argenx SE (NASDAQ:ARGX) Q4 2023 Earnings Call Transcript

argenx SE (NASDAQ:ARGX) Q4 2023 Earnings Call Transcript February 29, 2024

argenx SE misses on earnings expectations. Reported EPS is $-1.68 EPS, expectations were $-1.23. ARGX isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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, Global Head of Corporate Communications and Investor Relations. You may now begin your conference.

Beth DelGiacco: Thank you. A press release was issued earlier today with our full year financial results and 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 time lines, 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 to Tim.

Tim Van Hauwermeiren: Thank you, Beth, and welcome everyone. I’ll begin on Slide 3. It has been an over year of incredible execution by the argenx team, setting us up to build on this momentum for the year ahead. At the core of everything we do is our mission to transform the lives of patients suffering from autoimmune diseases, and today, we are in a better position than ever to deliver on this mission, reaching more patients globally with our first-in-class innovation and bringing hope to the autoimmune community on what a novel treatment can offer. We see multiple opportunities to expand our patient impact this year and are investing across our business to do so. These innovation horizons serve as a roadmap for how we will build long-term value by expanding the VYVGART opportunity, advancing our pipeline and bringing the next wave of R&D candidates into the clinic.

On today’s call, I would like to highlight recent news and walk through upcoming milestones in the context of these horizons. Slide 4. Let’s start with a VYVGART opportunity. We had an incredible second year of launch, driven by the ambitious strategies and seamless execution of our commercial and medical teams. And we are still at the beginning of what we hope to achieve. First and foremost, the launch trajectory demonstrates the significant unmet need that still exists with gMG and the opportunity for innovation like VYVGART to deliver differentiated outcomes for patients. As a part of our commitment to the broader MG community, we will initiate a registration trial in seronegative patients this year, which is positive could allow us to visit the 15% of gMG patients who are not served by our current label.

Beyond MG, we continue to demonstrate the breadth of possibility for FcRn across autoimmune indications and we have launched preparations underway ahead of anticipated regulatory decisions in ITP in Japan in March and in CIDP in the U.S. in June. We will be ready to tackle these anticipated opportunities as we leverage our key learnings from our launch playbook to best position ourselves for success. Slide 5. VYVGART continues to make headway in the clinic. The Phase 3 TED study is ready to start this quarter, and we’ll be the first to utilize our pre filled syringe from the onset. We are expecting relapse from 5 Phase 2 studies, including insurance, post-COVID pops and three subtypes of myositis. And we expect to provide an update on our plans in bullous pemphigoid data this year, once the team has had the opportunity to analyze the data from patients who are involved in pilot stage 8.

This is part of our commitment as a learning organization and our ongoing work to double click on the clinical feasibility of current and future abatement studies based on the insights from ADVANCE-SC and ADDRESS. This will be another year where we learn more about the broad potential of FcRn through our next wave of indications, advancing our leadership of the class and unraveling important findings about the underlying biology of these autoimmune diseases. Today, we will focus on our expectations of success around Sjogren as that will be the first of the five. The RHO study has a target enrollment of 30 moderate to severe patients randomized to one. The study is not powered for efficacy, so we will rely on the depth of data we will gather from each patient looking at various endpoints including CRESS, ESSDAI, ESSPRI and biomarkers across patients.

We have a few objectives with the signal finding study. First, to confirm the role of IgG auto antibodies in mediating disease in Sjogren; second, to evaluate a combination of efficacy and biomarker data to gain sufficient confidence to move forward in this indication; and third, to inform potential patient selection and endpoints to design a winning registrational trial to amplify anything we observe in Phase 2. We plan to employ a similar approach in our evaluation of looking at the depth of data across the enrolled patients to make an evidence-based decision to move into a Phase 3 study. With my guidance, we have a seamless Phase 2/3 design, which will expedite the transition from the first 30 patients of each subset into a registration study of one or more of the subset where proof-of-concept has been established.

Wrapping up on efgartigimod, I’m very proud of all that we have accomplished in pioneering this new class of medicines. Proof-of-concept as now been demonstrated in nine out of nine indications across FcRn and we believe this is still just the beginning of the broader opportunity. Slide 6. Turning attention to our next horizon of innovation, I want to briefly touch on our pipeline progress. Empa is our second pipeline in a part product opportunity from which we have showed compelling MMN data from the first patient cohort earlier this year. This is a program that emerged from our IIP and perfectly demonstrates how we like to build opportunity from our discovery engine into our pipeline and now towards the registrational trial in its first indication.

