Good day, and thank you for standing by. Welcome to the Roivant 2Q 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jeffrey Kalmus, Head of Strategic Finance. Please go ahead..

Good morning, and thank you for joining today's call to discuss Roivant's financial results for the quarter ended September 30, 2022. Presenting today, we have Matt Gline, our Chief Executive Officer.

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.investor.roivant.com. We'll also be providing the current slide numbers as we present to help you follow along.

I would like to remind you that we'll be making certain forward-looking statements during today's presentation that reflect our current views and expectations, including those related to our financial performance and the potential attributes of our products and product candidates.

We strongly encourage you to review the information that we filed with the SEC, including the earnings release and Form 10-Q filed this morning for more information regarding these forward-looking statements and related risks and uncertainties.

We'll begin with Matt Gline, who will review key business updates across Roivant's events, and provide a financial update. We'll end the call with a Q&A session. And with that, I'll turn it over to Matt..

Thank you, Jeff, and thank you, everybody, for joining this morning. It's been a really impactful quarter for us and I'm excited to share some updates both from the quarter and more recent. Some of these updates we already shared last week as a consequence of the financing that we did, and some of them are new.

And as I said, I look forward to sharing everything. So we're going to cover a few topics. Notably, I'm going to start with a discussion on the launch of VTAMA and then we'll go through some clinical updates and some other updates around the business as well as the financial update at the end.

So I'm going to start on Slide 6 with just a -- an update on the VTAMA launch. And really a reminder, we are really, really pleased with how this launch is going. So you can see the script data here, including for the quarter itself as well as for the more recent periods, And we continue to see great growth in scripts and we're very pleased with it.

We'll talk a little bit more about the revenue, but also excited to announce that we did $5 million in net product revenue for the quarter ending September 30, which is a 12% net yield, which given that all occurred prior to the signing of our PBM contract, again sort of a testament to the quality of our script to the number of docs who are willing to go through the prior authorization process.

So on Slide 7, one of the most important updates here is we have our first major PBM/payer contract signed. We indicated that would be coming before the end of the year, and we're very pleased that it was effective as of October 1.

We haven't said which payer win, but most importantly, it gives us exactly the kind of coverage and access that we wanted, requiring only an automatic look back for steroid on the patient's chart. Or if the physician prefers an e-attestation of prior steroid use, which is a really easy bar to clear.

So this is better than what we had initially hoped for in terms of the quality of coverage. And it ensures because close to 90% of psoriasis patients use a topical steroid as first-line therapy. This gives us really access to all of the patients that we are focused on.

And notably, as we said, we're still focused on becoming the mainstay of therapy and ultimately supplanting steroids, which means, of course, the simplicity of access here is straightforward.

And as a reminder as cons -- in this contract and our sort of copay card, any covered claim that the pharmacy should have a $0 copay for the patient and so they should create a really positive experience for the patients covered here as well.

So on Slide 8, I'll also just remind everybody, we're obviously pleased with how the launch is going in absolute terms. We also -- we're pleased with how this looks relative to other psoriasis launches that we've observed.

We became the number one most branded topical eight weeks into our launch, and we've comfortably stayed there since and we continue to keep pace with the launch of OPZELURA, which is notable because OPZELURA is atopic dermatitis and has about 4x as many scripts to draw from.

We're now meaningfully over 50,000 prescriptions written, and we're over 6,000 by 6,400 unique prescribers since launch, so broad prescriber base and volumes that we're really happy with at this stage. I want to talk a little bit on Slide 9 about the P&L.

So we're still not giving explicit long-term gross to net guidance, but we've said since our Investor Day that we are confident we're going to get to a commercially attractive P&L. And I think you can see in some of the metrics on Slide 9, sort of why we had that confidence even before we knew what the sort of PBM contract look like.

We had $5 million in net product revenue, which for this stage in the launch we feel really good about and a 12% net yield, again, this is a clear demonstration of prescriber enthusiasm for the drug, given the sort of work required before that PBM contract to get medical exceptions during formulary review.

So we're very pleased with these metrics and again, we expect to give steady state gross to net guidance after we've signed some additional PBM and payer contracts. But we expect to see this GTN yield improving from here as we execute on more of these contracts. We'll provide those updates as they come.

On Slide 10, I think is just an important point to hit. We're really pleased with how the launch has gone and certainly the sort of weekly script numbers. But I want to point out; we are really just getting started here. There are over 90,000 topical prescriptions in psoriasis alone, the vast majority of which are topical steroids.

And there are over 320,000 topical prescriptions in atopic dermatitis, which will be a market accessible to us after we get our data and approval there. And our data is coming in the first half of next year. And so no matter how well things are going at this stage, this is a huge market to draw from.

As we work to replace steroids as the topical steroids is the mainstay of care for these diseases. And notably, to get to a blockbuster product, we need like 5% to 10% share here, so really modest relative to the quality of the product. So we've talked a little bit about sort of how the launch goes from here.

And the one thing I'll say is, we have a lot of useful tools and levers to continue to drive adoption. And we're excited now that payer coverage is coming online to continue to build the script volume and to grow into what we believe should be an important multi-blockbuster product opportunities.

