argenx SE (ARGX) Earnings Call Transcript & Summary

Sorry, we're a couple of minutes late, but we'll make up for on the back end. Thanks for joining us, everyone. This is the fireside chat with argenx. My name is Vikram Purohit, I'm one of the biotech analysts with the research team here. I'm joined by my colleague, James Quigley from the EU biopharma team. Before we get started, I just need to read a brief disclosure statement. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. With that, very happy to have with us Tim and Karl from argenx. Thank you so much for joining us. Really appreciate your time.

Thank you for having us.

A couple of items that I think are going to be important to touch on today through our chat. We'll touch on VYVGART commercial performance, talk about CIDP, and then we'll talk about additional pipeline expansion opportunities. But before we do all of that, Tim, any -- just high-level opening remarks you'd like to make on the current state of the business, what do you think some of the key points are that people should focus on. And then we can go into questions from there.

Yes. Very happy to do that at the opening. So at the start of the year, we presented again a very ambitious plan. If you look at the commercial objectives, we have set ourselves the pipeline objectives. And I think it is fair to say that argenx in the tradition of the house is executing that plan. So I think the year is not over yet. But again, we have ticked all the boxes we promised we would tick, with two more important Phase III clinical data points to go. This company is again executing, I think, a very strong year. So we were in a strong position.

Great. Great. So let's touch on VYVGART commercial performance first. I think a natural question that comes up Tim is, now VYVGART quarter-over-quarter has been growing. And now people when they look towards 3Q, 4Q 2024, the big question is, what is the appropriate cadence of growth to expect? And what needs to happen for VYVGART to continue to grow in MG.

Yes. So I think we're very proud of the people in the field who have been doing a fantastic launch so far. In order to continue on this trajectory, a couple of things will have to happen. The first thing I think which will need to happen is that we successfully penetrate the upstream part of the treatment paradigm. I think we still see about 50% [indiscernible] of our MG patients, which are IVIg experienced so that has proven to be a somewhat larger pool than what we anticipated at launch. And we see that we are moving upstream in the treatment paradigm, but that's where the real long-term market opportunity really is. I mean if I can draw the analogy with the MS market, innovation like VYVGART should not be reserved for your last line relapsed/refractory patients. It should be used upfront when the disease is diagnosed, really preventing the disease from spreading and worsening. And that I think is the real task which we have in front of us. The other thing which needs to happen is that, of course, our geographical expansion continues to be successful. You know that we have been launching at very high pace in multiple countries. But we're still working our way in Europe through getting reimbursement. And we just launched in China, so the geographical expansion, I think needs to continue its momentum. And then, of course, the product presentations, we had approval of VYVGART Hytrulo at record speed. I think it is important that we can continue to launch these subcu product presentations, generation after generation successfully in order to sustain the long-term growth trajectory behind the drug.

Got it. And then when you think about earlier line expansion from VYVGART, what drives that? Is it awareness? Is it just working through physician practice inertia? Or is it -- and/or is it the availability of Hytrulo?

Vikram, I think it's all of them. If you look at the last quarter earnings, we gave you that number around 2,000 prescribing physicians in the U.S. That's around 1/4 of all the nearers who do prescribe MG patients. So there's still a lot of work there to do to reach the physicians and to -- and a lot of work in terms of education is a first-in-class new mode of action drug, of course. Then moving into those earlier lines is all about the physicians gaining experience. Typically, they give you a more refractory patient then moving into the earlier lines. I think that is happening and that need to continue to happen. The other thing, which is really a differentiator for us, of course, is our database. Our safety database is building and particularly, if you -- in immunology, safety, of course, is really important and have over communities in the near -- community nearer, I think that is really important. So it's about educating, it's about talking about it. So over time, I think we will move into those earlier lines. The subcu, of course, will help. The subcu is opening more sites of care decoupling the patient from the infusion chair. All of this will come -- will hopefully come together. And as said we, we're only scratching the surface as their lot of opportunity waiting for us to go after.

Got it. And do you have enough experience with Hytrulo at this point to know if the majority of patients are coming on to that option from IV VYVGART or if they're treatment naive, any initial indications.

I think it's early days. I mean we are just over a couple of months into the launch, typically for any new product, you are going through all the negotiations with the payers. We are signing up payer agreements. Typically, those agreements are copy and paste of IV agreements, making progress. But it's still early days. I think what's happening when the physician and the patient discuss VYVGART, they typically go for IV because not sure whether the payer is going to be a hurdle for subcu. And with IV launch, physicians who are willing to go through the appeal process as to get the patients on VYVGART. But for subcu, no need to do about the patients can just get VYVGART. So we're making progress early days, but it's too early for us to start talking about trends.

