Earnings Call Transcript - ROIV Q1 2023

Operator, Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to Roivant's First Quarter 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. Please note that today’s conference is being recorded. I will now hand the conference over to your speaker host today, Stephanie Lee. Please go ahead.

Stephanie Lee, Host

Good morning, and thanks for joining today’s call to review Roivant’s financial results for the company’s first quarter ended June 30, 2023. I’m Stephanie Lee with Roivant. Presenting today, we have Matt Gline, CEO of Roivant, and Mayukh Sukhatme, President and Chief Investment Officer for 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.investors.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.

Matthew Gline, CEO

Thank you, Stephanie, and thank you everybody for joining this morning and for listening. It’s only been a short six weeks since our last call, as our last call was for the K. So comparatively a little bit tougher updates, but certainly an exciting quarter ended June 30 and a lot to talk about today. I’m going to give just a brief update on the state of the business as well as an update on the quarter and VTAMA sales. What we’re going to spend the bulk of time on today is brepocitinib; we’ve been getting more questions about it and we’ve actually got some new data there in Crohn’s disease. We will share that and talk through how we’re thinking about that program as we approach the lupus data in the back half of the year and more beyond. And with that, I’m going to get started on Page 5. Overall, we continue to be pleased with the progress we’ve made in the business. During the 6/30 quarter, we completed our tenth consecutive positive Phase III trial, the second study of VTAMA, which we continue to be proud of that track record, now leading to six FDA-approved products across Roivant and the Sumitomo collaboration. As of 6/30, we had just under $1.5 billion in cash on the balance sheet, which comfortably funds us into the second half of 2025 with a lot of clinical data generated recently and even more coming in the near future. We’re very proud of our pipeline at this point; we think it is among the strongest I&I pipelines, with an estimate of over $15 billion in peak sales potential supported by VTAMA, but also a number of critical first and best-in-class programs behind it. On Slide 6, it’s funny because this is a relatively quiet moment. But 2022 has been, and I expect will continue to be, an extraordinary year for us as a business. As a reminder, up until now, in addition to continued progress on the VTAMA commercial launch, we’ve generated positive data in both large randomized controlled studies, Phase III studies in atopic dermatitis for VTAMA, which, as we’ve said before, will support our filing for additional indication at the beginning of next year and approval hopefully next year as well. We’ve also now put out two important data sets, one in January and one in June, demonstrating the efficacy and overall enthusiasm for RVT-3101 antibody, which has received a lot of discussion. That program is one of the most important in our pipeline. We are currently underway with our Phase II Crohn's study and in the midst of preparations for our Phase III study in ulcerative colitis, which we will share more detail on in the near future. Still coming for the year are two significant events. One, which I expect we’ll get questions on, is the upcoming single ascending dose and multiple ascending dose data for IMVT-1402, our next-generation ATF antibodies at Immunovant. This data, we think, has the potential to show that we have a best-in-class program there, and we’re really looking forward to putting it out. There’s a number of other data sets in our FcRn franchise coming in the near future as well. As I mentioned, the topic on which we’ll spend the most time this morning is brepocitinib, our dual inhibitor of TYK2 and JAK1. That program has what would be one of two registrational studies in SLE, a Phase IIb study reading out in the fourth quarter of this year and there is a lot going on generally as well. It’s a program that I think is just starting to get some attention, but is still earlier on people’s radar. All of that situates on Slide 7 in our late-stage pipeline, which we are very excited about in terms of its breadth and the importance of many of the mechanisms we’re working on. Lastly, the remaining programs in that pipeline, like namilumab and RVT-2001, are earlier stage higher SKU opportunities that we’ll share more about as we get data starting at the end of this year with 2001 and beyond within milanab. With that, I’m going to go into a brief update on where we are on VTAMA, starting on Slide 9. We continue to be very excited about the progress we are making here. We continue to see monthly prescriptions increase. We continue to see doctors enthusiastic. We continue to hear a lot of enthusiasm for our AD data. We continue to make payer progress and continue to see improvements in revenue, which is ultimately the bottom line at the moment. We’re just very pleased with the growth there. We have now over 11,500 unique prescribers who have written over 200,000 scripts, which is quite extraordinary for just over a year on the market. It’s a really strong start from our perspective. On Slide 10, I want to give a sort of payer update. We’re up to about 130 million lives covered, just under 80% of commercial lives, plus 87 million government lives. This is the kind of coverage we dreamed of having maybe 18 months after our launch. This is really exactly where we need to be from a government perspective. We are on formulary with all three major PBMs, so we’re in good shape from a major PBM perspective. We have four additional national health plan formularies and have made considerable progress across some regional and smaller plans. We’re in a great place recovery-wise. The significant majority of this coverage has no prior authorization. In dermatology, very few drugs have true prior authorization requirements, but most importantly, the majority of it is a single step through steroid with a very easy process for that step to be achieved. So we feel good about the strength of our coverage, and we think it’s underpinning our successful commercial model. On Slide 11, we did $16.7 million in net revenues for the quarter, which continues to show solid growth quarter-on-quarter. We feel good about that growth and expect to continue to see it accelerate with both volume and gross net improvements in the future. Gross to net was a little better at 26% yield over the last quarter. We had pulled some of the GTN improvements from this quarter back into the 3/31 quarter with some earlier formulary additions. I expect CGTN to progress linearly over the course of the year, and I expect to end this fiscal year in the mid- to high 30s from a yield perspective. We still believe we will be on a trajectory to get to that 50% yield as we progress. The contracting and payer progression is all moving exactly in the direction we need it to, and we think we’re in good shape from a GTN perspective. So that’s about it on VTAMA for now, and I’m sure we’ll get some more questions. The continued progress there is exciting to us. We believe script volumes will continue to increase over the course of this year, especially as our now live DTC campaigns begin to have an impact on volumes. We’re really looking forward to getting going in AD next year, which is, as you may remember, about a fourfold larger market opportunity where we have some truly exciting and highly differentiated data. With that, I’m going to turn it over to Mayukh, who is going to do a deep dive on brepocitinib, our dual inhibitor of TYK2 and JAK1. This is a program that has been high on our minds, but a little bit below the radar for others because of everything else going on in our pipeline. However, it’s a really exciting program. It’s a very potent agent, which continues to demonstrate strong clinical efficacy. One of the many reasons we’re highlighting it today is that we generated some data with Pfizer's ongoing study in Crohn’s disease, which has read out and once again, the agent has shown great promise in another clinical study. We are unlikely, as you know, to progress it in Crohn’s disease, but nonetheless, are really excited about the data there and the implications for what we’re going to do in some of these other places. So with that, let me hand it over to Mayukh to take it away, starting on Slide 13.

