Earnings Call Transcript - ARGX Q1 2025

Operator, 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 speaker’s remarks, there will be a question-and-answer session. Thank you, I'd now like to introduce; Beth DelGiacco, Vice President, Corporate Communications and Investor Relations. You may now begin your conference.

Beth DelGiacco, Vice President, Corporate Communications and Investor Relations

Thank you. A press release was issued earlier today with our First Quarter 2025 Financial Results and Business Update. This can be found on our website along with the presentation for today's webcast. Before we begin on Slide 2, I'd like to remind you that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical development, regulatory timelines, 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 these 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, Chief Executive Officer

Thank you, Beth, and welcome everyone. I'll begin on slide number three. At Argenx, we are building our company for the long run. Our strategic decision-making paired with an agile approach has positioned us to deliver sustained growth in a dynamic and evolving market landscape. It's with this same long-term focus that we introduced an ambitious Vision 2030 to reach 50,000 patients across 10 labeled indications and advance five Phase III assets. This quarter, we continue to execute against a bold innovation agenda, keeping us firmly on track to realize this vision. We successfully launched the pre-filled syringe in the U.S. and Germany to reach more patients with VYVGART. We are advancing 10 registrational and 10 proof-of-concept studies across our pipeline, and we remain on track to progress 4 INDs in the clinic this year with ARGX-109 and ARGX-213, now in Phase I studies. Our focus on execution continues to yield results. Let's begin with our commercial business, where underlying growth is exactly where we expected to be. Consistent with last year, first quarter results reflected typical seasonality following an exceptional fourth quarter. Karen will share more details on launch dynamics later in the call with big picture, key physician and patient metrics across both gMG and CIDP continuing to be strong. Looking at the full year ahead, we remain confident in our ability to drive consistent growth. First, we were thrilled to receive an optimal label in the United States with the recent FDA approval of VYVGART Hytrulo pre-filled syringe for self-injection. This comes at the perfect time to maintain our growth momentum and broaden our patient reach in gMG and CIDP. We are excited with the opportunity ahead for CIDP and have just launched our patient activation campaign. This will be critical to empower CIDP patients in their decision-making about which is the best therapy for them. We continue to see a demand for innovation in the gMG and CIDP market. We are building the broadest offering possible to support its unmet need. This includes advancing our auto-injectors and progressing our label expansion studies in seronegative and ocular MG. Finally, we recognize that the global market is dynamic at the moment. While it is still too early to speculate how our industry will be impacted by future policy development, we are confident that our strategic decisions today have positioned Argenx to navigate a range of potential outcomes. We are prepared to meet growing demand for our precision therapies with a robust global supply chain and a strategy to manufacture in each region for that region. This includes continued and long-standing investments in our U.S. manufacturing capabilities to ensure long-term scalability. Taking a step back, the success of our commercial efforts is rooted in patient and physician demand for new and innovative treatment solutions. Last month at AAN, we had the opportunity to present data that reinforce the broader potential of VYVGART and reflect our commitment to generating data that is most meaningful to the neurologist community and the patients they serve. VYVGART continues to set a high bar with its sustained efficacy and improved quality of life measures for patients living with gMG and CIDP. Beginning with gMG, more and more neurologists are recognizing minimum symptom expression or MSE as the metric most relevant to patients. New data from the ADVANCE-NEXT study showed that 56.5% of patients achieved MSE at any point during treatment. We believe that an individualized treatment approach is the best way to treat gMG given that each patient experiences the disease differently. The ADVANCE-NEXT study supports this view showing that both fixed and biweekly dosing regimens can deliver rapid, meaningful, and sustained improvements for up to 126 weeks. Recognizing that we're still early in the launch of VYVGART Hytrulo in CIDP, we were encouraged by our engagement with treating physicians and some of the positive patient experiences we're already seeing. We shared new open-label data showing that Hytrulo can drive sustained functional improvement and highlighted our switch study design which looks at patients switching to Hytrulo within 1 week of the last IVIg treatment. Finally, VYVGART's strong and predictable safety profile remains a critical part of its value to patients and physicians. We have over 8,000 patient years of data across studies and are proud to have a label with no vaccinations, no REMS, no black box and no monitoring. Delivering on our Vision 2030 will also depend on the progress of our pipeline and I'm particularly energized by the breadth of indications we are pursuing across multiple first-in-class assets that opened the door to new disease areas with high unmet needs. We continue to push the boundaries of our understanding of FcRn as we explore new therapeutic areas with efgartigimod including rheumatology with myositis and Sjögren’s and endocrinology with TED. These are highly prevalent diseases where we see a clear path to deliver meaningful, differentiated benefits to patients. With empasiprubart, we have taken a bold approach, advancing our C2 inhibitors into 2 registrational head-to-head studies against IVIg in both MMN and CIDP. These trials reflect our commitment to disrupting the treatment paradigm for each of these diseases by challenging the standard of care and bringing forward innovation for patients in need of new precision treatment options. And finally, let's take a look at what's ahead for the rest of the year with several readouts across the pipeline. The seronegative gMG study will be the first of our 10 registrational trial readouts which has the potential to expand the breadth of gMG patients we treat. Beyond that, we have proof-of-concept readouts in lupus nephritis with efgartigimod, delayed graft function with empasiprubart and CMS with ARGX-119, the first clinical readout for our third asset. We have 2 primary objectives with our proof-of-concept study. First, to gain confidence in the signal observed to invest in further development. And second, to thoughtfully shape the Phase III design. Before turning the call over to Karl, I want to circle back to our innovation mission. We have always put innovation at the forefront of our decision-making, which means prioritizing what patients need and ensuring that we remain forward-thinking to prepare ourselves for the long term. With an enviable financial position, we are able to continue investing in our innovation engine, capitalizing on both commercial and clinical opportunities to deliver sustained long-term value. And with that, I'll turn the call over to Karl.

