argenx SE (ARGX) Earnings Call Transcript & Summary

All right. Let's go ahead and get started. Thanks, everyone, for joining. This is a fireside chat with argenx. Happy to have with me CEO, Tim Van Hauwermeiren, Tim, thank you for joining us. Appreciate it.

Thanks for having us. It's a joy.

Of course. My name is Vikram Purohit. I'm one of the biotech analysts with the Morgan Stanley research team. Let me read a brief disclosure before we get started for important disclosures. Please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please feel free to reach out to your Morgan Stanley sales representative. With that, Tim, let's dive right in.

A lot to talk about for VYVGART, a lot to talk about across the pipeline, but maybe we can just start with kind of a recap of where you've been focused for the business, your recent articulation of Vision 2030 at your recent R&D Day, maybe that's a good place to kind of kick things off.

I think that's a great start of the conversation. Of course, we're firing from all cylinders, commercial execution is going well. The clinical pipeline is progressing according to plan. And I think the discovery engine is running, where I spend most of my time is on the pockets where we innovate. So we have plenty of people who can run the business, attention and full focus is on innovation. So I think the R&D Day was a very important day for us where we could zoom out of just top line revenue growth, which is important and which is going well, but actually showing what we have under the hood above and beyond just VYVGART. So we need to maximize the VYVGART opportunity, but we need more molecules. I was thrilled to see the empa data in MMN and be able to talk about them. I'm thrilled about by 119 and then, of course, the 4 IND molecules, which you're racing towards the clinic. So I think we're more than halfway through the year, and argenx is executing according to plan.

Great. Great. So I know CIDP that launch is on top of mind for a lot of people. So maybe we can just start there. At a high level, how is that tracking versus your initial expectations?

We're very early in the launch. So we are only 2 months into the launch. There's very little things we can say quantitatively, and we will try to help the audience in the earnings call to give you some early metrics exactly the same way we did it for MG. We will talk about breadth and depth of the prescriber base, the phenotype of the patients coming on drug and importantly, how we're doing with installing the proper payer policies. Today, I can say we are on plan. I'm very happy to see the level of awareness in the CIDP community. It's very clear from the patient interactions and the physician interactions that people are waiting for that other tool in the toolbox. I think the regain of function data resonate extremely well with physicians, but also with payers. And I think the market access team is on track installing proper payer policies. The speed is not necessarily the most important metric, but broad access is going to be the important metric.

Understood. From the early uptick you're seeing so far, are there any specific types of prescribers or types of patients or types of centers that are just more prone to being early users of VYVGART and CIDP?

It's too early for me to comment on that here on the podium. Wait for the earnings call that I think we will start to give you some credible evidence. It's now just too early to say it. We do see, of course, patients which are IVIg experienced, which is not abnormal. This is a prevalent disease, and most patients will have seen in some way or shape or form IVIg on their journey.

Understood. We'll definitely wait for that. I guess on the topic of metrics, you mentioned metrics similar to what you provided for VYVGART and MG. I'm assuming everyone here is pretty familiar with that story, how that launch unfolded. But just to kind of level set, what were some of those metrics?

So I just call them out. So we would like to give you an initial view on depth and breadth of prescriber base. There's a big difference between just a few champions giving all your patients as opposed to a broad prescription basis, which is a foundation you can build from. And we will be watching the division between academic centers and community because we think the majority of CIDP treaters are in the community. From the patient phenotype point of view, of course, we will have an interest in who are these patients coming on drug, what is that history? And can we see a pattern there. And then in terms of payer policies, I think along the metrics of how many commercial lives are covered and what is the quality of these policies, which we're putting in place.

Got it. Any qualitative feedback from payers you can share on the announced price?

You can imagine that we did a lot of homework when we were setting the price for CIDP. Part of that, of course, was socializing the data from the study with the payers and making them understand the value of the product. You can never look at price in isolation, it's all about the value. And I think the data which resonates very well are the regain of function data compared to the best people could get on IVIg or steroids. We really saw a market step-up in function of these people. For example, the majority of people entering the trial in a wheelchair could leave the study walking independently. And this is the type of data which articulate value and the type of information payers are very interested in.

Got it. Got it. Okay. Great. So we'll watch out for more color on the launch at the next earnings call. Maybe for the time being then, we pivot to MG. So you mentioned a couple of times this year that the opportunity in MG has ended up being larger than you had initially expected. What are the factors that have surprised you to the upside? Because I'm sure you did a lot of homework and have been doing a lot of homework at the launch unfolded. But now that you mentioned it a couple of times, I'm curious, which factor caught you by surprise?