Mayukh Sukhatme, President and CIO

Thank you, Matt. Please turn to Slide 13. As Matt said, I want to take this opportunity to talk about what I consider one of the sleeping giants within our portfolio. To the extent that brepocitinib is going to get notice from investors, I think it’s mostly through the lens of being a pivotal study catalyst for Roivant by the end of this year. While that is true, we do have the lupus data later this year. I think the lupus story is just a small part of what we’re trying to build with brepocitinib. I want to go through that story fresh here today. The bottom line, from my perspective, is don’t underestimate brepocitinib. Brepocitinib is a unique, highly active dual inhibitor of both TYK2 and JAK1 that has already shown spectacular efficacy in a broad range of autoimmune diseases. As Matt said, we’re reporting here for the first time on the sixth consecutive positive Phase II study for brepocitinib this time in Crohn’s disease, which is a study run by Pfizer. That adds to the string of positive Phase II studies already reported, now covering psoriasis, alopecia areata, psoriatic arthritis, ulcerative colitis, hidradenitis suppurativa, and Behçet's disease. We think we really have the potential to become a leading oral therapy in lupus given the dual inhibition of TYK2 and JAK1, which should provide greater efficacy than inhibition of either one alone. This is a large global study designed to serve as one of two registrational studies, and importantly, it is a 52-week study with a 52-week primary endpoint, which has historically been the most predictive of future studies. Our ongoing single Phase III study in dermatomyositis will serve as the basis of an NDA filing shortly as data comes up. I think as we round out the year and are sitting in the first half of 2024, that will be a near-term catalyst. This is just the beginning for this program. The unique dual mechanism and the demonstrated high efficacy of brepocitinib create the pipeline and product approach where we can own a series of specialty rheumatology indications, each with high unmet need and blockbuster revenue potential for brepocitinib. We also have a long IP runway with protection until at least 2039. Please turn to Slide 14. As many of you know, the JAK family consists of four isoforms: JAK1, JAK2, JAK3, and TYK2. The JAK family inhibition has proven over the past several years to be an enormously powerful mechanism for treating a wide spectrum of autoimmune diseases. While the field has accumulated approvals starting in rheumatology and moving across other products, the underlying biology remains complex and deeply irreducible. Here is a simplified schematic detailing several key cytokines that drive the pathobiology of autoimmune disease, along with the key JAK isoforms responsible for mediating those signaling pathways. While early JAK inhibitors were relatively nonselective, the trend has moved towards more specific inhibitors with JAK1 having the broadest applicability and therefore, being the first to be explored. Selective JAK1 inhibitors, such as RINVOQ, primarily impact certain key cytokines linked to autoimmunity but have their limitations. Both medicines have shown clinical benefits, yet effectiveness varies, especially in conditions with high patient burdens. This drove our original hypothesis that the field may not be maximizing the power of JAK inhibition, suggesting that efficacy might be getting left on the table in certain indications. In our search for the right molecule, we ended up partnering with Pfizer. In brepocitinib, we found a highly active, well-characterized molecule with a novel mechanism perfectly suited for what we need. The simultaneous inhibition of both TYK2 and JAK1 creates two distinct opportunities to deliver differentiated efficacy. For diseases driven by Type 1 interferon signaling—interferon alpha and beta—a dual hit on both sides of the heterodimer may allow for greater suppression and potentially greater efficacy than hitting TYK2 or JAK1 alone. Furthermore, diseases with broad cytokine involvement, which include IL-6 and B-cell pathways and IL-12/23 and IL-17 pathway, may be treatable with brepocitinib in a way that wouldn’t be possible with either JAK1 or TYK2 alone. This is fundamentally our hypothesis. Please turn to Slide 15. The data we obtained from several standard cytokine inhibition assays showed exactly what we hoped to see. The left bar shows type 1 interferon signaling—a key driver across multiple autoimmune diseases—where both TYK2 and JAK1 inhibition would be expected to have an effect. In studies conducted at Pfizer, brepocitinib was able to suppress type 1 interferon signaling as well as or potentially even better than either RINVOQ or Sotyktu. On the right, we show two critical cytokine drivers: type 2 interferon (interferon gamma) and IL-12/23, where brepocitinib performed robustly compared to leading single isoform therapies. This unique profile should lead brepocitinib to achieve greater type 