And Vikram, if I can add to that. We're not following a switch strategy. I mean for some of the other subcu launches, you have seen the name of the game is switch and IV business over into a subcu business. That's not the strategy which we pursue. It is really trying to address new prescribers and new patients with the subcu product. The early signs suggest that is happening. And it's one of the two score early in the [ needed ] treatment paradigm. We believe this step from an oral to a subcu injection is a smaller step for the patient to make them from an oral to an IV infusion.

Sure. Okay. On a related point then, Hytrulo pending approval later this year, early next year in additional geographies as well. When the time comes in 2024 and beyond for people to evaluate how that option is doing across geographies, anything you think we should all keep in mind when thinking about subcu versus IV, U.S. end dynamics, UX versus ex U.S., excuse me.

I'll take it and then Tim can add. I think outside the U.S., patients were the subcu formulation or product presentation will very quickly be dominant. In the U.S., I think it will be a little bit different, one because of the infusion network, which is in the U.S., the U.S. just operates that way. And secondly, around the payer dynamics we believe, or we hope that the subcu will ultimately be self-administered, pay for largely part D, a pharmacy benefit, not the medical benefit. While the IV presentation will be mostly Part B medical benefit. And with IRA coming part D redesigned with a payer picking up a large share, about 60% of post catastrophic. Having that optionality is really important. And I think that will drive continued usage of IV in the U.S. So I think those are some of the dynamics we have to take into account.

Great. Great. Okay. That's helpful. I'll ask you one more question, and then I'll turn it over to James. You've often been asked about sales guidance for VYVGART. Would just love to hear your latest thinking on what are the key considerations you have in mind there before you can seriously consider providing sales guidance if that's something of interest to you?

We haven't provided sales guidance up until now because of all the variables out there in terms of new indications, geographical expansion, prices in the geographic -- in these new geographic -- geographical areas. For example, now China has been added I think what we want to focus on is continued execution. And looking into next year, I think there will be a number of variables still out there. So I think we need that to mature before we will talk about sales guidance. We typically do provide cash burn guidance, and that's something which we'll consider to provide again early next year.

Got it. Okay. I'll turn it over to James to talk a little bit about CIDP and pipeline.

Excellent. So earlier this year, you presented the data from the ADHERE study in CIDP. So what has been the initial physician feedback from that study from what we're hearing, some of your competitors in the IVIg space we're cautioning today that VYVGART shouldn't be seen as a standard of care. So where are we now, where's the physician attitudes and what needs to happen to become standard of care.

Let's maybe refresh our memories first on the data we presented. So first of all, this was the biggest CIDP study ever, the most global trial ever. And I think also the cleanest trial ever. I mean, with this independent adjudication committee, we have been testing in a true global CIDP community. And let's not forget that we had all 3 subsets of patients fairly represented. We had treatment-naive patients. We had steroid experienced patients and we had IVIg experienced patients. And I think the study has convincingly shown that all 3 subsets of patients have an equal right to respond to the drug. And not just to respond, I think the data we have been put forward are very spectacular. For ones and for all, we have established that this disease is an IgG mediated disease. I think we also have set a whole new standard in terms of the quality of the clinical trial we have done and the initial feedback which we get from the community, patients and physicians is one of excitement. They're not shy of using the word game changer. And the jury is out. We're still doing a ton of market research here, but I can tell you that just from the study, we see a 99% compliance in the trial and an almost 100% rollover into the OLE. So that is a high unmet medical need, and there are more treatment options required for the treatment of CIDP.

Got you. And it's very early, but I mean, we can discuss surely all the regulatory processes, et cetera. But how would you characterize the initial potential launch of CIDP relative to MG?

I think it's too early to comment on that. I think we're still doing all the homework. But for sure, we cannot ignore the data, right? So of all the scenarios which we had prepared ahead of the data readout, this was the boot case. I mean this is just an equivocal data. And the way the study is designed, the way the study panned out in terms of data is justifying us to think about VYVGART as a frontline use in CIDP and we should not niche this product into a kind of relapsed/refractory patient population.

Got it. And more broadly, how are you thinking about the commercial opportunity in both the U.S. and internationally for CIDP.

It is a very sizable market. And we all know that the global IVIg market is around EUR 12 billion and growing. We know that next to PID, CIDP is the second biggest indication, I think, growing double digit. So I think that kind of helps us to calibrate the size of the opportunity. And I honestly believe that with more treatment options, that opportunity can only grow. So we are excited about the opportunity.

