Roivant Sciences Ltd (ROIV) 2022 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to Roivant's Fourth Quarter and Fiscal Year 2021 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I'd now like to hand the conference over to your speaker today, Paul Davis, Head of Communications. Please go ahead.

Good morning, and thank you for joining today's call to discuss Roivant's financial results and business updates for the fourth quarter and fiscal year ended March 31, 2022. I'm Paul Davis, the Head of Communications at Roivant. On the call today, we have Matt Gline, our Chief Executive Officer; Richard Pulik, our Chief Financial Officer; Frank Torti, our Vant Chair; Eric Venker, our President and Chief Operating Officer; and Mayukh Sukhatme, our President and Chief Investment Officer.

For those dialing in by phone, 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 be providing the slide numbers we present to help you follow along.

I would like to remind you that we will 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 have filed with the SEC, including the earnings release and Form 10-K filed this morning for more information regarding these forward-looking statements and related risks and uncertainties.

Matt Gline will review key business updates across Roivant events, including the commercial launch of VTAMA at Dermavant as well as Priovant, a new Vant we unveiled today, and he'll provide a financial update. We will end the call with a Q&A session.

Without further ado, I'll hand it over to Matt.

Thank you, Paul, and thank you, everybody, for joining this morning. It's an exciting call for us. It's our first 10-K as a public company. It's our third earnings call, so we appreciate everyone being here this morning. So I'll start just briefly on Slide 4 and talk a little bit about sort of what's going on in the business. Starting with -- and I think everybody is familiar with this, but we have, as of this month, really the commercial launch ongoing of VTAMA cream, and we'll provide a brief update there, although it's still early days.

Behind that, we have a really exciting differentiated pipeline of clinical programs, and we'll talk a little bit about some reprioritization we've made there in part to make room for Priovant, a new Vant that we've announced this morning that's developing a drug that we'll spend a fair amount of time on today. We also have our Chip-to-Clinic discovery platform with our proprietary tools, including QUAISAR and VantAI working on a pipeline of preclinical programs against challenging targets. I'll talk a little bit about some collaborations during the quarter there. And there are a number of sources of asymmetric potential upside, including the Genevant IP portfolio and others, all backed by a strong capital position with, as of 03/31, $2.1 billion in cash and cash equivalents on our balance sheet and a significant portfolio of public equity stakes.

So we won't spend a ton of time on Slide 5 on VTAMA today because we've just provided the update call a few weeks ago on the approval, and it's too early to say much. I'll say we see strong early prescriptions recorded to date. The IMS numbers are here. We've got some really good feedback from physicians on the label, and we're really excited about what that looks like. And then obviously, we're still focused on the atopic dermatitis program, which will read out in the first half of next year, which we expect to help us get to a blockbuster in both indications, frankly, in each indication.

The one thing -- it's really early days here, so while these numbers are exciting to us, it's hard to make any forecast for what it means. Over time, we'll provide a more fulsome update when we can. I would, for example, expect this week to be a little flatter because our field force is out of the field for their sales meeting. So we'll see it as it goes. But again, really promising early signs and something that is an obviously an important area of focus for us and a major milestone that happened during this period where we've got our first commercially launched product now. So excited about that, excited about the team doing that work and looking forward to seeing how it develops.

So moving on to Slide 6. I'll just reiterate something that's always been true for us, which is that we intend to operate from a strong capital position we have, as I'm sure you've seen, $2.1 billion in cash and cash equivalents as of 03/31. We always sort of work to run the business generally with over 2 years of runway, and we're confident we're doing so right now, and we continue to focus on that. As part of that and responsive to the current capital markets and responsive to some of the opportunities we've seen outside, including Priovant, which is now a program of ours, we've continued to watch our portfolio, and we've implemented some company-wide cost optimization and portfolio reprioritization projects. And you can see on the right-hand side here, we've deprioritized some programs, notably among them probably Aruvant, our program in sickle cell disease, where we were just looking at the field there and trying to make sure we felt like we had a portfolio of truly differentiated offerings, and it was hard for us to know whether we were going to meet our squeaky-clean efficacy bar.

So if you move forward to Slide 7. I guess one other point I'll make about capital for us is that we have always run our business with access to capital sources that go well beyond just equity. And in fact, if you look at our history, more than half of the capital that we've raised and deployed since inception has come from sources other than Roivant equity. And we've just listed a few of them here as a reminder that we feel very independent of the capital markets. One, obviously, is revenue from VTAMA cream I mentioned again. We expect this to be a potential blockbuster in multiple indications. We've shown in our history a number of important cash-generating partnerships, including out-licensing deals like the Japanese rights to tapinarof to Torii Pharmaceutical, including discovery-stage partnerships such as the ones that we've announced with Janssen, Blueprint and with BI and, obviously, for example, the DSP deal a couple of years ago.

We have Genevant's IP estate, which is something that we know people are focused on and which we expect has the potential to be a source of significant capital, depending on how that situation plays out. And then we have a monetizable ownership of our Vants and other assets. I'll call attention to the Datavant we are a 12% owner of today, which is something that obviously we will be watching as that company continues to grow and evolve, something we've talked about a few times.

So jumping ahead to here, to Slide 8. It's been a really exciting period for us just from a pure clinical execution perspective. We have 10 or more pivotal or pivotal-enabling trials expected to be up this year. Seven of those are ongoing, including at least 4 pivotals, and we'll spend some time today talking about the programs in brepocitinib at Priovant, and with 3 or more additional trials expected to initiate this year. So we have some really exciting work to go. And we've mentioned a few times, this really is an important period of clinical execution for us.