Karl Gubitz, Chief Financial Officer

Thank you, Tim. The first quarter 2025 financial results are detailed in this morning's press release. Total operating income in the first quarter totaled $807 million. This reflects $790 million in product net sales and $17 million in our operating income. The product net sales of $790 million represents 99% growth compared to a corresponding prior year quarter. The product net sales breakdown by region is $681 million in the U.S., $32 million in Japan, $57 million in the rest of the world and $20 million of product supply to Zai Lab in China. On a quarter-over-quarter basis comparing Q1 2025 with Q4 2024, the growth is 7%, with the U.S. growing at 5%. We saw strong underlying demand in both gMG and CIDP with growth in net sales impacted by two factors. First, typical Q1 seasonality with reverification of benefits for patients and second, Medicare redesign took effect on January 1 which accelerated the evolution of our channel mix to Part D. This had an impact on gross to net for the quarter. We expect PFS self-injection to further drive a shift to Part D, though, over time, the impact on revenues from increased gross to net will be offset by patient volume growth. Specifically our ability to reach new patient populations with PFS for self-injection. In Japan and the rest of the world, the quarter-over-quarter growth continues to be in the high teens. Cost of sales is $81 million in Q1. This reflects a gross margin of 90%, which is in line with previous quarters. Total operating expenses in Q1 2025 were $668 million, a quarter-over-quarter growth of 2%. The increase is explained by a $12 million increase in R&D, offset by a decrease of $10 million in SG&A. This results in operating profit for Q1 of $139 million. The quarterly net financial income is $36 million. We benefit in the quarter from unrealized exchange gains of $27 million on our non-U.S. denominated cash balances. The effective tax rate for Q1 2025 is 16%. After tax, the profit for the quarter is $169 million. Our cash balance represented by cash, cash equivalents, and current financial assets is $3.6 billion at quarter end, an increase of $238 million from Q4 2024, driven primarily by cash flow from operations. Our previously issued guidance on total R&D and SG&A for the year remains unchanged. I will now hand it over to Karen.

