Roivant Sciences Ltd. (NASDAQ:ROIV) Q2 2023 Earnings Call Transcript

Roivant Sciences Ltd. (NASDAQ:ROIV) Q2 2023 Earnings Call Transcript November 13, 2023

Roivant Sciences Ltd. misses on earnings expectations. Reported EPS is $-0.4 EPS, expectations were $-0.25.

Operator: Good day, and thank you for standing by. Welcome to the Roivant Q2 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Stephanie Lee. Please go ahead.

Stephanie Lee: Good morning, and thanks for joining today’s call to review Roivant’s financial results for the second quarter ended September 30th, 2023, along with the business update. I’m Stephanie Lee with Roivant. Presenting today, we have Matt Gline, CEO of Roivant. For those dialing in via conference call, you can find the slides being presented today as well as the press release announcing these updates on our IR website at www.investor.roivant.com. We’ll also be providing the current slide numbers as we present to help you follow along. I’d like to remind you that we’ll be making certain forward-looking statements during today’s presentation. We strongly encourage you to review the information that we filed with the SEC for more information regarding these forward-looking statements and related risks and uncertainties. And with that, I’ll turn it over to Matt.

Matt Gline: Thank you, Stephanie, and good morning, everybody. Thank you for joining us on this call this morning. It has been a highly eventful quarter, but comparatively an uneventful call given that most of the major updates, including the Immunovant data from September and the sale of Telavant to Roche have already been discussed, but I’m looking forward to giving everyone our normal business update and taking the questions-and-answers. The plan here is, I’ll talk a little bit about where we are as a business. I’m going to remind everybody of the parameters of the sale of Telavant, we are going to give a brief overview of the data that Immunovant presented back in September, a little bit about the VTAMA launch, a brief reminder of the upcoming brepocitinib data, and then we’ll wrap up with financials and Q&A.

So, I’m going to start on slide six in the presentation, which is a slide — which is fun to put up. So we are sitting here in November of 2023, and I keep saying on these calls but it’s true, it’s been a pretty wild year. We said this was going to be our biggest year yet, and at this point, it has surpassed certainly my expectations. We’ve delivered some really great Phase 3 data for VTAMA in atopic dermatitis, as well as strategic progress on that commercial launch. We’ll talk more about that a little later on this call, but those believe it or not were the first clinical datasets this year. We delivered some extraordinary clinical data for RVT-3101, our anti-TL1A antibody in ulcerative colitis both at the beginning of the year, in the induction phase and in June in the maintenance phase.

And obviously, we announced the culmination of that journey a couple of weeks ago with the planned sale of that program to Roche. We announced the first cut of the IMVT-1402 healthy volunteers SAD and MAD data in September, and showed a profile that we believe sets us up to have a potentially best-in-class anti-FcRn antibody with Batoclimab-like IgG suppression, and at least in the cohorts, so and so far no impact on LDL or albumin. And that’s all sort of up until now, and believe it or not, there are still more data coming through the rest of this year, including the final 600 milligram multiple ascending dose cohort from Immunovant, the SLE data for the Phase 2b study of brepocitinib, we will talk a little more about and the Graves’ data of Immunovant also coming this year.

So, just a year really chock-full of clinical data, and I could not be more proud of how it has gone so far, and of the Roivant teams for delivering on it. So, on the next slide, just want to talk a little bit about the acquisition here that we’ve already messaged which is the plan here is for us to sell Telavant our anti-TL1A antibody program to Roche, we previously discussed that a couple of weeks ago. The sale was for $7.1 billion upfront with $150 million milestone. As a reminder, Roivant owns about 75% of that business, so our cash proceeds will be about $5.2 billion on close on as well as $110 million from that milestone, which we expect next year. At the close of this transaction, pro forma for including the proceeds from that transaction as well as the Immunovant follow-on offering, we expect cash and cash equivalents consolidated for Roivant of $7 billion which is an extraordinary capital position.