So on Slide 9, 10 and especially, let's start on Slide 9, we really -- we have programs that go beyond what are shown on these slides at this point. But we're really focused on the opportunities in our pipeline and currently outside of our pipeline that have the opportunity to be really sort of differentiated and that are uniquely available and interesting opportunities for us. And so we've got, obviously, VTAMA at Dermavant, where we continue to do both commercial and development work. We have batoclimab that we've talked about a fair amount at Immunovant. We have brepocitinib at Priovant. We have a list behind that, that includes namilumab, our anti-GM-CSF antibody on Slide 10, at Kinevant that includes our SF3B1 modulator or Hemavant for transfusion-dependent anemia and low-risk myelodysplastic and so on. So a number of programs in our pipeline that we think are differentiated and interesting and really sort of focused on the biggest value opportunities.

So with that, I'm going to switch gears a little bit, and I'm going to talk about something I'm excited to talk about. I've been waiting for about 6 months to talk about this publicly as we've been sort of getting it ready. But that is -- I'm excited to unveil Priovant, a Vant built in partnership to Pfizer to develop a potential first-in-class dual-selective inhibitor of TYK2 and JAK1.

So if you start on Slide 12, I just wanted to -- before we go into Priovant itself, I just wanted to note that I think we've quite built a portfolio of really high potential first-in-class or best-in-class and some cases only in class programs in immunology across the Roivant portfolio, and that includes many of the -- I think people on this call are already focused on. There's a broad characterization.

We're looking for programs where we have a clear swimming lane, the differentiation area of unmet need. And sometimes that clear swimming lane is in the biggest volume segment of the market as with tapinarof, where we saw a need for a novel topical in inflammatory skin disease, where otherwise systemic agents have been the primary focus of the field. And sometimes it's in a specific indication or a set of indications where we understand the biology well and there's a clear potential bad actor as with many of our FcRn indications or with GM-CSF in sarcoid. And sometimes, there's a disease that requires an agent that has a more pleiotropic effect, and we want to attack it accordingly. And that's, I think, what you'll see with our approach to development at Priovant, which I'm excited to unveil here today.

So we closed this deal last fall, and we've been sort of diligently working to get ready to make this announcement at such a time when we could say confidently that our Phase III program in DM was underway, which we can now do. We built a really phenomenal -- I want to just lead off by saying that it was a really phenomenal working relationship with Pfizer. They're a repeat partner of ours, and they've been really good partners to us here. And so we're thrilled to partner with them to create Priovant, and I am excited to talk about it right now.

So on Slide 13, we'll spend most of our time today talking about brepocitinib, which is the lead program at Priovant. It's a first-in-class dual inhibitor of TYK2 and JAK1, which we're developing for specialty autoimmune diseases with high mortality and morbidity and with limited treatment options. So we'll go through each of these points in greater detail during the call. But first of all, the molecule has all the sort of characteristics that we have generally really liked.

First of all, it's got a unique dual-targeting mechanism, and we'll go into why that's important from a biology perspective. Second, we know that it is a highly active agent. We have a very robust efficacy data set covering a wide range of indications and successful Phase II studies already under our belt. We have a distinctive development strategy and specific indications that play to the strength of the drug and elegantly work around some of the well-known current limitations in the JAK pathway. And we have 2 ongoing registration programs with the first readout expected in the second half of next year. And finally, it's a long-tailed asset with composition of matter going through roughly 2039. So an exciting program to have in our hands.

On Slide 14, I just want to start with a little bit of a review of the relevant biologies. So the JAK family, JAK1, 2, 3 and TYK2, generally signals via pairwise combinations. So a dual inhibitor of TYK2 and JAK1 allows you to mediate the signaling of a number of inflammatory cytokines represented by the boxes shaded in yellow on the left. And particularly and importantly, it's expected to more robustly suppress the cytokines in the upper right-hand corner, namely interferon alpha and beta, most importantly.

As such, the specific dual TYK2 and JAK1 inhibition is relevant to a signature of autoimmune disease. We can suppress interferon alpha and beta strongly and also interferon gamma, IL-6, IL-12 and IL-23, which are particularly relevant in the diseases we're pursuing. So it's worth noting again, this is not simply another TYK2 or another JAK, it's a unique small molecule with a profile that allowed us to tailor a customized precision clinical development plan. And it's also worth noting, this is the only dual inhibitor of TYK2 and JAK1 in any kind of late-stage clinical development. So we think it's a really interesting opportunity.

So on Slide 15 and some of the studies have already been made public and some have not. But one thing that we're excited about, brepo has a really robust set of efficacy in a range of autoimmune indications. We know that it's a highly active agent. It's shown P values in multiple studies run by Pfizer in every indication -- Oral brepocitinib has shown P values in every indication tested by Pfizer so far. We have an extensive safety database as well with exposures in over 1,000 subjects and patients. This shows profile that's consistent with approved JAK inhibitors just as you'd expect.

So then if you jump to Slide 16, kind of what's our strategy here, right? What are we doing? And obviously, the world is sort of watching what's happening with JAKs. Where do we think we have an opportunity? We talked to Pfizer about our interest here. We were particularly interested not in sort of the typical JAK markets where there's more competition, both from small molecules and, frankly, from biologics, but to go after a set of indications where we felt there was a clear differentiated opportunity, one, where we felt the biology of the disease indicated that both TYK2 and JAK1 would contribute to efficacy; two, where the diseases had high morbidity and mortality and an urgent need for novel therapies; and three, where there weren't a lot of therapies, including in all of our cases, no approved oral therapy. And this led us to a series of indications, some of which you can see on this slide, where the overall opportunity was high, we felt for a new leading treatment option in orphan disease markets that are largely uncrowded.