Karen Massey, Chief Operating Officer

Thank you, Karl. Our patient-centric approach to innovation continues to deliver real-world results as we have now successfully brought a first-in-class medicine to patients across multiple markets executing launches across 3 indications, 3 product presentations in over 30 countries in less than 4 years. With this launch cadence, we have maintained steady momentum and delivered 13 quarters of growth. This is a remarkable achievement, and I'm incredibly proud of the entire Argenx team for the focus, dedication, and collaboration that has made it possible. We continue to drive meaningful impact with VYVGART, expanding our reach to new patients and prescribers in both CIDP and gMG as well as ITP in Japan. With the recent approval of our pre-filled syringe which further enhances patient access and convenience, we expect that momentum to continue. Today, I'll walk you through the dynamics behind our performance this quarter and how we're positioned to continue to drive sustained long-term growth and deliver lasting outcomes for patients. We're continuing to deliver on our long-term growth strategy with 99% year-over-year revenue growth for the quarter and steady growth delivered across every region and indication. After an incredibly strong fourth quarter, we faced typical first quarter seasonality in the U.S., which similar to last year, is primarily due to benefit reverification. This quarter also marked the first industry-wide impact of Medicare Part D reform, which is accelerating the evolution of our channel mix towards Part D. As Karl outlined, due to this dynamic, we saw an impact on our gross to net over the quarter. Looking beyond these technical impacts in the U.S., we saw a strong quarter, and we continue to deliver consistent growth. I am very pleased with our performance in new patient starts, in new prescribers and in high patient conversion rates. We believe there is significant commercial opportunity ahead of us for both gMG and CIDP. In gMG, VYVGART achieved the fastest market share growth amongst branded biologics, solidifying the number one position in the MG market. VYVGART Hytrulo is the key growth driver, contributing to a strong quarter-over-quarter increase in new patient initiations. In CIDP, our strong launch momentum continues with consistent quarter-over-quarter growth in new patient starts. Although we recognize the CIDP market dynamics are unique from MG, early trends reinforce our confidence in a significant long-term opportunity for VYVGART Hytrulo in this market. In addition to strong patient starts in both MG and CIDP, we continue to see consistent new prescriber growth. Over the quarter, we added about 250 first-time VYVGART prescribers, bringing us to over 3,700 total prescribers, and we saw a reciprocal halo effect between MG and CIDP. Reaching new prescribers is a critical priority to increase the breadth and depth of patients that we reach. We also saw solid performance internationally. Japan CIDP launch is up to an encouraging start, echoing the U.S. experience with patients and prescribers welcoming the first novel mechanism of CIDP treatment in 30 years. The contribution from the rest of the world continues to grow as we secure pricing and reimbursement agreements across Europe and Canada. In Europe, VYVGART subcutaneous continues to expand our gMG uptake including initial pre-filled syringe use in Germany. Lastly, we're close to bringing VYVGART to its second indication in the EU with positive CHMP opinion last month in CIDP. The recent approval of our pre-filled syringe for self-injection in the U.S. comes at the perfect time to enable our continued growth momentum in MG and CIDP. The label we received is an optimal outcome. Patients now have the ability to self-inject in as little as 20 to 30 seconds after being trained with proper instructions, and they can do so at home or in the HCP office. Patients will have the flexibility and independence to manage their treatment in a way that fits their lifestyle and continue to benefit from VYVGART Hytrulo's strong efficacy and favorable safety profile. The first patients have already been dosed with PFS for self-injection in the U.S. and Germany. Reception to date has been very positive with encouraging initial patient prescriptions. You'll recall we are not pursuing a conversion strategy with PFS to self-injection. Rather, our goal is to reach more patients earlier in the treatment paradigm. We're seeing that play out already with 50% of initial enrollment being first-time VYVGART users. Patients have been vocal in their positive feedback often referencing the PFS as game-changing. One patient commented that he was now ready to take back control of his life and eager to travel with his family. Another patient shared her relief to be able to manage her work schedule instead of taking off significant time for weekly infusions. We're just at the beginning of this launch, and we continue market expansion in the U.S. and future expansion opportunities in Canada, China, and Japan. We're transforming the MG and CIDP treatment paradigm with VYVGART and VYVGART Hytrulo. We're empowering patients to expect more from their treatment. This is especially true for CIDP patients who have not seen new novel mechanisms of action in the space for close to 30 years. Physicians are more conservative in switching their CIDP patients between medications in general and often prefer an active request from the patient before doing so. In February, we successfully launched our patient activation campaign which is empowering patients to ask their neurologists about VYVGART Hytrulo. We are seeing a very high grant rate to these requests, demonstrating that neurologists believe in the value proposition of VYVGART Hytrulo to CIDP. Our patient engagement efforts across both gMG and CIDP led to a significant increase in patients actively requesting VYVGART or VYVGART Hytrulo over the quarter. What excites me most is the tremendous opportunity ahead to expand the impact of our precision medicine. We are exactly where we need to be. We have the right strategy in place to reach patients earlier in their treatment journey. We successfully launched our prefilled syringe, and we're generating the data needed to position VYVGART as a treatment of choice in both MG and CIDP. And this is just the beginning. With multiple potential launches ahead, we're ready to expand into new high unmet need indications bringing our therapy to thousands more patients and advancing our vision to redefine the standard of care in autoimmunity. With that, I'll turn the call back to Tim.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Karen. We have an incredibly strong foundation to deliver significant growth this year and beyond, which puts us perfectly on track to achieve our Vision 2030. We have the benefit of a strong financial position to continue investing in our commercial business and early innovation. With multiple expansion opportunities ahead, we plan to sustain our growth trajectory in MG and CIDP. Additionally, we have a steady cadence of several milestones across the robust pipeline, which will further contribute to patient growth and support our leadership in autoimmunity. Execution has always been a key strength of our company, and therefore, we entered the remainder of the year confident in our ability to deliver value to our patients and shareholders whose long-term support has been critical to our success. We will now open the call for questions.

Operator, Operator

Your first question comes from Tazeen Ahmad from Bank of America.

Tazeen Ahmad, Analyst

I wanted to ask a broader question about the profile of gMG patients at this stage of the launch who are starting VYVGART therapy. Can you tell me what portion of the curve you're on regarding onboarding patients who are not currently receiving therapy? Also, have you noticed any changes in discontinuation rates or any impact from competing products so far?

