Roivant Sciences Ltd. Q1 FY2022 Earnings Call

Good day, and thank you for standing by. Welcome to the Roivant 1Q 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Davis, Head of Communication. Please go ahead.

Good morning, and thank you for joining today's call to discuss Roivant's financial results for the quarter ended June 30, 2022. I'm Paul Davis, Head of Communications at Roivant. Presenting today, we have Matt Gline, our Chief Executive Officer. For those dialing in via conference call, you can find the slide being presented today as well as the press release announcing these updates on our IR website. We'll also be providing the current slide numbers as we present to assist you in following along. I would like to remind you that we'll be making certain forward-looking statements during today's presentation that reflect our current views and expectations, including those related to our financial performance and the potential attributes of our products and product candidates. We strongly encourage you to review the information that we filed with the SEC, including the earnings release and Form 10-Q filed this morning for more information regarding these forward-looking statements and related risks and uncertainties. We'll begin with Matt Gline, who will review key business updates across Roivant in advance, and provide a financial update. We'll end the call with a Q&A session. With that, I'll turn it over to Matt.

Thank you, Paul, and good morning, everybody, and thank you for joining our first quarter earnings call. Today's call will be a little bit shorter than usual because we last got together about six weeks ago when we presented our year-end results. So I'll begin on Page 4 and I'll take you through some of the key highlights of the business today and then we'll make some time for Q&A. As a reminder, we're excited about where we are at the end of our first quarter this year, with a number of important attributes, including the ongoing commercial launch of VTAMA, which we will spend a little bit of time on this morning, that is backed by a broad clinical-stage pipeline, including multiple pivotal and registrational studies currently ongoing. Our chip-to-clinic discovery program, including our proprietary QUAISAR platform, which we are using to bolster that pipeline at the discovery stage, a number of sources of asymmetric potential upside, including our Genevant IP portfolio, all supported by what continues to be a strong capital position with $2 billion in cash and cash equivalents and restricted cash, which enables us to finance and develop all of our programs across our pipeline. I'll start on Page 5 with a brief update on the VTAMA launch. First of all, I'm incredibly pleased with the very early information here. As we've said on a number of occasions, we are principally tracking prescriptions at this time, and we feel script volume has been robust in the early days of the launch. It is still early days; we're only a couple of months in, but we feel the script volume and the early feedback from providers has been very, very strong. There are a few key updates in recent weeks around this launch. The first is that our LTE data, our long-term extension study data, has been published, highlighting the 130-day remissive effect off-therapy for patients achieving a PGA of zero on VTAMA. We've talked about this before, and it is an important differentiating attribute of the drug. Our Japanese partner reported positive Phase 3 data for tapinarof in atopic dermatitis, including statistically significant results in IGA and EASI, with plans to file that for approval in Japan. Finally, our own Phase 3 study in atopic dermatitis is expected in the first half of next year, which could extend our market to potentially $15 million in annual topical prescriptions. From the data, we're excited to know that we've become the number one most prescribed branded topical for psoriasis just eight weeks into our launch. On Page 6, I'll note again from a script volume perspective, we are excited about how we are performing relative to other topical launches that we've seen in psoriasis. You can see a number of those launches here, and we feel proud of our early performance. We are approximately keeping pace with OPZELURA, which is a new agent in atopic dermatitis, a market about four times larger than psoriasis. Again, it's early days but an exciting indicator for us. Just a reminder, we are principally focused on prescription volume at this time. The quarter here has really only one month of launch data for VTAMA, so the revenues are not significant, but we're focusing on prescription data as we work through our coverage and contracting. We expect it will take about 12 to 18 months to have all contracts in place. On Page 7, I want to remind people of a few key attributes of VTAMA that we think will