So let's turn and we'll talk about the first couple of these more closely and, obviously, more to come in terms of additional indications over time with this program. So I'll start on Slide 17 with dermatomyositis, which is a rare chronic immune-mediated disease of muscle and skin, affects about 37,000 adults in the U.S. alone. Hallmark symptoms are on the skin and muscle, painful skin rashes, muscle weakness often with disfigurement and disability associated with them. The cycle of inflammation with damaged muscle and damage vascular endothelium tends to lead to damage in multiple organ systems, including pulmonary and cardiovascular systems. There's significant mortality.

A majority of cases are chronic and demand chronic steroid therapy and aren't well controlled even with that. And the only approved therapy apart from steroids and corticotropin is IVIg, which we just got approved recently. It's an advance in the field. It's not a perfect solution. It's IV with a cumbersome administration that gets dosed, I think, for like 2 to 5 consecutive days each month with infusion times that are pretty long on each day, and with a number of side effects, including an elevated risk of thrombosis. So there's a high need for novel targeted therapies that address underlying DM pathobiology in a chronic refractory patient.

So if you jump to Slide 18, there is some evidence already that JAK inhibition alone has efficacy in DM. So on the left-hand side, there's this STIR study in refractory dermatomyositis, where a JAK1 inhibitor was studied in the disease, notably the endpoint here, total improvement score, or TIS, is the -- was the primary endpoint in this study. It was an open-label study. It was the primary endpoint in the study and is the scale used for regulatory approval. And you can see the blue line is the immediate improvement there. We got to -- this JAK inhibitor got to a roughly 40-point improvement. It's worth noting that every single patient improved. It's all the hash lines on here. Secondary endpoint analysis also showed robust improvement in other relevant scores, CDASI and steroid-sparing ability for those patients that are steroid-dependent.

It's worth noting the median improvement in TIS was similar to that which we're seeing in IVIg, leading to its recent approval. Of course, this JAK study was an open-label study. We also compiled a bunch of case reports, where we had seen, documented and published in literature about 145 cases of DM and juvenile DM that were treated with various JAK inhibitors. And out of those 145, 137 were considered clinical success by their respective investigators. Again, this is not a controlled study, but this is just supportive evidence for JAK inhibition as being relevant to the field. And many of those case reports noted objective and subjective improvements, including in the muscle, skin and lung.

So I think back to the point that I made about sort of why we are in this field at all or why we're excited about brepocitinib on Slide 19, I think it's important to think about where the disease biology fits in here. And again, here, dual inhibition of TYK2 and JAK1, as a reminder, provides optimized suppression of type I interferon, which is the key pathogenic cytokine in dermatomyositis. I won't cover all the intro on the slide, but a couple of lines of evidence for that. One is that elevated levels of type I interferon are found in the relevant organ systems of DM patients. The second is type I interferon gene signature scores correlate with DM disease activity, go down with successful therapy and go up as disease worsens. Direct exposure to type I interferon to myotubes elicits a pathogenic response. We know that hitting both TYK2 and JAK1 seems to be required for maximal type I interferon suppression. And finally, in whole blood assays, we see evidence that brepo does exactly what you think it should with greater type I interferon expression than TYK2 inhibitors or JAK inhibitors.

So on Slide 20. In addition to type I interferon, dual inhibition of TYK2 and JAK1 also uniquely suppresses other DM-associated pathogenic cytokines, specifically interferon gamma, IL-23 and IL-12. And this signature is important. And again, you can see in these whole blood assays the brepocitinib has suppression that compares favorably over TYK2 inhibitors and JAK inhibitors.

So on Slide 21. Here's a schematic of the program that is currently underway. We've gotten regulatory alignment on the design, and we believe that these data are robust, that this single Phase III, along with all the other supporting evidence around the compound, should be sufficient or could be sufficient for approval.

So moving to lupus now on Slide 22. So this is obviously a pretty well-known disease among the investor community. It continues to be one of the biggest autoimmune markets, obviously, and it continues to have enormous unmet need. The classic hallmark is the sort of butterfly rash, but it can result in symptoms in basically all major organ systems, and it has elevated mortality. And there's no question there's unmet need here. It's widely recognized by patients, by physicians and by regulators. Benlysta is an approved therapy. It was approved back in 2011, which was a huge achievement. It was the first drug approved in decades in the indication. But it's proved in spite of a relatively modest effect of placebo-adjusted delta of somewhere between like 10% to 14%.

Anifrolumab was approved last year, was really one positive study. The other Phase III study outright failed and looked worse than placebo. But FDA kind of looked at the totality of data. Again, there was a significant unmet need and the Phase II also looked supportive. And so it was approved. And so clearly, lupus is not a solved issue. I'd say a common conclusion is almost nothing ever works, but actually, we think that a lot of study failures have resulted from an attempt to improve upon what's already been successful rather than repeating what works and that we can learn a lot from Benlysta in particular, which was positive in all of its Phase III studies despite some challenges on the efficacy side.

And so yes, I think it would be fair to conclude, we view this as a pretty high-risk proposition, and we have some humility in tackling it. But also, there's some important lessons in what's likely to work, and we think we can design a study that maximizes chances for success.

