Roivant, BridgeBio enjoy 2023 turnarounds with big data, stirring M&A chatter

What’s next for two of biotech’s once-cool, now-hot companies?

Hot on the heels of critical data readouts, Roivant Sciences and BridgeBio Pharma are enjoying two of 2023’s most dramatic stock turnarounds, after their briefly-out-of-favor business models have turned up potential blockbuster drugs.

Successful readouts of the programs — Roivant’s stomach drug, RVT-3101, and BridgeBio’s heart pill, acoramidis — have prompted the sort of question that faces any smaller company after positive data. In Roivant’s case, there have been reports that it plans to sell the drug for as much as $7 billion — but no deal has materialized. And BridgeBio was said to have attracted inquiries from larger drugmakers ahead of its readout, but the company hasn’t announced a deal or its own financing plans.

Both companies have adopted a unique business model, sometimes called the “hub-and-spoke” approach. Typically, they find neglected or discarded drug programs from larger drugmakers or academic labs that they believe hold more value.

Roivant’s RVT-3101 came from Pfizer, and in June showed success against placebo in a Phase IIb trial in ulcerative colitis. Interest in targeting the TL1A protein, as Roivant’s drug does, has exploded since this spring, when Merck struck a deal to buy Prometheus Biosciences for $10.8 billion.

Tim Opler

“Immunology today is what oncology was in 2017,” Tim Opler, managing director of Stifel’s global healthcare group, told Endpoints News. “It’s the hottest thing right now.”

RVT-3101 could be a “perfect fit for any number of companies that are behind” in immunology, Opler added, ticking off GSK, Novartis, Takeda, Pfizer, Bristol Myers Squibb, and Amgen as examples.

The Swiss pharma giant Roche has been in talks to buy RVT-3101, for upwards of $7 billion, the Wall Street Journal reported earlier this month. The results and the buyout speculation have propelled Roivant’s share price $ROIVW by about 46% this year, reaching a market capitalization of $8.9 billion and bringing it back above its IPO price after years of doldrums.

In an interview with Endpoints on Monday, Roivant CEO Matt Gline declined to comment on the Journal’s reporting. He acknowledged Roivant’s approach, which launches subsidiaries called “Vants” around drug programs or therapeutic areas, makes it potentially easier for pharma companies to acquire the assets.

But the model would also make Roivant’s own commercialization efforts more efficient, he contended.

“It also can get us, once we’ve got multiple programs in the family that are commercial, some of the important economies of scale that Big Pharma companies get like lower distribution costs, market access opportunities that single-product companies won’t necessarily have,” Gline said.

“It’s not so much that we built the company to sell Vants,” he said.

Like Roivant’s drug, BridgeBio’s acoramidis came from outside the company as well, picking it up from Stanford University in a licensing arrangement.

BridgeBio has also waded through down years. After going public in 2019, its stock price $BBIO plunged 75% after a surprising negative readout in late 2021 for acoramidis. Positive Phase III data announced on July 17 has upped Wall Street’s confidence in a blockbuster in the making, and shares have soared 350% on the year.

Earlier in the spring, Bloomberg reported that large pharmas were considering BridgeBio as a takeover option. For both companies, an asset sale appears more likely than a company sale, given Roivant and Bridge have sprawling, diversified pipelines going after a range of diseases with various technologies.

Two weeks after the positive data announcement, Bridge has drawn intrigue by not following biotech’s well-worn playbook of issuing a secondary offering following positive data. The biotech could use the cash, as it carries $1.7 billion in net debt on its books, with $450 million due in November 2026.

Mizuho Securities analyst Salim Syed said he sees a structured financing deal involving acoramidis as most likely, in particular a royalty deal that exchanges a percentage of future sales for an upfront payment.

“The longer we don’t get a public equity deal, the more the odds increase that BridgeBio’s next financing will at least, in part, be a structured deal,” Syed wrote in a July 19 note.

Neil Kumar

Syed added he expects an announcement before Aug. 27, when BridgeBio is expected to present more clinical data at the European Society of Cardiology’s annual congress.

In a statement to Endpoints, BridgeBio CEO Neil Kumar said the acoramidis results help demonstrate the value of its model. In particular, “it demonstrates the validity of targeting well-described diseases at their source, which underpins all of the ‘spokes’ in our model,” Kumar wrote.

Moving ahead despite M&A buzz 

With M&A rumors swirling, analysts and investors are closely watching their every move for significance.

Syed, for instance, flagged two new job postings at BridgeBio in a July 27 note to investors. Bridge is hiring for a vice president of sales for acoramidis, as well as a head of asset acquisition to “define the future of BridgeBio” and “fuel our pipeline.” The unstated implication is that the biotech wouldn’t be hiring for those roles if it was planning to sell the asset, or the whole company.

Roivant has also carried on with clinical development, announcing last Thursday it had dosed the first patient in a Phase II Crohn’s disease study, planning for topline data in the fourth quarter.

Yaron Werber, an analyst at TD Cowen covering Roivant, said the fate of its TL1A drug is likely a $7 billion to $11 billion choice, or “the most sizable decision of the company’s history.”

While Werber acknowledged the Roche rumors, he thinks it’s most likely that Roivant will keep the drug and go it alone in the US market, eventually looking for an ex-US commercialization partner.

Either way, the drug has helped lead a surge of investor interest in Roivant’s stock, which he said was “grossly out of favor” after it went public.

Now, “Roivant is absolutely in vogue,” Werber said.

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