because there's 12 weeks of washout and then 12 weeks of dosing, but we wanted more of these patients to mature through the study, so we got enough end to distinguish between the doses, and that's the other decision that we made.

Got it. And when you think about your FcRn strategy in general, right, batoclimab has a very strong and profound reduction in IgG relative to VYVGART.

Yes.

So is your expectation that in both MG and CIDP and TED that you would get -- or sorry, not necessarily TED, but that you get better efficacy than VYVGART. Is that the bar that you guys are shooting for?

Look, we absolutely believe that it has been shown consistently in clinical trials that deeper IgG suppression results in better clinical benefit. We showed it in our TED study. We've seen it in our Graves data, which we'll put out later this year, but which I think will also show unambiguous benefit to deeper IgG suppression. And we think at the patient level, it has been shown consistently in MG, right? If you look at Momenta's old decks or if you look at argenx's decks, they all show this like clear patient level correlation between IgG suppression MG ADL response, it's been difficult to show at the cohort level in MG in part because MG-ADL is a relatively noisy measure, but absolutely, the short answer is we believe that deeper IgG suppression is going to matter. We think it's going to matter to some patients in every disease and to all patients in some diseases. And we think ultimately, the biggest differentiator among several that we will have is that 1402 will have better clinical benefit because of the deeper IgG suppression in many indices.

Right, exactly. And the whole, I think, attraction with the FcRn space is the numerous amount of indications in areas that you guys can move forward with and I appreciate that there's already many other companies that are going to different areas of the population, but talk about how you prioritize where you guys will be moving forward with? I mean, Graves' is one that I don't think you guys are doing, but how do you think about that?

Yes. Look, I think for us, with 1402, we've caught the tiger by the tail. And now there's question is like what we do with it. And I think the thing for us is there are certain indications that we feel like we, they're just like table stakes, like MG, what we've now said we're going to progress into pivotal development. I believe we're going to do that with an efficacy profile that's potentially better. And also, I think we have some creative ideas for clinical development there given that VYVGART has a healthy lead. So a couple of those kind of table stakes indications. And then everywhere else, I think there's no particular reason to get in a squabble coming from behind. There's so much white space. We're looking for indications where we will be first like Graves', where we're leading the pack or the really nice thing about FcRn as a target is IgG suppression is such a good biomarker for efficacy that you basically know from anybody's Phase II, what you need to do and so in any indication, take Sjogren's, where J&J put out some pretty impressive data actually last week, 2 weeks ago. I think like it's now clear that if we wanted to go into Sjogren's, we could be neck and neck with the competitive field just by starting a pivotal program imminently. And so I think our goal is to either be at or near the front of the pack or in complete white space in leading the pack from here on out with a couple of exceptions where we just feel like we really need to play.

And how do you think about the pricing strategy? Because I think previously, you guys were moving forward with a 2-prong, 2 different price points with batoclimab in 1402 now that you guys are just presumably moving ahead with 1402, how do you think about going after a rare indication versus something like RA?

Yes. Look, I -- first of all, I wouldn't -- I think the strategy, as previously articulated, is still available to us. We're going to get the data in bato and TED. If that data does what we wanted to do, I think it's very plausible that we could launch bato and TED. I think we are currently prioritizing investment and time in 1402 just because that is -- that's clearly the bigger of the 2 programs given its profile, but there's nothing stopping us from continuing to develop bato and hyper syndications as we get a clear picture of where we are on things like TED. . I think, in general, our view is 1402 is a potentially true best-in-class molecule here. And so we're going to develop it broadly and price it to access the sort of broadest number of indications, the biggest number of patients. And I think that means things like Sjogren's. I think that means things like potentially refractory RA patients. I don't think that means we're going to compete at like the -- like entry-level price point for a frontline RA therapy. But I think there are absolutely opportunities at reasonable price points to go after that patient population. I think that means 1402 will not be priced at like some ultra-rare price point. And then battle is still available for that purpose depending on how the world looks.

Got it. Very interesting. Maybe if we kind of shift gears to the rest of the pipeline in the last 5 minutes, I know we spend a lot of time on BD and -- but in terms of the clinical readouts left this year, go over some of those. I think what I'm getting at is sarcoidosis that's in Q4. Can you talk a little bit about that and your expectations going to that data?

Yes, obviously, several of the clinical readouts we have coming this year, including like Graves' disease or obviously in FcRn. But outside of FcRn, I think the other major piece of clinical data we have this year is our sarcoidosis readout. That's in our anti-GM-CSF antibody, namilumab. No one ever asks me about it. We don't talk that much about it for that reason. Look, sarcoidosis is one of these sort of great orphan inflammatory indications where there is an enormous amount of patient need. There's basically no good alternatives at this point, and there's very few alternatives in late stage clinical development that show promise. GM-CSF is good biology for sarcoidosis. We know that sarcoidosis is caused by these sort of granulomas and these granulomas are effectively formed in part by macrophages, and GM-CSF is obviously relevant to the formation of macrophages. So it's promising from that perspective. It's a tough indication, right, that sort of patient -- or tough that sort of steroid taper dynamics are complicated as with all of these indications. And so I think for that reason, I've been pretty content for it to live in the high SKU bucket, where if it works, I think it will be worth quite a lot. And we've spent relatively little on it to get an answer. That said, data is coming, and I think it's a kind of thing that has the ability to add a lot of value if it looks good.