In collaboration with Professor Eric Hack, we built what we believe is the first in class and best in class treating antibody against C2 and have conducted translation work to highlight the targeting C2 could have the most impact. Out of this, we identified that complement activation in MMN happens upstream in the complement cascade. We designed an innovative trial, and in the first quarter, we demonstrated a 91% reduction in the need for IVIg rescue compared to placebo. We are now awaiting results of the second cohort to inform the final design of the registrational trial and look forward to sharing the full Phase 2 data set this year. The MMN opportunity fits perfectly within our expanding capabilities in neurology as does ARGX-119 our third pipeline program.

This molecule will go more into focus this year as we move beyond healthy volunteers into CMS and ALS patient study. Of note, we recently initiated natural history studies in both CMS and MMN to engage each of their respective patient communities. This falls in line with our strategy to better understand the real world experience of patients and will help us identify potential participants in upcoming studies. Slide 7. Finally and core to our sustainable growth is our third innovation horizon, our immunology innovation program. The track record of success of our IIP goes well beyond efgartigimod and empa with nine programs tested in humans since inception. We demonstrated the efficiency of this baritone engine by nominating four new molecules last year.

All are on track to be filed with IND by the end of 2025. We will continue to invest in our internal discovery engine and technical capabilities, combining our antibody engineering and clinical development expertise with the knowledge of leading scientific collaborators as we advance our next wave of molecules. I will now turn the call over to Karl.

Karl Gubitz: Thank you, Tim. Slide 8. The fourth quarter 2023 financial results are detailed in the press release from this morning. I will highlight the key points here. Revenue in the fourth quarter totaled $418 million. This reflects $374 million in product net sales and $43 million in other income and collaboration revenue. Our collaboration revenue includes a $30 million milestone payment from AbbVie for advancing ARGX-115 to Phase 2 as well as royalty income from Zai Lab of 0.7 million for VYVGART sales in China. The breakdown per region of a $374 million in product net sales fees, $326 million in the U.S., $17 million in Japan, $24 million in EMEA and $7 million in China. Globally, we saw growth of 14% or $45 million in your product net sales from Q3 2023 to Q4.

Operating expenses in Q4 were $556 million. This is an increase of $136 million over Q3 2023, driven primarily by the recognition of a priority review voucher we submitted with SBLA filing for CIDP. This impact of the PRV was $102 million and brings total R&D cost for the quarter to $306 million. Net loss for the quarter was $99 million bringing the full year loss to $295 million. We continue to have a strong balance sheet with 3.2 billion in cash, cash equivalents and current financial assets at the year-end. The financial guidance for 2024 is as follows. Based on our current operating plans, we expect the combined research and development, and selling, general and administrative expenses in 2024 will be less than $2 billion, and we expect to utilize up to $500 million of cash in 2024 on our anticipated operating expenses as well as working capital and capital expenditure including investment in our supply chain.

I will now turn the call over to Karen, who will provide details on the commercial front.

Karen Massey: Thanks, Karl. Slide 10. Echoing Tim, I’m thrilled with the impact this guide is having on patients and their loved ones. With over 6,000 patients on therapy, the response from the patient community has been tremendous and we’ve set the bar high for what a novel gMG treatment can offer. I want to first thank the team because the success of our launch can only be achieved through tireless dedication and a firm commitment to our mission to transform the lives of autoimmune patients. Today, I would like to focus on three key areas, which I believe will advance VYVGART leadership and maximize the impact we can have on patients globally. One, reaching new gMG populations with VYVGART; two, leveraging our knowhow from gMG as we prepare to potentially launch in CIDP and ITP; and three, building a commercial engine that can reliably and repeatedly maximize value creation and patient impact.

Slide 11. Let’s begin with our MG launch. We closed out 2023 with $1.2 billion in revenues, including over $1 billion in the U.S. alone, which is a remarkable feat in just our second year of launch. Importantly, this tells us that patients place a high value on innovative treatments such as VYVGART to meet the demand for safe and effective treatment alternatives in the gMG treatment space. We continue to see double-digit quarter-over-quarter growth and we contribute this momentum to several factors, including a broader prescriber base, the continued shift to patients earlier in the treatment paradigm and additional regulatory approvals and launches in our ex-U.S. markets. We see consistent growth of our subscriber base having breadth and depth amongst neurologists and further reach into community centers.

Prescribers are becoming increasingly comfortable with the efficacy and safety of VYVGART, which is supported by a body of real world evidence, demonstrating the consistent value VYVGART can deliver to patients. As an example, we see rates of minimum symptom expression in the real world that mirror the data from our clinical trial, indicating that patients have the potential to achieve quality of life scores that are comparable to healthy populations. And we have over 4,000 patient years of safety follow-up with efgartigimod, which continues to support our consistent safety profile and with physicians this is a key differentiator. We are observing increased utilization of both VYVGART and VYVGART Hytrulo in earlier lines of therapy with an impressive 55% of patients coming to VYVGART directly from orals and we only expect this trajectory to continue.

