Roivant Sciences Ltd

F:87S

Earnings Call Analysis

Stable VTAMA Growth and Psoriasis Market Expansion

VTAMA's commercialization journey provides the company with key insights and infrastructure, positioning it to launch additional products and secure free cash flow into the future. The main goal is to build a durable biopharma company through both self-commercializing and judiciously partnering on products. Clinical feedback on VTAMA has generally been positive, with physicians recognizing its utility as a steroid alternative, although some are still gauging how to integrate it versus steroids. Future growth will rely on converting physicians who currently underprescribe to more frequent usage, supported by favorable safety, efficacy, and patient response data.

A Solid Quarter with a Strong Cash Balance

Roivant Sciences had a rather notable quarter, primarily due to the sale of a significant program and a resulting strong cash position. The scheduled sale of their anti-TL1A antibody program in ulcerative colitis to Roche is a highlight, culminating in expected cash proceeds of approximately $5.2 billion, coupled with an additional expected milestone payment of $110 million next year. Post-transaction, the company anticipates a robust consolidated cash balance of $7 billion. This capital infusion positions Roivant to undertake numerous strategic initiatives and investments as part of its next growth phase.

Steady Revenue Growth with Room for Improvement

Roivant reported building revenues, amounting to $18.4 million for the quarter. While the company has expressed satisfaction with physician and patient reactions, it seeks accelerated growth for its products, which consists of the steadily growing prescription volume for their psoriasis treatment. Despite the slower-than-preferred growth, Roivant remains optimistic about bending the curve and building more product volume, especially with the anticipated launch for atopic dermatitis in the latter half of the next year that promises an even larger patient population.

Positive Clinical Data Driving Future Prospects

There's been notable success in clinical trials, particularly with the Phase III data for VTAMA in atopic dermatitis. This is essential as it marks progress toward the commercial launch of new treatments. Furthermore, there's excitement around the upcoming data for other studies, including brepocitinib and the anti-FcRn franchise, which are set to reveal more insights later in the year. The company is also eagerly awaiting the Graves' data from Immunovant, expected within the same time frame.

Leveraging Nondilutive Financing Strategies

Roivant continues to focus on ruthless economic evaluation in deploying its resources effectively, considering nondilutive financing options for its VTAMA program. Whether through monetization, partnerships, or reaching profitability with the product, the company is poised to create a steady flow of free cash, which is projected into the late 2020s and beyond.

Modest Improvement in GTN Yield

The company has achieved a modest increase in GTN yield, reporting an uptick to 27.6%. Having mostly completed the contracting process, Roivant anticipates a gradual improvement toward the long-term goal of a 50% yield. The trajectory toward this target is expected to follow a stable and incremental path.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Roivant Q2 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Stephanie Lee. Please go ahead.

[Stephanie Lee Griffin, executive]

Good morning, and thanks for joining today's call to review Roivant's financial results for the second quarter ended September 30, 2023, along with the business update. I'm Stephanie Lee with Roivant, presenting today, we have Matt Gline, CEO of Roivant. For those dialing in via conference call, you can find the slides being presented today as well as the press release announcing these updates on our IR website at www.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, executive]

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

So I'm going to start on Slide 6 in the presentation, which is a slide that's fun to put up. So we're sitting here in November of 2023. And I keep saying on these calls, but it's true. It's been a pretty wild year. We said this was going to be our biggest year yet. And at this point, it has surpassed certainly my expectations. We've delivered some really great Phase III data for VTAMA in atopic dermatitis as well as continued progress on that commercial launch. We'll talk more about that a little later on this call. But those we are not really first clinical data sets this year.

We delivered some extraordinary clinical data for RVT-3101, our anti-TL1A antibody in ulcerative colitis, both at the beginning of the year in the induction phase and in June in the maintenance phase. Obviously, we announced the culmination of that journey a couple of weeks ago with the planned sale of that program to Roche. We announced the first cut of the IMVT-1402 healthy volunteers, SAD and MAD data in September and showed a profile that we believe sets us up to have a potentially best-in-class anti-FcRn antibody with bitoklimab-like IgG suppression and at least in the cohort shown so far, no impact on LDL or albumin. And that's all sort of up until now. And believe it or not, there's still more data coming through the rest of this year, including the final 600-milligram multiple ascending dose cohort from Immunovant, the SLE data for the Phase IIb study of [indiscernible] we talk a little more about and the Graves' data at Immunovant also coming this year. So just a year really chock-full of clinical data, and I could not be more proud of how it has gone so far. End of the Roivant's teams are delivering on it.

So on the next slide, I just want to talk a little bit about the acquisition here that we've already messaged, which is that the plan here is for us to sell Telavant, our anti-TL1A antibody program to Roche previously discussed that a couple of weeks ago, the sale was for $7.1 billion upfront with a [indiscernible] million milestone. As a reminder, [indiscernible] owns about 75% of that business. So our cash proceeds will be about $5.2 billion on close as well as $110 million from that milestone that we expect next year. At the close of this transaction, pro forma for -- or including the proceeds from that transaction as well as the follow-on offering. We expect cash and cash equivalents consolidated for Roivant of $7 billion, which is an extraordinary capital position. We will talk a little bit more on this call and a lot more in the future about what we plan to do with that capital. And Pfizer will keep commercial rights to the program outside of the U.S. and Japan, and we'll continue to partner with Roche on the program.