Karen Massey, Chief Operating Officer

Thank you for the question, Tazeen. I appreciate it. As we are 13 quarters into the launch for MG, I am proud that we've consistently delivered growth quarter after quarter, even after a strong performance in Q4. This suggests that we are still early in the launch phase for MG. Regarding the patient profile you mentioned, we still see around 60% of patients starting VYVGART coming from oral medications. This indicates that we are indeed moving into earlier lines of treatment, which aligns with our strategy to expand the market. The market for biologics is growing, and VYVGART is at the forefront of that growth. We maintain the number one market share among biologics in MG, and our leadership in the pre-filled syringe segment will further accelerate our progress as we continue the launch. So, I would say that we are still in the early stages of the launch curve at this point. Thank you for the question.

Operator, Operator

Your next question comes from the line of James Gordon from JPMorgan.

James Gordon, Analyst

Hello. James Gordon, JPMorgan. Hello, can you hear me? This is James. Can you hear me?

Karen Massey, Chief Operating Officer

Yes, we can hear you James.

James Gordon, Analyst

Hello, you can hear me, okay?

Karen Massey, Chief Operating Officer

Yes, James, we can hear you.

Operator, Operator

We're experiencing some technical difficulties with that line. We're going to move on to the next question from Alex Thompson from Stifel.

Alex Thompson, Analyst

Congrats on the quarter. I guess as we think about the PFS launch now with 3 VYVGART forms in the market, can you talk about how we should think about net price over time?

Karen Massey, Chief Operating Officer

Thank you. I'm excited to discuss the PFS launch. I'm very pleased with the label we received as part of the approval, and I want to extend a big congratulations to the team. We achieved the optimal label, and we are already noticing positive reactions from both prescribers and patients, who believe this is a game changer. We see this as an opportunity for expansion that will support continued growth for VYVGART throughout the year. Karl, would you like to provide your insights on the gross to net?

Karl Gubitz, Chief Financial Officer

Yes. Thank you, Alex. PFS will, of course, be pharmacy benefit and the gross to net will have a different dynamic in the pharmacy benefit versus the medical benefit due to the 20% manufacturers have to pay for patients in the catastrophic phase. Therefore, the net price per patient for PFS, patients will be lower than for patients in the medical benefit, which will largely be IV and VYVGART Hytrulo. At the moment, we will maintain the 225,000 for MG patients and the 450,000 for CIDP patients, but over time, that will evolve, and we're going to give you updates later on.

Beth DelGiacco, Vice President, Corporate Communications and Investor Relations

Do you want to also just answer the discontinuation question from the last?

Karen Massey, Chief Operating Officer

Yes, Tazeen, sorry. I think you asked about discontinuation as well. And so just to come back to that, we're not seeing any shift in discontinuation. In fact, we see the consistent discontinuation rates, and I would say given that it's a maintenance therapy and chronic treatment, it's quite strong, and you can see that the patients are definitely appreciating staying in MSE and the adverse event profile. So no shift in discontinuation rates for MG.

Operator, Operator

Your next question comes from the line of Vikram Purohit from Morgan Stanley.

Vikram Purohit, Analyst

Ours is on CIDP. If you could just help us understand in a bit more detail. The cadence of new patient starts, where you ended 1Q with in terms of patients on therapy and how you might expect that to trend throughout the course of the year?

Karen Massey, Chief Operating Officer

Yes. Thanks for the question on the CIDP launch. So we're really excited about where we are with the CIDP launch. What we've seen is continued momentum since the beginning of launch and through Q1, the execution continues to be strong. When you look at the underlying fundamentals, to your question, what we see is continued new patient adds quarter-over-quarter. We also continue to see new prescriber growth quarter-over-quarter, which is a really important measure to demonstrate that we're reaching more prescribers and therefore, reaching more patients. And the other really important feedback that we have from this quarter is the consistent patient story that we're hearing about the transformational impact that VYVGART is having on their CIDP. So I mean, patients are at the center of our launch and are the key to the CIDP launch. We launched our DTC campaign in Q2 and what we're seeing is that more and more patients are initiating the request to switch with their prescribers and in the majority of cases, their neurologists are granting that switch request. And what that shows us is that neurologists believe in the profile of VYVGART for CIDP. So all of the underlying launch metrics for CIDP continue to be very strong.

Operator, Operator

Your next question comes from the line of Rajan Sharma from Goldman Sachs.

Rajan Sharma, Analyst

I would like to follow up on the Q1 effects. You mentioned there were three factors that impacted revenue growth for the quarter, including reverification and the Medicare redesign. Can you provide more detail on the relative significance of each factor and which had the most substantial impact in Q1?

