Roivant Sciences Ltd. ($ROIV)

Good morning, everyone. Thanks for joining the BofA Healthcare Conferences. My name is Chi Fong, I have [ Dina Ramadane ] with me today, we are both from the U.S. Bio-pharmaceutical Health Care Team here, Bank of America. I cover Roivant, she covers Immunovant. We are glad to be co-hosting CEO of Roivant, Matthew Gline today. Thanks for joining us, Matt.

I'm so happy to be here. Thank you.

Okay. Great. Maybe start with some high-level questions, if we may, before we dive into some of the deeper product level questions. And so as you know, Roivant has gone through several distinct areas, you have the initial [ Myovant days ] through the value realizing exits like TL1A to now you're building franchises like brepo and Immunovant 1402 as multi-indication franchises. So curious, which parts of the original Roivant model have proven durable? And what have you potentially want to move away from us to company matures?

Yes. Look, a great question. Good to be here. Thank you for having me. I can't see that well because the lights are, but I think thanks for being in the room. And thank you for your great coverage of Immunovant. So Roivant, actually, we celebrated our 12-year anniversary last week. And we've done a lot of things in our history. And I think like it's hard, biotech is such a path-dependent industry. It's hard to say that like any of it was wrong. But we've built a successive -- a group of successive pipelines. First, the sort of more spec pharma pipeline you referred to in women's health and urology, and then we had the TL1A briefly as a short era and then now with this immunology pipeline -- immunology, pulmonology pipeline that I think is the best we've ever had. I think one of the things that's always been core to our model is, I think we're pretty thoughtful about how we bring drugs in. And one thing that's become more and more true about I think we're pretty thoughtful about how we develop them. I think we've become quite good at indication selection and aggressive clinical development. I think that's something we've developed as a core competence over the past handful of years, gotten better and better at. And I think it's enabled some of the multi-indication franchises you referred to. I think it's enabled some of the data we've been able to generate. So that's been sort of a new add. BD remains core to the model. We're always out looking for new programs. Obviously, at our current scale, the things we need to do to matter are different than some of things that could have worked for us a smaller companies. So I think that's shifted over time. But in general, we remain opportunistic. We remain aggressive. I was talking to someone yesterday, I feel like there are CEOs who are sort of whatever, they're very like long-term narrative-driven CEOs. They have like a big vision. And I feel like Roivant's more of a mark-off chain. It's about like what the next thing we can build is on the thing that we've got now and sort of keep continuing to add that on over time. I think it served us well, and I'm excited to see where it takes us next.

Is the business model still primarily optimizing for optionality where, say, if we have a great asset, potentially if you can find an extra strategy for it, you contemplate that? Or are you starting to think about underwriting Roivant more of a stand-alone commercial biotech company?

Yes, look, we're not dogmatic. And so I think we remain open and flexible in the literal sense of that word. I think we are acutely aware and have been since the very beginning of the company, that the way you build -- at this scale, the way that you deliver shareholder value, the way that you grow as a business, the way that you become a $50 billion, $60 billion, $80 billion, $100 billion company over time. There are no $100 billion like VC companies or whatever, like in our industry, the way you build a company that size is you commercialize products and you generate revenues and you become profitable. And I think that's always been sort of our expectation for where we would land eventually. And I think it's been true that with each successive exit from a capital and portfolio perspective, we wound up in a stronger position in the next time to do it again. I think you would be hard-pressed to describe a pipeline of portfolio of drugs more exciting to commercialize than the one we have now, nor a pipeline or portfolio of drugs more aligned with where biotech has been successful at commercializing drugs than the one we have now. And so I think it's highly likely we're going to commercialize this portfolio of drugs.

Great. Great. curious on our capital allocation. After the TL1A divestiture, you were able to balance between reinvesting in the company as well as returning capital to shareholders. If additional LNP proceeds were to materialize, how would you rank about priorities on capital allocation strategy?