As a little reminder of [indiscernible] on slide 7. First of all, we think for the program, Roche will continue to do great things. Obviously, we were proud of the work that we had done and would have been excited to continue developing the program, but Roche certainly adds the resources and expertise of a large global pharma company to maximize access for patients across indications. For us, this is tremendous near-term value generation that with proper value to a large opportunity and with a lot of capital efficiency relative to the modest amount that we had so far invested in the program. And this is a transformational capital opportunity for us. We -- as we've said on the previous call, are going to be patient and thoughtful. I know -- and I heard it from a lot of investors, people were looking for a sense of what we're going to do with the capital, I'll just remind people, we have a phenomenal pipeline already between Immunovant and our FcRn program and a number of others. We're excited to put some of the capital to work there. We see transaction opportunities in the relatively near term that are as large and exciting as anything we've ever done before TL1A included.

We expect to continue to be capital efficient in those business development transactions. And while I never rule anything out, I think it is more likely that the deals that we'll continue to look like the ones we've done before with relatively smaller upfront components. But again, we're taking stock of the whole opportunity side, and there's a great opportunity. And we have the potential to return capital to shareholders. above and beyond that, given the significant sum. So we'll talk more about all 3 of those things in the near future and over time. As a reminder, on Slide 8, one of the questions I've gotten frequently from investors is what does the catalyst road map look like now that this deal has happened. And my answer is, well, it looks much the same as it did before. And in fact, the TL1A program would be just in the Crohn's data at the end of that year. You didn't have any near-term catalyst. Our pipeline is tremendously rich today.

With VTAMA, obviously, a commercial program with a significant amount of data coming at both brepocitinib and especially in our anti-FcRn franchise in the next 12 months, and we look forward to continuing to generate important clinical data from those and other programs in the months to come. So with that, I'm going to do a brief review of where we are at Immunovant and some of the other programs.

And I'll just start on Slide 10 with a reminder, we are very proud of the anti-FcRn franchise that we have. We believe we have 2 great programs, both of which are capable as best we can tell from the data we have available expressing [indiscernible] deeper than anybody else. And one of them etokimab, we've generated a lot of data in a continuing to generate mid-stage clinical data in indications that matter where we think we're going to be able to prove out to that deeper is better IgG hypothesis. And the other one [indiscernible] coming close behind now looking like it delivers that same IgG suppression, but without an impact on LDL and albumin. So a really exciting opportunity for a franchise of these programs.

As a reminder, on Slide 11, 1402 is in the late innings of this single ascending and multiple ascending dose healthy volunteer study that was designed to reveal the clinical profile of that program. it had both multiple single ascending dose cohorts that were IV from 100 milligrams all the way up to 1,200 milligrams IV, it had subcutaneous single ascending dose cohort to 300 and 600 and then multiple sending dose cohorts at 300 and 600 subcu. And at this point, we've delivered all other than that higher dose 600-milligram multiple-ascending no subcu cohort, which, as a reminder, [indiscernible] signals, they expect this month, and that is fully on track.

I'm not going to share all of the data here. Obviously, everything we believe that we shared in September was fully consistent and painted a proceeding picture as far as we were concerned of what this drug could do. On Slides 12 and beyond, I just have the multiple ascending dose data, which, as a reminder, shows on Slide 12, very much etokimab like IgG suppression with 300-1402 suppressing IgG by a very similar amount to 340 milligrams of etokimab for 1402 similar [indiscernible] 340.

And then on Slide 13, you can see that that's achieved. There was really no time course impact on albumin at all. Albumin [indiscernible] up at the end slightly above baseline and slightly above placebo, remember down is the direction to be concerned about. Unlike etokimab, which is the multiple sending dose data showed a clear dose-dependent time course dependent impact on albumin. And then you can see in the LDL data, which unfortunately we don't have in the same study batoclimab, but you can see again, really no time course impact of note on LDL with LDL in this case, winding up slightly below baseline. So as a reminder, there was variability in these data with we always said we expected variability in LDL to the plus or minus 10% tune. But we believe the consistency of it across all of this suggests that we have a strong profile, and we're looking forward to sharing the 600-milligram met data once we have it.

And then as a sort of final reminder on Slide 15, just to note, this is an incredibly broad target. Even since September when we shared our data, we've continued to see developments in the field, including the full J&J [indiscernible] RA data, we continue to make progress on our own studies, Graves' data coming later this year. Graves an indication that I think is significantly underappreciated for the commercial potential and the number of patients that we can help. And it's just a really broad target with at this point, great clinical validation across multiple indications that FCR is active and it matters clinically in a number of new diseases as well. So really excited about what's to come there. A very, very data rich set of months and really a full year ahead, excited to generate that data and continue to evaluate strategic options that I believe will present themselves and to continue to communicate about where we are as that plays forward.

