And if you the — at the MS Conferences and Neurology Conferences, we are starting to see KOLs and others talk about some of the long-term side effects of chronic B-cell depletion over the long term. And so when we put that together, I think that’s one potential interesting and attractive and large market for frexalimab. That being said, we think there’s use well beyond that population as well. We were really trying to focus on that there’s an unmet need here, a need for new mechanisms and we think frexalimab is well positioned to be a part of the solution there.
Michael DiFiore: Got it. And then my follow-up is just on the pace of deals. Can we expect the deal pace to pick up in the back half of the year? Recognizing that today’s deal was phenomenal. And how might be higher for longer outlook on interest rates factor into the types of deals that Royalty Pharma is considering?
Pablo Legorreta: Yes. Chris can take the question on deal flow and what to expect and I think maybe Terry can talk about interest rates.
Chris Hite: Thanks, Mike, for the question. The — we continue to see a very robust environment when we look at potential investments and we’re super excited about the opportunity set in front of us. As you know, it’s hard to predict when the deals will actually happen but we’re very encouraged with what we’re seeing from a funnel perspective and the opportunity set in front of us.
Terrance Coyne: And then on rates, Mike, I think what we’ve tried to reiterate is that our business is really sort of agnostic to the rate environment. And we’ve been sort of highlighting this with the deals that we’ve done, I think even including the deal today which we think is going to generate really attractive returns, longer term. But I think that the key for us is that we feel like we’re able to continue to maintain the same spreads above our cost of capital on new investments regardless of the rate environment. And so you’ll see that as rates are sort of as they drifted higher, we are targeting slightly higher returns. And I think that, that really shows how our business really is agnostic to the rate environment.
Operator: Next question comes from Steve Scala with TD Cowen.
Steve Scala: Just to be clear on frexalimab, it sounds as though Type 1 diabetes and lupus are not part of the initial deal, maybe you can confirm that. But is subcu part of the initial deal? And what aspects of the molecule were the toughest for you to become comfortable? So that’s the first question. Second question, Chris, you mentioned milestones for this year. Apologies if I missed it but did you mention the PDE10A inhibitor Phase II data from Merck which is expected? And if not, why didn’t you mention it? And then the last question is, you’ve gotten the obesity question, I think every quarter for a while now. And every quarter, you say you’re always looking. But within obesity, does RPRX have a preference for oral versus subcu, muscle sparing versus not muscle sparing and degree of weight loss. So in other words is, more the better, always the case? Or is it not necessary for the masses, so you’re not necessarily pursuing that?
Pablo Legorreta: Yes. Thanks for the question, Steve. I mean, just to clarify, I think for whatever reason, the terms of the frexalimab deal might be a bit confusing to several of you. But the license that underlies our transaction entitles us to receive royalties on all potential indications for the product. And that — they’re all included. All we were saying is that for us to get comfortable with a really attractive investment with really attractive returns. We had to get comfortable that this product was going to achieve a good level of sales in MS. And we think that in MS, we’re very comfortable with getting to the $3 billion plus range. And then we see us upside other indications. And obviously, the 2 that are interesting and sort of being looked at our type 1 diabetes and lupus and the terms of the transaction are such that we would be entitled to receive royalties on those.
And there is infrastructure in addition to the $525 million upfront payment, some sharing with the shareholders of ImmuNext above $2 billion of sales. But as we have said, the sharing is sort of percentage that is less than 50%. In fact, we’ve just said that we’re going to retain a significant majority of all of the royalties above $2 billion. And also regarding the milestones, when we looked at the total milestones that the license producers which is a little bit north of $400 million, we’ve identified about half of those 240 or so as high probability milestones that are tied to things like filing and dosing in other indications, Phase III trials and things like that which we think is highly likely to happen. And we saw that as an attractive part of the transaction.
But let me turn it over to Marshall that can talk about Merck and then obesity.
Marshall Urist: Sure. So on Merck, Steve, nothing to interpret there. I think much of Chris’ — most of Chris’ comments were really focused on the later stage, the later-stage programs within our pipeline. As a reminder, 8189 has a Phase IIb trial that reads out relatively soon. And so we — and so that was maybe why it was not sort of discussed as prominently as some of the others but we remain excited about the potential there and look forward to learning more. Finally, in obesity, no, I think you’re going to hear a similar answer in our approach there. But I think part of your — but implicit in your question, I think, is the key thing which is there are a lot of different approaches to what is obviously a very, very large and attractive market.
And we’re continuing to look at our opportunities within all of those different dynamics in terms of form of delivery, biology, et cetera. And our view at a high level is that there’s going to be opportunities for multiple types of products for different patients at different times in the management of their obesity and that’s going to create opportunity and we’ll continue to take the same opportunistic approach of looking for the right thing at the right time that makes sense for us and our partner.
Operator: One moment for the next question. The next question comes from Terence Flynn with Morgan Stanley.
Unidentified Analyst: This is Dan [ph] on for Terence. I was just wondering on Tremfya in Crohn’s disease at this point, kind of how you’re thinking about market share capture and the indication and views on the competitive profile versus SKYRIZI?