So, excited to continue to share updates as we progress. As important at this stage is the quantitative metrics, if you look on Slide 11, we've gotten just tremendous high-quality feedback from early prescribers. We held on our Investor Day in September, a panel of KOLs, which I recommend listening to, if you haven't.

And we got I think great to representative indications from prescribers on that panel, including great feedback on onset of action. We're seeing docs saying that their patients are telling them they're clearing as early as a couple of weeks into therapy.

Docs understanding that this is really potentially a first-line monotherapy topical treatment that cleans up the sort of use of steroids and the use of multiple steroids. And it's a real significant paradigm shift in how psoriasis patients can be managed.

We've had great feedback on the feel of the cream itself and certainly have not heard any meaningful reports of tolerability issues that affect prescriber behavior. And yet just a huge amount of tremendous support for VTAMA from prescribers, a really fantastic fab base to build from.

I want to highlight on Slide 12, an update that is relevant for our upcoming atopic dermatitis data, as well as just a good reminder on sort of the quality of the safety profile for VTAMA. We reported earlier last week, the results of our pediatric maximal use study in atopic dermatitis.

And notably this included subjects, pediatric patients with a body surface area of atopic dermatitis up to 90% with a mean body surface area of 43%. So if you just picture what that literally means on a person, that's a remarkable body surface area to be treated with VTAMA.

So we were using quite a lot of VTAMA on these patients and we saw a really favorable safety profile with a very low incidence of adverse events, no SAEs, a PK profile consistent with what we saw in the adult psoriasis population and really minimal to no systemic exposure even under these sort of maximal use conditions.

So we feel really good about the quality of this data and what it's going to mean for safety and tolerability. And I'll note that it has a real commercial benefit as well, because it gives us something that is differentiated, which is a single dose form.

So in peds [ph], in adult patients in psoriasis and atopic dermatitis, there's only one script for anyone to remember, it's a single dose of the product, a single sort of 1% spinner off the cream VTAMA, whereas some of our competitor products have multiple doses depending on whether you're in psoriasis, whether you're in AD, whether you have a pediatric patient or not.

And so, really pleased with that simplicity and is a direct function of the safety profile of the compounds. So very pleased with that data and think it'll be a useful fact as we get towards the AD data. And then as a final reminder on VTAMA on Slide 13, that AD data is coming. Our Phase 3 program enrollment is on track.

We expect data in the first half of next year.

There's a ton of patients in investigator enthusiasm for the study, and that's built obviously including on the safety data that I just described, but also on the very strong Phase 2b data that that we've already sort of made public as well as the positive outcome from our Japanese partners atopic dermatitis study, which they reported over the summers.

So overall, again, incredibly pleased with the quality of launching in -- for VTAMA looking forward to continue to provide those updates and looking forward to the improvement in GTN and other things that will come from PBM contract, as well as from other contracts that we'll be looking to do here.

So in offset on VTAMA, although I'm sure we'll come back to it in the Q&A. So I want to turn now and talk about a couple of other clinical updates in the rest of our pipelines.

So Slide 15, again, you can see a review of our late-stage pipeline with a number of really important therapies, many of them in inflammation and immunology, but also in some other areas as well.

A truly broad late-stage pipeline with some opportunities that we won't talk about as much today like Brepocitinib, where we've talked a fair amount in the past about that upcoming data set in SLE and in dermatomyositis as well as Batoclimab and others.

So as of right now on Slide 16, we have seven ongoing major studies including at least four of them pivotal and we expect three more to initiate in the near future as well. So we'll be up sort of 10 pivotal total enabling studies which is a great breadth of R&D from our perspective across the portfolio.

I want to spend a few minutes, and this was an update during the September 30 quarter reminding everybody about an important development at Immunovant in our anti-FcRn franchise starting on Slide 17.

We announced is that we've got a new next-generation anti-FcRn antibody to compliment batoclimab there IMVT-1402, which was developed in-house, and which we've shown in animal studies, delivers what we think should be deep potentially best-in-class IgG lowering, similar to what we get from our first antibody batoclimab.

Notably, however also and we'll talk more about this in the data, minimal impact in albumin and LDL.

So we think this could be the only anti-FcRn antibody to have both minimal or no impact in albumin and LDL, as well as that deep potentially best-in-class IgG and all of that in a simple subcu administration that is also differentiated versus our competitors.

And one of the great things, and we'll hit this again at the end of this section about anti-FcRn antibodies is that IgG lowering has been a really great biomarker across a range of indications.

And so we feel like we have a real potential for accelerated development here, where we can use proprietary data from our own studies and well known biology as well as data from industry-wide trials in anti-FcRn antibodies to design our own pivotal programs.

And so we think immediately after getting our first in-human data from IMVT-1402, which will come in the middle of next year, we'll be able to go sort of on an accelerated path straight into pivotal studies thereafter, which is something that's unique to the class and sets us up to be really right in the pack with all of our competitors with a best-in-class drug.

So you can see the data as a reminder on Slide 18. And I love this data because it shows so clearly. We get the same IgG suppression as batoclimab.

We've got here the sort of supersaturated 50 mg dose, and you can see right on top of each other in terms of the level of IgG suppression, which is important because we think it's necessary to be able to get to that in humans.

As a reminder, batoclimab gets to 80%-plus suppression of IgG, which is more than some of our competitors are able to achieve, and which we think will be relevant across disease populations and across patient populations within a disease.