So next up, I'm going to provide a brief update on the the VTAMA launch starting on Slide 17. So I'd say, overall, we continue to be pleased with how this launch is going. It continues -- script volume continues to grow at a steady clip, probably not quite as fast as we would like at this stage, but we're overall pleased with the reaction from physicians and the reactions from patients, and we see continued uptake of the product. So we're hopeful that we're going to be able to continue to bend the curve and generate more volume in psoriasis. This remains the best launching topical in history. And we're in particular, we're excited for the atopic dermatitis launch in the second half of next year, where we have terrific data and with a significantly larger patient population.

On Slide 18, we just got the financials here. Revenues continue to build. We did about $18.4 million for the quarter. GTN yield accreted, I'd say, modestly up to 27.6%. We're sort of through the contracting process at this point. So I would expect GTN will continue to improve modestly at a steady clip over time as we approach the steady state, which we think long term, we'll get to the 50% that we've talked about, and we'll take some time to build up to there as we've communicated. Finally, just a couple of notes about where we are from a data perspective. There's actually been some additional data generated were published in this program in the last month or two including on Slide 19, one of the things that at least 1 of our competitors has talked aggressively about is efficacy in inecrigenous psoriasis. This is psoriasis inside the skin fold, inside the elbow and the growing, et cetera, where psoriasis is pernicious and where some of the other -- especially the most potent steroids are not permitted. And you can see we have really phenomenal data in endocrigenis psoriasis. We think as good in our view across our comparison as anybody else here. So we feel very good about what we deliver in [indiscernible] psoriasis.

We also put out some additional data, which is super important in the atopic hepatitis area, which is the speed of onset for itch. As you can see on Slide 20, we had a specifically significant separation on placebo as early as week 1 and just a clear visible separation really within 24 hours and a meaningful reduction in itch within 24 hours. So we feel very good about the speed of onset and that's something that matters quite a lot to a [indiscernible] patients. So it's data we're excited to continue to continue to put out there as we get closer to that NDA filing and eventual launch. And then as a reminder, on Slide 21, we just couldn't be more excited for the clinical profile of this agent in AD with some really phenomenal data when you look across mechanisms, this is we just take 1 endpoint 75, we published before, but across mechanism, some of the best data that's ever been shown with safety profile that is about as good as any. In fact, an efficacy profile that looks numerically differentiated from even some of the systemic therapies. So really exciting and looking forward to that. Progression as a reminder, expect that S&D to go in early next year and expect the launch sort of later next year.

Finally, on the program side, I just want to give a reminder of the upcoming data in brepocitinib. So brepocitinib is a really exciting drug to me. In some ways have been sort of sitting in the shadow of I'd say, the TL1A and FcRn programs. But it's an incredibly effective agent. We have now 6 positive Phase II studies with some of the best data that's been shown across the JAK or TYK2 classes, I think we have the single best numerical remission rate in Crohn's disease, for example, that we talked about on the last call. So just a very potent kind of a big gun agent for inflammatory disease. We are really excited about what our plans are for the program, which included the sort of main program for which we set up here, which was the registrational study that we're running dermatomyositis, but more importantly, near term, we also have the Phase IIb study that would be 1 of 2 pivotals in SLE reading out this quarter.

We've talked a lot about some of the challenges in SLE and that's not the sort of main or at least the sole focus of the program. But if it works and if it generates what we think it should be capable of as an agent, that's an indication that is in need of highly effective therapies. And we think if we can beat the [indiscernible] equivalent order that we've set for ourselves, we will have a really big opportunity to benefit patients, so we're looking forward to it. There's obviously potential beyond that, including another data set, we have a proof concept setting in [indiscernible] I guess reading out in the first quarter of next year as well as the possibility to run -- to run the study in Hidradenitis Suppurativa, which is an area that's tracked a lot of attention recently. So really excited for brepocitinib.

On Slide 24 and 25, we just have a reminder of the -- of the study design in each of SLE in the NIU study reading out at the beginning of next year, both of which we're really looking forward to seeing that data and sharing it with the world. So I will wrap up here is a relatively quick update. Just a reminder of the financials on Slide 27. I won't read all of the numbers on here, but relatively straightforward quarter and excited again for that $7 billion consolidated cash balance giving effect to the closing of the deal, which would put us in a very strong position to do lots of great things in this next phase of our life. So I won't go through the full catalyst road map again on Slide 29. Other than to say, 2023 was a huge year for us. It will be hard to top it in 2024, but we are definitely going to try and we're excited for quite a lot of data that's coming our way to help us. With that, I will say thank you to everybody. Thank you to the entire team at Roivant, to our investors, to everybody who help make this quarter possible and this year to date. And I will hand it back over to the operator for Q&A.

[Operator]

[Operator Instructions] Our first question will come from David Risinger of Leerink Partners.

