argenx SE (NASDAQ:ARGX) Q1 2024 Earnings Call Transcript

argenx SE (NASDAQ:ARGX) Q1 2024 Earnings Call Transcript May 9, 2024

argenx SE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Rob and I will be your conference operator today. I would like to welcome everyone to the call. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I'd like to introduce Beth DelGiacco, Vice President, Global Head of Corporate Communications and Investor Relations. You may now begin your conference.

Beth DelGiacco: Thank you. A press release was issued earlier today with our first quarter financial results and recent business update. This can be found on our website along with the presentation for today's webcast. Before we begin, I'd like to remind you on Slide 2 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical development, regulatory time lines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. Argenx is not under any obligation to update statements regarding the future or to conform those statements in relation to actual results unless required by law. I'm joined on the call today by Tim Van Hauwermeiren, Chief Executive Officer; Karl Gubitz, Chief Financial Officer; and Karen Massey, Chief Operating Officer. I'll now turn the call to Tim.

Tim Van Hauwermeiren: Thank you, Beth, and welcome, everyone. At the beginning of the year, we shared an ambitious plan to maximize patient impact over time through our three innovation horizons. First, bringing VYVGART to more patients by employing a multi-dimensional launch strategy. Second, advancing our clinical pipeline including empasiprubart and ARGX-119, which have potential across multiple indications with high unmet need. And third, leveraging our IIP to bring forward the next wave of novel targets to the clinic. Today, I'm pleased to share that our execution over the quarter puts us perfectly on track with this plan. Slide 4, let's dive into some of our recent accomplishments beginning with the team's success in delivering another quarter of solid revenue growth.

We now have 7,500 patients on VYVGART and VYVGART subcu globally, which does not include China with over 2,700 patients started on therapy in the first quarter alone. This means we surpassed the 10,000 patient mark and we continue to reach new patients and prescribers each quarter, gaining market share among all gMG treatments. We have two key drivers of revenue growth in the first quarter. First, we saw a 34% increase in patients on the VYVGART subcu in the US. The majority of these patients were naive to VYVGART, so the subcutaneous product is expanding the market in the way we planned. Second, we saw 46% growth in patients on treatment in Europe, driven by strong demand in Germany and new launches in Italy and Spain. And while it's still early days in the ITP launch in Japan, we are pleased to see patients already start therapy in our second indication.

Looking ahead to next month and the expected FDA decision for CIDP, we are making the right choices today with our gMG growth strategy that should serve us well for a CIDP launch in the scenario of an approval. We shared at the beginning of this year that advancing our pre-filled syringe in both gMG and CIDP is a top priority for us and we have a positive update for you today. We have successfully collected all necessary data points from our bioequivalents and human factor studies and are on track to file with the FDA by the end of June. Our goal is to have the broadest product offering available to patients recognizing that different patients and prescribers have different treatment preferences. With the pre-filled syringe, we continue to innovate on the patient experience and will seek self-administration in the label, which we expect will help us reach patients earlier in the treatment paradigm.

On the clinical front, we made important progress in advancing our next set of indications to Phase 3 and now have studies underway in powered eye disease and the anti-acetylcholine receptor antibody negative gMG population. The seronegative study is designed to enable a label expansion into 15% of the broader gMG population beyond those patients we can serve today. We are also advancing Phase 3 plans for efgartigimod in Sjogren's and empasiprubart in MMN based on Phase 2 results in both indications. And we still have additional data readouts ahead this year in PC-POTS and three subtypes of myositis which all could jump start registrational studies depending on the outcome. The development of our earlier pipeline programs all remain on track including patient studies of ARGX-119 and our upcoming INDs across four molecules as we rapidly work to advance the next wave of novel targets.

Slide 5. Last month, we presented important data to the neurologist community during AAN, furthering our confidence in the opportunity we have with VYVGART. In the absence of a cure, the best we can achieve for patients is deep and sustained functional improvement, not just managing symptoms, but getting to the heart of the disease to deliver a better outcome than patients have with current treatments. In gMG, this is minimum symptom expression or MSE and we demonstrate that across studies and various dosing regimens, approximately 50% of patients are able to achieve MSE. This comes without compromising safety and in fact we show that patients can meaningfully take steroids post graft treatment, reducing treatment burden, and improving the overall experience.

