Legend Biotech Corporation (LEGN) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for attending Jefferies Healthcare Conference. My name is Kelly Shi, one of the biotech analysts here. In this session, we are very pleased to have Dr. Ying Huang, CEO of Legend Biotech for this first set of China sessions. Ying, welcome.

Yes. Thanks, Kelly. Thanks also to Jefferies for inviting Legend Biotech to present here. So I do want to make a little bit of a statement before Kelly asks us questions because I understand given last Friday's news, there's a lot of questions from the investors about this letter from the Congress Select Committee. So just to provide you guys with a little bit of context, the House Select Committee issued a press release last Friday regarding GenScript, where Legend is mentioned also as a business segment. Legend Biotech, which is headquartered in Somerset, New Jersey, was spun out from GenScript in 2020. And we do employ over 1,000 team members in the United States. That's where we have the biggest operation in terms of head count, assets, operations and revenues. While GenScript is Legend's largest shareholder, Legend Biotech is an independently operated company with its own dedicated Board of Directors, the majority of whom are independent. The Board is carefully monitoring and assessing the situation, has already officially convened and is formally engaging with GenScript to discuss potential actions that would further reinforce the independent operations of the two organizations. We, at Legend, remain focused on creating value for our shareholders and bring hope to cancer patients and their families by continuing to deliver CARVYKTI to patients. We anticipate no disruptions in business operations. With that, I know, Kelly, we have a packed agenda this morning. I'll turn it back to you.

Terrific. Thank you. And let's focus on CARVYKTI launch in last line and also in second line. CARVYKTI has been one of the most focused oncology launches in recent years given the superior clinical profile you continuously present over medical meetings. And since the launch of -- in February 2022, what has been the key learnings and achievements?

Yes. I think the drug has been on the market by now for more than 2 years. A couple of key learnings here. Number one, as you should know, without any surprise, efficacy really trumps everything in the selection of the therapy by physicians and patients as well. So when we go out and ask physicians, well, when you're in a position to recommend a therapy for your patients with relapsed or refractory myeloma, what is the #1 factor you consider? I mean, pretty much 100% of the case, the physicians will tell us, it is PFS. And that is why we feel we're very well positioned because, as you remember, in CARTITUDE-1 trial, with late-line patients, we achieved median PFS nearly 3 years. That compared to standard of care, which gives a PFS of roughly 4 months, oral competition, which has a PFS of roughly 8.8 months. Now in the recently launched second-line indication, we have not reached median PFS. However, the hazard ratio is 0.26, which means CARVYKTI can reduce the risk of progression from cancer or death from cancer by 74% compared to standard of care. So that is definitely the first key learning. Now second, what do patients and also what do physicians care as our customers. They care about also predictability and reliability of supply. That is why we're laser focused on reducing the so-called van-to-van time. The other thing they do care about is also, obviously, the once-and-done benefit for patients because if you talk to these patients who have been unfortunately on drug therapy for 5, 6, 7, 8 years, they really are sick of day in/day out taking a pill, injecting themselves every week, every 2 weeks because even if they're in CR, it reminds them you have cancer. You have cancer every single day. Also, this prevents them from having their daily normal living activities. They cannot travel because, as you can imagine, if you have to inject yourself with an antibody, you have to refrigerate it. So they cannot travel, they cannot attend weddings. They cannot attend graduation ceremonies or commencements. That is really a very, very important quality of life request from the patient. They want to get a CAR-T such as CARVYKTI where you get one injection, you're done. Hopefully, it gets CR and then you can start to resume some of your normal living activities. So I think those probably are the two key learnings here.

Okay. Terrific. And from the real world experience, what has been physician's feedback on the consistency or efficacy and safety? And also after CARVYKTI launch, we also have multiple BCMA agents available now, including bispecifics and also the new target therapy like GPRC5D bispecific antibody. How does physician position CARVYKTI versus other novel therapies?