Although VYVGART still comprises the majority of prescriptions, we are seeing more traction with Hytrulo likely supported by access dynamics, favorable payer policies that mirror VYVGART and a dedicated J-Code in place. We are committed to innovating on the patient experience even further by advancing the development of our prefilled syringe or PFS this year. The PFS will allow us to introduce VYVGART to a new patient population with an increasingly easy to use interface. It is our goal to make a prefilled syringe available for both MG and CIDC. And importantly, we believe this will move us one step closer to the possibility of self-administration in the U.S. Slide 12. The momentum ex U.S. has been strong with multiple launches and approvals already underway for 2024.

The majority of our current sales are still in the U.S, but overtime we expect global markets to make increasingly larger contributions to total revenue, especially as the speed at which we bring VYVGART into new territories is picking up. I’m very proud of the team in Europe who has been working hard to secure reimbursement at a record pace in Germany, Italy, Spain and recently Belgium, with patients receiving access to VYVGART in half the average time historically needed by orphan drugs. We’re also seeing incredible uptake in China through our partnership with Zai Lab, driven by our recent inclusion on the NRDL. We are still at the front end of reaching patients who could benefit from VYVGART and we remain committed to deliver on our promise of reaching the broadest set of MG patients possible.

We also know that the MG opportunity continues to expand with competition and innovation driving growth of the overall market. With a robust knowledge of FcRn and one of the most expansive sets of clinical and real world data generated to date, we are in a position of strength to continue to lead this market. Slide 13. We’re excited by the opportunity to expand our patient impact beyond MG this year with two upcoming regulatory decisions in ITP and CIDP. Today, we’re going to focus on the CIDP opportunity. CIDP is a debilitating disease and one where patients continue to face significant burden, both from the symptoms of the disease, but also the demands of the available treatments. Our strategy will be to leverage the learnings and infrastructure we built with MG and apply them to the unique dynamics of the CIDP market to best position ourselves for success.

The key learnings and overlapping strategies between MG and CIDP give us more confidence in the long-term potential of VYVGART Hytrulo as a transformational treatment in CIDP. But we also recognize there will be some unique challenges that may impact launch trajectory. First, as standard with most launches, we will need to wait approximately two quarters for payer policies to come into place. Second, IVIg is well entrenched and on label for CIDP patients. CIDP is a progressive disorder with many patients fearful of symptom aggression who may not want to change from their existing therapy. Having said that, we’re very motivated by the strength of ADHERE data to bring a new treatment option to the CIDP community, which would be the first real innovation in decades and we’ll be prepared with thoughtful strategies at the time of the FDA’s decision on our submission.

Slide 14. Before I turn the call back to Tim, I want to talk about the commercial engine we’re building as we think ahead on how we can reliably and repeatedly maximize the value we offer to autoimmune patients. We continue to learn about the unique challenges and resulting gaps in treatment that patients suffer with autoimmune diseases. Most notably, there’s an overall lack of innovation. Old entrenched therapies are considered sufficient. Patients take a long journey to get to diagnosis and often that diagnosis does not result in clear answers. Finally, there are high barriers to access even when innovative treatments become available. At argenx, we’re making a long-term commitment to these communities that we hope extends well beyond the treatments we can deliver.

Some of the areas of focus for us include generating awareness of the disease and the challenges that patients and their supporters face whether through online communities, our DTC campaigns or our advocacy efforts. We want to raise the bar on treatment expectations. Our goal is not just to replace old treatments, but to reset expectations. We want to move the goalpost so that patients aim to regain function or going back to things they enjoyed before their diagnosis. We want to drive innovation beyond the molecule and on the patient experience in the form of new product presentation and a best in class support system. And we’re delivering on our commitment by providing broad and simple access to patients. These are the types of investments we want to make as we grow and expand into new patient populations because we’re in the business of transformation and advancing beyond incremental change.

We’re making a long term commitment to deliver repeatable, sustainable, comprehensive value to patients, their care teams and to the broader autoimmune community. And with that, I’ll turn the call back to Tim.

Tim Van Hauwermeiren: Thank you, Karen. We laid out an ambitious plan for the year, and at two months in, we are already in a great position to deliver on our goals. We are energized by the incredible cadence of opportunities that remain ahead and we’ll continue to approach the argenx way with relentless execution. Before we turn the call over to Q&A, I want to take a moment to thank the individuals who drive our success. We would not be where we are today without the tireless efforts of the argenx team. I also want to thank all the patient communities and physicians who inspire our efforts to bring better outcomes to those suffering from autoimmune diseases. Thank you and we look forward to your questions.

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Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Tazeen Ahmad from Bank of America. Your line is open.