support our blockbuster potential in psoriasis and potentially atopic dermatitis. We have the efficacy and durability needed, and perhaps most importantly, we have this off-treatment remittive benefit that we've discussed. We have a broad target population with a label used across the entire psoriasis spectrum from mild to moderate to severe. We have no warnings or precautions at all, nor do we have any restrictions or notes about concomitant medications on our label. We're labeled for use on all areas of the body, notably including intertriginous areas. Something we've talked a little less about, but I'd like to remind everyone, we have statistically significant improvement in itch as early as week two in our studies. On Slide 8, I've included that itch data in the presentation to remind us of the data. You can see the data across the two studies here. We saw statistically significant separation from vehicle on impact on itch as early as week two. This correlates with some early feedback we're seeing from prescribers and patients, with many noting that the drug is working faster than expected, which is encouraging for us. I'll close on VTAMA on Slide 9, just updating our differentiation profile versus the field for psoriasis. We have updated this chart to include that ZORYVE was approved recently. We feel we have a truly differentiated profile among the few topicals to have an on-label remittive benefit. We continue to be pleased that we have no duration limitations, no body surface limitations, and no safety warnings or precaution sections on our label, along with no drug interactions and no contraindications. Moving on from VTAMA, let's discuss Slide 11, focusing on our current clinical pipeline. We're highlighting a subset of our pipeline, including our VTAMA study in atopic dermatitis. We've initiated our Phase 3 program for Brepocitinib in dermatomyositis and have our ongoing program in Brepocitinib lupus. We're excited about sharing more on that as those programs progress. On Slide 12, we show our clinical positioning features—by the end of this year, we will have seven trials, including four pivotal trials ongoing, and we expect to initiate more programs in 2022, including Brepocitinib for Myasthenia Gravis and Thyroid Eye Disease. I want to reiterate Brepocitinib's unique dual-targeted TYK2 and JAK1 inhibition for a variety of specialty autoimmune diseases. We believe this dual inhibition may provide greater efficacy than agents that target only one pathway. We have strong clinical data from five placebo-controlled studies and a safety profile consistent with approved JAK inhibitors. Our strategy aims to focus on therapies for high unmet need. On Slide 14, I'll highlight that SLE is a significant disease affecting many patients, with limited approved therapies. On Page 15, I want to remind everyone about our rationale for believing in Brepocitinib in SLE. We've seen efficacy signals from other JAK inhibitors in SLE, and we believe we can improve upon that with our data. The Phase 2 study will have a high bar for efficacy. Our aim is significantly improved SRI-4 versus the approved therapies, a necessary goal for us. Thanks for your attention thus far. On slide 18, just a reminder that our Annual Roivant Investor Day will be on Wednesday, September 28, at 11 a.m. More details to follow, and we look forward to sharing key updates around our business, including R&D updates at that event. I'll wrap up here, remarking on the market dynamics, but we are privileged with our capital position. Please turn to Page 20 for key financial items for the quarter. Our R&D expense was $136 million, adjusted R&D non-GAAP was $123 million. SG&A was $149 million, or adjusted non-GAAP at $88 million, leading to a total adjusted net loss of $354 million or an adjusted net loss of $211 million. Our cash and cash equivalents remained about $2 billion for the quarter. Of that, our balance sheet debt is approximately $417 million, of which only $33 million is standard credit facility obligations. Finally, as of Friday, we had 703,625,000 common shares issued and outstanding. On Slide 21, we consider this an incredibly catalyst-rich period for our business, with updates on VTAMA and new mid-and late-stage in-licensing ongoing. We'll continue to provide updates on our LNP patent litigation at Genevant and on QUAISAR on our degrader discovery efforts as they arise. Also, we're initiating multiple pivotal programs, and we're excited about data forthcoming from pivotal trials. It’s an exciting period for execution. Looking forward to connecting with everyone on Investor Day and to tracking many of these developments, including the VTAMA launch. I'll end my remarks and open the line for Q&A, handing it back to the operator.

Our first question comes from David Risinger with SVB Securities. Your line is now open.

