Description

Summary

When their $7.25B deal with Roche for their Telavant closes in ~1 month, ROIV will have ~$7.0B ($8.05 / fully diluted share net) in pro forma net cash and public stakes (overwhelmingly their 57% stake in IMVT), worth $3.5B ($4.12 / share), for a total of ~$12 in value. This implies that the current market price ($10.35) is ascribing everything else ROIV owns a negative ~$1.5B value. While many cash burning biotechs trade below cash, few have a recent pedigree as good as ROIV (having just delivered a 110x return on capital for Telavant in 9 months), or as much upside optionality. 

We think ROIV shares could garner over 100% upside with minimal downside at current levels, an opportunity presented because biotech has become an investment hellscape where market participants are scared of their own shadows. It’s exactly the type of environment in which a value investor can thrive, and we believe ROIV is an extreme case of dislocation from fundamental reality.

Before expounding on the myriad of upside catalysts, we want to highlight some of the reasons you should read on:

1. We believe they are poised to return $1.0-2B in capital to shareholders, helping clean up existing holders like Softbank and Sumitomo while reinforcing their commitment to shareholder return and capital-light asset development. 

2. IMVT (of which they own 57%) is more likely than not to be sold to large-cap pharma in the next 12 months in light of recent positive data and the ~$28B valuation of competing FcRN maker ARGX. 

3. Claims construction on their LNP litigation will begin in February and could unlock significant value.  We estimate that ROIV has ~65% of the economics on the litigation, and that could be worth ~$5 - 10 per share, with royalty rates on the $150B of legacy COVID vaccine sales utilizing LNP technology. 

4. Dermavant’s drug (Vtama) is already approved and will see significant TAM expansion when the Atopic Dermatitis indication is approved in 2024.

5. Brepocitinib, which is currently in phase 3 for Dermatomyositis, could represent a potential billion dollar asset opportunity.

6. Multiple smaller but still compelling opportunities in hematology (Hemavant), AI/computational biology (Psivant/Covant), immunology (Kinevant), and health data analytics (Datavant), plus others.

In short, we see little downside at current levels, and with upside to a double or more while backing one of the best teams in biotech and taking advantage of a sector undergoing a crisis of confidence following years of investor underperformance.

Valuation Summary and R/R

To highlight this compelling opportunity let’s walk through the base, upside, and downside cases.  

 First, the base case, in which we arrive at $15.61 / share of ~51% upside:

The assumptions underlying this case are outlined below, but effectively it risk-adjusts a lot of the upside optionality using conservative estimates on the likelihood of success.

Next, the downside case - which really exemplifies how ridiculous the current valuation is since the resulting price is 2% ABOVE the current price. Now, a skeptical reader will say that’s impossible, but as discussed in the introduction, since the value of their stake in their pro forma cash and their stake in Immunovant is ~$12 today, thus even accounting for 2 years of cash burn ($1.5B) for which they fail to generate any returns on that investment, you’d still have a value higher than you have today.  This scenario assumes a discount of 40% on IMVT, which given their advantaged tax position and the strength of the data thus far we view as draconian.

As to the upside, we see clear upside to over $24 in the event the LNP litigation goes their way, IMVT is sold or garners further clinical success (+50%), and moderate incremental derisking of the other Vants.

A Note on Taxes:

You will note that we do not tax-affect any of the asset valuations in this analysis, which some might say is aggressive.  However even among seasoned ROIV investors, we think their tax structure is misunderstood and underappreciated.  The upshot is ROIV pays no taxes on the sale of any of the individual Vants. This is due to the fact non-UK shareholders are not liable for United Kingdom corporation tax on capital gains realized from the sale of common shares.  As ROIV (the parent) is domiciled in Bermuda (thus a non-UK shareholder) and holds the shares in each Vant through a UK subsidiary, they don’t pay UK capital gains and Bermuda has no capital gains tax.  