And then you can see on Slide 19, as a reminder again, that we're sort of right on top of placebo at therapeutic doses as far as albumin and LDL impact are concerned.

And so we get kind of everything we need here in terms of in these monkey studies, minimal impact or no impact on albumin and LDL and the level of IgG suppression that we think will continue to keep us differentiate as best-in-class. So again, as a reminder data coming in humans in the sort of the middle of next year.

I get fairly often the question of sort of how did we achieve this? And so, on Slide 20, just as a reminder, we've put this slide up before you can see the crystal structures, batoclimab as with many of the full length antibodies FcRn binds to FcRn and the configuration that's very good for suppressing IgG, but also you can see sort of interferes with a steric hindrance of albumin binding on the FcRn as well.

And so that sort of causes an impact on albumin. IMVT-1402 on the right-hand side, similarly, high quality binding from an IgG suppression perspective but does not sort of interfere with albumin binding. And so it doesn't affect the albumin level in there for LDL.

As a reminder and this is another question that we've got a little bit on Slide 21, we wanted to summarize all of this in one place. Across all of the known anti-FcRn programs generally including batoclimab, our own program as well as many of the other antibodies that are sort of probably have published data.

The translation from monkey data to clinical data has been very strong on albumins. So the impact on albumin observed in NHP has generally been translatable to humans. And so I wanted just to summarize this data in one place so that people had a good reference for it.

And we've got all the publications at the bottom there that demonstrated over and over again that monkeys are a good predictor of human data for impact on albumin and therefore we think impact on LDL. And again, we'll get the data from IMVT-1402 on this in mid-2023.

So last thing, I'll say on our anti-FcRn franchise before moving on to other updates, on Slide 22, just as a reminder, this is very broad disease biology. There are many different diseases ranging from sort of ultra-rare diseases to more common diseases.

And we have a pretty unique ability because we have both batoclimab and IMVT-1402 in our pipeline to tailor the development strategy for each drug, two different disease populations, and to be able to sort of compete in ways that I think our individual competitors will struggle, are sort of differentially in let's say rare disease settings versus in more common settings where we can take the profile of our drug and we can take the commercial strategy around each of these different compounds and optimize the choice of compound and the development strategy and the commercial strategy to the selection of indication.

So looking forward to providing more updates on our development strategy for both IMVT-1402 and batoclimab in the quarters to come. You should expect continuous updates on those as we get programs up and running, and as we sort of learn from our own data and from industry-wide data and think it's going to be an incredibly exciting opportunity.

We are truly and I view the best in class anti-FcRn franchise at this moment with the sort of 1402 being a sort of clear best-in-class potential antibody. And with both 1402 and batoclimab in our portfolio allowing us to do some really interesting and differentiated things. Good.

So I'm not going to cover many of the other sort of clinical updates at this point. We continue to make progress in a number of other programs including brepocitinib, which is marching toward its SLE data, as well as namilumab and sarcoidosis and so on. But I wanted to stay focused today on some of the key new things.

So I'm going to give just a couple of additional updates on other parts of the business now including on Slide 24, some data that we have not presented before. So we've not spent a lot of time talking about our discovery organization or a greater discovery efforts, those continue to chug along, and we're doing some interesting things there.

It remains a small fraction of our overall burn and obviously a lesser focus.

But given some of the high quality data that we've seen recently in ER Degraders, just wanted to highlight that we have an ER Degrader program and this is some new data about that program demonstrating either equal or better tumor volume reduction compared to the most Advanced Degrader known in ER and you can see on the left-hand side, you can see the in vitro data on degradation.

And on the right-hand side, you can see that, that, that our compound has either equal or better tumor reduction mouse models. So exciting opportunity. It's early days there. We'll provide more updates on that program when we have them.

But just want to highlight that we continue to believe we're going to be able using our unique combination of platforms to develop some interesting best-in-class degraders. And this is not a bet on the next couple of years. This is a bet on the future beyond, but excited what we're going to be able to do with our pipeline as these programs mature.

The other update I'll give briefly, because we get questions about it often on Slide 25, is an update on Genevant's IP litigation.

So this is a relatively recent development that some of you may have seen, which is on November 2, the Federal District Court in Delaware denied Moderna's partial motion to dismiss, which as we've talked about before they had filed on the basis of this U.S.

contractor defense 1498, which was an attempt by Moderna to shift liability for its alleged infringement, or at least a portion of it to U.S. government taxpayers. And we were pleased to see that the court deny that motion.

And most importantly for the case, that means that we'll now move to this pretrial discovery phase where we'll be able to learn more about the state of play and we should be able to provide more updates on that as that phase progresses. So look to round out the overall discussion on the sort of heart of the business here on Slide 26.

I'll just say, I could not be more excited for 2023. It's an incredibly impactful year for us.

First of all, it'll be our first full-year of VTAMA on the market, and we look forward to continued prescription and meaningful revenue growth as well as sort of watching early PBM and payer wins really translate into sort of approaching a steady state GTN and a commercially attractive P&L that we've signaled over and over again at this point.

We are confident we're going to obtain. So looking forward to be able to provide more guidance there. Looking forward to watching that mature and really think we're going to do some impressive things there.