[David Risinger, analyst]

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

[Matthew Gline, executive]

Thanks, Dave. Those are both great questions, and I appreciate your listening this morning. On VTAMA, and this is -- in all of my conversations with investors have not been a significant investor focus of late. But obviously, we agree that scripts have been growing, as I said earlier, slower than we would have hoped. We continue to see growth in demand. I think if you look quarter-over-quarter, it's growing every quarter. I would expect it to be at sort of at least steady over the coming quarters. We have some ideas about how to create some inflections. One of the main pieces of feedback that we continue to get from prescribers is concerns about coverage and the patient experience, especially at some of the larger pharmacies like the Walgreens where the middle of the distribution back to writing scripts 10 to 10 patients. In fact, our coverage position is very good now. It is at least as good as really any other topical. And we think patients who draw up at the pharmacy are very likely to have a good experience. So I think there's a little bit of a perception gap there that we are working to close and we're continue to experiment with other demand generation tools, including DTC.

So I'd expect as a base case, I would expect you to continue progression about this pace until the AB launch, but there's certainly the possibility for better and we're working on it. I'd say 2 other things. One is the AD launch is a really big opportunity. Obviously, the patient size is much larger. I think the program is on a path to be in a source of nondilutive financing, if that's what we'd like for it. And that's through lighter as it ramps to profitability, which we think it will continue to do or through other means, partnership, et cetera.

And the only other thing I'd say is, I think in the spirit of your second question, I think one of the reasons we say we're going to be patient here is, we don't want to make the sake of having a lot of capital and therefore, spending it kind of by default or by [indiscernible]. And so we are evaluating every dollar that goes into every one of our programs, including VTAMA critically and making sure that we're spending those dollars in the places where they're going to be most valuable. That said, again, I think as VTAMA ramps to profitability, it will be quite a useful baseline for the business. So that's on the first question.

On the second question, I expect I'm going to say this a few times today. But we really believe that patients is an asset. We believe the ability to be patient is important. We think that is what's going to get us the best opportunities. We think it's what's going to put us in the strongest position to take advantage of, as you said, we don't control exactly when the great assets become available, and we don't want to be in a position where we miss something because we do something else that's not quite as good. As you know, we're being very thoughtful about what we see. The truth is that we see some really great opportunities. As I said, we see some opportunities that are -- in my opinion, every bit as exciting as the L&A or a number of our other programs. So there's certainly the possibility for near-term deployment of capital on something like that. But I think you will see us -- you'll see us be patient because we think it is a huge advantage, especially in the current market with so much available to be patient. So I think that's as many times I can say there were patients in 1 sentence, but we feel we feel good about that. That said, we're not going to go into a dark period and we're going to continue to update the street regularly on where we're at. We'll continue to talk about our plans. We'll continue to talk about cat deployment as we see the SLE data, as we see some more of the FcRn data, as we get some transactions done. So I would expect continued updates, we're not asking people to trust us in silence. We're just asking to come along with us on our capital deployment process.

[Operator]

Next question will come from Brian Cheng of JPMorgan.

[Unknown Analyst]

First on pablocimimib's upcoming Phase II data in SLE. Matt, you talked about the difference of serotapering between the study compared to [indiscernible] Phase II -- can you talk about just how might that impact the readout? And given SLE is a hectrogeneous indication, are there other variables that we should also consider that could impact the outcome ahead of the readout? And then I have a follow-up.

[Matthew Gline, executive]

Yes. Thanks, Brian. We're obviously tremendously excited about repo and those are some of the right questions. SLE is an important disease. It's a tough indication historically for a variety of reasons, a lot of, as you say, heterogenatedn a patient population, there's a lot of variability in things like placebo response rates. We're generally happy with the study design. It was designed in a good place that's been only slightly modified since we took the program on adviser has been executing the study. We think it's a good design. As you noted, there are some modest differences in the mandatory steroid taper between our studies and the [indiscernible] study. but they will have mandatory steroid taper so, in a any they are more similar than different.

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

[Mayukh Sukhatme, executive]

Yes, sure. I mean I think you hit most of it, Matt. I think what Brian, as you well appreciate, it is -- it's a heterogeneous disease, and there's a lot of different subleasing nuances to really every trial. And you asked about steroid taper, I think a couple of other factors might be, for example, just to give you a sense of things that are different or slightly different in any trial and each of these sort of contribute in their own different ways. But severity of disease at baseline, so baseline fleet [indiscernible] or things like baseline steroids, all sort of contribute to the [indiscernible]. .

[Unknown Analyst]

And also just on Graves' readout later this quarter. Can you help us set the expectations there? How does success look like to you -- and given it's a single-arm trial and the first FcRn program increase, how do you think of the success rate? How do you think of the read-through coming from efficacy of FcRn showing other indications?

[Matthew Gline, executive]

Yes, thanks. It's a great question. We're provincially excited about what Graves' could be. I'll take it and then Frank, I'll hand it over to you've got anything to add. [indiscernible] team has spoken about this. Graves is pretty straightforward biologically here and that it's relatively well understood to be auto antibody mediated and there's a clear biomarker entire hormone levels that you're looking to normalize. So I think the data will tell us what we've got. I think we'll have a clear sense of what we've got. I think what we're looking for is relatively high rates of normalization of viral hormone levels, and we're also attracting people to be able to get off oral antithyroid drugs. And I think we will have a pretty clear answer to that question from this data. Frank, anything you'd add to that?