TL;DR Version of Background on Roivant

Roivant was founded in 2014 by Vivek Ramaswamy (not involved anymore) with an idea to incubate a number of subsidiaries (“Vants”) in different therapeutic modalities while applying a consistent, mercenary capital allocation policy across all of them.  The process, which you can see in action as we walk through the various Vants, is depicted below:

Vivek stepped down in 2021, the same year ROIV went public via a SPAC transaction with Patient Square’s SPAC. Due to Vivek’s increasing political aspirations he stepped off the board in early 2023.  Since that time, the company has been led by Matt Gline who joined in 2016 as CFO and who has a somewhat non-traditional biotech CEO background, having been an investment banker at Goldman and Barclays/Lehman, with a focus on fixed income structuring and risk management.  

We have diligenced and interacted extensively with Matt and find him to be thoughtful and pragmatic, notable in a sector whose CEOs appear to have checked their pragmatism at the door chasing lottery ticket wins funded by a belief in unlimited equity funding.  He transacted Datavant in 2021 through the merger with CIOX, has been instrumental in in-licensing the drug that is now IMVT-1402 in 2022, and most recently orchestrated the TL1a deal with Pfizer and subsequent exit to Roche for a 110x return.

The Major Vants 

Immunovant

The largest contributor to the SOTP (after cash) and the most likely to be sold, ROIV’s stake in IMVT gives the company significant strategic optionality.

The most financially important of the Vants (although not the biggest driver of the share price scenarios), IMVT is developing drugs that inhibit FcRn, a receptor that helps perpetuate IgG antibodies, a type of immune cell that in autoimmune conditions can attack healthy tissue.  By inhibiting a receptor that protects those cells, IgG levels decline, thereby lessening disease burden and improving a patient’s symptoms.  There are two approved FcRns today, VYVGART from Argenx (ARGX), which was approved in 2021 and is expected to generate over $10B in peak sales, and RYSTIGGO from UCB which was approved in July.  JNJ has a robust FcRn program they acquired in 2020 through the $6.5B acquisition of Momenta.

With that backdrop, let’s discuss the investment opportunity around IMVT.  ROIV owns ~57% of IMVT and has participated in capital raises to maintain that level of ownership.  In effect that means that for all decisions ROIV is the ultimate decision maker and the cost of developing drugs is borne roughly 60/40 with the public shareholders.  IMVT has had notable ups and downs since going public in 2019, most notable the safety concerns which derailed the development of IMVT-1401, their original attempt at designing an FcRn antibody.  While potent, 1401 was found to also bind to albumin, the inhibition of which leads to increased LDL cholesterol (which is bad).  ROIV and IMVT worked to license the molecule which is now IMVT-1402 and presented data in September that demonstrated 1402 has similarly potent IgG suppression but without any impact on albumin or LDL.  

This chart from their multiple ascending dose trial demonstrates the magnitude of effect on IgG:

Now, this data is in healthy volunteers, but we have robust backup from ARGX that healthy volunteer data translates to patients. To backup that claim, see the following chart from the EU review of VYVGART which shows 3 trials worth of IgG suppression, spanning both healthy volunteers (in red) and patients with generalized myasthenia gravis, their first approved indication.    

In short we believe the IMVT healthy volunteer data to be substantially derisking, and while VYGART achieves 50-60% IgG suppression in their trials, we believe 1402’s 74% (and deepening to 80% over time) response in higher doses provide the opportunity for it to become a more potent option for patients across a range of conditions.  

To characterize the opportunity simply, many indications for IVIG (Intravenous Immunoglobulin) are effectively targets for FcRn.  That’s because IVIG therapy aims to suppress aberrant IVIG caused by an autoimmune condition by adding healthy donor IVIG to a patient's blood, thus diluting the diseased IgG. If you look at the revenue generated by companies like CSL, Grifols, and Takeda in this field, the numbers add up quickly: it’s estimated IVIG generates $6B in revenue in the US and over $8.5B globally.

Finally here is ARGX’s landscape of indications they intend to pursue: the breadth of the opportunity is the reason IMVT has an opportunity to both move first on some indication and differentiate itself.

