Roche: Roivant’s Ulcerative Colitis Drug Could Lead New Class of Drugs, Maintaining Valuation

Roche is paying $7.1 billion to acquire U.S. and Japan rights to inflammatory bowel disease drug RVT-3101 from Roivant in a deal that has been rumored for months, and we’re not making any changes to our fair value estimate. The value of the drug candidate has skyrocketed in recent months with positive midstage data, as Pfizer sold U.S. and Japan rights to Roivant in November 2022 in exchange for a 25% stake in the RVT-3101-focused subsidiary, which was valued at $88 million at the time. While Roche does not have an existing IBD business, this will be a nice boost to the firm’s immunology arm, which is under pressure from recent generics of pulmonary fibrosis drug Esbriet and upcoming potential biosimilar launches for arthritis drug Actemra (later this year) and asthma and hives drug Xolair (in 2025). We think RVT-3101 has demonstrated excellent data so far and has potential for a strong position ($3 billion in 2032 sales) in a nearly $20 billion IBD market, further supporting Roche’s wide moat.