So on Slide 23. For starters, we do have recent data for what happens if you inhibit JAK1 or TYK2 in lupus in these patients. And the good news is there are signs of efficacy with the JAK1 inhibitor, as you saw on the Phase II's and one of the Phase III's of baricitinib. And then also with the recently announced Phase II of deucravacitinib, which showed some noisy dose response, but again, separation of each dose arm over placebo that we think is a good supporter of drug efficacy. And there's obviously nuances in these study designs and some of them we think made the data look more noisy than it really was.

So on Slide 24, I won't belabor at this point, but we did just want to show you cross-study comparisons of brepo versus that -- those couple of drugs. It's worth noting that all of these diseases have very different biology for lupus. But just looking at the slide, you can see that brepo is a really big gun and it compares favorably to deucrav and bari in each of these indications. So we think we have an opportunity to differentiate. And look, the biology ought to even play further in our favor again given the unique signature of our drug. Like dermatomyositis, lupus is known to be a type I interferon-driven disease and brepo may provide sort of best-in-class suppression of type I interferon signaling, in addition to other cytokines implicated such as IL-6, IL-12 and IL-23.

So our strategies are built on evidence over the last 20 years that SLE has specific [pathogenesis that has been] relevant and also underscores that you can't go after just one access for efficacy if you want robust efficacy. Anifrolumab provides evidence that type I interferon inhibition provides activity in SLE, were the only one -- the only oral drug to hit this accesses robustly and then bari provides evidence that JAK1 inhibition provides modest activities -- provides modest activity in SLE, which includes IL-6, interferon-gamma. Deucrav and Stelara provide evidence that TYK2 inhibition or reductions in IL-12 and IL-23 also provide some activity in SLE and were the only drug to hit this whole unique signature.

So on Slide 25. Here's the lupus study design. It's a large global Phase IIb study, has all the design features you want from pivotal. It's close to fully enrolled actually. So that's an important piece of news. And we're using a 52-week endpoint, so we expect top line data in the second half of next year, so quite soon. And then it's important to note here, a feature of our collaboration with Pfizer is that Pfizer is sharing in the expense of this study. It was already in flight when we launched Priovant, but in total, this ended up being a really highly capital-efficient bet for Roivant to make relative to running an entire lupus registration quality study from start to finish. And obviously, we're excited to partner with Pfizer on it. And then on the back of this, if successful, we'll just be one study away from approval in a quite large market.

So I'll wrap up on Priovant on Slide 26 with just a recap on partnership. So Pfizer, as it's sometimes the case with our really important partners with Vants, owns an equity interest, a 25% equity interest in Priovant. Priovant develops the drug and owns commercial rights to brepocitinib in the U.S. and Japan. And we also have similar rights to a mid-stage TYK2 inhibitor. This was a capital-efficient deal for us, so there was a nominal $10 million upfront, which actually included the purchase of inventory of drug in hand.

There's no regulatory milestones at all and a single commercial milestone. There's a tiered sub-teens royalty on net sales in our territories and sales that were booked by Pfizer outside of our territories that have a slightly lower but conceptually similar single milestone royalties flowing back to Priovant and back to us. So yes, we are thrilled to unveil this program. It's emblematic we think of our ability to work with partners, often repeat partners on high-impact therapies with creative development strategies and with some capital efficiency.

And I'd say, obviously, a little bit of contrarianism in moving into this area with what everyone else is focusing on. But we think it's going to deliver a meaningful therapy to patients in a range of diseases with high unmet need. So we think this will be one of the anchor programs in our portfolio in the years ahead and looking forward to providing further updates as we continue to execute.

So I'm going to go quickly through a couple of other updates. That was the main new item for the period, but I just wanted to give a couple of quick updates on some other things going on around the portfolio, and then we'll wrap up with a brief financial update and then open line for questions.

So jumping ahead to Slide 28. We've talked a little bit about this on earlier calls in the press release, but I always point out, at this point, we've done multiple strategic partnerships that validate the quality of our discovery pipeline and our discovery platforms, our discovery tooling, including a partnership with Janssen focused on VantAI's deep learning platform, looking at generating novel molecular-glues and hetero-bifunctional protein degraders; a collaboration with Proteovant and Blueprint to advance novel protein degraders to address important areas of unmet need; and then an early discovery collaboration with BI. And we think there's sort of more of this to come. And we see a lot of enthusiasm for what we're doing on the discovery side with pharma partners, who are interested in using the kind of tools and modalities that we bet heavily on. And I'll note that these 3 deals together have contingent milestone payments of well over $1 billion in addition to potential product royalties.

And then not too much new to say here on Slide 29, but litigation surrounding Genevant's IP portfolio, this situation continues to develop since we last provided a detailed update on it, Moderna, as you may know, on May 6, filed a partial motion to dismiss our claims, which we responded to and Moderna actually filed its reply just a few days ago. So the briefing on that motion to dismiss is now complete. So we'll get the court's decision when it comes. And I'll just say that rather than respond to the substance of our claims, they filed a motion to dismiss an unidentified portion, but not all of our lawsuit in an apparent effort to shift responsibility for potential patent infringement to the U.S. government.

And then the only other sort of ongoing relevant litigation is Acuitas, an LNP company, on March 18 filed an action against Genevant and Arbutus, looking for a declaratory judgment, basically looking for a statement that we are not infringing -- that they are not infringing on our patents. So we told the court last week that we intend to dismiss that -- or file a motion to dismiss that lawsuit for lack of an actual controversy. And so we'll hear back from the court there as well.