Great. Thank you very much and thank you for the updates. So I have a few questions. First, could you talk about the expected ramp of VTAMA going forward, particularly in the face of competitive dynamics? Second, could you discuss how you're thinking about gross to net over the next couple of years, particularly relative to Street expectations and what you're seeing from the sell-side? And then third, could you comment on the cash burn in the quarter and remind us about your cash runway? Thank you very much.

Thanks, Dave. I appreciate the questions. I'll start with VTAMA. Early in the launch, it's difficult to make long-term projections. We are pleased with early prescription data, and we think it sets us up well. We are pleased with engagement with patients and physicians and some of the positive feedback we're receiving about the drug. We don't view this as competitive versus other novel agents; we view it more as competition against corticosteroids, where there are millions of prescriptions for psoriasis. We believe we have better efficacy and tolerability that should allow us to capture significant market share from that category. Regarding gross to net dynamics, our expectation is that our yields will be low for the next while; we've stated previously that it’s about 12 to 18 months for commercial contracts to settle. As for cash burn, we typically run the business with visibility into about two years of runway and have options to extend this through partnerships and managing our portfolio. Hence, we are excited about our outlook.

Great. Thank you.

Our next question comes from Dennis Ng with Jefferies. Your line is now open.

Hi, guys. Thanks for taking the questions. Two for me. First on VTAMA, can you please give some more granularity on the launch, in terms of who and where it's being prescribed? Are you seeing it from mild and moderate? And maybe talk about how penetrated are those accounts that you guys are currently in? And then secondly, perhaps on Proteovant, you guys mentioned that you had an AR study that is ongoing. When can we expect the mix? Thank you very much.

Yes. Thank you, Dennis. Really good questions. I'll start on VTAMA. We've seen about 3,000 prescribers write VTAMA prescriptions. Early on, we focused solely on the highest prescribers who account for a significant percentage of topical prescriptions, and many are thought leaders for novel topical agents. We are experiencing a broad interest in VTAMA across both mild and more severe psoriasis patients, which is encouraging. Regarding Proteovant, we are currently evaluating the latest data in conjunction with our competitor data and are monitoring that closely as the competitive landscape evolves. We'll provide updates as we get them.

Thanks.

Our next question comes from Neena Bitritto-Garg with Citi. Your line is now open.

Hey, guys. Thanks for taking my question. I was just wondering, if you could talk a little bit more. Matt, you just mentioned that you are seeing some docs write multiple prescriptions. If you could talk a little bit more about just the general prescriber behavior you're seeing. Are you seeing docs generally prescribed to one or two patients first, see how things go with those patients and then kind of opening up their broader population of patients? And then also any initial feedback or anything you’re hearing about folliculitis? That'd be great. Thanks.

Yeah. Thanks, Neena. Those are both good questions. We don't have specific data on patterns of prescriber behavior. Anecdotally, there is a mix; some physicians have taken a leap of faith with VTAMA for multiple patients, while others have introduced it more cautiously. We are receiving consistently positive reports about how quickly patients see efficacy from VTAMA, which is encouraging. Regarding folliculitis, as we expected, there hasn't been significant concern raised, and we don't believe it is affecting the prescriber or patient experience given its transient nature. The feedback overall has been positive.

Thank you.

Please standby for our next question. Our next question comes from Louise Chen with Cantor. Your line is now open.

Hi. Thanks for taking my question. So I have a few for you. First one I wanted to ask about was Brepocitinib and the SLE market landscape and how you think about that for your product? Also, why you chose this indication in dermatomyositis as the first two indications? Secondly, on the Japan tobacco, congratulations on that news. If you could be more specific about feedback or read through to your AD study that would be very helpful. Lastly, broadly, what is the physician feedback on VTAMA and how they view it as an addition to the market with one of the first novel topicals approved in a long time? Thank you.