Today IMVT shares trade at ~$44, equating to a market cap of ~$6.3B.  ROIV owns slightly under 80M shares worth $3.5B or ~$4.12 per ROIV share.  We believe it’s more likely than not that ROIV elects to sell IMVT, particularly considering the current ROIV valuation, which could come at a substantial premium in light of comps and the success of VYGART in the market. 

Priovant

A derisked asset partnered with Pfizer with multiple shots on goal to make a billion dollar plus business

Priovant was set up to develop Brepocitinib (Brepo), which was licensed from Pfizer in 2021, and is presently 25% owned by Pfizer (the same structure as Telavant).  Brepocitinib is a dual inhibitor of TYK2 and JAK1, both known to be active targets across a range of inflammatory conditions. Development to date has consisted of six positive phase 2 trials, as depicted below, plus the failed phase 2 in systemic lupus erythematosus (SLE) announced in November. 

And here is how these results compare vs competitive TYK2 agents:

To take a giant step back: 1) inhibition of TYK2 and JAK1 is unequivocally effective in the treatment of autoimmune diseases, 2) Brepo is an active agent against both of those targets, 3) competitive molecules Sotyktu (TYK2) and Rinvoq (JAK1) are multi-billion dollar blockbuster drugs, and 4) there is evidence Brepo could be more effective than either in a range of conditions.  So why does Priovant get, effectively, negative value in ROIV’s valuation today? Because they are late to the party (Rinvoq approved in 2019, Sotyktu in 2022), it contains JAK1 which means it will carry a black box warning like all JAKs, and perhaps most importantly: despite the phase 2 successes, ROIV is attempting to differentiate Brepo by running phase 3 trials in areas where the competition is either non-existent (dermatomyositis or “DM”, the lead indication) or can be a fast follower to competitive approvals (Hidraenitis Suppurativa or “HS” and Non-infectious uveitis or “NIU”) 

Their strategy is one of high risk / high reward. In DM, ROIV did not run a phase 2, instead electing to move directly to phase 3 based on a proof of concept shown by an open label study of 10 patients by the JAK1/2/3 inhibitor Tofacitinib (Xeljanz). If successful in the phase 3 trial in 2024, Brepo would become the first-and-only oral agent for DM. 

In terms of what success means: ARGX presented the following patient numbers, and Cowen did some research below on sizing the opportunity: 

Assuming 25% patient share, and pricing in line with Sotyktu, Brepo could generate ~$540M in the US alone. With IP out to 2038, we believe Brepo would garner at least 3x peak sales, so that would be worth ~$1.6B.  Assuming 50% odds of success, the risk-adjusted value for DM would be $800M.  

A note on the recent failure of SLE:  Lupus has remained a difficult disease to successfully demonstrate efficacy in, for 2 reasons: 1) it’s heterogeneous, meaning people with SLE manifest different vary symptoms from one another and 2) high placebo response rates in trials (and as was seen in ROIV’s trial).  In 60 years there have been just 3 approvals in Lupus and 2 of those have been in Lupus Nephritis, the kidney disease complication of SLE. 

Assuming just those 50% odds of approval in DM, we get $800M in adjusted EV for Priovant and $200M in pipeline value for the other indications, while assuming it will burn $300M to see them to profitability, arriving at a net value equity of $700M.  ROIV owns 75%, which is diluted to 68% to account for options / equity for the team, so $476 to ROIV shareholders or ~$0.56 per share.  Upside to $1.5B if the DM trial is successful and therefore derisked. 

Genevant

Drug delivery innovator whose patent cases vs mRNA vaccine makers could be worth $10B or more

To not bury the lede: Genevant (and therefore ROIV given their ~65% economics) could be entitled to $5-10B in damages from MRNA and PFE/BNTX if they win in court. So with that provocative headline, here are the details on Genevant:

Genevant is ROIV’s development subsidiary for lipid nanoparticles (LNPs).  In layman’s terms, LNPs are effectively tiny balls of fat (lipid) that act as the vehicle to carry nucleic acid (such as DNA or RNA) to the body, in order to protect that acid from being degraded as it makes its way to the body’s cells. The most famous and topical use case for LNPs is mRNA vaccines for COVID, as both MRNA and PFE/BNTX used the technology.  The crux of the investment case on Genevant is that while the companies rushed to develop a vaccine, thereby generating a cumulative $150B in revenue during the pandemic, they did so while brazenly using IP that rightfully belongs to Genevant.  Genevant is now suing both companies for compensation.  