Yes. I mean, I think we're very pleased to see so many novel mechanism of actions coming into the play in multiple myeloma. I remember when I was a junior analyst quite a few years ago in Wall Street, we used to say that the median survival was 3 to 5 years. Well, today, especially with the CAR-T introduction, the medium survival probably will get to 7 to 8 years or even longer. So we're really pleased with all these choices that are coming into the market because it's a very large market. It's probably a $40 billion-plus market for all myeloma patients. And patients are living longer, which means the prevalence is also going higher. So it's great to see that, with CARVYKTI and also other new medicines coming into the market, we're actually converting myeloma, which was a lethal end-stage disease to now probably a chronic disease. And we hope one day, we can even cure some of the patients with these new advances in medicine. So that is really a great advance into the field. Now in terms of how we view competition, I think CARVYKTI is a CAR-T, which is immune therapy. So first of all, we know that from the science rationale, it really makes sense to go as early as possible because, as you know, most of the drugs on the market for myeloma today, they're immunosuppressive which means, unfortunately, they do reduce the immune power of patient's own body. So since we harvest the cells from the patient's own body, it really makes sense to go as early as possible because that's when patients are younger, healthier and their T cells are also -- have better cancer-killing properties. So that is one thing we're trying to do. We are very pleased to achieve the second-line label. We're conducting the 2 global Phase III trials in front-line with our partner, J&J, and we hope to report also some front-line data soon. And you saw just last week in ASCO, we reported data from Cohort D. These are patients who just got transplanted within the last 100 days. And unfortunately, they did not achieve CR. Now again, we show 94% CR rate, 94% PFS and survival rate at 18 months median follow-up. So we think that there's a spot for every therapy in the market, but CARVYKTI as a CAR-T immunotherapy should be really placed as early as possible in the spectrum.

Terrific. As CARVYKTI won second-line approval recently, could you share like the early line launch? And what is the wait line and also supply for CARVYKTI? And also what is the patient dynamic? You see a [ quicker ] switch from last line to early line or actually the new patients?

Yes. So we're very pleased with our label in U.S. and also label granted in EMA in Europe, where we have a very clean broad label in second line. And right now, the preliminary feedback from the field is quite encouraging. Most of the centers already have formulated the so-called coverage policy. And typically, the policy is that for all third-line patients, they will recommend CARVYKTI. For second-line patients, they will recommend that to roughly 25% of patients who have high-risk cytogenetics mutations because these are high-risk patients that do not respond well to the triple cocktail therapies. And then for other patients, maybe another 10%, who may have standard risk cytogenetics, but they are younger and therefore they want to have this once-and-done therapy to go back to their normal living. So that is typically the feedback we hear. In terms of waiting list, we're again seeing pretty much every center building their waiting list from second-line patients. Of course, we and J&J legally would not promote or triage how to decide which patients get this. So it's really completely 100% decided by physicians and patients. We suspect that for the rest of 2024, the majority of the patients still will be fifth line and beyond, but we should start to see definitely some second-line patients. Now regarding supply, we are trying very hard to increase our supply. I believe you will see in the second half we will actually have a very significant increase in our supply. And that's also reflected by Street numbers in the second half compared to the first half. So we're trying very hard on increasing our supply, reducing our van-to-van time and improving overall success rate from manufacturing. And I think, suffice to say, probably in the next couple of years we will not have enough supply given the demand we're seeing and also we're forecasting.

What about the Q2 versus Q1 on manufacturing capacity increase?

Yes, you will see some increase there. And I think both Joaquin from J&J and we have said on our earnings call that we should expect sequential increase in the second quarter, but we do expect much more significant growth rate from third quarter and then fourth quarter because our plan is to roughly doubling our supply into the market this year compared to our supply last year. And then, again, we're planning to double our supply next year in the year of 2025 compared to the supply in 2024.

Do you have a target to reach by the end of 2024 and 2025 in terms of how many doses?

Yes. We have always said since the beginning of last year that we have laid out detailed plans. And right now, we're on track to achieve that plan target, which is we will exit 2025 with a combined supply of 10,000 doses per year or more. So that is our plan. And right now, as I said, we believe we're still on track to achieve that.