Yes. One of the things that has been always true about Roivant and particularly true about us since the TL1A is we've been spoiled from a capitalization perspective. We're a well-capitalized business. We always have been. And I think on the back of the TL1A, we sort of said at the time, we had roughly $6 billion in cash, and we sort of said we're going to return 1/3 of it to shareholders roughly, we're going to sort of save 1/3 of it for like new stuff, and we're going to spend 1/3 of it, making sure we do right by the existing pipeline. I think we've been executing along that plan. If we are taking in money from this Moderna settlement as soon as this summer, we've already accelerated our share buyback on the basis of that cash coming in. The truth is, it's hard to look at our pipeline and opportunity set and say if someone handed me another $1 billion or $2 billion tomorrow. That we would do anything materially different from what we're doing now. And so I think up to a point, I think we'd be pretty aggressive about continuing to return capital to shareholders. But we are constantly evaluating the opportunity set and looking at bigger things, different things, different opportunities. Obviously, we'll have a better sense of what our own commercial P&L looks like as we get launched, hopefully, later this year. And so I think all of those things will factor into capital allocation decisions. But I think the base case though here is we have the cash to do the things we need to do. And if we have more, we'll be thoughtful about returning it. And share buybacks are judged in hindsight, which always makes them nerve wracking to do as a company. But we bought back $1.5 billion of stock at $10 a share, which looks pretty good now.

All right. Great. I guess on business development, where do you feel externally sourced assets could add the most value versus, say, what you're already developing internally?

Yes. Again, we're spoiled not to have to choose between those things and that we have plenty of capital to add indications for our existing programs. I think it is clear that both brepo and 1402 are phenomenal drugs that work well at impacting important systems that have a lot of biology associated with them. And I think we have lots of ideas beyond what we are currently doing in both of those spaces. And for the moment, are not capital constrained on those ideas. It's just about making sure the execution remains at high quality. And I think we will continue to add indications to both programs.

You talked about you're not capital constrained, but you have frequently described Roivant R&D culture as ruthlessly economic. I have repeatedly. So I'm curious, as the company scales and begins to generate revenue, improving cash flow, does standard loosen ups allowing for bigger and longer-dated investments?

I don't think being ruthlessly economic precludes bigger or longer-dated investments. I just think it stipulates a standard for the quality of those investments that I hope we never stop holding ourselves to. Look, I think one of the reasons -- this is like a philosophical comment, I think one of the reasons Roivant exists as a company is because the investor landscape as pertains large pharma companies, forces large pharma companies to do unnatural things to try and make choppy businesses with highs and lows related to patent costs and R&D cycles look more like NVIDIA or Google because the marginal investor in Pfizer or Eli Lilly right now isn't deciding mostly between Pfizer and Eli Lilly, they're deciding between Pfizer and NVIDIA. And I think the truth of the physics of our industry is the return on capital can be amazing, but it's fixed life and these programs have ebbs and flows and the unnatural things you have to do to make yourself look different than you are, are costly. And so my hope, at least for the foreseeable future is that we can avoid those pitfalls, and we can run ourselves in a ruthlessly economic way and making decisions about capital based on what is right for the capital and not based on trying to attract the attention of specific investor.

Great. Maybe we'll jump to brepo is your next drug coming up that has a PDUFA in 3Q and launch follow after and so is for initial indication is for dermatomyositis. And so you talked about building a targeted and specialized field force focused on academic testing physician community. So I'm curious how concentrated is the DM patient population among physicians that you are targeting? And what proportion of that patients represent out of the 40,000 treated patients right now?

So about half of the in-treatment dermatomyositis patients in the U.S. right now are treated at specialty myositis referral centers, mostly academic in nature, and there are about 200 of those referral centers. On our those referral centers are not single physicians. It's like Mayo Rochester is a referral center, Cleveland Clinic, Johns Hopkins. And so there are often multiple physicians involved, but we will target all 200 of those centers and most of the Docs at those 200 centers at launch and more Docs, community Rheumatologist, community Dermatologists who treat a larger number of dermatitis patients but aren't like at an academic referral center. And the truth of the matter is when you're talking about 200 centers or even 2,000 physicians, it's like not that difficult to build the field force to cover that size of operation. And so I think, to be honest, our principal focus right now, we want to make sure we have a large enough operation. We want to make sure we're able to cover those Docs, able to cover them often, get-in those offices and make sure they're getting what they need from a support perspective, getting what they need from a touch point perspective but also -- we're very focused on field force quality and on making sure that the people we're sending into these academic referral centers can go toe to toe with the highly experienced academic physicians to treat these myositis patients. So like one of our field medical person, one of our -- exactly a sales rep, like one of our field commercial personnel when she's out in the field is a myositis KOL who spent a career treating myositis patients. And then decided she really liked our drug and wanted to do something different and came in-house. And I meant if we could fill our field force with people like that, it would be enormously impactful.