[Unknown Executive]

I would say as a bar, as we've talked to KOLs they've said, look, if you can get patients -- about 50% of the patients to normalized thyroid levels, that would be very clinically meaningful to them. And so that's the bar we look to a level of importance. .

[Operator]

Our next question will come from Jaman Werber of TD Cowen.

[Yaron Werber, analyst]

Great. I also have a couple. One on Brepo and then another just on Immunovant. So for brepocitinib, maybe just to follow up for lupus and definitely for noninfectious uveitis, that's definitely more -- a little bit less competitive. What is the bar for you in lupus? Is it -- we sort of have a good sense already what the safety profile of Brepo is. So is it mostly on the efficacy side as you're looking to differentiate and for noninfectious uveitis, sort of what do you want to see to continue forward? And then I have a quick follow-up.

[Matthew Gline, executive]

Yes. I'll take the SLE question. Mayukh, maybe I'll hand it over to you for the NIU question. On SLE, I think we've said this before, we think the safety profile of Brepo is, as you said, well understood. We've been in well over 1,000 patients. We have a lot of data. It is effectively JAK like from a safety profile perspective, and we expect the FDA to treat it like a JAK inhibitor or will have the appropriate labels and so on. So I think that's pretty well characterized. I think for us, it's about efficacy. I think we -- we feel the bar has been set by the [indiscernible] studies, which are the current sort of best oral data in a large late-stage program that we've seen. .

Our view of the bar that [indiscernible] resets adjusting for some pretty significant imbalances in their dosing arms is like a mid-teens SRI for placebo-adjusted delta. And so we'd like to do kind of better than that in order to feel confident about progressing the program, but it will be a balance of the factors we'll look at multiple endpoints and so on. And Mayukh, I think we sort of laid this out on the last call, but Mayukh please go ahead.

[Mayukh Sukhatme, executive]

Sure, sure. So I think we'll make an overall assessment. This is kind of a signal finding study here really. We're looking for treatment failure rate greater than 70% the treatment failure rate is quite high, not on treatment. So that's a good bar. And overall, I think really the bet here across these indications fundamentally is on efficacy. And so that's the thing that we're really looking to hit robustly.

[Yaron Werber, analyst]

And then just to clarify the NIU study you're running it, right, it's not Pfizer.

[Mayukh Sukhatme, executive]

That's right -- that's right. That's our study.

[Yaron Werber, analyst]

Okay. And just we've gotten a lot of questions, and I know you have as well. When you guys announced the TL1A deal with Roche, I think the word you used was monetize the [indiscernible] -- can you just help us understand kind of philosophically or conceptually how you're thinking about that?

[Matthew Gline, executive]

Sure. I apologies. You cut out literally as you said, what word we can do something monetized.

[Unknown Executive]

I think it was ruthlessly monetized Immunovant.

[Matthew Gline, executive]

I think we said we'd be ruthlessly economic about the Immunovant data is I think I said, although we go back and look at the transcript. But I think that's true. The way that we have always thought about this is we're going to do what maximizes value. We think the FcRn program is -- as good a program as biotech has to offer at this point. It has true best-in-class potential numerically have an investment class potential in an area where IgG has been a phenomenal biomarker for clinical efficacy and where we have really exciting IgG suppression with a clean safety picture as to what we can tell so far. So I think that program in our hands without monetizing it could be the basis for yes, one of the great I&I biotech companies of the next generation, and we are excited and fully resourced to progress that program that way. .

But along the way, as we've shown historically, we're going to evaluate options and we're going to make sure we understand the competitive landscape and understand the strategic options available to us, and we're going to be ruthlessly economic in assessing that position, and that's just who we are [indiscernible].

[Operator]

Our next question will come from Corinne Jenkins of Goldman Sachs.

[Corinne Jenkins, analyst]

Yes. Maybe a couple from us. First, you mentioned the commercial potential you see with Graves' disease. Could you just step us through how you're thinking about the market opportunity there? And in particular, which patients within Graves' disease you think are candidates for new therapeutic agents.

[Matthew Gline, executive]

Yes. Perfect. Thanks. And I'll ask Frank to add if he's got anything after I give a first cut here. But look, this is a large indication. It has hundreds of thousands of patients and our study is on patients who are uncontrolled by ATVs, that's the existing study. There's a pretty significant percentage of patients, but sometimes 40% to 50% of patients on ATVs do not end up fully controlled. So there's hundreds of thousands of uncontrolled patients. Surgery and radiation are effective, but surgery and radiation are complicated and not everyone wants to sign up for that. So uncontrolled patients currently don't have a great therapeutic option. There has not been real novel drug development in Graves' for a long time. So we think this is a -- it's one of these indications where there's just a very large patient population that has unmet need. And if you talk to these patients, they're clear about that. Frankly, some of the patients who are controlled on ATVs still feel like they have symptoms, although rising to start with the uncontrolled patients. So we think this has the potential to be just a really, really large market. .

