argenx SE (NASDAQ:ARGX) Q1 2023 Earnings Call Transcript May 6, 2023

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

Beth DelGiacco: Thank you, operator. A press release was issued earlier today with our first quarter 2023 financial results and our recent business update. This can be found on our website along with the presentation for today’s webcast. Before we begin, I’d like to remind you on Slide 2 that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical development, regulatory timelines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. argenx is not under any obligation to update statements regarding the future or to conform those statements in relation to actual results unless required by law.

I’m joined on the call today by Tim Van Hauwermeiren, Chief Executive Officer; Karl Gubitz, Chief Financial Officer; and Karen Massey, Chief Operating Officer. I’ll now turn the call over to Tim.

Tim Van Hauwermeiren: Thank you, Beth, and welcome, everyone. Slide 3: I’m pleased to be today to share another quarter of strong execution with our global VYVGART launch. We continue to deliver results both in our ability to reach patients and drive revenue, but also with the progress we are making on the regulatory side. We recently announced regulatory approvals in Israel and the U.K., marking our fourth and fifth approvals globally, and we expect more to follow later this year. This is a remarkable achievement from our global submission teams. We are preparing for additional regulatory milestones with the potential approval of subcu efgartigimod in the United States. Our PDUFA date of June 20 is fast approaching, as to which we hope to have the broadest gMG offering for patients, both with an IV infusion and a simple subcutaneous injection.

We know that gaining traction in early line patients will be important for the continued trajectory of our launch, hence the approval of subcu products may help us achieve this. I was able to attend the AAN meeting last week where we had a significant presence, demonstrating our long-standing commitment to the neurology community. We had six abstracts accepted for presentation, including new data from the ADAPT open-label extension studies, highlighting the consistent efficacy and safety profile of both IV and subcu efgartigimod. More importantly, we were able to connect with leading neurologists, many who are using VYVGART in their practices. Slide 4: When we first started development in gMG, we made a commitment to the patient community. We have listened to the challenges they faced with long diagnosis journey and significant disease burden and wanted to create an entirely new standard of treatment, elevating the expectations of physicians and patients on what “well-controlled” means.

It was clear from our interactions at AAN that we are achieving this with VYVGART. We had stories of patients where VYVGART had a transformational impact and it felt like we had come full circle in honoring that initial commitment. Beyond the upcoming subcutaneous approval decision, we also have a busy upcoming quarter and the remainder of the year with our pipeline. We continue to expect five data readouts across efgartigimod and ARGX-117, all of which will showcase the depth of potential within our immunology programs. Slide 5: Firstly efgartigimod. Since our last call, we crossed the 88 event mark in the ADHERE trial and are making progress towards the readout of top-line results in CIDP. Reaching 88 events does not mark the end of the trial, and the team still has to gather final data points from patients and complete some mechanics associated with rollover to the open-label extension study.

This is an important readout for us and for the CIDP community. We want to put ourselves in the best position to bring in new innovation to CIDP patients as quickly as possible. As part of this, we will give our team sufficient time to close the trial and review the data in a high-quality rate, which is why we now expect top-line data in July. We also have exciting updates from the ADVANCE-SC and ADDRESS trials, both of which have completed enrollment. This puts us firmly on track to have top-line results in immune thrombocytopenia and pemphigus in the fourth quarter of this year. All of this sets us up to have notable potential approvals over the next two years, advancing us towards achieving our 2025 vision of reaching autoimmune patients globally across our franchises.

With ITP, this process will start in Japan in the middle of this year when we expect to file the dossier for approval based on the IV data. The rest of our efgartigimod programs remain on track, and we expect to start several trials in new indications and report initial results in post-COVID POTS, bullous pemphigoid, myositis, Sjogren’s and membranous nephropathy all before the end of 2024. Slide 6: We also expect the first clinical efficacy data on ARGX-117 in the middle of this year from the Phase 2 trial in multifocal motor neuropathy. We have a couple of objectives with the first cohort of nine patients. We want to confirm the safety profile we observed in the Phase 1 healthy volunteer study, but now in MMN patients. We also want to understand the extent of complement blockade we can achieve with the initial cohort 1 dose scheme.