We will talk a little bit more on this call and a lot more in the future about what we plan to do with that capital. And, you know, Pfizer will keep commercial rights of the program outside of the U.S. and Japan, and will continue to partner with Roche on the program. As a little reminder of the why on slide seven. You know, first of all, we think for the program, Roche will continue to do great things. Obviously, we were proud of the work that we had done and would have been excited to continue developing the program, but Roche certainly adds the resources and expertise of a large global pharma company to maximize access for patients across indications. For us, this is tremendous near-term value generation, with that — with, sort of, proper value to a large opportunity, and with a lot of capital efficiency relative to the modest amount that we have so far invested in the program.

And this is a transformational capital opportunity for us. We, as we’ve said on previous call are going be patient and thoughtful. I know, and I heard it from a lot of investors, people are looking for a sense of what we are going to do with the capital. I’ll just remind people we have a phenomenal pipeline already between Immunovant and our FcRn program and a number of others. We are excited to put some of the capital to work there. We see transaction opportunities in the relatively near-term that are as large and exciting as anything we’ve ever done before, TL1A included. We expect to continue to be capital efficient in those business development transactions, and while I’d never rule anything out, that can give us more likelihood that the deals that we do will continue to look like the ones we’ve done before with relatively smaller upfront components.

But again, we are taking stock of the whole opportunity set, and there is a great opportunity and we have the potential to return capital to shareholders, above and beyond that, given the significant sum. So, we’ll talk more about all three of those things in the near future and overtime. As a reminder on slide eight, you know, one of the questions I’ve gotten frequently from investors is, what does the catalyst roadmap look like, now that this deal has happened. And my answer is, well, it looks much the same as it did before, and in fact, the TL1A program will be adjusting to the Crohn’s data at the end of that year, didn’t have any near-term catalysts. Our pipeline is tremendously rich today with VTAMA obviously a commercial program with a significant amount of data coming at both Brepocitinib and especially in our anti-FcRn franchise in the next 12-months.

And we look forward to continuing to generate important clinical data from those and other programs in the months to come. So with that, I’m going to do a brief review of where we are at Immunovant and some of the other programs. And I’ll just start on slide 10. With a reminder, we are very proud of the anti-FcRn franchise that we have. We believe we have two great programs, both of which are capable as best we can tell from the data we have available expressing IgG as deeply or deeper than anybody else. And, you know, one of them, Batoclimab, we’ve generated a lot of data and are continuing to generate mid-stage clinical data in indications that matter where we think we are going be able to prove out that deeper is better IgG hypothesis. And the other one IMVT-1402 coming close behind, now looking like it delivers that same IgG suppression, but without an impact in LDL and albumin.

So, really exciting opportunity for a franchise of these programs. As a reminder on slide 11, 1402 is in the late innings of this Single-Ascending and Multiple-Ascending Dose healthy volunteer study that was designed to reveal the clinical profile of that program. It had both multiple Single-Ascending Dose cohorts that were IV from a 100 milligrams all the way up to 1,200 milligrams IV. It had subcutaneous Single-Ascending Dose cohorts at 300 and 600, and then multiple-ascending dose cohorts at 300 and 600 subcu. And at this point, we’ve delivered all other than that higher dose 600 milligram multiple-ascending dose subcu cohort, which as a reminder Immunovant has signaled they expect this month, and that is fully on track. I’m not going to share all of the data here.

Obviously, everything we believe that we shared in September was fully consistent and painted a foreseeing picture as far as we were concerned of what this drug could do. On slides 12 and beyond, I just have the multiple-ascending dose data which as a reminder, shows on slide 12, very much batoclimab-like IgG suppression with 300 of 1402 suppressing IgG by a very similar amounts to 340 milligrams of Batoclimab, sorry, 1402 similar to Batoclimab 340. And then on slide 13, you can see that that’s achieved with really no time course impact on albumin at all. Albumin wound up at the end slightly above baseline and slightly above placebo number down is the direction to be concerned about. Unlike Batoclimab which in multiple ascending dose data showed a clear dose-dependent time course dependent impact on albumin and then you can see in the LDL data, which unfortunately we don’t have in the same study from Batoclimab but you can see, again, really no time course impact of note on LDL with LDL in this case went up slightly below baseline.