The people are not appreciating because it's been a while since we can develop it. The only thing I'll add to that before handing over to Frank is the sort of interesting dynamic here where median severing this data. And in some ways, the better the data is, the more closely, we may need to keep some of it to the vest because we've said before, anyone Phase II study is everyone stayed through study and that works in our favor in many other indications, but it is something we need to be thoughtful about here. But in short, we think the commercial potential is really, really large. Frank, anything you'd add there?

[Unknown Executive]

I think you've covered most of the the important part. I mean, just to restate it, there is a substantial opportunity in patients who are antithyroid medicine refractory. And there is a very large, both incident and prevalent population of patients who are just not getting enough benefit. This is a category of medicines that hasn't seen meaningful innovation in the disease fleet in decades. And so there's ripe opportunity to come in or something that really matters and disrupt that. And we'll look forward to talking about it more in detail soon.

[Corinne Jenkins, analyst]

Great. And then you mentioned anyone says [indiscernible] Phase II programs. So maybe that's a good segue to the data over the weekend in rheumatoid arthritis from J&J. I guess, what were your takeaways from those results? And how are you thinking about the read across your own program and plans in rheumatic disease.

[Matthew Gline, executive]

Perfect. So [indiscernible], we'll obviously speak more to this consistently over time as we as we lay out our study plans and get everything geared up. I guess, I continue to feel about the J&J RA data in the way that I felt when we had first seen the abstract, which is -- it's tremendously exciting to see an FcRn show signs of activity in an immune complex disease, and it opens a large envelope of what could be possible. I'd say like this data in and of itself need some work to better understand and characterize J&J is doing some of that work. Encouraging signs include that the response rates look pretty solid, specifically in patients who have the autoantibody measured. And the sort of efficacy is well correlated with auto antibody suppression. And as we would have talked about before, I think one of the things that's interesting about nipocalimab in this study is it was -- it seemed to us somewhat under dosed. And so they really only got to I think it was about a 58% expression of IgG, and I think lower than that on the auto antibody. So I think it's sort of possible to understand that there is room for better efficacy at higher IgG suppression. I think it is not very likely, although this is for an event to ultimately announce that we're going to immediately begin a large Phase III program in RA, but I think it's certainly really informative data for how we see the FcRn [indiscernible] developing, and it suggests activity in an even broader set of indications than one might have originally imagined. So I think that's kind of how we think about it.

[Operator]

Our next question will come from the line of Robyn Karnauskas of Truist Securities.

[Robyn Karnauskas, analyst]

I love the word ruthless economic. I think that's a great term for a company to you. So I have 3. So first, you just mentioned Graves. I may have to keep some of that data close to your how much data would you release? Or would you just say the results were positive and you're moving forward? Second question is really about the other comment you made about [indiscernible] may shape up to be an opportunity for dilutive financing. And given that you've sold assets before, how do you think about running the company and thinking about are you going to be just a like a breeding ground where you get drugs developed and then you sell them and then you have some that you keep and how do you figure that out?

And then the last question is on VTAMA. You've mentioned gross margins of 28% -- they're relatively flat, hoping to go over time. How -- what's influencing the gross margins? Are you still sampling? Is that still influencing that? How do we model those -- how do you help us model gross margins over the next, say, 18 months?

[Matthew Gline, executive]

Yes. Thanks, Rob. Appreciate listening I appreciate all of the great questions. The first question, I'll say, having not yet seen the Graves' data, it's hard to say exactly what we would disclose about it, and it probably depends a little bit on the data and exactly what we see in the controllers of the outcome. But I think the full range is on the table in terms of when and how we share that data other than we expect to get the main thrust of it in the relatively near future. And so we'll be able to say something, I'm confident that will be helpful. .

On the other 2 questions, I guess, like I'll take a bigger strategic one first, and then I'll come back to sort of VTAMA progression. We are here to build a great, durable, long-lasting, important biopharma company that delivers medicines to patients. As we did with VTAMA, that will mean that we commercialize products as we did with the [indiscernible] that will mean sometimes we partner or monetize them. And you use the phrase again, we're going to be ruthlessly economic in deciding which of those -- again, just to be clear, we meant nondilutive financing in terms of VTAMA. And I think the nice thing about VTAMA is, in the event that we monetize it or partner geographies or whatever, that's one source of nondilutive financing. In the event that we don't and build it into profitability, that's a steady stream of free cash flow out into the late 20s, 30s, there's a different source of nondilutive financing.

And on top of that, we've learned a tremendous amount about commercialization. We've built some infrastructure, we've got distribution agreements and things like that, that should be leverageable if we add additional products. And so I think overall, the launch of VTAMA has been an important informative experience for us. We are excited to continue to see it play out. We're excited to get the AD launch up and running. And I'm confident we will commercialize many products in our long life from here.

On sort of GCN trajectory. As I said, I think we're largely through contracting. And so I think the things that are going to drive GTN from here it's not sampling per se. We've never had a sampling program that meaningfully affected our yields. It's getting patients on to the right side of the co-pay card, and it's getting more patients into a covered position at pharmacies like Walgreens and CVS and so on, which is all -- it's all groundwork at some level. It's just getting out there and talking to docs and working through the issues to make sure the patients are getting on drug. So I would model steady improvement in GTN yield over time, maybe at around or a slightly faster clip than the one that we've had in recent quarters. And I would expect that to sort of continue to build up to that's kind of 40-plus and getting to 50 eventually sort of steady state that products seem to get to. I think some of the dynamics over the past couple of quarters with new contracts signed have created a little bit of volatility in the progression, but I expect it to be pretty steady from here.