Based on what we learned from that and the corresponding efficacy results, we will start to build out a PK/PD model that will ultimately be used to identify our Phase 3 dose level. And lastly, we want to understand whether we can maintain or even improve efficacy scores when switching from IVIg to ARGX-117. Through the trial, while a small initial sample will provide us with a lot of information. Slide 7: And last within our wholly owned pipeline, ARGX-119. We started the Phase 1 trial earlier this year, and we’ll be evaluating single and multiple ascending doses. In the higher dose levels, we will also evaluate responses in a congenital myasthenic syndrome patient cohorts. Before I turn the call to Karl, I want to take a moment to thank our teams.

The feedback we hear from physicians at AAN is just a small window into the achievements over the last year, particularly from our field teams to engage from climate physicians. We are over one year into our gMG launch and are preparing for the second launch with subcu. This is still just the beginning of what we hope to achieve on our mission to transform autoimmunity. With that, I will turn the call over to Karl to talk about our financial results.

Karl Gubitz: Thank you, Tim. Our first quarter 2023 financial results are detailed in our press release from this morning. I will only highlight the key points here on Slides 8 and 9. We generated $230 million in total revenues for our first quarter, which includes $218 million in global net product revenues, $1 million in collaboration revenues and $11 million in other operating income. Cost of sales for the quarter were $18 million. Looking at the breakdown of our global product sales, you can see that $196 million was from the U.S., $10 million from Japan and $12 million from Europe and our distributor markets. With Europe, a large majority of the revenues comes from Germany, and this will be the case for the rest of the year, even with the price adjustment, which will take place through the AMNOG process.

Recall that we will land on our negotiated price in September, but we’ll start to recognize revenue at that expected new price six months ahead of that, so effectively March 22. Our R&D expenses for our first quarter were approximately $166 million and can mainly be attributed to the external research and development expenses and personnel expenses incurred from clinical development activities. Our SG&A expenses for our first quarter were $149 million and was mainly driven by professional and marketing fees linked to the commercialization of VYVGART in the U.S., Japan and the EU. We ended the quarter with $2 billion in cash, cash equivalents and current financial assets. Based on our current operating plans and the projected 2023 cash burn of approximately $500 million, we expect our existing cash, cash equivalents and current financial assets together with anticipated future product revenue to fund the company to profitability.

You can find additional details behind these number in the press release we issued this morning. I’ll now hand the call to Karen for a commercial update.

Karen Massey: Thank you, Karl. Slide 10: It’s been an exciting first six weeks for me at argenx, and I’m delighted to be working with an exceptional group of colleagues who are creating value quarter-over-quarter, not just commercially, but truly across the business. When I first made a decision to join argenx, it was the culture that initially drew me in and the innovative science and patient-driven missions that may be realized to the uniqueness of the company and of the opportunity. I spent most of the time in the last six weeks meeting the team listening to the conversations among them and learning. I’ve witnessed the team of people who are talented, passionate and engaged. They are at the core of our successful launch and have executed on a strong plan.

I believe that the strategies that were developed at the beginning of the launch are the right ones, and now we have the opportunity to expand further on this. We need to optimize how we engage with our key stakeholders to continue to bring value to patients and society. I look forward to building on these achievements together with the team as we expand as we’ve got opportunity into new geographies and new patient population. Turning now to a review of our recent commercial progress with our global launch. Slide 11: As Karl mentioned, we generated $218 million in global net product revenue this quarter, which shows the continued demand we are getting from physicians and patients. The unmet need in gMG is significant. And with VYVGART, our first-in-class FcRn blocker, we have been able to reframe expectations of what a therapy should offer a patient.

This has been a driving force of the consistent growth we see. I also had the opportunity to attend AAN last week and one of my key observations is that the value proposition of VYVGART is clear. The data we generated from ADAPT are playing out in the real world in a very consistent way, especially in the ADAPT-life patient population. The commercial and medical teams last year did an amazing job establishing the product as a new treatment option for gMG. The opportunity in that is to entrench it as the go-through therapy among neurologists. There is nothing more valuable than physician experience to achieve this. A physician having a direct positive experience is much more powerful than the impact of reading published data. One story I heard from a physician was so rewarding, someone who had had early experience with VYVGART but hadn’t moved up the adoption curve yet.