On top of that, we'll continue to build on the VTAMA sort of franchise, if you will, with Phase 3 data in AD coming in the first half, which opens up an even larger market for VTAMA that we're excited to get into.

And we think the high quality of our safety data, the simplicity of our dosing, all going to be important in continuing to sort of grow into that market.

Then as I mentioned just a moment ago we're going to get human data in IMVT-1402, which is expected to be in the clinic starting in the first quarter with the initial Phase 1 data expected mid-year that'll come together with in the second half of next year, initial Phase 2 data in Graves' disease with the ability to take 1402 straight to pivotals thereafter and that Graves' data is in batoclimab but will inform development strategy for 1402 which is a great example of sort of how we think we can move fast with 1402.

And then, finally, not a focus for today's call, but as a reminder the sort of pivotal readout from our global Phase 2b study now fully enrolled in SLE should be one of our two registrational studies if that data's successful in the second half of next year.

And reasons that we believe we have a possibility of being some of the best SLE data the world has ever seen, so really looking forward to that data as well. I'm going to round out today's call with the financial update. I'll use Slide 28 as a partial guidance here.

Some of these updates, including some of the updates I've already given on this call, we gave beginning of last week because as I'm sure many of you saw, we did a $150 million follow-on offering with some great institutional investors that we were really excited about.

It was catalyzed by our reverse inquiry that that we were excited to take advantage of especially in this market. Even before that offering, we had taken some important steps in our business to make sure that we could give that we'd extended our runway -- that we could give extended runway guidance.

So our runway is now comfortably extended into the second half of calendar year 2025. And I will talk in a moment about what we've sort of achieved there, what that extended runway buys us in terms of additional catalysts, there are many, including some really important datasets. We achieved that in a variety of ways.

We achieved it with some cross reduction and efficiencies. You may have seen an article over the weekend about an impactful, relatively modest round of layoffs that we've done, that we don't think are going to have any meaningful business impact in terms of slowing us down or changing catalyst.

But together, with other changes we made, the business will give us the ability to really sort of drive length of runway, which we think is important given where the market is and given how choppy things have continued to be.

Overall for the quarter adjusted R&D expense of $123 million, adjusted G&A of $102 million and notably, the majority of that G&A expense relates to Dermavant and the commercial launch of VTAMA at this point. So we think that's sort of an important position to be in.

And then, ended the quarter with $1.6 billion of cash or $1.9 billion in effect after our follow-on offering, Immunovant follow-on offering and anticipate proceeds from the sale of minority to Sumitomo Pharma.

So a really strong financial position, continue to be pleased with our ability to generate cash from a variety of sources to fund the business many of which non-dilutive.

And looking forward to taking advantage of this position in a number of ways, including frankly with some attractive in licensing opportunities that we see that could bring new programs into our portfolio. So stay tuned for updates on that as well.

So I'll finish my prepared marks on Slide 29, with just a reminder, I said 2024 -- 2023 is a really impactful year from a catalyst perspective. As we sort of thought about extending runway and making sure that we sort of catalyze well into 2025, there's really a tremendous amount now within that window.

Not only the data from exterior atopic dermatitis data, the brepocitinib data and so on, but additional important data from batoclimab and multiple indications including CIDP, including MG, including thyroid eye disease, the brepocitinib data in dermatomyositis in addition to the brepocitinib data and SLEs coming next year, as well as continued data from RVT-2001 our program in low-risk in transfusion-dependent anemia in low risk Myelodysplastic syndromes and a number of other important catalysts.

As well as what will then be multiple years of sales in VTAMA and sort of a clear demonstration of what we think we'll be doing at that point, which is through adding towards blockbuster territory on that product. So really, really excited for next year.

Really, really excited for what our current capital runway allows us to achieve in a choppy market and looking forward to continue to provide updates at each quarter and more frequently as they present.

So I'm going to wrap up my comments there and I want to thank everyone again for joining, and I'm going to hand it back over to the operator to open line for Q&A. So thank you, everybody..

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

Thanks very much and congrats, Matt, to you and your team on all the progress. So I wanted to focus on the good news on VTAMA and just better understand the contracting.

So could you provide more color on what percentage of lives are actually covered immediately with your PBM contract and what percentage required downstream contracting with employers to achieve paid for drug? And to follow-on, what would the timing be for that secondary contracting? And then, separately, could you also discuss your pursuit of health plan coverage in addition to PBM coverage and how you're thinking about opportunities there? Thanks very much..

Yes. Thanks, Dave. Appreciate the question and appreciate your listening and obviously this is -- look, this is top of mind for us in terms of our overall strategy at this point on the VTAMA launch. So first of all, I think what most companies would say about this PBM contract is that the PBM covers about 30% of commercial lives.

David, you and I have talked a fair amount about this. We've been a little bit more nuanced than how we describe this process, the PBMs have custom -- have national formularies and many lives are covered by that national formulary. And so we'll get access to a decent number.

We haven't said exactly which, because it would sort of reveal a little bit more about which PBM we signed the contract with, but a decent number of lives kind of immediately on the back of this contract.

But also this now gives us a template for all of the downstream customers of that PBM, that even for the ones that have their own custom formularies they now have sort of a template.