We also presented new ADHERE data at AAN specifically on functional improvement showing that some CIDP patients were able to improve more than three or four points on INCAT, which to put it into perspective can mean the difference for a patient between being wheelchair bound and walking without support. Slide 6. During the first quarter, we announced our decision to advance efgartigimod to Phase 3 in Sjogren's disease following the outcome of the single finding RHO study. We are confident in moving forward based on the consistency of data across clinical and biomarker endpoints. This was a relatively small trial, just 34 patients, but one of it could look patient by patient at how these endpoints moved together. We had two objectives with the RHO study.

First, to gain confidence to invest in further development and second, to thoughtfully shape the Phase 3 study. We achieved both and see a clear opportunity ahead for VYVGART card in these disease where there is significant unmet need, specifically in those patients with moderate to severe systemic disease who can experience dry eyes and mouth, fatigue, joint pain, and even organ damage. Slide 7. We are leading this new field of medicine with FcRn, and at the end of last year, we made a commitment to apply key learnings from the ADDRESS and ADVANCE subcu trials to all ongoing and proposed indications. The first trial in focus was the BALLAD study of efgartigimod in bullous pemphigoid. We stopped enrollment in the Phase 2 and are currently waiting for data to mature across all patients.

We will be ready to communicate a path forward this year whether to change the study design and the normal Phase 2, advance to Phase 3 or stop development in BP altogether. We also completed a thorough risk assessment of all of the programs across efgartigimod and Empa, recognizing the need to be disciplined in where we invest our capital and time. Based on our revaluation, we have decided to discontinue development in ANCA-associated vasculitis or AAV and to focus instead on a newly nominated indication, systemic scleroderma. We determined the risk did not outweigh the benefit in AAV given the potentially unmanageable interference of background medication. All other indications are advancing forward with trials underway in MN, LN and AMR for efgartigimod and DGF and DM for empasiprubart.

We have plans to nominate additional indications for both assets later this year. Our opportunity to transform autoimmunity remains strong. The more data we generate in the clinic and translationally, the more informed we can get in our R&D investments and selecting indications where we can win. This is the best formula for long-term value creation and is a perfect transition to Karl to talk about our financials.

Karl Gubitz: Thank you, Tim. Slide 8. The first quarter 2024 financial results are detailed in the press release of this morning. I will highlight the key points here. Total operating income in the first quarter totaled $413 million. This reflects $398 million in product net sales and $14 million in other income and collaboration revenue, including $2 million in royalty income from Zai Lab for VYVGART sales in China. Product net sales of $398 million represents 83% growth plus $180 million compared to the same period in 2023. Here is a regional breakdown along with key drivers. $347 million in the US with notable expansion of patients on VYVGART Hytrulo. $18 million in Japan indicating strong volume growth offset by a recent 8% price decrease.

EMEA had an excellent quarter with net product revenues of $31 million. The majority of sales still come from Germany, where we had strong volume growth offset by higher accruals due to the planned reassessment of a German price, which will be finalized in 1Q 2025. We saw meaningful revenue contributions this quarter from Italy and Spain and these launches are just ramping up. We also saw our patient reach expand in Eastern European countries like Poland and ex-EU countries like Saudi Arabia and Switzerland through named patient sales. We expect these sales to be an important source of growth going forward as we finalize pricing and reimbursement discussions. We also had $2 million in product net sales to Zai Lab for the launch in China. Slide 9, operating expenses in Q1 were $506 million, a decrease of $51 million compared with Q4 2023.

Excluding the $102 million impact of a priority review voucher in Q4 2023, operating expenses increased by $51 million. The increased expenses reflect our continued conviction in the long-term opportunity we have for value creation. SG&A expenses were $236 million in Q1, which is an increase of $27 million compared to Q4 2023 due to incremental investment in the commercial infrastructure, most notably expanding our customer facing organizations in the US to capitalize on the gMG opportunity and prepare for potential CIDP approval. R&D expenses for the first quarter were $225 million. Excluding the impact of the PRV from the fourth quarter, we had an increase in the underlying spend of $21 million. This increase reflects our continued investment in our pipeline and we currently have 48 clinical trials across 19 indications and 3 pipeline candidates.