And to reach the goal in 2025, do you need additional manufacturing building house, a CDMO, besides the sites in New Jersey, Europe and also Novartis CDMO?

So in terms of our combined sites, what really we mean here is that we'll continue to expand in our Raritan, New Jersey facility. That remains our main supply site. And then commercially speaking, in late 3Q or early 4Q, we expect our Phase I facility in Belgium called Obelisc to start commercial production. Right now, that site is already authorized to produce clinical trial material for CARTITUDE-6 right now. And then Novartis just filed IND last week. So we expect to hear from FDA within 30 days. And we believe Novartis will be cleared to start clinical production in July. And then probably early next year, as early as first quarter next year, Novartis should be authorized to start commercial supply. And then our much larger greenfield facility, the Phase II facility in Ghent called Tech Lane should start clinical supply early next year and then probably second half of next year should start also commercial production. So that's the internal 3 nodes plus Novartis. And as you can imagine, if there's additional supply in the market, we and J&J are interested in engaging further CDMO or building our own additional supply, given the demand.

Okay. And what is the current out-of-spec rate? And do you see room for further improvement? And also on the balance between supply and demand, where you are at the moment?

Yes. So what we have said is that recently in the last few quarters, in general, the out-of-spec or OS rate has been hovering around teens. If you recall, in our old label for [ first ] line and beyond, our OS rate was 18%. So most of the time, it's actually below that. Occasionally, it may be around that. Right now, it's too early to say what the OS rate will be, given the new FDA-approved wider release spec. But we think it should result in additionally 5 percentage to 10 percentage points lower OS. So we're going to have to wait and see because this will take months to play out in terms of the OS. But we're very pleased with this widened FDA approval release spec because that would be applied to all patients, including the fifth-line and beyond patients. So that's an improvement from the last label here.

Okay. Great. And also in your early line and at the recent ASCO data update, we saw BCMA ADC from GSK, Blenrep, showed a pretty compelling survival benefit. And so we could expect the ADC come to the market in near term? And also BCMA bispecifics could read out their Phase III. We don't know exactly when, but probably could be in like next year. So I mean, after all 3 BCMA agents come to a second line, how do you think about physicians' kind of use? And also do you see sequential use for different BCMA agents?

Yes. I mean, first of all, I'm sure you guys are all familiar. CARVYKTI is really an amazing product because it produced consistent efficacy in almost every single trial we have done so far in Phase II, in Phase III, in fifth line and beyond, in second line and beyond and first-line patients who did not get CR. So we always get nearly perfect response rate. Very, very high CR rate, very durable, deep response. And you see a [indiscernible] trend over the tail for both PFS and OS. So that is something I think really sets a very high bar for efficacy for any competition that will come in our way. So like I mentioned in the very beginning, if you ask patients and ask the physicians what matters the most, it's always efficacy, right? So we really are very highly confident about the efficacy profile of CARVYKTI demonstrated in myeloma. Secondly, you mentioned specifically about the GSK ADC. I think, definitely, the data looks encouraging compared to the traditional combo. They did demonstrate a significant reduction in PFS risk. I do believe most likely it will come back to the market pending FDA approval. However, if you look at the safety profile, it's not changing, right? Still a large majority of patients have ocular tox. Sometimes even though they may not have blurred vision, they have a large amount of cysts in the eyes. And then if you talk to physicians who had experience with the drug, they will tell that even a Grade 1 ocular tox, it's bothersome because patients cannot drive themselves. I mean, if you live in this country, it's hard to imagine if you don't drive. I mean, of course, not you guys in New York City, but in general, people have to drive around, right, even to get medicines. Secondly, most people in this country live in a traditional colonial house. If you get that type of tox, doctors are saying that it's actually difficult to walk from the first floor to second floor without assistance. So I think it does come with certain challenges in terms of the side effects. And also, I don't know if, Kelly, you went to that panel right after the presentation, I believe Dr. Cohen and another doctor weighed in. They said that if you look at durability, certainly CAR-T or especially CARVYKTI is much better. So they say that if I can give a patient onetime therapy, which is much longer durability, that is preferred. So it seems that the feedback we heard at ASCO last weekend is that for patients who are frail or for whatever unfortunate reason cannot access CAR-T, they would consider a therapy such as this ADC therapy. So I do think it's another addition to the armamentarium of myeloma therapies people can deploy, but I doubt it will really make a big dent in the market here.