So wrapping up today with just a brief reminder of some of the financials of the period on Slide 31. I think we're pleased with where we are from a capital perspective. In the 3 months ended 03/31/22, we had R&D expense of $135 million or adjusted non-GAAP of $118 million. We had minimal IPR&D of $2 million. We had $139 million of G&A or adjusted non-GAAP of $77 million of G&A for a net loss of $291 million or an adjusted net loss of $188 million. And then we've also got metrics on the slide for the full year, and our balance sheet, most importantly, remains really strong with $2.1 billion of cash and cash equivalents and $210 million of balance sheet debt, which is sort of a credit facility of $33 million, and then the rest of that is effectively the present value of milestone payments, mostly Dermavant associated with (inaudible).

Yes. And then finally, on Slide 32, I'll just say we have a period of really exciting news flow and information and catalysts that we think are things we're watching really closely that includes, obviously, continuing to follow closely the commercial launch of VTAMA that includes topical data for VTAMA in atopic dermatitis, a second potential blockbuster indication there in the first half that includes multiple readouts and additional program initiations at Immunovant that includes top line data coming next year for lupus. It includes sort of upcoming readouts at Kinevant and Hemavant. So -- and all that in addition to potential output from our discovery apparatus and other things going on around the business. So an exciting period of execution for us, an exciting period of upcoming catalysts, and we're really pleased with where we are as a business.

With that, I'll wrap up the formal presentation. Slide 31 is just a non-GAAP -- sorry, Slide 33 is just a non-GAAP disclosures and Slide 34 is a summary of our Vant ownership. And so I will -- I'll end there. Again, I'll say thank you for listening this morning, and I'm excited to take your questions. So I will turn it back to the operator to open the line.

(Operator Instructions) Our first question comes from Dennis Ding with Jefferies.

Congratulations on the progress and the partnership with Pfizer. Two questions for me, one on Priovant. Can you just talk about the decision for Pfizer to out-license these assets? I think there's clearly a lot of interest in the [class] and these trials seem relatively late staged, having enrolled already or close to fully enrolled. So perhaps why do you think these assets are in better hands with Priovant versus Pfizer, whose cost of capital is presumably lower? And then my follow-up question is on VTAMA and script volumes and whether these have been tracking in line or better than your expectations thus far? And I guess, especially on pricing, if you can [rightsize] The Street on gross to net, that would be really helpful.

Yes. Thanks, Dennis. Appreciate the questions, appreciate you for listening this morning. I'll probably take those in reverse order, and I'll take the VTAMA question first, and then I'll give some thoughts on the Priovant question and I also ask Mayukh, who worked closely on that collaboration to chime in. On VTAMA, in terms of script volumes, we haven't said exactly what our expectations were. I think what I'll say is we're pleased with the early demand. We're very pleased with the response from the doctors that we're out talking to. It is very early days, and so it's hard to look at this and say that we're ready to draw any conclusions. We are excited to see where this goes, and we're looking forward to providing a more fulsome update.

And then on gross to net, I guess, I'll just go back to what we said on the launch call, which is we are focused very hard at this stage in the game on getting credible high-quality coverage, which includes the right formulary, which includes the right rebating strategy and so on. I think until that happens, we're not providing specific guidance, but I would expect deep gross-to-net discounts just because of the way the market works. And then I expect that will normalize once we have credible coverage. And what we've said is that's going to be about 12 to 18 months. So that's kind of what I would say on VTAMA.

On the Priovant-Pfizer question, the first thing I'll say is, yes, I think you can see it in the partnership terms, Pfizer remains excited about this program. They continue to invest in the lupus trial alongside us. They own 25% of Priovant. They have economics flowing back to them. And they have a large portfolio of drugs in this general sort of area of the world. And so I think even companies like Pfizer need to pick and choose and make strategic decisions. And I think this was -- if I had to guess a tough one for them to "let go," it has to do with the quality of our relationship that they thought it was in good hands with us and that it was going to generate good value for them in this construct. So that's sort of my high-level answer. Mayukh, I don't know if you would add anything to that in terms of how you think Pfizer was thinking about it.

Yes, I think that's right. Thanks, Matt. So I mean, I think, as Matt mentioned, obviously, we view Pfizer is really the world leaders in this specific biology and has a number of other programs, both marketed and late-stage development in these areas, and I think we're looking at the data for brepo that (inaudible) had largely been developing in the sort of the broader market indications. And I think that they saw in our proposal sort of a way to develop it in a unique set of indications that, again, really play to the strengths of this specific molecule. I think as you guys probably all appreciate, Pfizer has got a long history now of partnering assets with new [cos]. They've done it with Cerevel, with Allogene, with SpringWorks. And we're really excited to move forward. This has been a great partnership. Thanks.

Our next question comes from Yaron Werber with Cowen.

Congrats also on this deal. So I also have a couple of questions on brepo. Number one, can -- I guess I have 3 questions. One, is the collaboration open-ended in terms of indications? Or are you sort of restricted to lupus and dermatomyositis? (technical difficulty) they're retaining right to develop any other TYK2 or JAK1 independent of you for any indications, including these 2? And then finally, when we look at the prio data, kind of 2 things jump to mind. The -- you're right, the data you showed us look pretty good. The atopic dermatitis data was a bit weak on efficacy. And then infection -- there's obviously some infections, but nothing overly concerning on the safety (technical difficulty) address those 2 as well.