It only took one patient with a transformational response to change their perspective, pushing the doctor to now use VYVGART in the earlier adult-like population after ISTs or [indiscernible]. The patient said they are experiencing a new normal that they didn’t realize was possible. This is what we want to achieve when we talk about changing expectations. We also want to build on the momentum we established amongst patients, finding more and different ways to reach patients, especially those earlier in line of therapy. We’ve seen more of our patients coming to VYVGART directly from IST and [oral] (ph), and continuing to shift to early aligned patients will be instrumental for our growth trajectory. Of course, this takes time. It means further challenging physician inertia and the disconnect between patients and physicians on what well-controlled could mean.

We hope that the subcu approval will be a potential momentum driver for this shift. We are now just six weeks away from our subcu PDUFA date, and we are busy preparing for our second potential product launch. We believe the most powerful way to create value is through innovation and the most powerful offering to the gMG community is to provide more choice. For us, this means further individualizing gMG treatment, not only with the dosing schedule but also by offering both an IV and subcu options to capture the broadest number of patients. A subcu option may also serve us well from a payer perspective. Our engagement with payers in the U.S. was a success driver for VYVGART launch, and we will focus again on early conversations, centered on the value we can create for patients and society.

Even with our proactive strategy, we expect to navigate potential hurdles in securing early reimbursement as with any launch, we’ll face new-to-market blocks. We are planning to launch our subcu product in the U.S., but we are also filed in both Europe and Japan. By early 2024, we hope to have both IV and subcu VYVGART products approved across all three priority regions, and we’ll be working in the background on a next-generation presentation with a prefilled syringe. I want to leave plenty of time for your questions, so before we close the call, I’ll quickly touch on our global expansion because we continue to expect new approvals through the end of this year. Slide 12: We received notification last week from the Ministry of Health in Israel that together with our partner, Medison Pharma, we’ve received approval of VYVGART for gMG.

This marks the fifth approval in less than 18 months, an achievement that is truly remarkable for a first-time launch company. When I talk about being impressed by the commitment to patients and the team’s ability to execute and deliver on its goal, this is a perfect example of that and makes me proud to be part of such a dedicated team. We also received approval in the U.K. earlier in the quarter and are already in price negotiations as we aim for a late ’23, early ’24 launch. Across Europe and the U.K., we are now in pricing and reimbursement discussions in more than 10 countries. Though from a revenue perspective, Germany will be the primary driver this year, even with the price adjustments that Karl mentioned. We are also on track in both China and Canada to receive approval decisions by the end of the year, which would mark the sixth and seventh approvals for VYVGART.

I’m going to close by reiterating how excited I am to be part of the argenx team. We have a lot to accomplish in the months ahead, but it is clear that we are just scratching the surface with the vastness of our opportunity, both with VYVGART as well as our future program. Successful biotech companies are built on a foundation of innovative science, great talent and a strong culture, and, in argenx, we have all three. I am so inspired by what I’ve already experienced, and I’m ready to make the most of the opportunity before, positioning argenx for future growth. And with that, I’ll now turn the call back to Tim for closing remarks.

Tim Van Hauwermeiren: Thanks, Karen. Slide 13: Sitting here in May, we still have many milestones ahead of us this year, which for us means that we have the opportunity to reach more patients, advance our clinical programs, invest in our strong science and innovate across every corner of the company to create more value for our stakeholders. And we’re not stopping here. Our near-term data readouts are the first of many important stepping stones to unlock the full potential of our differentiated immunology pipeline programs, and we look forward to communicating on those in the coming months. The value we are creating today is laying a strong foundation for the long term as we build a global, integrated, multi-asset immunology company focused on transforming the future for autoimmune patients. Thank you for your time today. I would now like to open the call to your questions.

Q&A Session

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Operator: And this concludes today’s conference call. We thank you for your participation today. You may now disconnect.