They understand the commercial picture; they understand the value judgment that this PBM placed on the product, and we're sort of confident in looking forward to continuing to sort of build into that. This is true for all launches. Once you get the PBM contract, you then kind of work your way through the customers of the PBM.

We've said probably three months to six months to hit the tail of what that looks like. But I think you can expect lives sort of covered under this PBM sort of turning on for coverage over that period as we continue to work our way through those customers. Notably, I'd say you mentioned employers specifically.

I'd say employers are probably less likely than some other payers to have custom formularies of their own. And so it is just going to vary by sort of which specific type of plan it is. And we're sort of every bit is focused on every covered live that we can get our hands on.

So in terms of PBMs, which are obviously the overall keys to the process and then the health plans and the employers, I think we're sort of -- we focus on all these things. We probably will not provide specific updates as we get contracts with downstream customers of the PBM.

We may comment on it a little bit, but it's just sort of at this point to us kind of routine from here as far as sort of continuing to build into these downstream plans..

Please standby for our next question. Our next question comes from Brian Cheng with JPMorgan. Your line is now open..

Hey Matt and team, thanks for taking my question and congrats on the progress. My first question is on VTAMA.

With your first PBM contract in place, can you walk us through the process perhaps from getting the script at the doctor's office to getting the VTAMA in hand? And how much read through is there from the PA step that we see here from for only prior steroid use from the first major PBM contract to other PBM discussions that are ongoing? And then I have a follow-up.

Thank you..

Yes. Thanks, Brian. Thank you for listening. Thank you for joining and excited to have you on the call. So welcome to the Group here. I think it's a great question. So first of all, I think it's an important point.

The patient experience from having a PBM contract in terms of like timeline and process actually isn't that different thanks to the copay card program that we had in place originally. So patient gets a prescription from the doctor. Many of these docs work with independent retail pharmacies.

And so the doc gets the drug -- the prescription over to the pharmacy, the pharmacy works with the patient to get the drug fulfilled. Prior to the contract, patients who weren't covered would then pay a $75 co-pay because of the VTAMA card, the rest would be covered by the co-pay card.

And now those same patients if they're covered by this PBM contract or by any other coverage that we obtain, would pay a $0 co-pay because that's sort of the design of our co-pay card. But again, we would then get coverage from the payer or the insurance company. So that's kind of the sort of process for a patient to get script filled.

And we think it's a good straightforward process. I think in terms of the template here, I think this was a perfect outcome from a coverage perspective, from my perspective; it gives us everything we need. It gives us access to the patients we're really seeking, which are the patients who are on steroids now.

It's what we said from the beginning that's 90% of psoriasis patients. So it's over. We feel really good about the template there.

I will say as far as health plans are concerned, as far as sort of duplicating this model across other PBMs across health plans, given the script volume, as you can imagine, we have a ton of inbound interest from health plans and from -- and active discussion with all the major PBMs on getting the product covered.

And that discussion is very constructive given where we are in a volume perspective. I think you said you had a follow-up question..

Okay. And then maybe just one on SLE since we're going to get top line data from the Phase 2 trials for SLE in the second half next year.

Can you remind us what you want to see in terms of the primary endpoint with SLE for that you need to see in Phase 2 to be deemed as success in the trial? And maybe just if I can squeeze in one more, we noticed that you -- that there was a workforce reduction that was announced over the weekend.

Just curious if you can provide a little bit more color how -- whether that has any impact on this program. Thank you..

Yes, thanks. So on the SLE question, we haven't given the numerical bar, we'll continue to talk more about what we expect out of that study over the course of next years, the data becomes closer. I'll just say we have a high bar for what we want to achieve there.

We think the agent is a powerful agent and we think the biology of the dual inhibition should be relevant specifically to SLE disease biology. So we feel really good. We'd want to see excellent data on SLE forward. We want to see meaningful improvement on key secondaries.

I said we'll sort of talk a little bit more about how we think about those scales as we get closer. I think we have evidence from other JAK1s and evidence from other TYK2s on what they've done in SLE, and we think we have a possibility of being more impactful than either of those agents on their own because of the biology here.

So kind of looking out for that. On the question of the risks, look, these are always tough decisions and they impact people's lives. So I don't want to sort of -- I want to be a little bit careful, but I think in general the answer is we don't expect any meaningful impact on any of our sort of major programs or any of our key projects.

Nothing that we've talked about on this call should be affected at all by this. We’re focused on G&A efficiency. We’re focused on sort of taking the most benefit we could from the model. We’re focused on making sure that our early-stage programs were really focused on the most important impactful that work.

And so I'd say that's kind of where we went there. And as you saw on the endpoint articles, about 12% of overall staff, so not something that we expect to have a meaningful business impact..

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

Yes. Good morning, guys. So I guess the -- looks like the effective date for this payer contract went into effect in Octo -- early October. So I'm just curious what portion of scripts written today are being written for patients that are under that recently disclosed coverage agreement.

And can you just give us a little bit of color on what the process looks for that patient population?.

Yes. Thanks, Corinne and thanks for -- thanks for joining the call and obviously thanks for all your coverage. So I -- we haven't given a specific sort of guidance for what percentage of our scripts are covered by this specific contract, referring to the answer to Dave's question earlier, in terms of the way these generally work.