So the first thing you need to know about myasthenia is the mindset is evolving. I mean when we did our initial market research and we were talking to neurologists, they would give you the answer that my patient is doing fine. That would be a typical answer. And I think the benchmark was, my patient is not hospitalized at this moment in time. That was doing fine. It was the meaning of doing fine. I think we have invested significantly in trying to move the goalpost to patients are actually living a live the way they could live it before they were diagnosed with MG. What does that mean? It means you can live your life symptom-free. 50% of VYVGART patients in the real world have no longer symptoms. We call that MSE. 80% of VYVGART patients have an ADL below 5, that means they no longer qualify even to enroll in a clinical trial. That is massive. Secondly, side effects. The safety and tolerability profile of VYVGART in the real world is pick and span. It's a very clean safety profile. And now we have so many -- thousands patients worth of safety data that is consistent. And that's a big deal because neurologists will worry first about safety and only then efficacy. And then the third thing you need, of course, for the patient to live his or her life without being reminded of the disease constantly is independents. I think the IV product is great. The subcu product, VYVGART Hytrulo is even greater. And I think the prefilled syringe, which we're developing aggressively, I think, will be that finishing touch into independence from the infusion chair or the medical practice. So I think we're really moving the goalpost. And then the second factor, which is important, I think, which is not unusual for rare diseases is when you have an underserved rare disease and innovation starts to come in, more patients come out of the woodworks. There are more MG patients than what the Philip publication suggests back in 2002. I think we're rather looking at 80,000 to 100,000 MG patients in the United States instead of the reported 65,000. So that, again, is an underlying current, which is an important one.

Got it. And you just touched on the subcu version of VYVGART, which was approved last year -- commercialized last year. How is that split currently looking to you, IV versus subcu? And I guess looking 3 to 5 years out, do you think that there's going to be a role for IV? Or do you think it's a good...

It's a great question. And I think here, we need to look at the United States and rest of the world. In rest of the world, I think the subcu product is going to quickly overtake the business. I think I would not be far off if I would predict it's going to be 10% IV versus 90% subcu because that's how the medical systems are organized. Here in the United States, I think it's essential you have both. There will always be a market for the IV product that is driven by patients but also physician and payer preference and the subcu product, I think, will grow in importance. So how that ultimately is going to break out, I don't know, but I think it's important to have both in the portfolio.

Got it. Got it. Okay. And has the subcu option expanded the market as you had hoped it would?

As hoped, patients coming on VYVGART Hytrulo outpatients we've never seen before. I mean, you see a small amount of switches from IV to subcu but the majority of patients, the large majority of patients are patients we have never seen before, also prescribers we have never seen before. Typically, people who do not have easy access to an IV infusion chair or facility. So it's really growing the market. And I think we see more and more people actually coming straight from orals on to VYVGART and VYVGART Hytrulo, which is exactly where we need to go if we want to build the market, we need to take market share from these old pretty dirty chemotherapeutic agents.

Got it. Got it. And then the prefilled syringe. By what factor do you think that could increase the realistic addressable population for VYVGART? What portion of the population do you think it's waiting for that type of option to be available to the before they'll go on gift card.

It's difficult for me to quantify ultimately how many patients will go on the PFS, but it's the missing link to full independence because unlike the rest of the world, where we already have sell administration for VYVGART Hytrulo, here in the United States, we don't have that yet. And I think it's clear from the interaction with the FDA that the PFS would be the stepping stone into self-administration at home, which I think is going to be a big deal for the younger active patient population. So we're diligently working on it. A quick update here for the audience. We did submit in June. The file got accepted without any review issues, which is great. We have a PDUFA date of April 10, and the FDA came straight out of the gate with inspection announcements for the manufacturing facilities and the Q&A started on the data review. So it looks like the FDA is giving this file the level of attention it deserves.

Got it. So April 10, that will be a decision point for both MG and CIDP for the prefilled syringe.

Correct. Yes.

Okay. Great. Switching gears a little bit but staying on MG. There's a good amount of late-stage data coming out from potential competitors later this year throughout the course of 2025. Broadly, how much does competition in MG concerned you for the tail on the VYVGART franchise?

The first thing I'm going to say is competition is good. And that's what we're trying to say in the R&D Day. It's the innovators which build the market. And what we see currently is that everyone is building market share. So jointly, we're building the overall size of the market. It's not a win-lose game. It's a win-win game. And that's a very important overall dynamic to bear in mind. If and when we would have to compete with an innovator, I think we're very well equipped because we've put the bar so high that I haven't seen anyone come close. So our job has not changed. We need to get as many patients on VYVGART as possible as fast as possible because once you're in VYVGART and you're doing well, there is no compelling reason I have seen to actually switch medication.