1 interference suppression than any single-action JAK inhibitor. Please turn to Slide 16. This data has translated well into a string of Phase II data readouts to date. Oral brepocitinib has demonstrated a consistent pattern of meaningful clinical efficacy in every indication tested, with results for alopecia, psoriatic arthritis, ulcerative colitis, psoriasis, and hidradenitis suppurativa all statistically significant. We’re also excited to report the induction results of a global Phase II Crohn’s study run by Pfizer. This is a 151 patient global Phase II study, the primary endpoint being the SES CD50 and key secondary endpoint was the clinical remission rate at week 12. Both endpoints were highly statistically significant. We believe that actual efficacy might be understated on the SES-CD50 due to a slight imbalance in baseline severity, but the secondary endpoint remained unaffected. The point of this message is that this trial, while not on any investor’s radar, has delivered really strong efficacy, with a 33.5% placebo-adjusted delta on clinical remission—the highest seen in any late-stage study to date. We find ourselves in a strong position. We have a highly efficacious molecule with strong biological and clinical translation in large-market indications. Our vision with brepocitinib from the start has been to focus on the indications where we can deliver step-function improvements in outcomes for patients, generating maximum impact for them and maximum return for our investors. We examine the disease indications where the unique properties of brepocitinib really shine, considering factors like the need for dual inhibition for maximal efficacy, the high morbidity and mortality of the conditions, and the availability of treatments. Our strategy suggests a potential for brepocitinib to become a leading treatment option in a series of large, uncoded markets. Please turn to Slide 19. Dermatomyositis is a large orphan indication with a similar profile to conditions like pulmonary arterial hypertension and cystic fibrosis, where oral small molecules have become $1 billion-plus products. Over the past 30 years, dermatomyositis has become increasingly better understood, with rising disease awareness leading to higher incidence estimates. We’ve analyzed claims data from 2016 to 2020 and estimate the U.S. adult population at around 37,000 patients. This is not an ultra-rare indication. For an autoimmune disease of this magnitude, dermatomyositis presents a significant disease burden, with high mortality estimates of up to 40% at 5 years. Most patients suffer from interstitial lung disease and severe inflammatory symptoms that greatly influence daily life. As a high morbid indication, dermatomyositis presents a terrific opportunity for a modern targeted oral therapy. No new chemical entities have been approved in the past 60 years, and the absence of oral therapies in late-stage development means brepocitinib has the potential to become a blockbuster. As we analyze potential launch timelines for brepocitinib, we anticipate a substantial commercial driver for Roivant over the next 5-plus years. Please turn to Slide 20. The case for brepocitinib in this indication is strong, with meaningful clinical validation for JAK1 inhibition in dermatomyositis. Our confidence stems from the unique dual mechanism of action targeting the underlying pathobiology of the disease. We believe brepocitinib will provide enhanced benefits through its capacity to affect multiple pathways involved in disease activity. Given this unmet need, we took the bold step of initiating a Phase III program, which involves a single registrational study. Our expectation is that if this study succeeds, it will support an NDA filing for brepocitinib in dermatomyositis. We aim to complete enrollment in 2024 and expect data and an NDA filing by 2025. Therefore, we could be the first oral option on the market and likely ahead of several other biologics in later stages of development. This pivotal decision entails that our next catalyst in dermatomyositis won't come until 2025, but that milestone could be a major inflection point for Roivant, poised to deliver over $1 billion in product sales immediately. Given this launch would be in an orphan indication with a specialized prescriber base, we would expect a steeper revenue ramp than for volume products like VTAMA. Turning to lupus, an area receiving increasing interest due to its complexity and high unmet need. As previously stated, only two therapies have been approved in the past 20 years and are injectables. Lupus represents a challenging landscape, and brepocitinib is distinguished by its ability to target multiple inflammatory pathways. We have a fair expectation for top-line results from our ongoing study in lupus expected in the fourth quarter of this year. This is a large global study utilizing an industry-standard 52-week primary endpoint, with hopes of rapidly initiating a second confirmatory registrational study should results be positive.