The structure of the LNP economics is somewhat complicated. Genevant and Arbutus (ABUS) split the economics 80/20 from the LNP patent estate. From there ROIV owns 67% diluted share of Genevant, while ABUS owns 13% of Genevant, and ROIV then owns 24% of ABUS. The upshot of this is that ROIV owns ~65% of total economics from the LNP estate.  

Here is a somewhat outdated (Genevant has subsequently sued PFE) but generally accurate schematic of the parties involved in the litigation.   

MRNA Complaint (filed 8/28/22):

https://investor.arbutusbio.com/static-files/193fff17-0bdd-4287-8dfd-3617d3bf7850

PFE Complaint (filed 4/4/23): https://investor.arbutusbio.com/static-files/8c1e9e82-296c-448b-b973-7ef908c99948

The patents at issue against MRNA here are as follows:

The key to the patent litigation is the molar lipid ratios covered by the ABUS Particle Composition patents. This slide from 2022 outlines ROIV’s logic and the evidence backing up their infringement claims against MRNA.

1. 2020 Preprint from the NIH/Moderna team regarding the development of MRNA’s vaccine, contains the following passage highlighting a ratio of 50:10:38.5:1.5 when discussing SARS-CoV-2 lipid formulation.  

(found here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7301911/) 

2. 2020 NEJM: The MRNA/NIH publication includes cites yet another MRNA-authored paper published in Cell’s Molecular Therapy Nucleic Acids journal called “Optimization of lipid nanoparticles for intramuscular administration of mRNA vaccines” (https://www.cell.com/molecular-therapy-family/nucleic-acids/fulltext/S2162-2531(19)30017-4), which contains a preparation in the identical ratio:

3. The International Patent can be found here (https://patentscope.wipo.int/search/en/detail.jsf?docId=WO2021159130) and contains the following, yet again, identical, molar ratio. 

The conclusion of all this appears to be that MRNA used that same 50:10:38.5:1.5 lipid ratio, which puts it squarely in the ratios covered by the 5 patents stated above.

The Pfizer lawsuit contains 3 of the same patents as the MRNA action (‘359, ‘378, ‘651) while adding 2 additional ones (‘320, ‘098).  The additional patents are newer, having been issued subsequent to the MRNA suit and therefore are included here.  One wrinkle on the PFE lawsuit is that in 2018 BionTech licensed LNP technology from Genevant but only for specific cancer and rare liver disease indications, not for infectious diseases.  The additional wrinkle is that prior to filing the lawsuit in 2023, Pfizer and Genevant had licensing discussions but those discussions failed to result in a settlement and now the matter is before the court. 

On the two additional patents: Both the ‘320 and ‘098 patents cover the production method of using 2 solutions which are added to a mixing chamber from opposite ends.  Genevant effectively states that PFE’s demonstrated use of T-Mixers in manufacturing the vaccine infringes these patents. One additional explanation for the inclusion of these patents might, ironically, be the publication of PFE CEO Albert Bourla’s book MOONSHOT in 2022, which outlines the PFE manufacturing process. 

In terms of damages, we use a range of mid to high single digits.  Gevevant has published its current licensing arrangements which support that range. 

So for our analysis we use a range of 3 - 9% and calculate damages based on cumulative revenue in the table below. Obviously if they lose the case ROIV gets nothing and therefore that is our downside case.  

Note, this doesn’t include value for future vaccine sales, which in any settlement or ultimate court decision, would likely be additive as the vaccine makers would be required to take a license on existing infringing materials.  

