argenx SE (ARGX) Earnings Call Transcript & Summary

Wonderful. Thank you. Just on the competitive dynamics. So we have some other complement inhibitors sort of coming down the pike. We've got [indiscernible], we've got Ultomiris. There's a couple of drugs out there. On the other hand, you've got a very broad label in MG. You've got CIDP, you've established market position. How do you think about the risk of competition? Or how do you think about the competitive dynamic moving forward with all those pieces moving?

First of all, competition, of course, is good for patients. Competition helps to build the market. So of course, we welcome all competition. In terms of how it impacts us and how we've been able to successfully position VYVGART as first biologic in MG of course, it means that when competition comes in, it doesn't really impact us. It actually helps to grow the market. We are the market leaders. We get most of the new patients in terms of biologic patients. So that is one of the success stores. One of the reasons VYVGART is so successful in MG. And that is also why we should continue to be able to drive growth. I mean it's amazing, but we sit here today, VYVGART was launched 18 quarters ago. And we say, well, it's still the early stages of a launch because only 20% of patients is on a biologic. We are leading but biologic expansion or VYVGART is leading biologic expansion. And based on our efficacy where we talk about MSC, minimum symptom expression, our safety and tolerability, where we have 20,000 patient here and on the patient convenience side, where PFS for self-injection is clearly leading with our auto-injector to come. We believe that we will continue to see that growth. For competition comes in we get 4 out of 5 patients. The rest of competition is basically very competitive to get the rest. And of course, you also hear competitors say that VYVGART refractory patients, but of course, it's true. VYVGART does not work for all patients around 4 out of 5 patients responsd to VYVGART one of them don't. And VYVGART refractory patients, and that is also where some of the competition is getting patients from. But if we look at our data, it's very consistent in terms of we're hanging on to the patients we believe we should be able to keep and that is playing out in the real world.

Sure. Sure. The top line growth is often discussed. A lot of debate around that, not so much debate. Everyone recognizes that the growth is there. But I think what is maybe underappreciated in your story, and you do have to invest for growth as you've seen well over a 1,000 basis point expansion in operating margin over the last year. And we look at some benchmarking, you're probably looking at operating margin across larger cap biopharma, somewhere in the 40%, 40% range. So how would you contextualize the balance of investment in the business to sustain the top line growth versus an expanding margin profile?

Thank you, Sean. I love that question. I think in terms of our capital allocation, how we make decisions, we always lead to a science. The science league. We are a biotech company working for patients and investing in science. That is how we make decisions. We then -- we will also, in terms of giving guidance and talking about margins and putting ourselves in a box, we're going to be very hesitant to do but because we love the flexibility. If we see science to investing, we want to invent in that science like we just did in Forte. And it is not a bad. It's an and and we can give you margin expansion. I think that is a unique position. It speaks to the strength of VYVGART launch and the financial structure of the company. We've got a very flexible operating structure. I keep on reminding the Street, but with a $60 billion market company. We've got 2,000 colleagues only. We outsource a lot. We're working with partners, we collaborate. That is our DNA, that is how we work. And of course, that allows us to be a little bit more flexible. But ultimately, over time, we're going to continue to expand that margin, but following the science.

Sure. And I guess the my size data takes you into rheumatology. So again, related question, how do you think about the build-out of any commercial infrastructure associated with that TA entry?

Yes. Of course, we've got strong neuro capabilities. And if you think about my sites, including GM and we've talked about what we need to do to get DM on label, it's not if it's when. But we need to -- we will -- from my side is we will need near capabilities which we already have, strong neuro capabilities. We will need room and we might need a bit of them, but that's very small. In terms of rheumatology capabilities, we will need to go and build a field force. We will need to put those customer-facing organization in place. We've done that before. I think we know how to do it. And the platforms already exist and we can just bolt on that. In terms of size, we don't want to talk size now, but I mean typically orphan disease. I mean I think most organizations will talk about the reps of around 100, but I'm not saying we're going to hire on it, but just in terms of give you a sense of scale. But we will build that and most of that resources will come online next year. We are start adding a little bit of resources now. And in Q3, the earnings call, which we will have in October. I will talk a little bit about expenses for this year because we don't guide as a company, but we gave us a rough idea of where expenses will be in 2026. But now we have a Forte acquisition, and we have myositis reading out successfully, we need to augment that. And so I'll give you a revised guidance at that date.