[Robyn Karnauskas, analyst]

And one follow-up is just on 1402 using the word ruthless, it seems like with so many different indications you can go after and how aggressive your competitors are spending money towards all these indications. How do you compete with them? Like how do you compete? Do you just go into indications where they're not going? It seems like it just is such a competitive space, even though you have a best-in-class, we can argue your best-in-class drug. How do you expect to run like 20 trials? I mean how do we think about your plans for 1402, given the [indiscernible].

[Matthew Gline, executive]

Perfect. I mean I think the first thing we do to compete is monetize an anti-TL1 antibody and generate quite a lot of capital, which puts us in a strong position if we ultimately need to run 20 trials [indiscernible] to be able to do that. So I think we're in a really good spot from that perspective. Again, I think we're going to be capital efficient as we always try to be. I think we're going to be thoughtful about where we go in terms of exactly which indications and how we compete, I think we have to be aggressive, and I think we're positioned to be aggressive. And I think it's a huge opportunity if we if we are aggressive. I think first and foremost, we have some clear white space in front of us with Graves' disease and some others like it that we'll carve out as ours. And I think that will give us a real foothold. And then I think the second thing is to really line up all of the other Phase II studies that anybody is doing and decide which of those we want to use as guidance for our own pivotal programs so that we stay close to the front of the line everywhere that matters. So I think that's sort of how we're thinking about it more generally, but there's multiple first-in-class opportunities, and we have the capital to deliver on it.

[Operator]

Our next question will come from Louise Chen of Cantor.

[Louise Chen, analyst]

So I wanted to ask you, as you look to grow the company, what therapeutic areas do you see the most unmet need in? And then what areas do you think might be a little bit too crowded. And then secondly, on the HS indication for brepo, have you decided if you're going to move forward with it? And if you have, when do you think you'll start those studies? And then just lastly, on 1402, just curious how you're thinking about the first indication you're going to go after.

[Matthew Gline, executive]

Yes. So I'll go on reverse over there. So the first [indiscernible] that we've disclosed that 1402 indication has been Graves. So our plan if that data is successful is to progress in Graves, although we're working on lots of other things that we just haven't talked about yet. So I mean, I'll leave it to [indiscernible] to give specific updates at the cadence. On RevefHS, I think we have not made a final decision yet. And so there's no specific plan that our time line. We're in a pretty close to ready position in terms of the basics, but we need to actually start study if we're going to start a study.

I think the SLE data will be informative in terms of thinking about what payers with what and just how to develop the franchise. So I think we'll probably come back with a little bit more of an update on that sort of after either the SLA or the SLE [indiscernible] data. And then in terms of therapeutic areas where we see the most unmet need, we've always been therapeutic [indiscernible] agnostic. We continue to be therapeutic area agnostic. There is unmet need for patients in every therapeutic area. That's clear. Some areas are more competitive than others. Obviously, this has been a year with a lot of activity in II, although it's also proven to be a year where some mechanisms have had an easier go of it than others in I&I. So -- but we're looking across therapeutic area landscape and are really open to anything.

[Operator]

Our next question will come from Douglas Tsao of HC Wainwright.

[Douglas Tsao, analyst]

Just -- maybe as a starting point, Matt, if you could provide some color on VTAMA, I know you sort of indicated physicians were having some questions or sort of misperceptions around the coverage. I'm just curious what feedback you've gotten from a clinical standpoint, both the positive and negative? And what sort of things you might need to correct within the physician community to perhaps sort of jump-start growth within psoriasis?

[Matthew Gline, executive]

Yes. Perfect. So on the payer side, you covered it well. On the clinical side, we really have a little bit of a tail to cities where we have docs who use it quite a lot in the practice and love the drug. Report constantly positive both patient feedback and their own feedback in terms of how it helps them to have a real steroid alternative with this level of safety and efficacy. And then we have back to are writing, I'd say, like 6 or fewer scripts a month. We bucket them in a couple of different ways. And I think those docs are still sort of experimenting and so we get different feedback. I'd say like we're not getting a lot of like specific negative perceptions that we need to counteract. I'd say the main thing is these are docs who -- because they only use the product a little bit, have not sort of figured out how they want to think about it vis-a-vis steroids. And so if anything, the feedback is, yes, this is a great product, but steroids are pretty good, too. And so I think that's what we're sort of most actively working on is how to help those docs sort of see the benefits versus start see the remittent benefit see the tolerability benefit. The intertriginous data that we just put out here is potentially helpful to support our position, although we've always had good data there. So I think those are the kinds of messages that matter and it's really about working on continued strategies to convert those docs to the kinds who write it more. So as I said, we're hopeful about the work that we're doing there, but I want to be measured given what we've seen over the past, call it, 5 or 6 months.