Dermavant

ROIV’s only commercial business, viewed by the street as NPV negative given cash burn, but with a significant market opportunity we believe is underappreciated

Dermavant holds the sole commercial asset of ROIV today: VTAMA, a cream for psoriasis (approved currently) and atopic dermatitis (approval pending in 2024). In FQ2 VTAMA generated $18.4M in revenue in Q4 ($74M annualized) at a 28% gross to net (meaning they got a net price equal to 28% of the list (gross) price. The GTN yield is relevant because as a topical in dermatology the payors put a lot of hurdles in place to prevent rapid adoption since dermatologists are regarded as frivolous with their usage vs systemic therapies. Roivant has a stated goal of a 50% GTN yield over the next few years, which, to put another way, implies ~80% embedded net price growth from current levels, on top of whatever additional volume they are able to achieve. 

So while it continues to grow significantly, like many pharmaceutical launches (especially in dermatology) this must be set against the fact they are spending ~$75M a quarter to launch the drug.  As they launch atopic dermatitis, near-term burn could increase, but ultimately the scale of the opportunity is immense.  This bridge shows the magnitude of the market VTAMA is attempting to address:

This chart sells a pretty straightforward story: for these conditions everyone uses topical steroids.  Topical steroids have a number of clinical downsides for patients: chronic use results in thinning skin, which often restricts their use on facial areas, and can also include rash, increased hair growth, easy bruising among other side effects.  VTAMA, as a novel topical, was designed to avoid the clear downsides presented by steroids.  

Today VTAMA has ~1% market share of topicals for Psoriasis and AD, with >90% of those written today being steroids.  If VTAMA gets to 5% share and achieves their targeted gross to net improvement, quarterly revenue would increase from Q3’s $18M to $158M or $632M annualized.  Putting a 3x multiple on that, we get $1.9B in EV.  Assuming $400M in cumulative burn to profitability and including the NPV of their NovaQuest funding debt, we get an equity value of $1.2B in our base case or $1.21 per ROIV share.

Datavant

Minority stake in a fast growing and profitable software business

So Datavant is pretty opaque, both operationally (because its mandate is so broad) and in terms of current valuation (which is likely down from its last transaction). Datavant is a clearinghouse of health data with the aim of connecting patient data with payors, providers, drug companies, etc. to facilitate some sort of favorable health outcome (albeit mostly with a research focus). The most common use case is for the enrollment of drug trials - instead of weeding through individual databases to find patients who qualify for a trial, you can speed up this process using Datavant which stitches together a number of databases using compliant, de-identified patient records to help the company find potential eligible patients more quickly.  Patients benefit because they get access to trials outside of their specific institution, while drug companies benefit because all of the laborious data collection and processing is already done in a compliant manner.

In terms of valuation, in June 2021 Datavant merged with Ciox Health, a leader in clinical data exchange in a deal valued at $7.0B. Based on our research, the merged company (also called Datavant) is doing roughly $200M in EBITDA.  But we don’t know how quickly it’s growing, which makes putting a valuation range on it rather challenging.  With those 2 data points in mind, we use a range of $2.5 - $5.0B or 12.5x - 25x LTM EBITDA, with a base case of $3.5B or 17.5x EBITDA.  This base valuation is a 50% discount to the merger valuation which makes sense given a general contraction in multiples since then, and the fact VC valuations can be ephemeral even in the best of times.

Roivant owns ~17% of Class A units in the Ciox Parent, but as Ciox has multiple classes of stock that would dilute that total ownership, we estimate their true economic ownership at ~12%.  With that in mind, the Datavant stake is worth $375 - $600M, with a base case of $420M or ~$0.50 per ROIV share.  

The Minor Vants

Significant market opportunities, but earlier in their development lifecycle = cheap optionality for ROIV shareholders

We will do an abbreviated summary for each of these, since they don’t contribute a ton of value to the SOTP, nevertheless they still have significant optionality that is completely ignored by the market.