Great. Thank you, Louise. Really good questions. The SLE landscape has a notable need for new therapies that are effective. There are only two approved biologics, and many patients are unresponsive to existing treatments. We see tremendous opportunity with a novel agent like Brepocitinib, given our scientific rationale for combining TYK2 and JAK1 inhibition. As for the choice of indications, we selected diseases with high morbidity and mortality where there's a significant unmet need. On the positive feedback from Japan’s results, we are hopeful about our own upcoming study data for atopic dermatitis, as their results indicate efficacy in similar endpoints. Regarding physician feedback on VTAMA, it has been overwhelmingly positive. Physicians are eager for effective and novel topical agents, and feedback on efficacy onset has been encouraging.

Thank you.

Please standby for our next question. The next question comes from Douglas Tsao with H.C. Wainwright. Your line is now open.

Hi. Good morning. Thanks for taking the questions. Just as a quick follow-up to Louise’s question on the VTAMA readout in Japan, can you confirm that the study had the same primary endpoint as the one you’re currently running in atopic dermatitis, correct?

Yes, that's correct. The primary and key secondary endpoints for both studies are IGA and EASI.

I wanted to understand early feedback you’re getting from payers regarding contracts, particularly concerning prior authorizations and how they view VTAMA’s role in the treatment paradigm.

Those discussions are ongoing and challenging as expected. We want VTAMA positioned as a mainstay of therapy, not merely as a pre-biologics option. Achieving broad coverage will be critical for us. Payors are particularly concerned with biologics’ costs, making VTAMA an attractive alternative to manage spending.

Great. Thank you.

Please standby for our next question. Our next question comes from Corinne Jenkins with Goldman Sachs. Your line is now open.

Good morning. Two for me. First on folliculitis, you mentioned that you’re not seeing much of an impact, but is that something you're having to educate physicians on, or do they seem to understand it from the start? Secondly, regarding prescription acceleration, what are you seeing there, and how is the $75 patient copay affecting the process?

Yes. Good questions, Corinne. On folliculitis, dermatologists are quite familiar with it and it’s something we don’t need to educate them heavily about. The current feedback indicates it’s not impacting patient or prescriber behavior significantly. As for prescription acceleration, we are very pleased with prescription fill rates and attribute this success to the product's attributes and our copay program, which we believe is effective in getting patients the drug.

Great. Thank you.

Please standby for our next question. Our next question comes from Yaron Werber with Cowen. Your line is now open.

Hi, guys. This is Brendan on for Yaron. Thanks for taking the question. First on VTAMA, can you discuss the Japanese AD study? Are the baseline demographics reflective of the U.S. study?

Yes, the criteria are similar. The Japanese study is just being conducted in an exclusively Japanese patient population and it's smaller than our Phase 3 studies for atopic dermatitis, but we believe the read-through is positive.

Regarding Brepocitinib, where do you see the bar set for the Phase 2 study next year?

The efficacy bar must be high. We want to see superior SRI-4 outcomes compared to approved therapies and solid results on secondary endpoints, given the competitive landscape. We are confident about our potential.

Please standby for our next question. Our next question comes from Nishant Gandhi with Truist Securities. Your line is now open.

Hi, this is Alex from Truist Securities. Regarding your conversations with payers about formulary position, have the discussions changed at all with ZORYVE's launch and the price point they’ve chosen?

I cannot comment directly on ongoing discussions, but we’ve emphasized a pricing strategy that threads the needle between attractive list price and the ability to offer significant rebates. We believe the attributes of VTAMA will stand out against competitors like ZORYVE. We’re not concerned about their impact. We’re observing early refill data, but it's still early to draw definitive conclusions on tube utilization.

Thanks for taking my question and congrats on the progress.

Thank you.

At this time, I am showing no other questions in the queue. I would now like to turn the conference back to Matt Gline for closing remarks.

Thank you, operator. Thank you for everyone for your questions, and thank you everyone for listening this morning. As I said, it was a short call since we met six weeks ago. We're looking forward to our Investor Day in September and providing more updates on VTAMA and other exciting aspects of our business in the months to come. Thank you everybody, and we'll talk soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.