Sure. Sure. So increased cost at the moment with Forte going better logo, Celiac and alopecia. So got a incremental costs associated with that. Yes. Okay. Thinking about the next wave of FcRn and the pipeline, Brad. So ARGX-213, Phase III ready for monthly dosing. Does that extend the franchise or cannibalize VYVGART? How do you sequence the 2?

At the moment, people think of -- vyg at argenx as a VYVGART company. We need to change that to it being an FcRn company. VYVGART has got a very long patent life, built with a matter of composition patent is until 2036, and we're adding patterns on top of that, by the way. But eventually, we've got to run into it into is LOE. We are starting to think about how you build an FcRn capability, and we've got 2 second-generation FcRN which is 213, which is once a monthly dosing. It's ready, ready now. We can start Phase III studies, but we have a bit of time because the LOE is so far out, but we will get there. But we first want to see the profile of 124, our second second-generation at is currently in Phase I and first in human studies. We will get that data soon enough. And then we're going to determine which compound will be used for life cycle planning, which compound will be used for possibly broader indications possibly at a different price point. That -- and that should also be augmented with with our combo strategy. We have adapt forward where we put Ripcord and our C2 together is currently in an MG study. And of course, we also have our oral program all of it is designed to build on your current FcRN leadership and to make sure that we maintain and expand that leadership while and throughout the next decade.

Sure. Thank you. Thinking longer term, we wrote quite a large reporting company, I think, 2 weeks or so ago. And thinking longer term, like if you're doing this year, just call it, say, $6.5 billion of revenue, whatever it turns out to be, and we're forecasting, I think, $13 billion. So basically doubling of revenue by 2030. So therefore, if you held the current price to sales multiple, then you're looking at doubling in market cap over that time. And while you don't have control over the price to sales multiple at least the price component, you do have some control over the sales component. So if I think about not extra indications beyond what you have today in the broad MG label, throw in CIDP, that $6.5 billion revenue and compound it whatever you want to do at 5% to 10%, you're probably landing somewhere around $8.5 billion, $9 billion, something like that. So to get to the $13 billion, you've got another $3 billion to $4 billion of revenue to add, which may come from your entry into rheumatology. You can get there by mapping it out on 20,000 M&M patients at 400,000 a pop is $8 billion, and then throw in whatever contribution from DM. So am I thinking about it the right way? What's your confidence in those -- well, I'm not asking you necessarily give long-term guidance, just your confidence in those kinds of aspirations?

So Sean, first of all, thank you for that report. -- operated and read it again in detail and circulated with my team, and we're starting to see what we can learn. So it's a good read, Everybody, please go aware. In terms of 2030, I think our strategy is very clear. We want to reach 50,000 patients. We want to have 10 on-label indications, and we want to have 5 late-stage programs. That is our vision for 2030. We believe we're going to execute on that, and we are working hard to achieve it. And I think if we can do that, that will, of course, translate into the market cap implications, and we'll -- I'm sure we'll get -- will be rewarded for that. But in terms of a focus on patients, focus on Vision 2030 and doing it by argenx being very disciplined in terms of how we invest money, but still let the science lead we believe that is liable to biotech for the future, and we're going to continue to execute on that strategy.

Wonderful. If I could go all the way back. Thank you, Kyle, and thanks for the compliment. But if I go all the way back to the empasiprubart study in CIDP. So maybe just sort of frame the treatment burden for patients on immunoglobulin that have CIDP versus what would happen if in empasiprubart did improve on superiority. But then if you did prove superiority on IVIg, how do you think that melds into the conversation with payers around the different price points?

In CIDP or MMM?

Sorry, moving forward to next year, the CIDP study. Yes.

So moving forward to next year, the IDP study. As we know from IVIG, the burden is long in the chair, there is a safety label and based on that -- and that is something where, of course, we don't have Phase II data in CIDP, but we have Phase II data in MMN, and we don't expect it in the same way. So that is an element to take into account for that study. And we will have to see how the data turn out at that moment in time, but he is to, we believe that setting up the experiment in a direct head-to-head comparison versus IVIG was the right way to do and we'll learn once we have seen the data. And Karl, maybe you want to comment further.