Karl Gubitz, Chief Financial Officer

Thank you for the question, Rajan. I'll address the gross-to-net impact. Previously, we observed a consistent quarter-over-quarter increase in Part D. By the end of Q4 2024, it represented a small minority of patients. During the last earnings call, we mentioned that in 2025, we will launch PFS self-injections, leading to an increase in patients using the pharmacy benefit, which is Medicare Part D. As the mix between medical and pharmacy changes, the gross-to-net will rise. In Q1, with the Medicare redesign, we are seeing more patients opting to receive Hytrulo at home even before the PFS launch. This highlights the market demand that PFS self-injection will fulfill and suggests market expansion. Regarding the gross-to-net magnitude, we cannot provide further details at this time, but we may share more information at the end of Q2. There has been an increase in gross-to-net, predominantly influenced by seasonality related to the reverification of benefits, which is a typical industry-wide effect. Perhaps, Karen, you could add to that?

Karen Massey, Chief Operating Officer

Yes. Thanks, Karl, I think that's really clear. And I think that's important to note. What we saw in Q1 is similar to what we saw in Q1 last year and the normal industry dynamics of seasonality related to benefit reverification and impacting the volume. But remember, VYVGART is a growth story. We saw growth in Q1. We had the PFS approval in Q1 and what we expect to see is continued growth and continued cadence of growth through the remainder of the year as we continue to launch PFS for both MG and CIDP.

Operator, Operator

Your next question comes from the line of James Gordon from JPMorgan.

James Gordon, Analyst

The question was most favored nations has come into focus again, and there were some concerns around different list prices with VYVGART in different places. So can you remind me how VYVGART list price varies between the U.S., EU and Japan. And also, have you already set the PFS price outside the U.S.? So how the list price varies there? And if I could also just ask a follow-up question. So as it has been discussed, some impact this quarter from patients shifting to Part D and that comes in with a catastrophic discount from the company. But looking to Q2 and the rest of the year, are you seeing significant further incremental headwinds from this Part D shift and then holding net price that we need to be wary of when we're thinking about Q2 and the rest of the year? Or is one way of thinking about it looking at the phasing we saw last year in 2024, where Q1 was a bit softer sequentially within Q2 saw quite acceleration because you didn't have the recertification headwind. And then you've got PFS coming in and you've got more CIDP coming in. So should we look at last year's phasing for a bit of a guide for what this year's phasing looks like?

Karl Gubitz, Chief Financial Officer

Thank you, James. You've asked three questions, so I will address them one at a time. The first question is about most favored nations. We have maintained a disciplined approach and aim to keep our list prices in all markets within a tight range. For instance, we recently launched VYVGART in Germany, setting the list price very close to that in the U.S. While prices do change over time due to factors like foreign exchange and labor costs, we have successfully kept the list prices stable across our key markets. Regarding your second question, the pricing for PFS has been established in all our priority markets, so that is complete. For your third question about Q2, it aligns with what Karen mentioned previously. PFS is part of our expansion strategy, which will increase both our prescribers and patient base. Additionally, gross to net will rise quarter-over-quarter as the product mix between medical and pharmacy shifts.

Karen Massey, Chief Operating Officer

Yes. And I'm just going to add, in terms of the rebound effect that you mentioned, I wouldn't think about it like that; I would zoom out. And what you can see when you look quarter-over-quarter since the beginning of the launch of VYVGART. When you take a line through it, it's relatively consistent growth quarter-over-quarter. So we don't look at the ups and downs each quarter, but rather I'd encourage you to take that line through it and look at the long-term trajectory. And we're confident that that consistent growth will continue over the long term.

Operator, Operator

Your next question comes from the line of Derek Archila from Wells Fargo.

Derek Archila, Analyst

Just wanted to see, given the ADAPT-NXT publication and the data set there, are you assuming increasing number of treatment cycles in MG patients as part of your growth calculation to offset the Part D exposure?

Tim Van Hauwermeiren, Chief Executive Officer

Thanks, Derek. Thanks for the question. If you look at the material consumption between ADAPT-NXT or cyclical dosing, actually, net-net, you end up using the same amount of material. So we do not believe this is going to materially impact the dosing of VYVGART. I think what is really important about ADAPT-NXT is that now we have taken the individualization to the end. Now each patient can dose the drug the way it should be dosed from cyclical to continuous dosing. So now we can offer the full spectrum. We are very proud of the data at AAN. I think we showed impressive efficacy data from ADAPT-NXT with a 56% MSE, a spick-and-span safety profile, and real nice continuation over 126 weeks of use. Thank you for your question.

Operator, Operator

Your next question comes from the line of Yaron Werber from TD Cowen.