Matthew Gline, CEO

Thanks, May. I appreciate that. I want to quickly review other potential pipeline opportunities, touching on our efforts in NIU and HS as well. NIU has high return potential, also lacking in current targeted therapies despite existing untapped demand. Like dermatomyositis, HS is a significant and growing condition with high awareness leading to increased diagnoses. Meanwhile, we have another clinical program establishing proof of concept in HS scheduled for 2024. We feel excited about the potential for brepocitinib to rapidly become the leading oral therapy in these categories. As we pursue multiple orphan indications, each with blockbuster potential, we're establishing a robust pipeline position. Wrapping up with key highlights on our late-stage pipeline, we're expecting important data readouts over the next few months across all our projects. We've established a strong financial position and a clear path toward executing on our growth strategy. I want to thank Ben Zimmer and the entire private team for their work on brepocitinib. We’re eager to continue our collaboration with Pfizer, as well as express gratitude to the investigators and patients participating in our trials. I will now open the line for Q&A. Thank you.

Operator, Operator

Now, the first question comes from Brian Chen with JPMorgan. Your line is open.

Brian Chen, Analyst

Hey, guys, thanks for taking my question this morning and the walkthrough on brepocitinib. On that topic, given what we’ve seen from other JAK inhibitors in SLE specifically, how confident are you that brepocitinib can perform better, particularly in this indication? Are there any baseline characteristics in the ongoing Phase II design you want to emphasize to ensure differentiation? I have a follow-up.

Matthew Gline, CEO

Thanks, Brian. I’ll take that question briefly before handing it over to Mayukh for any additional comments. In terms of my confidence in SLE, I believe our strong biological rationale in targeting both TYK2 and JAK1 should provide a meaningful benefit. Second, a critical insight regarding the Duke data is how you interpret it. That data probably reflects mid-teens blended efficacy, with the 3-milligram dose showing a significant patient population imbalance. Therefore, we perceive mid-teens as the bar to beat. Our Phase II study, designed by Pfizer, has certain well-thought-out baseline criteria, and we’ve been watching that closely. However, the performance dynamics of lupus trials can be complex. Mayukh, do you have anything to add?

Mayukh Sukhatme, President and CIO

No, Matt covered it well. Thank you.

Brian Chen, Analyst

Following on your upcoming Immunovant 1402 data, could you clarify the profile metrics we should focus on regarding IgG suppression relative to etokimab? We also want to understand the albumin and LDL assays—how these interact given potential variability in outcomes.

Matthew Gline, CEO

Great question, Brian. While we have not seen the data yet, we believe we have an equivalently potent molecule and expect congruently deep IgG suppression as an outcome. Additionally, we’ll monitor the impact on albumin closely, noting that albumin assay variability is approximately 5%, while LDL is over 10%. Thus, in the early fractions, we want to be comfortably within those parameters. Lower values are better, and if impact on albumin is moderate, the LDL outcome should generally follow suit. We aim for impressive data that will provide clarity going forward.

David Risinger, Analyst

Good morning, Matt and team. Can you provide insights on the potential monetization of assets and updates on acquiring new product opportunities?

Matthew Gline, CEO

Indeed, we're currently in a privileged position regarding the clinical data we’ve gathered. It draws attention from potential partners and acquirers. However, the process of monetization will be approached cautiously, recognizing the inherently rare opportunities our late-stage programs present. We will likely refrain from decision-making until we receive critical data from Immunovant. As for new opportunities, we’re actively evaluating possibilities; the atmosphere for asset sourcing has been fruitful.