You described the expectation for the brepo launch as slow and steady. So I'm curious, what do you think is the biggest unknown when it comes to the pace of the early adoption or the kinetics of the launch curve?

Yes. I mean, there hasn't been a drug launched in dermatomyositis ever at some level. The only like dermatomyositis specific approval of like a "branded therapy" is an IVIG. And so I think the truth is like at some level, everything is unknown. I think how these -- we practices treat other patients like how these individual myositis referral centers embrace a new drug, how they decide which patients to put on how we work with them to get used to the coverage dynamics of drugs like this, which are complicated and well sorted at this point. Obviously, Argenx and Madrigal and Verona and Horizon and a bunch of other companies have like figured this out. But like working with the physicians to make sure we're getting what we need there is important in getting sites up and running and building a repeatable process, I think like all of that is specific to the physicians, specific to patient, specific stuff [Audio Gap] to declare itself and it's the uncertainty around every single one of those elements that makes it harder to call ramp than peak. There's a huge opportunity here. There's no question. But how do you get there and how long it takes -- it's just a question. I'll also say you watch companies launching drugs very successfully. And it's not clear to me that anybody is really benefiting from giving guidance these days.

Fair. I won't ask that question.

No, it's fine. I just like were sitting around thinking, I wish I had given more guidance.

In terms of payments -- patient segmentation in the early phase, which one do you think is the early adopters, do you think it's going to be treatment-naive, patients who are looking to roll off steroids or patients looking to formalize from an off-label JAK than on label treatment.

My honest view is it's going to vary by physician and by patient experience and there will be some patients who hate IVIG and use it because the only thing that works, and they'll be eager to get off IVIG, and some patients who are at practices that have like off-label JAK use is like not that common in DM and it's like pretty concentrated. It's like there's some Docs who use a lot of tofacitinib. And those Docs tell us. They want to get patients on a better branded drug that has better access and better patient support and all those things. So like those physicians, I think, will like potentially reach relatively quickly to those patients as they come in. I think it will depend on the center, it will depend on the patient. And I think it's going to be a little bit of a mixture of all of the above.

Okay. Great. I want to give it to Dina to ask about Immunovant questions. Dina, go ahead.

So you could talk for hours on just the 1402 pipeline. You guys have over 10 potentially registrational trials ongoing for across five to six or more indications. Maybe can you level set investors on where you think FcRn has the most value across these programs? Where you're prioritizing capital, what you're more most excited about? And how do you kind of think about balancing these higher-risk white spaces with large TAMs, right, versus this follow-on approach in certain indications that are a little bit crowded or there's first-to-market FcRn is already approved.

Yes. I mean, look, I think FcRn have declared themselves to be a pretty great category. And I think in some ways, one of the most remarkable -- it's a new axis of biology, it can treat a whole bunch of diseases that were roughly unaddressable with modern therapies before. But it's always, I think, one of the most exciting things about the FcRn class is that they've been able to do that while being like relatively easy to use, safe, well tolerated, no like major complicated issues, and that has meant quite like a lot of Doc enthusiasm uptake, right? Like you talk to MG Docs, and they're like excited to use VYVGART because it's a good drug for their patients and because they just like they put patients on it and the patients improve and don't complain, which I think is like the dream for an indication like MG. And so I think we're trying to lean into all of the great opportunities that are sort of presented in the FcRn field. I think it won't come as a huge surprise. The thing that we are probably like most excited about is Grave's, which has good in our view, biological validation at this point with our own Phase II work, a relatively straightforward mechanistic rationale and just like an unfathomably large unmet medical need, like so many patients who are walking around poorly treated on current therapy, that it feels like -- and I'm immensely proud of our getting there first at some level, like just like a huge opportunity to define that category. In a way that's similar to what Argenx has been able to do with MG, where they've defined a category that has been enormously successful, except for a patient population that is 3 to 6 larger than the MG patient population in total. And so I think it's like -- it's just an unfathomably large opportunity for us to get right. I think like then we're doing -- and look, certainly, there's like risk anytime you run the first Phase III program in any indication. So there's risk to the Grave's program, it's not 0 risk. But like it's relatively lower risk compared with something like D2T RA, where the biological translation is more complicated the evidence we have from nipocalimab is more mixed. Obviously, also if you can get there in late line RA, a huge opportunity from a patient population perspective, but you've got a clear scientific bar but I think is like relatively high. I think that's kind of the bookends on the white space in terms of like do some things that are higher risk, a big opportunity, like obviously, any time you're facing an opportunity like Grave's where you can do something that is like relatively lower risk and that big, it's going to be sort of top of mind. Then you get indications like MG, where, look, the truth is, are we going to take a ton of share in MG. I believe that our drug will ultimately, in the fullness of time, be viewed as a more efficacious therapy than VYVGART. I think deeper IgG suppression will matter for these patients. And I think you look at the other FcRns on the market -- and even without a ton of obvious differentiation, a little label difference and things like that, they're like, doing okay, like they're getting patients, just like Docs are using FcRns because they have them. I think the MG study is obviously incredibly low risk. MG has been valuating FcRn over and over again. It's not a very expensive study. It will be a decent indication for us. Is it going to be a huge indication for us? That's an uphill battle, but it will be a decent indication for us, and it's obviously worth the effort given the risk.