Kinevant - Kinevant is  developing Namilumab, a GM-CSF inhibitor for sarcoidosis. Sarcoidosis is an immune driven inflammatory disease suffered by ~150k people in the US, and typically affects the lungs but can affect other organ systems as well.  Treatment today consists largely of immunosuppressants (which has negative effects on overall health) and organ specific drugs to alleviate symptoms (such as joints).  Granulocyte macrophage colony stimulating factor (GM-CSF) is implicated in the development of sarcoidosis’s granulomas, so the theory is the inhibition of that factor will lead to a reduction in symptoms and tissue damage.

Kinevant dosed the 1st patient in their 100 patient phase 2 in 2022, with results expected in 2H 2024.  

Hemavant - Hemavant is developing RVT-2001, an inhibitor of SF3B1.This one gets into some SCIENCE so bear with me.  SF3B1 is a spliceosome protein that is mutated in ~80% of MDS-RS (myelodysplastic syndrome with ring sideroblasts). While the mutation is actually associated with positive prognostic value (i.e. lower risk disease, which still has an expected survival of only ~5 years), it causes ineffective erythropoiesis, which results in both low sodium and low iron conditions in patients.  Today these conditions are treated by erythropoiesis-stimulating agents (ESAs), but eventually do progress to becoming red blood cell dependent over time (i.e. you require blood transfusions for life).

There is some data for Hemavant, which can be found here (https://ashpublications.org/blood/article/134/Supplement_1/673/426543/Results-of-a-Clinical-Trial-of-H3B-8800-a-Splicing) that shows in an early study 14% of patients treated with RVT-2001 (then called H3B-8800) had decreased requirements for transfusions.  

To summarize the current state of play, RVT-2001 is being studied to find out if lower risk but still transfusion-dependent patients with the mutation could benefit from SF3B1 with the aim of reducing their dependence on donor blood over time.  There are ~120,000 MDS patients in the USA and ~30k per year in new diagnoses, the majority (60-70%) of which are considered lower risk, implying ~60k current patients in the U.S. who are lower risk and have a SF3B1 mutation.  Using the price for BMS’s luspatercept ($200k/yr), which was approved in 2020 for in low-to-intermediate MDS with anemia, and assuming 20% peak penetration, we arrive at $2.4B in peak sales for the drug.  Given the modest results to date (luspatercept had a 25% placebo adjusted response as a point of comparison), we’ll risk-adjust this heavily, and therefore include only $200M in value for the drug in our base case SOTP. 

Covant - We’ll keep this brief.  Covant was incubated at ROIV to accelerate drug discovery through the use of proteomics (basically next-gen mass spectrometry) to optimize proteins for covalency.  In March 2023 they announced their first partnership with Boehringer Ingelheim on the discovery of drugs targeting ADAR1, where Covant received $10M upfront, plus $471M in additional milestones and tiered royalties on global sales.  Covant is so early we only include a range of values from $0 – $50M today, but it could provide additional optionality over time as the opportunity becomes more clear.

Psivant - Psivant was created through the acquisition of Silicon Therapeutics in 2021, for $450M in ROIV stock plus additional milestone payments.  Silicon Therapeutics had built a platform for developing small molecule drug candidates using computational methods and their own supercomputer.  ROIV has indicated they would not do another deal of a “platform” like this, and while they are happy they own it and do think it will eventually result in attractive new assets, management acknowledges the price they paid was too high and the market no longer values computational discovery platforms like they once did.   

In all scenarios we value Psivant below the price ROIV paid for it 2 years ago.  Our base case represents a ~50% haircut to that price and reflects 1) the lack of process towards an asset in a clinic thus far and 2) declining market valuations for public market assets utilizing computational biology (computational biology peer SDGR, for example, is down 67% during that same time period).

VantAI - VantAI is another asset which could be very exciting given they are in a hot area (AI-driven drug discovery with a focus on molecular design) and have high profile partners (JNJ, Boehinger Ingelheim, Blueprint Medicines). The flip side of this is without clear assets or economics behind these partnerships, it’s nigh impossible to value it with any level of accuracy. So while we have a placeholder valuation today, I believe ROIV is planning to raise venture funding at VantAI in the next 12 months which will hopefully put some numbers around what the asset could be worth.