This PBM covers about 30% of covered lives altogether. And we expect kind of percolate through those covered lives, starting with the bulk of them that we -- the big chunk of them that we have now sort of percolating down through what we call a three to six month period. So I'd expect to see continued sort of development.

And I think as we get more payer contracts they'll accelerate, but I think you can expect to see kind of resulting improvement in GTN starting in the current quarter, starting in the quarter that we'll announce the December 31 quarter because the contract was effective October 31.

But it will take some time for all this to percolate through and to really sort of reach steady state..

Great. Thanks. And then you mentioned interest in additional in-licensing opportunities.

How should we think about the appropriate cadence for in-licensing deals for you all? And then what do you think about as your priorities for the kind of assets you'd be excited to bring in-house?.

You think it's a great question. I think with one of the reasons that we're focused on making sure our runway is long is because this is a great market to be in a strong capital position. There are some really amazing opportunities available to companies like us.

We're really focused on high quality programs that can be impactful in the near and medium-term.

I think if we -- we said before, kind of one to two of those a year, we as brepocitinib earlier this year, I wouldn't expect any sort of major change in cadence there other than the -- in the current capital environment, the bar is really high and we want to do things that we can be very capital efficient in executing.

And in terms of what we're looking for, we remain pretty open from a therapeutic area perspective, but we're looking for things where we think we're going to be able to do an important job developing the drug or a differentially -- a good job developing the drug.

And we're looking for things that are at the moment kind of mostly later-stage things that can add to the sort of bulk of our late-stage portfolio while sort of fitting within our financial goals..

Please standby for our next question. Our next question comes from Robyn Karnauskas with Truist. Your line is now open..

Hi, congrats on the quarter. This is Alex for Robyn. We wanted to know, as you continue discussions with physicians and payers have -- there's a lot of positive feedback, looks great, the launch looks very positive.

Have you received any pushback or any details to the discussions that might change how you view or approach the launch strategy? And then also for 1402, seems like this is a very sizable opportunity there. We're really excited.

How do you think about prioritizing which indications we pursue initially and then the cadence and going into different indications thereafter. Thanks..

Yes. Thanks, Alex. Appreciate it. Appreciate the question. Appreciate your listening. On the VTAMA question, look, obviously we are constantly taking feedback from docs and from our payer conversations and so on, and making sure that we're tailoring all of our messaging and tailoring our launch plans to that feedback.

In terms of pushback, honestly, I think the interest we have not gotten very much here. I think the drug has been extremely well received. You heard it in our KOL panel. I think you hear it in your own doc calls.

I think patients are just excited and doctors are excited to have a new topical option that that really candidly works and works without many of the liabilities that that steroids are widely interested to have. So I'd say no meaningful pushback.

But obviously, we're sort of constantly adjusting and reacting and even you think about this PBM contract, obviously we had a bar that we had set for what we hope the quality of coverage would look like. I think this PBM contract represents extremely high quality coverage that's going to work for patients and docs.

And I think we're learning every day as we sort of see the patient and docs experience and as we see the quality of what payers are willing to do given the sort of meaningful impact of the project. Yes.

So on 1402, I think, look, our plan for 1402 which you said a few times is to focus on indications where look like deep and sustained IgG suppression helpful. So chronic administration and in diseases where we think the LDL or the albumin impact might be more material to patients. So you think broader market diseases, think chronic diseases.

So I think that's kind of the sort of general framework. We'll get more specific with it as we progress. And then we think 1402 batoclimab fit really nicely together because both can achieve sort of deepest possible best-in-class suppressions of IgGs.

And so we can kind of go after any indication with either and expect to be able to deliver comparable or better efficacy to any of our competitors. And so we can really sort of tailor dosing strategy and indication selection by program in a comfortable way. So feeling really good about that portfolio as well..

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

Hi guys, this is Brendan on for Yaron. Thanks very much for taking the questions. Congrats on that update. Just a couple quick ones from us. First on VTAMA, obviously, more PBM impaired discussions is a big focus here as you guys have all kind of outlined.

But maybe also -- I also just wanted to ask from a broader commercial competitive dynamics standpoint, I mean, what are the next steps you're all focusing on to the launch, maybe beyond payer coverage, just in terms of getting it in patient, physician hands a little bit earlier if relative to competitors.

And then, just a quick one for the FcRn franchise. Can you just remind us if you need to or plan to run kind of a more traditional big Phase 1 study, Phase 2 with 1402 before moving into pivotal studies, or would you be able to move more or less directly into some of these larger registrational studies? Thanks..

Yes. Thanks. Appreciate the question and thanks for listening. I'll take the second question first because it's an easy answer, which is we believe that our sort of our plans Phase 1 is that we'll get initial data from the middle of next year will be sufficient together with the data that we have on IgG suppression to go right into pivotal studies.

So we think there's a clear path to go straight from sort of the planned Phase 1 into pivotal studies. And I think what we said is sort of six months after that data, we should be able to be in a pivotal study, which is really, again, sort of unique and interesting about the FcRn class, given the quality of IgG as a clinical biomarker.

So I like the first question a lot because to be honest to me, given the quality of the early payer contracts, we feel really, really good about where we are from a coverage perspective.