I guess to play devil's advocate, what do you think a competitor would need to show? Where could they differentiate to convince the prescriber that the prescriber should reach for that therapy versus VYVGART?

Vikram, you asking me a very difficult question. 80% of the patients live a life with no or little symptoms. The safety profile is as clean as it gets. And we have the most complete product offering. So let's wait for the cure.

Okay. Fair enough. Fair enough. I guess final question on VYVGART and then we should switch over to other parts of the pipeline, just kind of keeping time in mind. Your next-gen FcRn agent that you talked about a bit during the R&D Day. Where does that fit in terms of -- I mean, one, broader kind of VYVGART life cycle management, but then also, two, specifically for MG.

I think it's a big deal. People ask me the question, Tim, what's wrong with VYVGART. You told us it's a great drug, and now you have a next-gen. And then my first answer is there's no problem with VYVGART, except for the fact that the opportunity is so big that it cannot be addressed by 1 molecule. We need multiple molecules to address such a universe of opportunity. There's a patent clock ticking in the background. There's an IRA clock ticking in the background. So we're approaching the point where after these first 15 indications, we need to ask ourselves the question, is it still a justified investment to go into the next indication? So we need another molecule. That molecule, I think, is nicely differentiated from VYVGART. The ask to the scientist was give us a molecule which can replace the 4 weekly infusions or injections, which is one cycle of VYVGART with a single administration. That's a hell of an engineering job, and they did it. I think we have such a molecule. I'm very proud of it. And now our job is to take the true Phase I as fast as we can. And then it's opening up optionality. You can play the Soliris Ultomiris game, where you roll up your existing indications really fast with your next-gen or you go into new indications with the whole new price points and value proposition. So we don't need to make that decision today. Let's create optionality. I think that's the way you maintain leadership in a very exciting franchise over time.

Got it. Got it. And remind us of time lines for 213.

That molecule is going to go live in the clinic first half of next year.

Got it. Okay. And then I'm guessing, once you have that data set, then you'll be ready to speak about kind of indication expansion to let...

Exactly. So we're now doing the strategy work, which is fun. And once we have the Phase I data, we will be ready to move.

Got it. Okay. Great. Let's switch gears then to ALKIVIA. You have that data set coming up by the end of the year. You mentioned it's going to include GO/NO GO decisions on all 3 subsets of myositis that are involved in the study. One, just to kind of level set for everyone. Talk us through the design of that program. And then two, how are you defining the GO/NO GO for each different subset?

Yes, it's a great question. So I think myositis is a very interesting indication for VYVGART. We selected 3 subsets of myositis where we have conviction pathogenic IgGs drive the disease, immune necrotizing myopathy, ACIs and dermatomyositis. And here was an opportunity for the first time in the history of the company to do a basket trial. So we had a long back end forward with the FDA. We could agree on a basket trial, a seamless Phase II, Phase III trial, by the way, with a common endpoint, the total improvement scale -- our score, sorry, which they used as an approvable endpoint already in dermatomyositis. And we're running these 3 subsets in the basket trial in parallel. We derisk the investments by looking at the first 30-ish patients per subset, where we make a GO/NO GO decision point similar to what we did in CIDP. So it's a statistical rule based on 30 patients. You can ask statisticians to do a one-sided test and see actually is that with reasonable confidence that signal in these 30 patients or not because it's placebo-controlled. So the only decision we can actually make is a stop decision because we're already enrolling the Phase III at risk. So the decision we will be talking about in the fourth quarter of this year will be, do we continue with all 3, 2, 1 or 0 of these subsets.

Got it. Okay. I guess frame for us the commercial opportunity across these different -- these 3 different myositis subtypes, excuse me.

It is very significant. The 3 together would represent an opportunity, same ballpark as myasthenia, which is sizable. Dermatomyositis is the biggest subset, ACIs somewhere in the middle, and then necrotizing is the smallest indication. The unmet medical need is equally high across the 3. I mean, I have been personally attending the patient panels when we selected the indications to listen and learn from patients to also discuss the trial design that in a really bad shape. And the toolbox is limited. It's corticosteroids. It's some off-label use of IVIg and rituximab except for dermatomyositis where IVIG is on label, and there's a bad medical leader. So I think this is the type of indication we like high unmet medical need. There's an opportunity to shape the market to treatment paradigm in case the biology works in our favor.

Understood. So theoretically, if you were to decide to go with all 3 indications, then would you subsequently need a pivotal program for each different subtype?