Yaron Werber, Analyst

Maybe, Karen, just a question for you on CIDP. Is there any chance you can give us a little bit of a sense of how many patients did you have during the quarter or finished during the quarter? And then sort of related to that, at AAN, there was a publication, right, that looked at safety in CIDP and you had just over 1,300. I think it was 1,316, real-world patients on VYVGART at that point. Can you triangulate that maybe to again your commercial patient numbers on CIDP?

Karen Massey, Chief Operating Officer

Yes. Thank you for the question. We're not updating that number at this moment. What we'll do in the style of what we've done for other launches is update the number as we hit different milestones. But what I would say, again, just zooming out, is we have had consistent patient adds quarter-over-quarter and consistent prescriber growth in CIDP. We've also seen consistency in where the patients are coming from. And what I mean by that is 85% to 90% of the patients continue to be switched from IVIG or subcutaneous IG to VYVGART. And that's exactly in line with where we thought we would be at this moment in the launch and with the 12,000 in Japan. So we think we have a long way to go in terms of our growth. We're just at the start of the growth trajectory with the CIDP launch. And certainly, PFS will be a strong driver of that continued expansion as we continue to launch PFS through the year.

Operator, Operator

Your next question comes from the line of Victor Floch from BNP Paribas.

Victor Floch, Analyst

Great. There has been significant attention on the price effects of the PFS ramp-up related to the Part D product. However, it would be beneficial if you could share your expectations regarding the incremental volume associated with the PFS opportunity. You've mentioned that you're not pursuing a conversion strategy, and that you're looking to bring in new patients. Currently, we are focused on the pricing implications, but what are your expectations for volume growth linked to the PFS? As for my follow-up question, it's related to the seronegative Phase III trial. Investors have noticed there appears to be little news flow anticipated for the rest of the year. The Phase III trial for seronegative patients may be regarded as a certainty for some, but it would be helpful if you could discuss the potential for incremental volume and sales there. Growing the addressable market from 80% to 100% of patients is significant, even though I agree that the risk seems low. Any insights on the volume would be greatly appreciated.

Karen Massey, Chief Operating Officer

Yes. Thanks for the question. I'll take the first one, and I think Tim will take the second. So I would say, we're confident about PFS driving significant volume growth both for MG and CIDP. I would say we got the optimal label, and I would like to say huge congratulations to the team. I mean when you look at 20 to 30 second injection time, no specific monitoring or training requirements, these are all features, but the benefit that we see and that we hear from patients are that they are completely free from the office. We hear that they're excited. You heard in the script that patients are describing this as a game changer in terms of managing their MG and CIDP. So as you said, this is a market expansion opportunity for us. What we're seeing in the early data is that 50% of the PFS prescription is new to VYVGART patients. So they're not converted; rather, they're overall new to VYVGART, and that's exactly in line with this market expansion strategy. So if you zoom out, what we're looking to do in both MG and CIDP is bringing new innovation and patient-centric innovation to the market. And we're seeing this exactly in PFS, and that's what's going to drive the long-term growth trajectory for both of those indications. And then maybe further seronegative and the news flow, Tim, do you want to take that?

Tim Van Hauwermeiren, Chief Executive Officer

Yeah. I think Victor, you're right, calling out the news flow for this year, which I think is strong with 1 Phase III readout and 3 Phase II readouts. This company is in a strong position from a news flow point of view. So the Phase III readout in seronegative myasthenia, the Phase II in lupus nephritis for efgartigimod, the Phase II in delayed graft function for empasiprubart, and then the Phase II proof-of-concept in CMS for 119; the first clinical readout for our third asset. Specifically on seronegative MG, I think we are very excited about the opportunity in front of us. You have to think about 15% of the overall MG patient population, which falls in the seronegative basket. We do know from Japan that we have seronegatives on label that VYVGART is offering the same benefit risk profile to seronegative patients as it does to the acetylcholine receptor antibody patients. So very strong performance. Now it's all about the design of the experiments. We have been learning and triangulating with the FDA on the endpoint for this clinical trial. We think it's a solid clinical trial, and we feel very strong about the opportunity in front of us. Let me end by calling out our excitement about ocular MG, which I think is equally in size and unmet medical needs. So the opportunity would be equal in ocular MG as in seronegative MG.

Operator, Operator

Your next question comes from Tom Smith from Leerink Partners.

Nat Charoensook, Analyst

This is Nat Charoensook on for Tom Smith. So following the approval of pre-filled syringe, what's your expectation on the split among uses of the 3 product presentations of VYVGART including VYVGART subcu, Hytrulo and pre-filled syringe in MG and CIDP? And similarly, how do you expect the payer mix to evolve following the...