And then if you just think about that slide that I had up earlier about the fact that we're just getting started and sort of the depth of these markets, I think the next question is, 4,000 scripts a week is great and we feel really happy about it.

How do we get to 40,000 scripts a week? And that obviously requires continuing to work on changing prescriber behavior, continuing to educate patients on what VTAMA has to offer that is completely different than what they've been able to get historically with topical steroids.

So with a lot of different plans for that, obviously DTC is a component of that, but we've started to deploy in a very targeted way. And we'll continue to ramp that up as sort of payer coverage sort of matches it, but again, sort of very targeted sort of precise focused on sort of that that process.

And then, yes, look, we have a large and highly capable MSL force that is out there sort of doing a physician education and scientific communication that we think is important here because again, this really is a paradigm shift in the treatment of psoriasis.

Obviously, we think our atopic dermatitis data is going to be impactful here in the simplicity of the product you're prescribed in the AD setting. The fact that we have such a young cohort in the pediatric study with the same drug on the same dose, same product, I think all of those things are going to individually matter.

And we're focused on taking maximal advantage of each of those opportunities to get our messages out there and to help people understand what VTAMA can do.

And again, the nice thing is the product really sort of does deliver on so much differentiation from topical corticosteroids in terms of ease of administration, no duration limits, no body surface area limits, none of the really severe tolerability issues.

We have a particularly clean label in terms of safety and tolerability, even relative to other novel topicals, no concomitant meds, notices, nothing like that. So just a really straightforward setup and we want docs and patients to think of that as they reach for the drug.

So lots of strategies to deploy and excited to keep working on that sort of bigger goal there. And I feel like we're really well set up for it..

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

Hi, congrats on all the progress this quarter and thanks for taking my questions. I had a few for you.

First one I wanted to ask you about was how do you think about pricing for your first and second generation anti-FcRn? Will this be a competitive advantage for you? And then, secondly, the opportunity for Priovant in SLE and also DM and how the economics work with Pfizer.

And then, last question I had for you is how are you thinking about or framing the AD data readout in 2023, especially in light of what we saw with Japan Tobacco and then say versus OPZELURA and prior Phase 2 data you've shown. Thank you..

Yes. Thanks, Louise. Thank you for listening and thanks for taking for the great questions, all three of them.

So starting on FcRn, it's probably premature to come either batoclimab or 1402 specifically, but I'll just say it sort of has to be a competitive advantage to have both drugs available in terms of being able to think about price point to being able to think about other commercial levers that that sort of deploy a franchise strategy across the two program.

So I'd say, premature to have a specific comment on price for one or the other, but definitely has to be an advantage to have the franchise for all -- for that and all the other reasons that I've shared. On DM and SLE for Brepo, we've given a little bit of guidance on the size of the DM population.

I think we've given a little bit of information on the size of the SLE population, although I think that's obviously a very well understood population at this point. These are huge commercial markets where success in either of them on its own would be sort of a comfortable blockbuster product in our view.

And obviously across the two of them, just a huge opportunity and there's obviously room to go beyond those with brepocitinib in other indications as well. So yes, a very large commercial opportunity. From an economic perspective with Pfizer, we have effectively U.S. and Japan as our focus. We pay Pfizer sort of relatively modest royalty.

I think what we've said publicly is sort of high-single-digit, low-double-digit tier royalties. And we pay them that on our territories. They pay us that on their territories. And then Pfizer owns 25% of Priovant as well. And then, so you asked about how we were thinking about the AD data and sort of positioning.

First of all, as you mentioned, I think we have great comfort here in part because of the quality study run by Japan Tobacco that was successful in part because of the max use PK study in young pediatric patients that we just announced last week. And so we feel really good about kind of where that program is headed.

We think it should be a major event for the drug to have that data. Obviously, AD is also a really important market.

And you mentioned OPZELURA I think it's a market that has had a little bit more in the way of novel topicals, which obviously OPZELURA, but none of those drugs either from an efficacy perspective or from a tolerability perspective or from a label perspective, afford the kind of clean steroid replacement potential that that that become affords given the safety and what we believe is the potential efficacy profile of the drugs.

So we think it should really fit in a similar place in AD that it fits in psoriasis as a potential mainstay of therapy. We like the fact that some of the other topicals, and especially some of the more recently launched ones, the more recently launched one has done such a good job of highlighting demand for a novel topical in atopic dermatitis.

And it's clearly a popular drug and it's clearly doing well in spite of some pretty meaningful limitations on its label. So that -- and they've done a great job with commercial coverage now, and they're sort of gross net yields are progressing.

So we feel really good about what that means for our potential in AD where we think we'll have an importantly differentiated product..

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

Hey guys, thanks for taking my question. Just on the last question on atopic dermatitis, I'm just curious what you're hearing from dermatologists and physicians that are prescribing to thereof [ph] currently about their desire to prescribe it for atopic dermatitis and whether or not they have actually tried that.

And then also regarding the LNP patent update just wondering if there's any potential next steps that Moderna could take to actually try and push the motion to dismiss -- the partial motion to dismiss again, or if you are confident that there really is no other recourse that they can take at this point. Thanks..

Yes. Thanks. Thanks, Neena. Thanks for the questions and thanks for listening.