That's how the Phase III is currently enrolling. So the Phase III is actually enrolling a certain amount of patients per subset going to the endpoint and then we read out the study across the 3 indications with one in the same endpoint.

Sorry, I should have clarified. Would you need another subsequent Phase III study in each different subtype or would that be the filing?

So what we preagreed with the FDA is that it's, of course, always a data review issue. But in principle, when there's a clear database differentiation, one study will suffice for registration.

Got it. Okay. Okay. Moving along then. Maybe we can just pivot to another VYVGART indication you've talked about recently, TED, thyroid eye disease. You have a trial underway there. Just give us an update on what can you tell us about how that trial is progressing? And I guess, your internal level of excitement about what that opportunity could be for VYVGART?

We're not talking too much about TED because we're not first, and we don't have to. But that trial is a global trial. It's enrolling well. We're using the prefilled syringe from the get-go. And of course, we're looking for differentiation. So we know we have the ability or the right to differentiate based on safety. If you extrapolate the safety profile of VYVGART into TED that I think is compelling. And then, of course, the juries out with the this pathway will be competitive with the Tepezza pathway. I think it will be because there is plenty of evidence. This is an IgG-driven disease. These autoantibodies are known. There's sufficient to create a disease in passive transfer models. The titer of these auto antibodies correlates with disease severity. So I think we're in a good position to shine in TED and now the data need to speak. So we're fully focused on execution to study with quality and speed and then the data will tell.

Got it. And sorry if you just mentioned it and I missed it, but any color you can provide on the profile of patients coming into this trial?

I think in terms of -- the blueprint has been said by Tepezza. I think Tepezza is a fantastic drug. I think that's a blueprint from a study trial design point of view. So we are building from that trial design, including inclusion/exclusion criteria.

Got it. Are these -- is it going to be a mix of Tepezza naive patients and experienced? Or is it going to be...

WWe do allow Tepezza experience patients in the trial, given the unmet medical need in that population.

Got it. Got it. Okay. Great. I guess in terms of where these different commercial opportunities sit, whether it's myositis, the different subtypes Ted, how do you compare and contrast them to MG and potentially what CIDP could be as well?

I think they're all relatively equal in size. When we try to scope the commercial opportunity when you look at the number of patients, the ability to price their comparable opportunities. I would been MG, CIDP, myositis, DD and [indiscernible], all in the same basket of opportunities, size of opportunity.

Understood. Yes. Understood. Okay. MMN and empasiprubart, maybe that's the next best place to go, just to make sure we don't miss it through our conversation here. Just remind everyone what you've seen in that molecule's profile so far and kind of what's giving you a high level of conviction that you made the right choice here.

I'm super excited about the data. I mean I was so proud that in the R&D day, we could show the full Phase II data. People have been waiting for them. MMN is a very interesting indication. It's the third biggest IVIg indication in neuro. The only treatment option these patients have is IVIg and the biggest consumers of IVIg. They need the highest dose with the highest frequency. And despite being on IVIg, they still progress. So they're losing gradually function, which is a pretty bad position to be in. So the way we designed the Phase II trial is accepting everyone is on IVIg. We had a run-in phase where we established the dosing cadence per patient of IVIg. So we allow them to do 3 cycles of IVIg and at the peak efficacy of the third cycle, they got randomized on NPA or placebo 11. Of course, patients going over into placebo, they needed rescue therapy with IVIg in no time. whilst the empa patients actually had they needed any rescue to the contrary, they were actually regaining function compared to that IVIg best baseline. We have seen spectacular data in terms of regain of function, which had been lost in patients already for years. So it's clear that if you hit the biology of MMN in his heart that you can achieve things with patients, which you have never been able to do with IVIg. So I think that's a transformative opportunity. It's a high unmet medical need. We are pretty much alone in MMN coming in. And I think it's again a market opportunity where we can build. I think the disease is under diagnosed, it's under treated, under recognized and I think an innovation like empa can really change the game there. We're now going into Phase III as fast as we can. I'm very close to that trial. We will be in fast before the end of the year.

Okay. How sticky is standard of care, what patients currently have?

If you progress on standard of care, I think we have a good chance.

Okay. And you haven't talked much about the design of that Phase III trial yet.

No. That is for latest. We are wrapping up the conversation with the FDA with finalizing the protocol and starting the trial, give us some time to talk about real trial design and endpoints. It's something we will be talking about later.

Understood. Okay. I guess taking a step back, I mean, I have a broader question for you. When you think about optimizing your R&D dollars, when it comes down to choosing additional indications for VYVGART and your next-gen FcRn or putting dollars against a completely a new molecule. What drives that decision? What are some of the key criteria that you make -- that you used to kind of drive those pipeline priorities.