Karen Massey, Chief Operating Officer

Thanks for the question. With the launch of Hytrulo, we are already seeing most of the growth in new patients for MG and CIDP coming from Hytrulo. This is happening despite the butterfly execution, and we anticipate that this trend will continue and even accelerate with the introduction of the pre-filled syringe. Feedback from the market indicates strong excitement, and having a pre-filled syringe available for self-injection is truly a game changer for patients. We believe this will become an increasingly significant part of the market. Karl, would you like to address the question about the payer mix? As we've mentioned before, it's currently a 50-50 split between commercial and Medicare, and we don’t expect that to change significantly.

Karl Gubitz, Chief Financial Officer

Yes. No. I mean, I think that is what it is today, and I'm not expecting changes. We'll keep giving you updates if it does.

Operator, Operator

Your next question comes from the line of Akash Tewari from Jefferies.

Amy Li, Analyst

This is Amy on for Akash. So one, is your fill finish and better considered substantially transformative? And if needed, how quickly could you move that into the U.S. And then just a theoretical question on MFN. What mitigation measures could you potentially employ? Could you price your PFS differently ex U.S.? It's a different product code? And would you consider pulling some of the other formulations?

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Amy, for your questions. Regarding substantial transformation, I suggest looking at the drug substance manufacturing which is occurring in the U.S. Additionally, Karl has already mentioned that we are well-positioned from an MFN standpoint because we have been disciplined in maintaining prices within a narrow range globally in our key markets. Therefore, let's avoid speculation. However, I believe we have strong advantages to handle whatever the future may hold on these two fronts.

Operator, Operator

Your next question comes from the line of Charles Pitman-King from Barclays.

Charles Pitman-King, Analyst

I have a question regarding the movements in Part B and Part D. Could you provide more insight into the actual price difference between Part B and Part D patients in the first quarter? That information would be very helpful. Additionally, considering the future distribution of patients, you mentioned that PFS is expected to make up a larger portion moving forward. However, since you've already noticed a shift of Part B patients to Part D due to the $2,000 co-pay related to the redesign, how do you anticipate IV will grow from this point onward? What should we expect in terms of the future split of the three administration types?

Karl Gubitz, Chief Financial Officer

I mean, at a high level, the difference between the net price for a Part B and Part D would be the 20% incremental rebate which we have to pay and the Part D to CMS patients who are on catastrophic. So that's at a high level difference between the two. In terms of the presentations going forward, remember, we said that in the U.S., we think IV will always continue to be important for the U.S. market. Think of buy and bill customers, physician preference, and so forth. But over time, from where we are today and today, we already have a minority, but we already have Part D patients over time, but the mix will increase, and you're going to see a greater proportion of the patients in Part D.

Operator, Operator

Your next question comes from the line of Myles Minter from William Blair.

Myles Minter, Analyst

Just on VYVGART Hytrulo use in CIDP, I think you mentioned 85% to 90% of those patients were switch patients. Can you just comment on the incidence of CIDP disease worsening when you make that switch? Just wondering if you have any real-world data. I think someone has presented it at AAN.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for the question, Myles. I want to highlight our insightful discussion with Dr. Karam during the AAN panel. It's important to understand that in CIDP, any switch—whether from steroids to immunoglobulins or the VYVGART—comes with the expectation that the patient may relapse. This aligns with findings from IVIg and subcutaneous IG switch studies. The symptom worsening we've observed in the MG trial corresponds with historical data. In practice, this worsening is relatively rare, with low single-digit reports of CIDP worsening. Most physicians are managing this appropriately. It appears that switching to VYVGART one week after the last IVIg dose is effective, and we are working to document this in our Phase IV and switch study to gather evidence on the optimal switching process. Overall, this seems to be a manageable issue in CIDP, and we're navigating it successfully.

Operator, Operator

Your next question comes from the line of Suzanne van Voorthuizen from Kempen.

Suzanne van Voorthuizen, Analyst

This is Suzanne. Could you please elaborate a bit more on how you look at empa relative to VYVGART in CIDP given the pivotal trial for empa is different than what you did for VYVGART. Can you share how are you thinking about the positioning of each product and comment on how the commercial opportunity looks like for each molecule in this indication, perhaps relative to each other?

Tim Van Hauwermeiren, Chief Executive Officer

Thanks, Suzanne. Thanks for being with us and thanks for the great questions. So CIDP is a heterogeneous disease. I think the ADHERE trial, which was the biggest and the highest quality trial ever done in the CIDP space is clearly demonstrating that pathogenic IgGs drive disease at least in about 70%, 75% of the patients. The question is then why do the other patients not respond. There is a suspicion that complement is in play through pathogenic IgM antibodies. And we have pretty strong translational data in hand for EMPA in CIDP. Now we do not want to niche EMPA into kind of refractory setting only; we really want to give this great molecule the fullest chance of success in the CIDP setting. So that's why we have designed the clinical trial, you all see, and let the data speak. I think this is a significant market, a significant opportunity which can harbor multiple innovative molecules to optimally address the patient needs. So let the data speak now. Thank you for the question.