Tazeen Ahmad: Just a couple based on your prepared remarks. Regarding the CIDP launch, if we assume that it launches, let’s say, in early July, you’ve talked about taking a couple of quarters to really get full insurance reimbursement. So just directionally, how should we be thinking about any type of contribution from CIDP sales in calendar year 2024? And then I have a follow-up.

Karen Massey: It’s great to hear from you. So maybe I’ll provide a few thoughts on CIDP launch and what we’re learning. And Karl, do you want to make any comments from the financial perspective? So we’re in launch preparations as you mentioned for CIDP. And the more that we learn through market research, I would say the more confidence we have in the value that we’re going to bring to patients in this market. And it’s debilitating disease and there certainly is, a really, a very high unmet need, in this patient population. So, we’re very confident. As you said and as we shared in the prepared remarks, there’s a few things that will impact the uptake this year. There’s the payer policies getting in place and the fact that this is a debilitating disease, a progressive disease.

So there’s some what we call stickiness likely of the patients remembering that IVIg is on label for those. So, we could – so, we’re not expecting a rapid uptake in the latter part of the year. But Karl, do you want to comment on any further than that?

Karl Gubitz: No, I think you said it all. I think the payer contracts, which will take a quarter or two to put in place, will definitely delay some of those revenues into 2025.

Tazeen Ahmad: And then also a comment from your press release about price decrease in Germany. I know historically in Europe there is just naturally price deterioration. But are you calling out this particular decrease because it’s a bigger price decrease than you would have normally expected? Just to give a little bit of color.

Karl Gubitz: We had a really successful launch in Germany, and we of course had a really good price in Germany. That actually meant that we exceeded the threshold for the classification of an orphan drug, which automatically triggers a price renegotiation with the German authorities. We have now entered into that negotiation, and we have to assume a lower price. We don’t know what that price will be. We’re negotiating it. We will only know in the beginning of 2025, Q1 2025. But we will be accruing for that lower price from 1 January 2024 as the difference between old and new price will have to be a rebate back to the government. So Tazeen, I mean, this is because we were so successful and exceeding that threshold of $30 million which is also in drought designation.

Operator: Your next question comes from the line of Derek Archila from Wells Fargo. Your line is open.

Derek Archila: Just two from us. So I just wanted to understand the percent of the 2,300 prescribers for MG that currently treat CIDP patients? And then also, I guess you had a comment in the prepared remarks around new patients that you’ll be able to access with the prefilled syringe. So I just want to understand who those patients are specifically that you can’t really access right now with IV and Hytrulo? Thanks.

Karen Massey: I’ll take them one-by-one. So, what we’re learning as we look into the CIDP market is that there is significant overlap between the prescribers. As you said, the 2,300 prescribers that are prescribing the gut for MG and potential future prescribers for CIDP, CIDP is treated much more in the community, is what we’re learning. And as you well know, one of our strategies for MG and one of the things that we’re seeing is that out in the community, we’re seeing a lot more confidence with using VYVGART for MG based on the real world efficacy. We’re seeing real world efficacy that reflects the clinical trial efficacy. The safety that continues to hold, we have over 4,000 years of patient safety data now. So we see — so there will be very significant overlap in those in that prescriber base.

In terms of the new patients that you asked about with the prefilled syringe, I would say this just continues the momentum towards, our strategy of moving earlier into the treatment line. So in MG, we stated, that the goal is that we believe MG should be used, after orals. We’re seeing 55% of our patients coming directly from oral. The IV having the subcutaneous Hytrulo option and then moving into the prefilled syringe will just allow us to continue to execute on that strategy.

Operator: Your next question comes from the line of Rajan Sharma from Goldman Sachs. Your line is open.

Rajan Sharma: Just looking ahead to thyroid eye disease where you’re initiating the Phase 3 and I realize that we’ll probably see the clinical trials entry relatively soon. But could you perhaps just talk about how you’re thinking about positioning relative to incumbents in that market? And maybe related to that, could you just comment on what underpins your confidence in moving to Phase 3? We’ve obviously seen some competitive proof-of-concept data. But just wondering, if there’s anything beyond that that is driving the decision here?

Tim Van Hauwermeiren: No. Thank you. So I will take this question. The conviction in TED of course is driven by biology that’s done based on the internal homework, but also peer reviewed data from another player in the FcRn class. There are now nine indications out of nine for the class. Were we have seen successful proof-of-concept, TED is one of them. So, the base we are marching based on that combined prediction. And differentiation we hope will come from different modes of action. So, we are convinced TED is an IgG auto antibody driven disease. We think that by lowering this autoantibody. We could have the most profound effect on the disease, but we also, of course, can leverage a very clean safety profile and a very competitive way of presenting the product. So these are the three pillars to try and be competitive in the TD markets.

Operator: Your next question comes from the line of Yatin Suneja from Guggenheim. Your line is open.