Vikram, we need to do both. It's not good enough to say that we need to make a choice. If we see an indication where we think we can really create enormous value for patients and shareholders, we need to go for it. And I think we have the balance sheet to do that with more than USD 3 billion on the balance sheet. That cash balance will be intact by the end of the year, by the way. And we're reaching very quickly the point of breakeven of profitability. That means we should be able to fund all that R&D work from our own dollar. So we're not going to slow down on R&D. We're going to double down and maximize the opportunity in front of us.

Got it. I guess that said then, from an R&D productivity standpoint, there's quite a lot that you talked about at the R&D Day. Can people expect to see more molecules coming into the clinic more products being nominated, 2025, 2026 onwards, while all of these later-stage efforts progress.

It is a luxury problem, but it's a problem. So our Chief Medical Officer needs aspirin from time to time, but we're innovative in how we unpack such a volume of opportunity. We do have creative relationships with some of our CROs where we can in-source talent. We have a pretty creative development deal with ALKIVIA, but they really linen-heavy. And then, of course, we have Zai Lab in China, which is much more than just a commercialization part but also a development partner and boy, they do a hell of a job. So I think we're in good company. We do the heady lifting in close partnership with our allies.

Got it. Got it. I guess going back to empasiprubart there. You also mentioned CIDP for that molecule, right at your R&D Day. Just talk a little bit about that indication selection and also how you think empasiprubart could coexist assuming empasiprubart makes it to the market.

It's a great question. So VYVGART has shown the best ever data, response data in CIDP. No one did ever betters, but we only have a 70% response. So what is wrong with these other 30% of patients? That's an important question. And then we have seen our own translational data, which are not published yet. We have seen data from Sanofi in Phase II with a C1 blocker, which I think are attractive. So I think it is suggesting that is space for a real good complement blocker in CIDP, which should be able to coexist with VYVGART.So we're giving empa in Phase III, a real shot on goal. We're not going to niche it into a subpopulation. We give a general the full opportunity. We're going to see how it's doing. And I think CIDP is big enough. There is so much work to do in CIDP that 2 innovative molecules can fit under one roof.

Got it. So it's not going to be a trial that's eventually run to filter out people not responding to VYVGART.

Exactly. We're not going to niche it prematurely. There is no reason to do it. We will give it its full chance.

Got it. Got it. Okay. I guess with all these programs moving forward pretty aggressively, do you feel the need air a financial standpoint from a manpower standpoint to ever look into partnerships with other biopharma companies?

I think we're asking that question regularly. Should we team up, should be partnered up in order to do things faster or smarter. So far, the answer has been no. Also on the commercialization front, let me remind you that we did a global rollout of VYVGART in 12 calendar months. In 3 continents, we will sell into patients. For VYVGART Hytrulo, we did it even in 8 months' time. I don't think pharma can do that faster or better than what we do. So I think for the moment, I think we're well equipped to unpack the full opportunity for our own shareholders, and we will not have to share any value with someone else.

Got it. Okay. We have around 3 minutes left. I mean taking a very broad look at the business then IRA headlines have been pretty fast and furious recently. There's been obviously the initial announcements of initial price negotiation. When you think about what the IRA impact could be for your business, I know you mentioned that 213 is -- speaks to that consideration from one angle. But how else are you kind of planning for what the potential scenarios could be from IRA to some of the work that you've been doing in some pretty sizable indications.

From where I sit and it's far away, I didn't see any real surprise in the outcome of the price negotiations for these products. I think the big unknown under IRA is actually not -- the price negotiations is the reform of Medicare Part D. But whatever the outcome is, I think IRA is a call for more innovation. There will be no escape possible, and innovation happens to be our core business. So we're not so negative about IRA. We like to innovate.

Understood. Understood. Okay. And closing then, there's a lot in your pipeline that we didn't get to talk about. Are there major milestones, major programs that you think people should be paying attention to come 2025 that you feel aren't being discussed enough yet?

What we typically do, Vikram, is at the start of the calendar year, we outlined the clinical agenda for the year. So let's focus on the myositis readout, which is the last big data card to turn in a very busy 2024. When we open 2025, we're going to show you a detailed view on the clinical calendar for 2025. But there's a ton of work happening in Phase II and Phase III. New molecules coming to the clinic, so 2025 will be a very busy year, but we're still focused on 2024.

Got it. All right. With that, I think we're at a good stopping point. Let's go ahead and close out. Tim, thanks so much for your time. Really appreciate it. Thanks, everyone, for joining.

Vikram, thank you. Thanks for having us.