Lokavant - Lokavant is effectively a software dashboard to accelerate and improve clinical trial enrollment.  Conducting an effective trial on time and on budget is critically important to any biotech, so ROIV developed their own tools to optimize how those are monitored (keep in mind, the trials themselves are largely conducted by academic hospitals, but the company works with those trial sites to ensure both speed and trial integrity are progressing according to plan).  We put a small value here, since while the software does address a real need, we just don’t know what it's worth. To date they have raised $29M in venture funding, but that includes ROIV’s participation, so it’s hard to extrapolate with any precision.  ROIV currently owns 56% on a fully diluted basis.

Technical Dynamics

An overhang on shares but also near term capital deployment opportunity for ROIV

Normally we wouldn’t address technical dynamics as we believe a long term investor will focus solely on fundamentals and be rewarded, but there are some specific elements of ROIV’s capital structure that warrant discussion.  

QVT - Vivek’s former employer, which has now converted into a family office.  They have board representation and appear only to sell when they need liquidity to manage the wind down of their remaining LP commitments (so far roughly 1x per year).  

Dexcel - The largest private pharmaceutical company in Israel, the Co-CEO of which is the Chairman of ROIV’s board of directors.  They participated in the seed financing of ROIV and have never sold.

Viking - Invested in 2016 in their private fund.  Have sold modestly this year, but based on our understanding they did so for position size reasons and are not sellers at the current valuation.

Softbank - Invested $1.1B in 2017 and have sold periodically, largely in keeping with the woes of the Vision Fund more broadly.  Ultimately we think they continue selling periodically, but apparently have not been sellers post the sale of Telavant despite the end of their lock-up in early November.

Sumitomo - The most obviously problematic shareholder today.  They have publicly expressed the goal of reducing leverage through the sale of up to ¥150B in cross holdings and equity method investments, the largest liquid of which is ROIV shares.  Sumitomo is locked up until February 2024.

Vivek - Personally we are of the view that Vivek only sells if forced, specifically if forced because he has been appointed to a Republican cabinet and therefore gets to avail himself of the same federal loophole (Section 1043) that Hank Paulson took advantage of when appointed Treasury Secretary: “individuals who are forced to sell stock to meet federal conflict-of-interest rules to defer paying capital gains tax, so long as the proceeds are reinvested in government bonds, diversified index funds and other similar instruments”.  While we appreciate this theory is slightly conspiratorial, the fact he defer taxes indefinitely might explain, in part, Vivek’s continued presidential ambitions.

There is good news about this dynamic for ROIV: they have $7B in cash to address these technical overhangs.  We believe ROIV is actively working on preventing chunky sellers from reaching the market (part of their “we’re being patient” capital stance today), which means we could see 10-15% of shares outstanding retired through chunky transactions in the near term, resulting in accelerated value accretion for shareholders.

Conclusion

ROIV represents a compelling R/R situation at current levels, with substantial optionality embedded across the portfolio, the cash to see that optionality through to value inflection points, and a management team that is pragmatically focused on asset light development and the eventual return of capital.  Perhaps the most underappreciated part of the ROIV story is that the unknown pieces very well might end up being the most valuable.  If you rewound the ROIV story a year from the announcement of the TL1a deal in October, ROIV would not have had TL1a or unveiled the existence of IMVT-1402, since IMVT was still recovering from the safety problems of 1401.  Today, those 2 assets ALONE are worth ~$10.60 to ROIV shareholders ($6.48 in cash from TL1a, $4.12 in IMVT shares) for which in that year they only paid $50M in development costs with no upfront to PFE and $30M upfront to HanAll in Korea for 1402, plus probably $100M in development to date, so ~$0.25 per ROIV share in outlays. 

The point is, a year from now ROIV will likely look very different and the stock today offers a profound discount to the myriad of options, both known and unknown, which could prove valuable in the future.  

Catalyst

1. Near term capital return in the form of buybacks from Telavant proceeds

2. Sale of IMVT

3. Sale of WholeCo w/ IMVT

4. Clinical success on existing optionality

5. New partnerships / Vants