On the AD study, in terms of physician feedback and I -- we don't get specific evidence of off-label prescriptions and things like that, so we don't sort of have a specific view on sort of how it's being used, but we get a ton of prescriber enthusiasm for the drug and we hear a lot of enthusiasm for it, not just in psoriasis, but in AD and in other settings.

For starters, we have a ton of enthusiasm from the investigators in our AD study who are using the drug actively as a part of trial process and who are clearly sort of super enthusiastic for what comes next. So I think from that perspective, enrollments on schedule, I feel like we have the sort of promise there.

And as a reminder, our Phase 2b data, we have 49% sort of IGA clear, almost clearer and a two greater improvement at week eight compared to 13% on vehicles. So a really meaningful opportunity there in our Phase 2b study. And yes, great feedback from our Phase 2b investigators on that study as well.

So on the LNP question, the Judge ordered Moderna to file an answer by November 16, the original complaint. And we expect that they will file an answer. They've asked for a modest extension, which attorney granted.

So we feel pretty confident that that we'll hear back from them and then we'll be able to move on, as I said, to the discovery phase in the process..

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

Hi, good morning. Thanks for taking the questions.

Just Matt, in terms of -- and congrats on the progress and in terms of the PBM contract, at what point do you think operationally we should see that reflected in terms of the script volume trend, presumably as it gets easier for patients or for docs to write it, they'll be more inclined to do so, or do you think one contract isn't enough and that we need to wait a little bit before that becomes a real driver of volume? Thank you..

Yes. Thanks, Doug. Appreciate the question and yes, appreciate you are listening. So I think but there's a lot of different things sort of conspiring towards the quality of our script volume trajectory in with VTAMA. I'd say easiest payer coverage is one of those things.

I think that the copay card has helped in simplifying that process even before we had the contract in place. I think the contract will help too. And I think as docs have confidence that their patients will have a good coverage experience. You can see scripts build.

To be honest, again, I think the high prescribing docs already have a lot of that conviction just because of the way we handled the early commercial launch. But I think coverage will certainly help continue build that out. I think you will continue to see scripts building over the coming months and quarters and that's important.

I'd say we expect to see some stair step of prescriptions over time for a variety of reasons. coverage is one of them. The holidays obviously affect prescriber behavior. There's some seasonality that there's some of these populations.

So I'd say it may not be kind of literally linear from a true volume perspective, but I do think all of these things are going to add up to consistently growing demand once you take sort of one step back from the week on week numbers.

And again, we feel really good about what the contract lets us do there and what the market is sort of guiding us towards at this point from a -- from an enthusiasm perspective..

Okay. Great.

And then Matt, as a follow-up, I'm just curious, have you given thought about how the IRA might affect your development of certain assets? Because that's certainly something that we've started to hear from companies and certainly sort of rationalizing some of the opportunities that they were planning to pursue just given the potential impact.

Thank you..

Yes. Thanks. It's a great question. Sort of obviously look, we like the rest of the industry are watching really closely as this evolves and it's already factored into how we think about allocation of capital across the portfolio. So you can see, we think differently about molecules than we used to think.

We sort of think differently in general about specific programs. We are obviously compared to some of our bigger peers less impacted in the near-term than some of them might be. And so we've got a little bit more time to kind of watch and learn.

And it's just -- it's a pretty rapidly evolving situation, but absolutely affects our capital decisions today..

[Operator Instructions]. Please standby for our next question. Our next question comes from Dennis Ding with Jefferies. Your line is now open..

Hi, thanks. This is Yuchen with Jefferies. Two questions on our end.

The first on EU launch and efforts, could you just tell us where you are and when you would expect any updates on the EU process and what commercial preparations you have made in advance of the approval? And on the second question on the mRNA patent litigation, it's nice to hear the judge deny Moderna on the motion to dismiss.

But factually, what are the next steps here and what specific dates do we need to know and when do you expect us to move to discovery?.

Yes. Thanks. Both good questions. So on EU for VTAMA, we don't have a new update to provide right now. We continue to work towards that opportunity and to think about different approaches for commercializing in Europe. It's obviously a big commercial market, especially given the number of patients.

So we'll provide an update when we have one that's more specific, but I don't have a specific date or timeline to provide today. And then on -- and just as a reminder, by the way, the Japanese program is now on a path to approval after the positive study there. So and we'll get some commercial economics from the launch in Japan.

As far as the Moderna question is concerned, I said sort of in November we expect Moderna’s overall response and can we expect to move into discovery kind of just after. So I think you can expect there'll be a calendar set for discovery that'll be the subject of some discussion with the judge.

And perhaps once that calendar set will be able to provide a little bit more of an update, whether that's sort of end of this year or early next year or something like that on timing. But I'd expect the discovery process will take some time and perhaps more updates kind of over the course of next year as that progresses..

Please standby for our next question. And our next question comes from Dennis Ding with Jefferies..

I think that was our prior question..

One moment, please. I am showing no further questions. I would now like to turn the conference back to Matthew Gline for closing remarks..

Thank you very much. Thank you for the operator. Thank you to everyone who worked to get us through a pretty impactful, important quarter and thank you everyone for listening this morning. Look forward to continuing to provide updates at upcoming investor conferences and with our next quarter. And yes, everyone have a great day. Thank you so much..

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