Mayukh Sukhatme, President and CIO

I agree, we maintain our usual business processes while pursuing high-value options. Important relationships are being cultivated.

David Risinger, Analyst

Regarding brepocitinib, can you discuss your decision to forgo several compelling indications, such as Crohn’s disease, and Sotyktu’s inverse dose response in SLE? What implications does this have for Brepo?

Matthew Gline, CEO

The rationale for Crohn’s and other indications we decided against is closely tied to the evolving landscape of JAK inhibitors. Although Crohn's exhibited impressive data, the competitive dynamics alongside potential labeling challenges present difficulties to navigate. As for Sotyktu, I wouldn't be surprised if it reflects baselines that don’t capture true efficacy. We’ll need to evaluate this as more information becomes available, considering many other factors in play. The fundamental bet we’re making relates to focusing on orphan indications where our product can deliver maximum benefits and first-mover advantage. Our goal remains to pursue orphan drug indications, particularly those with high unmet needs.

Mayukh Sukhatme, President and CIO

Yes, it’s essential to keep adaptive approaches on these opportunities while prioritizing segments that allow differentiation in competitive environments. Reverting to the topic of tomorrow discussions, Sotyktu's performance illustrates discrepancies indicative of imbalance rather than true inversibility in treatment. We will cautiously observe SLE because our hypothesis suggests brepocitinib’s dual inhibition offers compelling rationale.

Robyn Karnauskas, Analyst

Thank you, Mauk, for doing the groundwork on lupus, brepocitinib. Regarding capital allocation, how should we consider brepocitinib's asset performance and upcoming developments? When should we anticipate a clearer picture on Roivant's capital spend?

Matthew Gline, CEO

Brepocitinib, especially in lupus studies, has been heavily subsidized by Pfizer, which significantly lowers our costs. However, our other initiatives in NIU and DM are fully funded on our end. Concerning our overall capital allocation strategies, we will analyze any bundling of information provided by upcoming Immunovant data. The decision-making process will not hinge strictly on one dataset but rather on a composite assessment of various forthcoming data points.

Louise Chen, Analyst

On brepocitinib, what strategies for pricing are you considering post-approval? Additionally, how can your work on reimbursement for psoriasis translate to accelerating your approach for atopic dermatitis?

Matthew Gline, CEO

In terms of pricing, we aren't quite ready to set benchmarks yet, as the range could vary based on the broader indication landscape. However, our focus remains on orphan drug pricing models. Additionally, our payer access work in psoriasis can significantly streamline the reimbursement process for atopic dermatitis, given we’ve gained formulary recognition with major providers. Also, we expect to see data on brepocitinib around mid-to-late fourth quarter. We have been clear about the timing for quality outputs based on clinical performance and anticipate some exciting results in the final quarter. Looking to the derm area, I appreciate the work done on patient access through various copay programs and the resulting benefits from government and commercial coverage, which could rapidly increase patient adoption of VTAMA for atopic dermatitis.

Douglas Tsao, Analyst

Hi, Matt. Following on your growth outlook, do you plan to adjust co-pay support mechanisms following this enhanced coverage? Or are modifications required not until AD approval?

Matthew Gline, CEO

Currently, we have no immediate plans to change the co-pay structure as it provides a solid approach navigating patient transitions from uncovered to covered status. However, we maintain vigilant oversight on perceptions regarding coverage. Our goal is to keep doctors confident in the ongoing process and to further encourage overall treatment adoption as we aim for sustained improvement in patient scripts.

Douglas Tsao, Analyst

Thank you. Overall, what strategies are you employing to draw in those low prescribers? And how do you anticipate converting their initial prescriptions into more frequent writing?

Matthew Gline, CEO

We are ramping up DTC campaigns now that we've secured good payer coverage; this is aimed at raising awareness and encouraging physician prescribing. For many of our doctors, script volume tends to build over time as they see more patients return to clinics. The success of our messaging concerning coverage is paramount as dermatologists historically faced some challenges in this regard. We see time on our side. Moreover, the strength of relaying script feedback from initial patients to their treating physicians reinforces the benefits of VTAMA. We’re optimistic that results from marketing, engagement, and patient support will create momentum moving forward.

Operator, Operator

Thank you. And I’m not showing any further questions in the Q&A at this time. I will now turn the call back over to Mr. Matt Gline for any closing remarks.

Matthew Gline, CEO

Thank you for your time today. I'm grateful to everyone for participating. It's an exciting period ahead, filled with significant opportunities for Roivant. We appreciate your support, and we look forward to reconnecting again shortly for further updates. Thank you.