As a reminder, there was variability in these data with you know we said we expected variability in LDL to the plus or minus 10% tune, but we believe the consistency of it across all of this suggests that we have a strong profile and we are looking forward to sharing the 600-milligram MAD data once we have it. And then as a sort of final reminder on slide 15, just to note. This is an incredibly broad target even since September when we shared our data, we’ve continued to see developments in the field, including the full J&J nipocalimab RA data. We continue to make progress on our own studies, gravis data coming later this year. Gravis is an indication that I think he is significantly under-appreciated for the commercial potential and the number of patients that we can help and it’s just a really broad target, at this point great clinical validation across multiple indications that FcRn is active and it matters clinically in a number of diseases as well.

So really excited about what’s to come there a very, very data-rich, instead of months and really a full year ahead. Excited to generate that data and to continue to evaluate strategic options that I believe will present themselves and to continue to communicate about where we are, as that plays forward. So next up, I’m going to provide a brief update on the VTAMA launch starting on slide 17. So I’d say, overall, we continue to be fully used with how this launch is going. It continues to — you know, it continues to clip line it continues to grow at a steady clip, probably not quite as fast as we would like at this stage, but we are overall pleased with the reaction from physicians and the reactions from patients. And we are seeing continued uptake of the products, so we are hopeful that we are going to be able to continue to bend the curve and generate more volume in psoriasis.

This remains the best launching topical in history. And we are in particular were excited for atopic dermatitis launch in the second half of next year where we have terrific data and with a significantly larger patient population. On slide 18, we just kept the financials here. Revenues continuing to build, we did about $18.4 million for the quarter. GTN yield accreted, I’d say modestly up to 27.6%, we are sort of through the contracting process at this point, so, I would expect GTM yield to continue to improve you know modestly at a steady clip over time, as we approach the steady state, which we think long term, we’ll get to the 50% that we’ve talked about and will take some time to build up to there as we’ve communicated. You know finally, just a couple of notes about where we are from a data perspective.

There is actually been some additional data generated or published in this program in the last month or two including. On slide 19 one of these that each one of our competitors has talked aggressively about is efficacy in intertriginous psoriasis. This is psoriasis inside the skin fold, inside the elbow, in the groin, et cetera, where psoriasis is pernicious where some of the other, especially the most potent steroids are not committed and you can see, we have really phenomenal data in intertriginous psoriasis we think as good in our view on a cross-hawke comparison as anybody else. So we feel very good about what we deliver in intertriginous psoriasis. We also put out some additional data, which is super important in atopic dermatitis area, which is the speed of onset for itch which you can see on slide 20 we had a statistically significant separation from placebo as early as week one and just a clear visible separation really within 24 hours and a meaningful reduction in itch within 24 hours.

So we feel very good about the speed of onset and that’s something that matter quite a lot to atopic dermatitis patients. So it’s data we are excited to continue to and getting to put out there as we get closer to that NDA filing and eventual launch. And then as a reminder, on slide 21, we just couldn’t be more excited for the clinical profile of this agent in AD with some really phenomenal data when you look across mechanisms. This is we just picked one endpoint EASI-75 we published before, but across mechanisms some of the best data that’s ever been shown with safety profile that is about as good as in fact an efficacy profile, it looks numerically differentiated from even some of the systemic therapies, really exciting and look forward to that.