And on reimbursement front, are there additional steps to take for the patients -- for the CARVYKTI to be applied to second line from last line?

So again, it's early days, but we're not seeing really a lot of challenge in this case compared to the old fifth-line label. Once there's a question coming from investors that because our label says that CARVYKTI is approved in second line patients who have been refractory to REVLIMID, so far, that's not been a significant challenge because we have not seen insurance companies always asking for, hey, show me the proof the patient is refractory to REVLIMID because given that REVLIMID is almost used in every single patient therapy here, especially since front line. So that has not been a challenge for us.

I see. And also to continuously expand the CARVYKTI use, the manufacturing capacity is currently the primary limiting factor. But do you see additional limiting factors, for example, at a number of eligible centers to trade the CAR-T and also maybe the potential to break into community centers in the future?

Yes. Right now, we are in roughly 75 certified centers. Our plan is to roll out CARVYKTI to about 90 to 100 certified hospital centers by end of this year. However, we do realize that it is a very different commercial dynamics from fifth line because in fifth line and beyond, the majority of the patients actually are being cared in academic centers. Now once we branch into second line, it's almost reversed, right? Probably about close to 2/3 or 70% of patients are being cared in the community setting. So we must expand beyond that tertiary hospital network. As you learned from another CD19 therapy in second-line launch, the growth really stalled because of lack of penetration in the community setting. So we and our partner, J&J, are very much aware of this, and we have been planning on this. So we're taking a two-pronged approach. First one is that we're expanding to secondary hospitals that are affiliated with a tertiary center in a network. Our first pilot program is around with UPenn Hospital. As you know, the UPenn hospital has been a very large CAR-T center. In fact, the first CAR-T therapy was administered in UPenn. So UPenn obviously is a tertiary teaching hospital. However, within that Philadelphia area, they're affiliated with the so-called Penn Medicine Network. And then there are a bunch of secondary hospitals that are in the community. So UPenn is working with us in J&J, so that we can train those secondary hospitals, which, by the way, never used CAR-T before. However, they have the beds. They have oncologists on staff. They have nurses. They have pretty much all the hardware they need. So as long as we provide training, they know how to manage the protocol, they know how to manage the adverse events, they know how to monitor that, I believe they can use that. Once we gain more experience with the Penn Medicine Network, then we'll expand that to other secondary hospital network affiliates. As you can imagine, Sloan Kettering, UCSF, Dana-Farber, these are tertiary hospitals, but they're in the network. So that's the first approach. Now the second approach here is that we are going into the community. So right now, without disclosing any specific names, we are engaging with certain, what we call, the group purchase organizations, a large outpatient network. You guys know there are a few of those in this country operating. So that we can deploy CARVYKTI in those networks. And again, pretty much the infrastructure is in the community. And then lastly, also, besides the dedicated sales force employed by us and dedicated CARVYKTI sales force employed by J&J., our partner, J&J is also looking to deploying their general hematology force in the community. So these sales people already sell other drugs in hematology, but they can allocate some time to ask physicians to refer on-label eligible patients to a third center for CARVYKTI.

Yes, super helpful. And do you have the information of -- the split of patients treated at academic centers versus community centers in second-line setting?

Yes. Right now, it's probably 30-70, which means about 30% of those second- and fourth-line patients are being cared in academic teaching hospitals and then maybe about 70% reside in the community.

Okay. And one recent discussion on CARVYKTI launch is actually the black box warning of a secondary malignancy. Have you received any pushback for second-line use because of this toxicity?

