Roivant Sciences (NASDAQ:ROIV) stock rose overnight after Roche Holdings (OTCMKTS:RHHBY) agreed to buy its joint venture with Pfizer (NYSE:PFE) for $7.1 billion.
The joint venture, called Televant, focuses on inflammatory and fibrotic diseases. Its RVT-3101 is about to start expensive Phase 3 trials for ulcerative colitis and Crohn’s Disease.
Roivant opened this morning at about $9.90 per share in a down market. As of this writing, ROIV stock is up by only 0.78%.
The Roivant Model
Because of its relatively small market capitalization of $7.5 billion, and its 75% stake in the joint venture, Roivant is the big winner in this deal. Roche and Pfizer will share marketing rights on the new drug once it’s approved.
Roche is looking for new drugs to add to its pipeline as patents on its cancer drugs expire. Pfizer stock is down 40% this year as the Covid-19 pandemic ebbs and vaccine sales fall.
Roche believes RVT-3101 has potential in dermatology, rheumatology, and gynecology, as well as for Crohn’s and colitis. It’s a monoclonal antibody targeting a protein called TL1A. Roivant formed Televant just a year ago with Pfizer.
Roivant’s business model is to buy rights to drugs whose development has stalled, then create subsidiaries and joint ventures to develop them. Its best-known drug is Tapinarof, sold as Vtama, a cream for psoriasis sold by a Roivant joint venture called Dermavant. Another joint venture, Immunovant, has a drug called Batoclimab for myasthenia gravis in a Phase 3 trial.
Roivant was founded by Vivek Ramaswamy, now a candidate for President. He stepped down from the company’s board after launching his campaign. There are eight analysts following Roivant at Tipranks, seven of whom call it a buy. At Stocktwits, traders expressed consternation that Roivant stock wasn’t doing better once the market opened.
ROIV Stock: What Happens Next?
Roivant’s stake in the sale represents two-thirds of its current market cap. The traders’ consternation is no surprise, but down markets take everything down with them.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