Got it. And how do you think about other areas in terms of -- versus IVIg? I mean there's lots of different analyses around cost of IVIg versus cost of VYVGART. So how are you sort of benchmarking those, particularly with respect to CIDP from your work?

Yes. We always said that when we priced for MG, I think not only to be priced close to an ideal price in MG. We also were very careful not to price VYVGART out of its next indication. So the MG price, which we have set, I think, is compatible with VYVGART playing a central role in the treatment of CIDP, ITP and pemphigus.

Okay. And then as you look forward, again, it might be too early as well. But from a payer perspective, have you -- are there any early insights that you can share from work done with payers since you've seen the data?

I think it's too early. The first thing is first, right? First, we need to talk with the FDA in the pre-sBLA meeting, calibrate expectations for submission, hopefully, then we can submit and then a lot will depend on the label, which we're getting. Once we know the label, which we're likely going to get, we can engage into payer conversations. The one thing I would like to say about our relationship with payers is that we have a credible relationship. When we went to them with our viable or open-label extension data, I should say, from the MG trial, predicting viable use of the drug and therefore entering into these value-based agreements. Now 18, 20 months post launch, we can go and look them in the eye and show them that the VIB was not an empty box. Actually, it was a valuable deal for them. It was a win-win agreement. And I think that's a good position to start the CIDP discussion from.

Got it. I've got 2 more on CIDP. So first, in terms of commercial infrastructure, Obviously, you have the CD -- the MG infrastructure in place now and is still growing. What do you need to add from a CIDP perspective?

From a systems and processes point of view, we will be able to completely leverage the historical investment into MG. What implications these data bring for sizing the field force is something which we're currently investigating. I think the type of data warrants that we're not going to be shy about the opportunity. And I think, Karl, it's fair to say that we're still going through the exercise of resizing the field force, right?

Yes, exactly. We'll -- something we'll get back to you next year.

Yes, of course. And finally, on CIDP. How are you assessing the competitive landscape? Obviously, you've got IVIg to battle against first. But in terms of other things coming down the pipeline, other approvals, is there anything that may keep you up at eye or anything that you're keeping an eye on from a competitive perspective?

I think in the first two market situation again with our FcRn blocker there is competition falling, but I think that way behind. So I don't think we should worry too much about them. I think we should worry about the opportunity in front of us and really take it on with both hands.

Thank you. Vikram?

Sure. On the topic of competition, recently approved competitor from UCB and MG. I would just be curious to hear if you've received any feedback from the field force on how prescribers are thinking about their options now that they have another one. And also if you think that there's been any change to your commercial strategy, either for IV or for subcu given that there's a competitor in place now.

Yes. Let's first start with the right philosophical level, when we talk about competition, I think the real competition Karl was describing is the inertia. The lack of sense of urgency for neurologists to use innovation early on in the treatment paradigm instead of reserving it for last line patients. So I think the real competition is inertia. And the old chemicals, the orals, which are perceived to be cheap, but they come at a pretty mediocre benefit risk profile. So that's the real competition to fight. More innovation coming into the space is only going to grow the size of the pie. I think this rising tide will lift all boats. And that's what we will need. I mean, again, drawing the parallel with the MS market, which, let's see, it took off 20 years ago. More innovation has been really developing, building, growing that market. So we badly need more innovation in the space. Now if and when we would be facing a situation where we would need to compete with one of the renovators, I think we've put the bar very high from an efficacy, safety and convenience point of view. So I feel very comfortable that the patient doing very well on VYVGART would not have too high of an incentive to switch. But again, innovation is welcome in this space. Let's build this market together.

Got it. Okay. I guess maybe on a related point then kind of a life cycle question for you on VYVGART. Could you just kind of recap for us where the prefilled syringe currently stands in terms of development status and what are we going to expect to learn there in the rest of this year in 2024, maybe?

Yes. You will hear us talk more about the prefilled syringe next year. But the way we think about innovation in this space is we think multiple generations already of product presentations. The current subcu execution, which we call Generation One is a simple execution. It's a butterfly execution. Medical staff perfectly knows how to use that. The next stage is the prefilled syringe. A couple of data sets which need to come together in order to be able to file on the PFS, the prefilled syringe that bioequivalence data and human factor study data. And these data are currently being generated. And I think we will be in a position in 2024 to give more visibility on the trajectory to market.