So are there any kind of comps in the space that with the benchmark namilumab to? Like I don't think there's...

In sarcoid?

Yes.

No. That's the beautiful thing about namilumab and sarcoid. There's nothing else. It's a lot of -- about 200,000 patients most of which the significant majority of which are sort of primarily pulmonary sarcoidosis patients. And I think the answer is there's basically nothing to count down with. And we know, yes. So I think the answer is it's a pretty open field.

What about things like off-label biologics. Like are there any data out there on that?

Yes, there's some. You do see -- look, people use all kinds of things. I mean, you see some JAK inhibitors used off-label. That's not a biologic, but like that's sort of a potent antiinflammatory. You see some of the other ones used. Not a ton because it's a tough indication and so actually, like a lot of these patients just live on and off systemic steroids because it's the only thing that is sort of truly known to work. So there's a real opportunity here.

And then if we pivot over to brepo. You guys had some very positive data in NIU and that's probably going to move forward into Phase III. Talk about that data and could you give a little bit of color on that and your confident level on getting a Phase III up and running.

Yes. So the last one is very high. I think we -- NIU is another area of like very high unmet need where HUMIRA is approved, it frankly doesn't work spectacularly well. The endpoint of choice in NIU is called treatment and failure rate, and it's exactly what it sounds like, right? The way these drugs are measured is how often they fail to successfully treat patients. On an apples-to-apples comparison to the way that we analyze our data, HUMIRA has got like a, call it, 2/3 or something, 60-plus percent treatment failure rate. So the majority of patients on HUMIRA do not successfully get treated by it. Even on their own measure, it's about 50-50. And on their measure, we were like, I forgot 11%, 15%, something like that. And in our measure, we were 29%. So just like much categorically different in terms of our ability to treat these patients successfully. And you can talk to ophthalmologists, the tolerance for inflammation in the eye right is basically nil. Like these patients, it's the leading cause of blindness in the U.S., 30,000 patients go blind every year. Certainly, maybe like the number 3 or 4, it's one of the top cause of blindness and 30,000 patients go blind every year. It's a very tough disease. The sort of -- for patients who have sort of the inflammation in the front of the eye, they use steroid drops and those work reasonably well, but on the back of the eye, you wind up on systemic steroids and systemic ISPs and they're tough therapies that people do not want to be on, and they don't work that that well, candidly. So we feel great about it. Our current analysis suggests there's about 40,000 sort of biologic scripts written here or 40,000 patients, I should say, on biologics. That includes sort of direct HUMIRA scripts, includes some off-label use and some other things. And again, those fail, 50%, 60% of the time, even in a biologics refractory setting, we would have 10,000, 15,000 patients to work on. And the price point for ocular inflammation is -- and TED obviously has shown there's a willingness to pay on the payer's behalf quite a lot for those patients. So we feel like it's a big opportunity.

Right. And I think the interesting thing about brepo is that you are moving forward in some of these orphan like indications like NIU. You have DM Phase III really out late next year or second half of next year. So talk about your pricing strategy there?

Yes, it was a good question. Pfizer has a DM program, and they've publicly indicated they think net price in DM is maybe like $150,000-ish. The dose that we are carrying forward in DM is 30 mgs basically. That's what we expect the commercial dose to be. NIU is probably the only indication where we expect 45 to be the commercial dose. So we have some flexibility, certainly, either to price at least 50% higher just based on dose alone or to price qualitatively differently is a different product. And I do think NIU may be able to command a different price point. But I think the expectation, if it works in DM is that we would be kind of competitive with the other novel therapies. So I think that Pfizer range is like a reasonable thing to keep in mind, and that's a net price, remember, so that's after rebates and everything.

Got it. Very interesting. And I feel like that's something that people don't necessarily appreciate is the pricing aspect of brepocitinib.

I totally agree. Look, I think -- we bought brepo effectively in 2021 at the bottom of the valley for JAK inhibitors, where I think no one really knew where they were headed. Obviously, RINVOQ since then has like tripled or something. So it's clear that like the future for JAK inhibitors is that they're going to be here to stay and they're going to be important properties of the treatment landscape. And I think part of what happened in that sort of whatever that sort of death valley around the Enbrel study is we lost all diversity and development strategy around JAK inhibitors. And I think the fact that we have this plan to develop brepo in orphan immunology and orphan rheumatology is pretty unique. And they're just the biggest gun out there, right? Even direct TL1A, even in UC or like the only mechanism that was able to approach the TL1As was RINVOQ. It was the JAK inhibitors. So I think like there's still unparalleled benefit from these mechanisms from JAK1 and from TYK2. And I think like the challenge has been tolerability, basically, our safety. And I'm sure, there's an orphan rheumatology, orphan immunology, we don't even think that's going to be that big of an issue. So we think we've got a pretty cool niche for ourselves where we can charge an appropriate price for the value we deliver and occupy a relatively open field relative to what other people are doing.

Very cool. All right. Well, I think that's all the time that we have today. Thanks so much, Matt, for being here.

Thank you. This was fun.