Great. I want to dive a little bit deeper maybe into Grave's and D2T RA. So I guess maybe top of mind here is the recent Phase III data you guys presented last month. Maybe can you just outline what your takeaways were from this study? How that maybe shapes your strategy for the Grave's indication?

Yes. I mean, first of all, A lot of people have followed us into Grave's, and that's great. I think it will actually, in the fullness of time to be good for us to have a more robust set of companies out marketing because it's a lot of endocrinologists -- it's not like I said. There's a lot of people treating Grave's patients. The more mind share you can get, the more of these docs are used to new therapies, the more likely they are to reach for any of them. I think it's good. That said, we have learned an enormous amount by being years ahead of everybody in terms of actually treating Grave's patients. And I think we're trying to stay like relatively careful about how much of those learnings we share. But yes, look, I think the hyperthyroid subset of patients in the TED study effectively doubled the number of hyperthyroid patients that we have treated with an FcRn and that's informative. And they are different patients. They are less hyperthyroid. They are on higher doses of ATDs, they are kept on stable ATDs during the course of therapy instead of being titrated. And I think like looking at that patient population, I'm still seeing a very similar consistent treatment benefit is super encouraging in terms of what we think it means for the translation of the biology, to the clinical benefit of FcRns and Grave's disease.

Do you think there's opportunity to capture overlapping patient population with both TED and Grave's, is there an opportunity to maybe kind of factor that into your current Grave's study?

Yes. I believe based on the data we've seen in the TED study, based on the data we saw in our own Phase II study, based on the data, we saw our Grave's study, that especially for like early onset of TED, FcRns are benefiting these patients. They are slowing proptosis, they are resulting in proptosis improvements. The benefits are not as pronounced as you see with the best of the IGF-1R class, which makes sense biologically. And I think that makes TED, in and of itself, a relatively difficult commercial market. But I think for Grave's patients, one of the many things that Grave's patients struggle with -- and you see it if you go to like Grave's, patient support groups or Internet or whatever is like one of the most common posts in those groups is like someone takes a picture of their face and they're like, do I have bulging eyes, do I have at the beginning of TED? Do I need to get treated for this? I think it's like something that like in an already stressful situation where you've be told you have a chronic illness that requires treatment, you're also wondering how it's going to affect your appearance. People get really, really focused on that. And I think being able to tell those patients we can slow this down. We can catch it early. You may never need to treat the TED because you're going to get the Grave's under control. Now I think it's a super powerful message. And I think we are gathering data in the Phase III studies for Grave's that hopefully will allow us to tell that story.

Great. So you're looking ahead to when we kind of see that pivotal data from the Grave's trial, and I believe it's 2027?

Next Year.

What's kind of giving you confidence? You shared Phase II data, but what gives you confidence that we'll be able to replicate that high 75% to 80% responder rate that we saw? And what kind of degree of maybe potential data erosion would still be considered commercially compelling? What would you consider to be a win to position FcRn as a potential replacement for ATD and avoidance of the latest therapy in this patient population.