Yes, thanks. So I'll hand over to Mayukh on couple of these things. First of all, the collaboration is definitely open-ended with regard to indications. And I would say not only are we not limited to these 2, but given the quality of the compound, I think you can imagine we are considering a whole range of things we might do with it. So definitely not limited. Mayukh can comment a little bit more on the specifics of what Pfizer might be limited to. But in short, I think you can imagine for a company like Pfizer with a portfolio like theirs, they don't have a lot of limitations on what they can do, but Mayukh can comment on the specifics there.

And then on the safety side, and then I'll hand it over to Mayukh to comment on any of these topics. I'd say, broadly, first of all, remember, this compound has been developed extensively. It's been exposed to over 1,000 subjects and patients. And we've observed rates of, let's say, JAK-class specific adverse events that are in line with those observed in other programs. From a tolerability standpoint, it's generally been well tolerated. I agree with you, things like infection numbers are not particularly problematic. I think we feel like the safety profile is consistent, is favorable for the development strategy we have in mind and it's something we're mindful of. And I think, frankly, the focus on tolerability for JAK inhibitors is part of what has given us the opportunity to do something unique and different here.

So Mayukh, I don't know if there's anything you'd add on any of those points and specifically if you want to comment on the AD data or on any limitations that Pfizer has.

Yes. Nothing really to add here. I mean I think as one might expect, I mean, I think that we were committed to these programs as our sort of expression of our interest in this particular biology. I think, as Matt noted, we don't have limitations in what we can pursue. And I think, as one might expect, I think sort of some of these core indications that we've highlighted today, it was important to us to kind of have Priovant [do this] the way in which Pfizer is expressing interest in these indications as well.

One comment on the AD data. I think you're referring to the published data. They published some data. The published data was on topical brepocitinib. So our lead compound here is the oral formulation. We have rights to the topical as well. We're sort of deciding what to do with it. Obviously, it's an area we have a fair amount of interest in. But I would say the activity data that we have that's most relevant to us is the data from the oral program.

Our next question comes from Robyn Karnauskas with Truist Securities.

This is Alex on for Robyn. Congrats on the partnership. A quick question on Aruvant, and I wanted to know if you could provide a little more color on what factors led to the wind down of the sickle cell program. And also how should we think about the approach to future resource allocation for existing Vants versus interest in additional initiation of subsidiaries?

Yes, thanks. Look, it's always a tough decision to wind down a program that you're potentially excited about. And so there were a lot of factors. I would say, chief among them from my perspective, others and a broad desire to be sort of careful about how we're allocating resources in the current environment is the clinical bar for curative therapy in sickle cell disease really is curative. And I think as you look at the development of that field with the other programs, we felt like that bar was really high, and we got nervous that we might not quite achieve the squeaky-clean clinical bar there.

And look, these are patients with few options. But actually, the pipeline across biotech is pretty broad. It's obviously been a little bit of a challenge area. But we still feel good about the high likelihood that curative therapies in genetic medicine are going to make it to sickle cell patients. We're obviously disappointed to bow out, but we're incredibly appreciative of the patients that have worked with us and, obviously, the investigators that have worked with us as well as our whole team, and it's something that we took a swing at.

So yes, it's a tough decision. I think what it enables for us is to continue to be broad-minded in our portfolio. We have to make decisions like this. And we have to make them quickly and decisively in order to be able to do things like this partnership with Pfizer opportunistically, and we think the current capital markets are going to give us even more opportunities of that kind. And so when we have the ability to make these decisions, it's just something we have to do quickly. So it's something -- it is always disappointing, as I said, but it's just the kind of decision we have to wait to make.

Got you. And you mentioned that you got some initial physician feedback on tapinarof, the tapinarof label. Can you elaborate on that a little bit?

Yes. I would say just generally, as we've been out to docs, as our field force has been out to docs, our Dermavant leadership team has been sort of out talking to the medical community. I think there's just a lot of excitement and enthusiasm for the label. We obviously were excited about it when we first saw it, but what you heard on the call a few weeks ago was really our Dermavant management team's first impressions of what seemed to be a very clean label. And I think as you get out there, just all of the things that we would have hoped are resonating with prescribers. And so yes, we're really excited to watch the progress there as that team gets out and does what it does best.

Our next question comes from Louise Chen with Cantor Fitzgerald.

So I wanted to ask you a few things. First one, if you could talk about the market opportunity for batoclimab in myasthenia gravis? And where do you think your drug would fit into the treatment landscape if it's approved? The second question I have for you is, how do you think about tapinarof or VTAMA and the potential opportunity in psoriasis and in atopic dermatitis? What gives you confidence in the positive data or positive data readout in 2023 in atopic dermatitis? And then can you talk about the pushes and pulls on your cash runway?

Yes. Thank you. I will -- I'll take those questions in some order here. I'll start with the VTAMA question, the tapinarof question. We're looking forward to that readout. We like the biology of AhR modulation very much. It's something you've heard us talk a fair amount about, and we think it's important to inflammatory skin disease generally.

And then I would say the thing that gives us most confidence about our readout in the first half of next year is that we have compelling Phase II data in atopic dermatitis that has guided our development strategy, and we feel like we've designed the trial to maximize the opportunity there. And in terms of the opportunity, look, we think it's really, really big. We think we have an opportunity for a blockbuster program in both indications or in each indication, and we're hopeful that our data next year is going to support it.