No, not really. When we go into field, talk to -- I mean, as you can imagine, these are the same physicians anyway who treat second line versus fifth line. They're all saying that they're very much aware of this adverse event and is associated with many other drugs, including REVLIMID for many, many years. So this is not a surprise at all. One KOL actually told us that, "I'm not going to be concerned about the few percentage of risk of developing SPM while I have active cancer patients. I need to treat cancer now." So that is very reflective of the majority of opinion in the field. And also, if you look at our data from CARTITUDE-4, actually in the primary analysis dated back November 1, 2022, the SPM rate was 4.3% in the CARVYKTI arm versus more than 6% in the control arm. So I think in general, it's a very balanced risk between CARVYKTI and the standard-of-care arm. And yes, SPM is a risk we need to manage and address, but it's not really going to change the equation in terms of the risk/benefit here.

Okay. And regarding the Parkinsonism events reported at ASCO, we actually hear doctors talking about there's also reported a case for BCMA bispecific antibody. So this could be a class effect. So do you have thoughts on that regarding maybe also the mechanism of action? Is this limited to BCMA targeting and also maybe the presence in your cells? And also, what are the additional steps you could implement to reduce the risks in commercial setting?

Absolutely. Safety is a paramount concern for us and we care a lot about our patients, and safety is always a #1 priority here. So you're right, we did hear that case at ASCO. So we have always said that this kind of Parkinson or delayed neurotoxicity and movement disorder, it's not BCMA-specific and it's not either construct-specific or BCMA-specific. Because if you look into FDA AR's database -- by the way, once the drug is commercial, that's actually probably the best database you should look at in terms of safety findings. And you will see that, yes, there are cases reported for CARVYKTI patients, there are cases of Parkinson reported for BCMA patients. They are even cases reported for patients who took KYMRIAH and also YESCARTA. So clearly, it's not a target-specific phenomenon. And now based on finding from ASCO, it's not even a CAR-T-specific phenomenon. I don't think the field has a consensus opinion on this, but there are two schools of thought, right? One is that this is basically a brain inflammation caused by cytokine because, as you know, a lot of cytokines are pro-inflammatory, right? So it doesn't matter whether you have a CAR-T or a bispecific, you do see that secretion of cytokine which causes inflammation. Now another school of thought is that, well, it may be specific to CAR-T cells because some of the patients, especially later-stage cancer patients, they have a compromised blood-brain barrier. So in that case, T cells may travel into the brain and cause also inflammation, right? Right now, we don't know which school of thought is right. But given the latest finding from Asco, it sounds like it could be just cytokine, right, because, otherwise, how do you explain why you see that from bispecific as well.

Yes. Makes sense. And the last -- go ahead.

Quick question. So you mentioned expansion to community centers. Would those community centers need to be certified with administering CAR-T? And what does that process require?

Yes, so the question is if we expand into the secondary community hospital, would those centers be certified or not? The answer is yes. The reason is for every single CAR-T label approved by the FDA, including ours, there's a REMS program attached to the label. Therefore, we have to provide the formal training of the centers. They have to be certified. They need to know how to manage the REMS and do their patient consent. That is why. Thank you.

So there is a time that's required, okay.

In terms of training or...

Yes.

Sure. It's actually a very quick process. It takes days for training and REMS program rollout.

And lastly, maybe very quickly for the front-line trial, CARTITUDE-5, what's the status update?

Yes. CARTITUDE-5 we have said that we completed all ex U.S. enrollment last year already and we're just over-enrolling a little bit because we need a certain number of U.S. patients. So we expect that to be done very quickly in the next month or so. Right now, we also dose a lot of patients of CARTITUDE-5. So right now, if you look at ClinicalTrials.gov disclosure, we expect the completion to be in 2026. For CARTITUDE-6 trial, we're enrolling very fast ahead of our plan. We think we can complete the enrollment by end of next year.

Okay. Terrific. Let's wrap up our session, and thanks for a great discussion. Thanks, everyone, for attending.

Thank you.