I'll say a few things. One is in terms of like what gives us biological confidence, the but think about Grave's disease is not that complicated, actually. Like we know how the biology of Graves' works and FcRn seems to be able to treat it consistently. So I'm pretty confident in our ability to deliver a biological clinical benefit to these patients. The endpoints in the Phase III are like a little bit different to the endpoints in the Phase II. And the truth is like we're exploring a whole bunch of different endpoints, some of which will be more important from a regulatory and scientific perspective, some of which more important from a commercial perspective. And I think it's like very hard to say with the small group of Phase II patients we have, like which of those endpoints are going to matter most in the clinical setting. I think remission is going to matter. That is, I think, the ability to preserve off-drug effects is something that physicians will look to in the commercial data set. You see it in Argenx study, you see it in our study. I think that is something that will be important commercially. In terms of like the numerical values of endpoints, my answer first of all, again, the definition of the primary in the Phase III is like actually a bit different than the definition of the primary in Phase II, and I would not expect an identical number. I think looking like-for-like to the Phase II endpoint. I think we'll see high response rates. But I think there will be a variety of different data to show. And one of the important things here is we're going to generate that data. And not only is that going to matter for like -- the Street's expectations around what Grave's looks like. But more importantly, it will really be the first time a drug company is presenting data on the benefit of treating Grave's patients with a novel therapy in decades. And so I think like even more than I'm focused on like how did the data look relative to the Phase II study? Or what is it going to mean for the Street? Or how are they going to compare us to some other company. I'm focused on like how do we present that data initially in a way that maximally sort of lands with the physician population who hasn't had a new drug for these patients in a long time, and that's really where our focus lies not on the numerical benefit in Phase II versus a numerical benefit in Phase III. The other thing that I think we've learned is like an important thing to acknowledge is because, in part, there has been no novel development in Grave's disease for such a long time, the treatment of graves patients globally into the United States is pretty heterogeneous. You can easily imagine the same patient biologically, like if you took a patient off all drug and you watch them, the lab values would be the same, the extent to which they were sick, their symptoms will be the same that, that patient in two different physicians' offices might be treated very differently today. In one physician's office, the physician office, they might be on and off 25 milligrams of the methimazole and relatively well treated for graves, but going through long periods of time where they were unhappy about the side effects of the methimazole. And you can imagine the doc office for that patient is perpetually on 5 or 7.5 milligrams with methimazole. And like is fine with the methimazole side of it, but it is like constantly complaining about symptoms of Grave's disease. They are the same patient, they're just being treated differently. And once you add things like ATD titration endpoints, like the way those patients present in clinical trials looks pretty different. So I think that's all the stuff that we have learned an enormous amount about being out in the field. and stuff that is driving how we run our study and how I expect we're going to present the data on the drug.

Great. And just mindful of time here. I wanted to ask on the RA program, we're going to see data in the second half of this year. Can you just speak to maybe general rationale for studying 1402 in RA, some people may argue that J&J nipo's data, kind of raise some questions in regards to the efficiency of an IgG lowering approach. What are you doing differently from nipo's studies that will set you up for success?

I 100% agree that nipo's data raises questions about the sufficiency of an IgG approach, and I think we're going to learn that in our study. But I want to feel like I think that is -- especially the second nipo study, the sort of TNF combo study. If that study had shown anything instead of basically nothing, I think like you would feel differently about risk in our Phase IIb. Look, the monotherapy nipo study that they ran first, like the -- that study looked interesting. It showed dose dependence, it showed higher responses in ACPA-positive patients it seemed to preserve benefit in later lines of therapy, which are all things that like biologically you would expect from an FcRn, but like seeing it play out coherently in that data set, I think, is what got us excited. And then our view was like, okay, how do you isolate a patient population where you were, A, maximize the benefit you see according to the data we've now seen from J&J. And B, you like carved out a commercial opportunity in RA, which is obviously in the earlier lines of therapy complicated based on the number of great drugs approved. So we focused on those questions in the design of our study, and we're studying late-line patients who have experience with TNF and JAKs and IL-6 is in various proportions and who don't have other treatment options, really. And we enriched for a population that is highly autoantibody positive. And my hope is that those things combined will put us in a better position than either of the J&J studies were. The J&J combo study with Cimzia was an interesting study. I think it is hard to study the effect of any drug together with a new onset TNF because TNF just works so well in RA.

I think we're out of time. So I just appreciate you taking the time to be here with us today. Matt, and thank you for the thoughtful discussion.

Absolutely. Thanks for having me.

Thank you.

Thanks, everybody.