On batoclimab in MG, we've talked a bit about this before, and I think the Immunovant team will continue to talk about it as well. We view that market as large and interesting. We view the evidence for FcRn modulation being effective, is obviously robust at this point across multiple programs. And we think the specific trial design that Immunovant is employing there with induction and maintenance and rescue therapy. And with all of the facility that comes from the subcutaneous administration from the trial design, allowing docs to move patients between doses at various times and randomizing across different doses is going to give us a really differentiated profile relative to any of the other FcRns in development. And obviously, the details of those plans, including the label on Efgart is well known and, frankly, doesn't have the same level of flexibility. So I think we feel a big opportunity in MG for a differentiated program. And we think we've got a development strategy.

And frankly, maybe this is another important point. We have the ability to suppress IgG, we think, deeper than roughly, we believe, any of the other anti-FcRn antibodies in development will do. That's a combination of the actual molecule and the way we're developing it. And look, we think that has the potential to drive maximum overall efficacy in addition to the flexibility of the treatment paradigm. So we think we have a chance to win competitively on multiple axes there. And we think the FcRn class is going to matter a ton for those patients.

And then finally, on cash runway, I'll reiterate we have over 2 years of runway. We try and generally run our business to be confident in over 2 years of runway visibility. It's easy for us to do that because we have a very broad portfolio with lots of pushes and pulls. And we have over 2 years of runway. Assuming everything succeeds, we move a whole bunch of discovery programs forward. So there's a lot of flexibility. As things evolve to modulate that, we just feel really lucky to be in the capital position that we're in. We think in terms of pulls and sort of the obvious things, we've kind of launched late-phase clinical development programs. Those are all expensive.

But in terms of pushes and I mentioned this at the beginning of the call, and I think it's a really important point, we have a lot of flexibility for sources of capital that go beyond the capital markets. Obviously, we're watching the capital markets closely, but we have a number of other opportunities. Partnership, obviously, Genevant, monetization of stakes, just a number of tools to allow us to modulate our cash balance even outside of the capital market. So we feel, as I said, very privileged both about our business model and about our cash balance capability there. So I appreciate the question. It's a good question in the current market for sure.

Our next question comes from Neena Bitritto-Garg with Citi.

For the Priovant's partnership with Pfizer, I believe there were actually 2 assets as part of that deal. Could you maybe talk a little bit about the second asset and kind of thoughts on that? And then on the updates on the LNP patent litigation, I guess, any update that you can give in terms of timing for when we could hear the court's decision on the motions of business would be great.

Sure. So the other asset in the Pfizer partnership was selective TYK2 with its own unique signature. We wanted to use this call to focus on brepo, given the fact that it's a lead molecule and is already in registrational studies. We don't have plans to share right now for [ruxolitinib], which is that selective TYK2. We're most focused on the combination.

I'm sorry. And then on the IP question that you asked, I don't think we have a specific comment on the court's time line for response there. I think it's ultimately up to the court. I don't think there's a prescribed time line for it. So they have the discretion to decide when they want to. So we're watching for it in the coming months is what I would say.

Our next question comes from David Risinger with SVB Securities.

Yes. Thanks very much. And I wanted to add my congrats on the (inaudible) Pfizer transaction. So my questions are as follows. First, could you talk about the expected payer access ramp for tapinarof? And then how we, as investors, should think about net sales in coming quarters since it's going to take a while for payer access to actually take hold?

Then second, with respect to court action on the LNP litigation ahead, could you just talk about potential timing and how we should think about developments to watch? And third, I don't know if Richard is on the call, but it would be helpful to understand how we should be thinking about cash flow in the upcoming fiscal year, specifically operating cash flow or operating cash burn, I mean.

Yes. Thanks, Dave. Those are all great questions. I appreciate it. On tapinarof payer ramp, I think we've commented a little bit in response to some of the other questions here. We've said our main focus is on high-quality coverage. What that means is we're prepared to do the work to get the covered claims through to get payers to pay attention to the program and that's what we're doing now. So we are most focused on, as I think we've said a few times, script volume during this period of initial launch and expect that to last for a little while here.

And then what we said is that we expect to have that coverage online kind of in the 12 to 18 months time line, and that's when we would expect gross to net to ramp up and normalize. And I would say we'll be prepared to provide sort of better specific guidance on what we think normal gross to net will look like for us once we have a little more visibility into those contracts and so on. So I think stay tuned on that topic.

Then on the LNP litigation, I think a similar answer to the prior question here. I think the district court has discretion on when they respond to sort of -- the next major action there is the district court's response to Moderna's motion to dismiss. The district court has some discretion there. But in general, they tend to respond within months. So that's something to specifically watch out for. We think the Acuitas situation is of less direct interest, but that's obviously also ongoing, and we'll get some feedback from the court there. And then beyond that, I don't have a lot to comment on right now or on any other possible movement there. But those are the things we're watching most closely.

And then Richard is on, so I can hand it over to him for any additional comments on operating cash flow. But I think while we haven't given a specific sort of cash flow statement and metric guidance, I think you can look at where things have been and you can look at the sort of runway guidance that we're giving overall and back in a little bit to kind of what we think things are going to look like from an operating cash flow perspective.

Richard, I don't know if there's anything you would add to that?

Thanks for the question. Look, we haven't provided guidance for the year specifically, but I'm very pleased with a lot of the reprioritization we've done this quarter. And as we think about the portfolio, I think we have a really high bar here as we move things forward. We'll have data emerging from us, from competitors, and we'll put the same laser focus lens on taking additional programs forward as data emerges from our programs and externally.