Net cash burn for the first quarter was $75 million. We continue to have a strong balance sheet with $3.1 billion in cash, cash equivalents and current financial assets. Our finance guidance for 2024 remains unchanged. I will now turn the call over to Karen, who will provide details on the commercial front.

Karen Massey: Thank you, Karl. Slide 10. I'm proud of the continued momentum of the VYVGART launch, expanding our impact to give more gMG patients the opportunity to return to the activities they love and preparing to do the same to the CIDP patient community ahead of our June PDUFA date. Before I get into details on the quarter, I want to highlight two things. First, we are changing the gMG treatment paradigm with VYVGART. Our ambition is to enable patients to live without the constant reminder of their disease and we can achieve this with VYVGART in a majority of patients. We now have extensive real world evidence and clinical trial data extending out beyond nine treatment cycles. That data consistently show approximately 50% of patients are able to achieve MSE or minimum symptom expression.

This translates into a very strong value proposition because patients report quality of life measures that are comparable to a healthy population. This is what paradigm changing means for patients, for physicians and for the societies in which we operate. Second, we are making decisions today that will benefit us for the CIDP launch and beyond. We are planning for the long-term to sustain growth and we want to ensure that everything we do today can be leveraged to support that growth. We believe we have the right strategy in place, and now with our expanded customer facing team, we will be even better placed to reach new patients. Slide 11. Our launch momentum continues with nine consecutive quarters of revenue growth. We have year-over-year revenue growth of 83% and we see consistent growth across every region with more than 10,000 patients on treatment globally.

This is an incredible achievement and we are very happy with the momentum we continue to generate from our launch strategy. Even with this sustained growth, we are still at the beginning of what we want to achieve and we are broadening our patient impact through our multidimensional expansion strategy. First, we want to reach patients earlier in the treatment paradigm by innovating on the patient experience with formats like the pre-filled syringe. Second, we wanted to expand our reach by seeking regulatory approval in new geographies. And third, we want to expand our label with new indications. Slide 12. In the US, VYVGART Hytrulo was a key driver of our growth this quarter. So let's start there because it's also an important strategy of how we will leverage momentum for the CIDP launch.

As of January 1st, we had payor policies and a dedicated J-Code in place and we saw a strong uptake of Hytrulo over the quarter with 34% growth from Q4 in patients on our subcutaneous product. The majority of these patients are brand new to the VYVGART franchise, which reflects the opportunity we have to expand within our gMG addressable market with VYVGART Hytrulo. With the backdrop of new innovations coming to market, our total market share across IV and subcutaneous increased over the quarter and we continue to expand the breadth of our prescriber base to now 2,700 neurologists using VYVGART or VYVGART Hytrulo in the US. The first quarter of the year is notoriously challenging and we were not immune to the impact of recertification, holidays and weather.

Taking the seasonality into consideration, I'm very pleased with our performance. The underlying fundamentals of our business is strong and have confidence that we are well positioned to maintain our growth momentum in gMG as we look ahead to the additional drivers this year. Slide 13. The contribution from our ex-U.S markets was another key driver in the quarter, and we saw 46% quarter-over-quarter growth in patients on therapy in Europe specifically. We are encouraged to see this growth materialize. It's consistent with our expectations that Europe will represent an increasingly larger proportion of the opportunity over time. The volume growth can be attributed to meaningful uptake in Italy and Spain following pricing and reimbursement negotiations in those countries, but also the impact of the approval and launch of VYVGART subcutaneous.

Whereas in the US, the strategy with subcutaneous is market expansion. In Europe, we see both the patient switch and the market expansion strategy. This is reflected in the growth this quarter. Moving to Japan, it has been a very busy quarter. In addition to delivering continued growth in gMG and securing approval for VYVGART subcutaneous, we received the first global approval for our second indication ITP. This is an important milestone for VYVGART and an important moment for ITP patients where there is a clear unmet need in the market. This was reflected in how quickly after approval ITP patients in Japan began treatment on VYVGART. And finally in China, through our partner, Zai Lab, we reached an additional 2,700 patients in the first quarter alone, driven by VYVGART's inclusion on the NRDL.