Yes. I think on the commercial opportunity of VYVGART, of course, is growing is doing really well in CIDP, but we are not able to help all patients from data, 70% of patients responded in efgart in CIDP. So 30% did not. PAUSE In the real world, by the way, we are not -- I think our response rate is slightly better than that. Probably over time, we might get to by 30%. We don't know we'll see. But there is a segment of patients which are not being helped and maybe IGM players are all there. I think we need to do the experiment and let the science speak. But if a data of cards falls away, having 2 drugs next to each other, we can talk about co-positioning at that date, but that will give us a very strong commercial footprint foundation, I should say, to be -- to have continued success in CIDP.

Sure. And moving forward another catalyst were keenly anticipating that next year is in [indiscernible] So again, a standard question. How do you frame the competitive framework? The competitive benchmarks? How do you think about what the bar for success is? And how do you think about the commercial opportunity?

Sjogren is, of course, large indication I see a lot of data points out there. Our data points suggest around over 300,000 patients in the U.S. And of course, there are other drugs, competition is coming in and some of them are even launching before us. But in terms of FcRn and specifically around Bevard, we believe that the Sjorgen signature can be very successful in children's to think of rapid response, deep and sustained. I think that -- and with our safety and tolerability, where we already have over 20,000 patient years of safety data can give us a really strong position to compete in such a large heterogeneous disease where multiple players will have to work together to build that market. I think longer term, if the VYVGART falls our way, super excited about what we can do for patients here.

Thank you. We've talked Forte, we've talked empasiprubart, we've talked further expansions of VYVGART. But what in the pipeline that maybe you don't get asked a lot about excite you the most?

I don't know, An, do you want to talk about the pipeline? Maybe you want to talk about IG?

That's one option. I was going to actually respond to what you called out is already quite exciting, right, with especially the fourth acquisition. In that regard and how we then expand our portfolio and pipeline. Of course, the data will have to tell and guide us in that regard. But when you look further down the pipeline. There is, of course, pioneering of biology with adimanebart, although that's in Phase III that's further down the pipeline, I would say, the IGA 121. I believe also, if you show how rapid and how deep we can inhibit the IDA. I believe that's also an exciting molecule to us.

And Sean, if you can add, what makes me excited is not necessarily one specific program. It is the opportunity we have at argenx. We have the short-term growth drivers. We believe we do have the medium-term growth drivers, think of Sjorgen, think of FB 102, all the other programs in your assets in your program. And then with our financial structure, the strength of our balance sheet, our focus on execution and the way we make capital allocation decisions, let the science lead let's focus on novel biology. Let's find those white spaces, let's develop them. I think that is -- we're building a type of biotech here, which will give you -- which will be durable and provide long-term revenue growth. I think the opportunity that we have here is what I'm very excited about.

Sure. I think I had you at about $6 billion on cash and balance sheet down to maybe 4-ish post Forte but then think about what we correct the numbers. But thinking about what we have just discussed on the pipeline, do you think BD is more organic or inorganic?

So we had $5.2 billion at the end of the previous quarter when we used around $2 billion, $2.2 billion on Forte but still a very strong balance sheet. I've talked about how we make decisions in terms of what we spend the capital on, capital allocation or what -- of course, FcRN is a very important pillar, and we talked about next-gen combos, peptide, all of that. Next to it is the rest of our pipeline. We've talked about empa MPA and how important that is, but there's also a number of other programs in there, which we're very excited about, like the IgE and all the other programs. And then the third pillar of growth is business development. We've done Forte, you can expect us to do more. You can expect us to look more at earlier stage because the way I describe it is what problem are we trying to solve. We don't really -- it is -- we do have a growth driver in the medium and the long term. But if you look forward, while into the next decade, VYVGART and FcRn should be a really large franchise. Which should generate a lot of revenue to maintain a good revenue CAGR on that, you will need a number of other successful franchises. And what do we need to do today to build those franchises, which gives us revenues early in the next decade to maintain the forward-looking CAGR we want. And that is this way, our business development effort is focused on, and you can look forward to us hopefully executing more, but it will follow the same playbook, novel biology, look for those white spaces, where we can be first-in-class and where we can build a product and our pipeline opportunities.

Wonderful. Well, we're right at time. Is there anything that I didn't ask that I should have asked.

No, I just want to say thank you to you for inviting us, and thank you to our investors who are supporting us on our journey. Thank you.

Thank you, everyone.