And certainly, as we ramp up the VTAMA launch and the AD data comes through, you can think about some of the additional spend for launch down the line. And then as we said, for Immunovant, we have the additional Phase III trial that will be coming through that you'll see kind of by the end of the year. And some of the other savings that we've talked about should confidently lend us a 2-plus year runway, but we're not providing 1-year guidance.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Just, Matt, maybe to start, I know you've highlighted that you've gotten some positive feedback on VTAMA in the early days. I'm just curious when we think about the sort of selling points that you had for tapinarof or VTAMA, is there anything in particular that is resonating with physicians or sort of really standing out to them in early conversations?

Yes. So in the last couple of weeks, we've actually done speaker trainings. We've been out to sort of top thought leaders on psoriasis, I think, in general, what are we getting? People are excited about the [bit of] data. Obviously, that's something we expected. I'd say the cosmetic elegance of the cream itself is a kind of thing that people can tell immediately on use. We've gotten good feedback on that and on tolerability right out of the gate. It mostly confirms the survey data that we've previously shared. And we're excited to see that patients want to use it again. And then yes, I would say, early indications from the field on sort of action, its benefit, (inaudible) benefit and a lot of things, these are the kinds of things that you would expect to hear in early launch. So we're pretty encouraged by it.

Okay. Great. And then just as a follow-up, and I might have missed it, could you just maybe talk a little bit about the origins of the brepo transaction with Pfizer? Was this an asset that you had identified and reached out to them? Or did they reach out to you to discuss it?

I will hand over the origin story to Mayukh.

Sure. Yes, I mean, I think that you should assume that, look, I think we have a great working group with Pfizer. We have great working relationships with other pharma companies as well. And it's almost more of an ongoing dialogue than an outreach or a specific outreach in either direction. But this is obviously a striking, I think, really unique drug that I think we had seen their data evolve and emerge for a period of time. And we're excited that we're able to kind of have a win-win collaboration and we're just getting started.

And I guess just maybe, Matt, final question on brepo. When you think about sort of prioritization, obviously, you're starting in dermatitis and lupus. I'm just curious how are you thinking that some of the bigger indications that we already have some proof-of-concept data on or sort of some early clinical data, are those worth pursuing or something that you think about down the road?

Yes, thanks. It's a good question. And obviously, the data that we have are highly compelling across a range of indications. I think they highlight just how strong a molecule it is. I think right now, we're focused on the development strategy that we've laid out here, not just in these indications but, frankly, in other indications that rhyme with these. We think there are many. And so I'd say that's our initial focus, and I think you can expect us to sort of continue to pursue that line. That said, we're watching the field closely and looking forward to continuing to provide updates as we get going. We think we can generate -- yes, go ahead. Yes.

And I guess, Matt, [as a follow-up,] should we think about this as sort of an asset similar to what we've seen with batoclimab in terms of just the rollout of new indications? Or do you think that these 2 are going to be the ones that we should focus on for some amount of time?

I think you should focus on these 2 first, but you should expect us to continue to announce some further opportunities as they crystallize. Obviously, it's a competitive area. So like batoclimab, we're focused on making our decisions, executing on them and talking about them in the right order. But I think you should expect us to continue to pay attention.

Look, we think that they should work in indications, a variety of indications of high morbidity and mortality with few approved therapies, and we're looking at areas where there's highly inflammatory pathobiologies, where specifically dual inhibition of TYK2 and JAK1 will be expected to provide greater efficacy than either alone, and we think there's multiple to choose from in addition to the 2 that we've mentioned today.

Our next question comes from Corinne Jenkins with Goldman Sachs.

You highlighted at the end there that you have this increasingly broad immunology portfolio and, of course, these are across different bands. So I'm curious, could you talk about any potential synergies across the set of bands, whether that's an area we should expect you to continue to focus on as you expand the portfolio?

Thanks, Corinne. It's a good question. I appreciate you listening. I would say a couple of things. First of all, we continue to not want to pigeonhole ourselves to specific therapeutic areas. So I think you'll continue to see us taking opportunities more broadly than just immunology. There are obvious benefits to having a concentration or some elevated expertise in an area. I think we see it in our diligence. We see it in our track record in people's understanding of our ability to execute these kinds of deals and these kinds of programs. Ultimately, if there are overlaps in commercial sort of footprint, we have the ability to do interesting things through the Vant family and working with Vant management teams to maximize sort of synergistic value, but we also have the flexibility to treat the programs as separate.

So I would say, we get benefit from talent mobility. We get benefit from leadership. We get benefit from sharing ideas across the family. And I think down the line, as we get closer to commercial in some of these programs, we have ability to think creatively about collaborations and the flexibility there. Do what makes sense across the family. And I'll highlight one of these things in particular, which is talent mobility. We talked about deprioritizing some programs today. I think one of the great things about the Vant model is that we have the ability to take -- to offer top talent from Vants, from programs that we deprioritized opportunities in other places around the organization, and that's something that's always been core to our model. And it's something that a concentration in a given therapeutic area makes it even easier. And so I think it's something we're excited to have.

Thank you. And I'm currently showing no further questions at this time. I would like to turn the call back to Matthew Gline for closing remarks.

Great. Well, thank you, operator, and thank you to all who are listening today. I appreciate all the really good questions. Obviously, an exciting combination of announcements for us. So yes, looking forward to continuing to provide updates over time. Thank you for listening, and have a good summer. We'll be back out in a call like this in a couple of months.

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