Demand has been very strong. You can see that our global launch efforts are steadily progressing. We are expanding our reach into new countries and new indications and expect to further accelerate growth as more opportunities come online. We are on track to receive VYVGART decisions on approval this year in Australia, Switzerland, Saudi Arabia and South Korea and with VYVGART subcutaneous in China. And we have filed our CIDP regulatory submissions in Japan and China with the EU to follow. Slide 14. Moving to indication expansion with CIDP. We expect a decision on approval in the US next month and preparations are well underway to expand our commercial engine to support this launch. CIDP patients continue to face a significant burden despite the availability of current treatment.

The unmet need is high with patients failing to see meaningful innovation in the last 30 years. Our data suggests that 88% of patients on current therapy still experience residual symptoms, and patients are constantly balancing the trade-off between efficacy and the treatment burden. A couple of weeks ago, the team had the chance to give firsthand accounts from patients suffering from CIDP. One story really struck me with the patient saying, what hurts the most is not having the treatments we deserve. All I want is to get back to the things that make me feel alive. This patient is on a high dose of IVIG, which typically requires a two-day administration period. She cannot afford to be away from work for this time. So she consolidate the treatment into one day, which is not sufficient to address her needs and has led to disease progression.

Our goal with VYVGART Hytrulo is to provide the convenience of a 30 to 92 second injection without compromising on safety or efficacy. And we believe this is possible from the ADHERE data, which we shared with the neurologist community at AAN. This is the largest trial in CIDP ever run, enrolling 322 patients. Data demonstrated a consistently strong response regardless of prior therapy and we also saw data that showcase the real world impact for CIDP patients. We successfully demonstrated efgartigimod's ability to drive a sustained improvement in functional strength across prior therapy groups, including almost 30% who improved three or more points on the INCAT scale. As Tim mentioned, a three point improvement can signify the difference from using a wheelchair to walking.

This is what a transformational outcome looks like in CIDP. Slide 15. We are well positioned to capture the CIDP opportunity in front of us. And as I said earlier, we are making decisions today to support our future success, leveraging our learnings and capabilities from the gMG launch and applying them to CIDP. We will take a consistent approach with each of our stakeholder groups to maximize its potential, early engagement with payors, disciplined execution to reach the right prescribers, and always putting patients at the center of our innovation mission. We have already started our work on enabling broad access to patients. In MG, we partnered with payors so that they could see the value VYVGART creates for the health care system, and we will take the same approach in CIDP.

We have a strong value proposition based on the ADHERE data and the open label extension study. But it takes about two quarters after approval for payor policies to kick in, which will have an effect on new patient starts during 2024. With prescribers, we have expanded our customer facing team to maximize growth in MG while also delivering a successful launch in CIDP. CIDP is an improved indication for IVIG, so this will be a competitive market, but we are equipped to meet the challenge. And last, as we saw in MG, patients and their communities will play an incredibly important role. In our market research, we've seen that it is a big step for CIDP patients to consider switching their treatment. Our goal is to raise awareness and to empower patients so that they can become advocates for their own care.

It will take some time at first, but once the community starts to experience the impact of VYVGART, I'm confident it will happen. I'll now turn the call back to Tim.

Tim Van Hauwermeiren: Thank you, Karen. Slide 16. I'm truly proud of the argenx team. Through relentless execution, we achieved an incredible milestone of treating over 10,000 patients globally. Our commitment to innovation on all fronts has supported this phenomenal growth from generating new data in the clinic that strengthens the use case for VYVGART to our sales team moving deeper into the community setting to reach early life patients. We will continue to diligently invest in and execute across our business to maximize the opportunity ahead of us. It is an exciting time for the company as we actively prepare to bring a game changing alternative to the CIDP community, while staying focused on advancing our pipeline. With notable size, we plan to uncover new opportunities to elevate treatment expectations and create value over the long run for autoimmune patients. I would now like to open the floor for questions. Thank you.

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