Progression is a reminder expected sNDA to go in early next year and expect to launch later next year. Finally, on the program side. I just want to give a reminder of the upcoming data in brepocitinib. So, brepocitinib is a really exciting drug to me. In some ways, it had been sort of sitting in the shadow of, I’d say the TL1A and FcRn programs, but it’s an incredibly effective agent. We have now six positive Phase 2 studies with some of the best data that’s been showing across the JAK or TYK2 classes. I think we have the single best numerical remission rate in Crohn’s disease, for example, that we talked about on the last call. So just a very potent kind of agent for inflammatory disease. We are really excited about what our plans are for the program, which included the sort of main program for which we set up here, which was the registrational study that we are running in for Dermatomyositis for 2025 but more importantly, near-term, we also have the Phase 2b study with one of two pivotals in SLE.

Reading out this quarter you know we’ve talked a lot about some of the channels in SLE and that’s not the sort of main or at least the sole focus of the program, but if it works and if it generates, what we think it should be capable of as an agent that’s an indication there is a need of highly effective therapies and we think if we can beat the deucravacitinib equivalent bar that we’ve set for ourselves. We will have a really big opportunity to benefit patients. So looking forward to it. There’s obviously potential beyond that. Including another dataset we have approved concept study in Non-infectious uveitis, reading out in the first quarter of next year as well as the possibility to run a study in Hidradenitis Suppurativa, which is an area that’s attracted a lot of attention recently.

So really excited for brepocitinib. On slide 24 and 25, we just have a reminder of the study designs in each of SLE and in the NIU study, reading out the beginning of next year. Both of which we are really looking forward to seeing that data and sharing it with the world. So I will wrap up here. It’s a relatively quick update. Just a reminder of the financials on slide 27. Well, I won’t read all the numbers on here, but you know relatively straightforward quarter, and excited again for that $7 billion consolidated cash balance giving effect to the closing of the deal that should put us in a very strong position to do lots of great things in this next phase of our life. So I won’t go through the four catalysts roadmap again, on slide 29, other than to say, 2023 was a huge year for us.

It will be hard to top in 2024, but we are definitely going to try and we are excited for quite a lot of data that’s coming our way to help us out. So with that. I will say thank you to everybody. Thank you to the entire team at Roivant to our investors to everybody who helped make this quarter possible in this year’s dates. And I will hand it back over to the operator for Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question will come from David Risinger of Leerink Partners. Your line is open.

David Risinger: Yes. Thanks very much. Good morning, Matt and team. So, I have a few questions. First, obviously, VTAMA scripts have flattened for many months now. Could you talk about prospects ahead and whether we should really assume flattish scripts into calendar ’24, or do you think there might be drivers for prescriptions to grow ahead of the addition of AD to the label at the end of calendar ’24? And then second, clearly, management has shown an exceptional ability to acquire highly compelling assets and create tremendous shareholder value. But now, the company will have a huge amount of money to work with and probably faces undue pressure to you know put that money to work quickly? So could you just talk a little bit about, I guess, you know how the company can, you know, effectively time putting money to work in exceptional business deal-making in short order, i.e., you know, it’s really not up to Roivant when great assets are up for sale, and when Roivant can acquire them.

And so, how are you balancing considering transactions with what may be, you know, pressure to put cash to work? Thanks so much.

Matt Gline: Yes. Thanks, Dave. Those are both great questions and appreciate your listening this morning. You know, on VTAMA, and this is in truth in all of my conversations with investors, we have not been a significant investor focus of late, but yes, obviously we agree that scripts have been growing, as I said earlier, slower than we would have hoped. We continue to see growth in demand. I think if you look quarter-over-quarter, it’s growing every quarter. I would expect that to be at sort of at least steady over the coming quarters we have some ideas about how to create some inflection. One of the main pieces of feedback that we continue to get from prescribers is concerns about coverage and the patient experience, especially at some of the larger pharmacies, like the Walgreens where there is a middle of the distribution docs, who are writing fewer scripts tend to send patients, in fact, our coverage position is very good now.