[Douglas Tsao, analyst]

And that maybe as a follow-up, and I know you touched on it a little bit on the [indiscernible] call. But just given your sort of what your capital position will be, does that change the sort of opportunities that you look at and sort of the commitment that those would take, be it either from a development standpoint as well as ultimately a commercial standpoint in terms of the infrastructure needed to support that.

[Matthew Gline, executive]

Yes. I think the short answer is it just puts us in an incredibly strong position to do anything. And so commercialized drugs to develop drugs, we feel like we have the capital to pursue the biggest opportunities aggressively. I think we are still frugal by nature. And so I think it's still hard for us to stomach large upfront capital commitments, generally. And so I think that's probably the one thing where if we do it, it will be for something really special. But other than that, I'd say the main way I think about the capital is it just lets us do more. And also -- I think I've said this in a couple of places now. But like -- in hindsight, it doesn't seem like it should have been, but the decision to pursue the TL1A program a year ago was not a totally easy decision, at least not for our entire team because those would have been extensive Phase III studies and we're doing it at a time where everyone's access to capital and our own access to capital were somewhat limited. And I think I don't want to be in the position next time of towing around an opportunity that is that good. So I think having this capital base and being able to put it to work really gives us strength in those kinds of discussions.

[Douglas Tsao, analyst]

And then, maybe just 1 follow-up -- final follow-up for me. Over the last couple of years, you've seen sort of a progressive deemphasis on some of the internal drug discovery efforts by the company. Just does that -- do those some of those come back into focus a little bit more, just given your cash needs or cash position is so much stronger.

[Matthew Gline, executive]

Yes. I think the evolution of that exercise in general for us, has been a positive one. It's been challenging at times, but I think we've got some best done right now and at CoBank, size that we are excited about. And one of the things we like about it is I think we found very capital efficient ways for that work to be funded through partnership or by outside capital, just that we have a lot of optionality on success, but it's always been a pretty small piece of our burn, and I'd say it's gotten significantly smaller. Over the past couple of years is our late-stage pipeline has come into sharper relief. I don't candidly expect that to change significantly in the near term, just because I think we're pretty well set on how those businesses are running, and we like the work way it set up.

[Douglas Tsao, analyst]

Our next question will come from the line of Yatin Suneja of Guggenheim Securities.

[Unknown Analyst]

This is Evan Tedi on for Yatin. Two for us, First is on repo and then I have another one kind of on broader strategy. On repo, how would your POS change for dermatomyositis if you didn't meet the bar, the [indiscernible] in SLE. And then from a strategic standpoint, when you're thinking about the potential progression of [indiscernible] $20 billion to $30 billion company, what proportion of the growth comes from the existing pipeline that you already have versus an external BD opportunity? So in other words, do you have to bring in an asset or to reach that future valuation.

[Matthew Gline, executive]

Yes. So I'll start with the first one of that, which is I don't think our view of the POS and DM would change at all depending on the outcome in SLE. The biology of Brepo is very clear, we have 6 positive large well-run Phase II studies and SLE is known to be a fickle place. So I think, overall, there would be no change in our view of that was likelihood of success in the end as a function of any kind of outcome in SLE, honestly, in either direction. If brepo [indiscernible] great necessarily. I'm not sure it will materially affect our portability in DM. At this point, Brepo has presented itself as an agent and it's just a question of finding the right therapeutic applications for its profile. So that's on that question. .

On the general strategy, and I can't say this clearly enough. If we never do another BD deal. And that is not -- we are definitely going to do more new deals. But if we never do another BD deal, we are sitting on, we think, today, the most exciting late-stage I&I portfolio between FcRn and Brepo and VTAMA and others. And there is no question in my mind. But frankly, I mean we know this from our competitors, [indiscernible] alone can support that kind of value creation, let alone a drug like brepocitinib, which certainly, again, pursuing a different strategy, but [indiscernible] is on track to do fantastically well. And I think we have an agent that has some real competitive advantages versus [indiscernible] with the 2 activities. So I think there is no question to me that we don't need to do BD for the next major leg of growth for us. That said, practically speaking, estimate what I expect. I expect to see significant value creation outside of our late-stage pipeline as well in new opportunities just because we've always been active because the opportunity set is literally as rich now as it has ever been in terms of the quality of things that we see, and we expect to take full advantage of that given our current capital position.

[Operator]

And this will end the Q&A portion of the conference. I would now like to turn the conference back to Matt Gline for closing remarks.

[Matthew Gline, executive]

Yes. Thank you. I just want to say thank you again to everybody to the Roivant teams to all of our investors to the patients and investigators in our studies to our partners. It's been a phenomenal year. This is probably not the last time we'll get on the phone together given the amount of data coming. But I just want to thank everybody for following along and what has felt like a really exciting moment for us. So if we don't talk before then, and I guess, again, it's possible that we will. But if we don't talk about giving have a great holiday for those who celebrate it and looking forward to getting on the phone again soon. Thank you very much. .

[Operator]

This concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.

[Stephanie Lee Griffin, executive]

Goodbye.