Got it. Okay. And generally speaking, what do you think is the scale of the opportunity that a prefilled syringe opens up. And what kinds of patients does it open up VYVGART to an MG and/or CIDP that you couldn't have accessed otherwise?

Probably self-administration, although the jury is still out for Generation One in Japan and Europe, I'm not excluding the get self-administration in these important geographies. I think in the conversation with FDA it became pretty clear that they would be waiting for kind of prefilled syringe execution to allow for self-administration. So I think that that could be that step change between the first generation and the prefilled syringes here in the United States.

Okay. And your corporate presentation actually mentioned that there's some future presentations beyond prefilled syringes that you're also working on for VYVGART. So anything we should keep on our radars for '23, '24 in terms of updates we could receive on kind of next-gen VYVGART options?

Yes. So we'll be very patient centric as a company. So we're trying to understand what is for the patient, the game changer for the administration of biological I think the next logical next step, which we publicly talk about is the auto injectors. So we are working on an auto injective already.

Okay. Okay. We have around 5 minutes left. James, I'll turn it over to you for some pipeline relating aspect. Yes.

Coming -- and you've got the ADDRESS trial, which is coming by end of the year or Q4. So what would constitute a good income -- good outcome? What are we sort of hoping to learn from the trial? And I suppose if you got any metrics because Rituxan is obviously used here as well. So where do you think the bar is from a trial point of view but also from a physician point of view?

When you talk to the pemphigus community, patients and physicians, what they really care about are a couple of important things. The first thing they really care about is being able to taper off that high dose of steroids as fast as they can. I mean they hit steroids with a passion. So steroid sparing or steroid tapering is really important. Disease control is really important, stop the formation of new lesions and start to see the healing of new lesions. This is top of mind. And that's already what we have seen in Phase II, right? I mean, in Phase II, and we published the data we have seen an incredibly fast speed to disease control and an ability to really put people in CR, complete remission in the background of a very low steroid dose. So the way we designed the Phase III endpoint, the regulatory endpoint is one over a patient and qualifies for the endpoint, if you go into complete response, complete remission, on a low dose of steroids and you're there for at least 8 weeks. So we're testing placebo versus active in a steroid tapering background. That's a very difficult endpoint, I think, to meet for the placebo arm. And I think a realistic endpoint to meet for VYVGART. Now it's still a very tough very challenging endpoint. So think of it along the lines of what we have shown in the ITP study and trying to control placebo to 0 response or as close to 0 response as possible and statistically significantly separate active placebo. That is the goal. So don't expect 60%, 70%, 80% response rate as we have shown in MG and CIDP, just expect a placebo as close to 0 as possible and as statistically significantly breaking away from that.

Got it. You've also got the advance Fc trial reading out. I think given the results of advance. I think it's fair to say that probably the market has got a high probability of success for this. Are there any risks or anything we should be thinking about for this readout?

Look, a clinical trial always carries intrinsic risk, right? You can never completely did it in the clinical trial. I think we did a good job reassessing sample size for the second study based on the outcome of the first study. I think we hit statistically significant in the endpoint, but I think we were surprised by the few placebo responders. And we have been reassessing the powering of the study, taking the lessons learned into account from the first study. That's why we upped the patient number for the second trial. So I think we did a reasonable job in derisking the trial and success would actually mean that we would be able to replicate with the second study what we have shown in the first study.

Got it. We're just over a minute left. So I suppose just to wrap up. So for those two indications, ITP and PV, what are you thinking of the commercial opportunity? And then as we look forward for the next 12 to 18 months or so, one of the key areas investors should be looking at and should be considering when thinking about the argenx equity story.

Everything that both indications are very exciting. I mean ITP looks more busy at the surface, but there's only really steroids TPO-receptor agonists and splenectomy and beyond that, there's not much left. I mean they keep on cycling patients between TPOs even if they stop working. So coming with a new mode of action, which is hitting the disease biology in its heart, I think, is very exciting. Also, the safety profile seems to be very attractive to ITP physicians. That's what they tell back to us. Pemphigus is almost a white space. I mean the unmet medical need is enormous. There's an ability to shape a whole treatment paradigm with this type of innovation. And then, of course, we're looking forward to the next Phase II proof-of-concept trials, which we're going to read out soon. Think of long COVID POTS, think of bullous pemphigoid, think of Sjogren's. These are the next data cards we're going to turn and each of them are actually opening up the door to a whole universe of opportunity. So there's a lot of clinical data to unpack.

Excellent. Perfect. Thank you very much for joining us, and I hope you enjoy the rest of the conference.

Thank you, James. Thank you, Vikram.

Thank you.

Thank you.