It is at least as good as really any other topical, and we think patients who show up at the pharmacy are very likely to have a good experience. So I think there’s a little bit of a perception gap there that we are working to close and we’ll continue to experiment with other demand-generation tools, including DTC. So, I’d expect, you know, as a base case I would expect, sort of, continued progression about the space until the AD launch, but there’s certainly the possibility for better, and we are working on it. I’d say two other things. One is the AD launch is a really big opportunity, obviously, the patient size is much larger. You know, I think the program is on a path to being a source of non-dilutive financing, if that’s what we’d like for it, and that’s true either as it ramps to profitability, which we think it will continue to do or through other means, partnership, et cetera.

And the only other thing I’d say is, I think in the spirit of your second question, I think one of the reasons we say we are going to be patient here is, we don’t want to make the mistake of having a lot of capital and therefore spending it, kind of, by default or by [fiat] (ph) and so we are evaluating every dollar that goes into every one of our programs, including VTAMA critically, and making sure that we are spending those dollars into places they are going to be most valuable. That said, again, I think as VTAMA ramps profitability, it will be quite as useful — a useful baseline for the business. So, you know, that’s on the first question. On the second question, I expect I’m going to say this a few times today. But we really believe that patience is an asset.

We believe the ability to be patient is important. We think that is what’s going to get us the best opportunities. We think it’s what’s going to put us in the strongest position to take advantage of as you said, we don’t control exactly when the great assets become available, and we don’t want to be in a position where we miss something because we do something else that’s not quite as good. So as, you know, we are being very thoughtful about what we see. The truth is that we see some really great opportunities, as I’ve said which is opportunities that are in my opinion, every bit is exciting as the TL1A or a number of our other programs. So, there’s certainly the possibility for near-term deployment of capital on something like that, but I think you will see us be patient, because we think it is a huge advantage, especially in the current market with so much available to being patient.

So, you know, I think that’s as many times I can say the word patient in one sentence, but we feel good about that. That’s it. We are not going to go into dark period, we are going to continue to update the Street regularly on where we’re at. We’ll continue to talk about our plans, we’ll continue to talk about capital deployment, as we see the SLE data, as we see some more of the FcRn data, as we get some transactions done. So I would expect continued updates. We are not asking people to trust us in silence. We’re just asking to come along with us, and — on our capital deployment process.

David Risinger: Great. Thank you.

Matt Gline: Thanks, Dave.

Operator: Thank you. And one moment please for our next question. Our next question will come from Brian Cheng of JPMorgan. Your line is open.

Brian Cheng: Good morning, guys. Thanks for taking my questions. First on Brepocitinib’s upcoming Phase 2 data in SLE. Matt, you talked about the difference of steroid-tapering between the study compared to Deucra’s Phase 2. Can you talk about just how might that impact the readout and given SLE is a heterogeneous indication, are there other variables that we should also consider that could impact the outcome ahead of the readout? And then I have a follow-up. Thank you.

Matt Gline: Yes, thanks Brian. We are obviously tremendously excited about brepo, and those are some of the right questions. You know, SLE is an important disease, it’s a tough indication historically for a variety of reasons, and lot of, as you say, heterogeneity in a patient population, there’s a lot of variability and things like placebo response rates. You know, we are generally happy with the study design. It was designed to finally put in place that’s been only slightly modified since we took the program on and Pfizer has been executing the study. We think it is a good design. As you noted, there are some modest differences in the mandatory steroid taper between our studies and the deucravacitinib study. But people have mandatory steroid tapers, so in many ways than more similar than different.

That said, there is a lot of variability in general both in placebo response rates and in lupus studies across the board. And so for that reason, I think we are just being appropriately measured in what we signal here. But, you know, in short, I’d say, the agent looks to us as good biologically as any agents in SLE could at this moment, at least as a small molecule, and the study design is a solid study design. So, sort of — in the hands of [SLEH] (ph) at the present moment. Mayukh, anything you’d add?