Operator, Operator

Your next question comes from the line of Yatin Suneja from Guggenheim.

Yatin Suneja, Analyst

Could you discuss the penetration you have achieved in the targeted patient population for gMG? In the past, you mentioned seeing quarter-over-quarter growth of $40 million to $50 million in myasthenia gravis. Is that still the case now? How should we view growth specifically in gMG? Also, have you noticed any impact or competition such as CD90 or anything else?

Karen Massey, Chief Operating Officer

Thank you for the question. I always appreciate the opportunity to discuss our growth in myasthenia gravis, especially as we mark 13 quarters since launch and continue to achieve consistent quarter-over-quarter growth. To address your question, we are indeed seeing steady penetration into earlier lines of treatment, as more than 60% of our patients are coming from these earlier stages. The market share for biologics is expanding significantly, with VYVGART leading this growth. We hold the top market share and are increasing it across all major markets. We updated the total addressable market to 60,000 patients, which indicates that we are still in the early phases of the growth curve for myasthenia gravis, despite being 13 quarters post-launch. You can expect ongoing growth in new patient starts, prescriber numbers, and other metrics that correlate with revenue growth. Since launch, we have consistently delivered average growth, and we anticipate this trend will continue.

Tim Van Hauwermeiren, Chief Executive Officer

Yes, Karen. And you can please see that we have broken out of the refractory patient population, right? What it takes to really move first line and lead in the first line is the clean safety profile, which we have demonstrated for the drug. Remember what we said in the prepared remarks, no black box, no need for vaccination, no lapse, no monitoring. That's a very powerful profile to go front line as a biological. And what we see, right, Karen, is that about 60% of the new patients coming on drug comes straight from the orals. And that is where the growth opportunity is in front of us, and we think PFS will continue to fuel that.

Operator, Operator

Our next question is from the line of Andy Chen from Wolfe Research.

Andy Chen, Analyst

And back to the topic of most-favored nation. So Karl, I understand that you talked about a narrow band. And just wondering if that narrow band is less than the 20% discount that you will have to pay on Part D or is it more than the 20%. Just curious if there's a way for you to push your patients to the Part D to minimize exposure just because Part D price cut is less likely than a Part B price cut if most-favored nation comes to play.

Karl Gubitz, Chief Financial Officer

Andy, I prefer not to focus on percentages, but I want to reference the most-favored nations in regard to list prices. In terms of list prices, we are operating within a narrow price band. I don't want to speculate on prices that are significantly lower since we are still in the conceptual phase. So, for now, I think I'll leave it there. Tim, would you like to add anything?

Tim Van Hauwermeiren, Chief Executive Officer

Yes, we're not in the business of pushing patients into certain directions. I think what we're trying to offer is the broadest product offering possible to satisfy the needs of the different patient segments. So I think what you guys are seeing in Q1 is a very strong appetite of patients to move into self-administration at home or product administration at home. That's why this acceleration under Medicare Part D is coming. But guys, this is the force you need in order to spectacularly grow your market. So following the patient demand and satisfying the demand is the best way for growth going forward. And I think you basically see a signal here that patients are eagerly awaiting the PFS.

Operator, Operator

Your next question comes from the line of David Nierengarten from Wedbush Securities.

David Nierengarten, Analyst

I have one question which is, are the dynamics as you see patients getting treated with ocular MG currently? Are those dynamics different from generalized MG and how that might affect your commercialization plans and duration of treatment, things like that in that potential expansion?

Tim Van Hauwermeiren, Chief Executive Officer

Yes, David, we don't want to squeeze you, right? I mean your question is valuable to us. Ocular MG, high unmet medical needs, which we overlooked in the beginning when we were approaching the MG market. It's very debilitating to have ocular MG. There's no ability to work on the screen, drive a car; there is a big social stigma associated with the symptoms, et cetera. So, the truth is that today, the toolbox to treat these patients is even more limited. You would typically see that these patients are being treated with mestinon and a high dose of corticosteroids. We know what the detrimental effects are of high-dose corticosteroids. We know what the detrimental effects are of high-dose corticosteroids used chronically. And we're really on a campaign of steroid tapering. We have a strategic alliance with Steritas. We think the moment has arrived to actually offer these patients a real alternative with the benefit-risk profile of VYVGART. So high unmet need, very limited treatment toolbox and an opportunity to disrupt that treatment paradigm.

Operator, Operator

Your next question comes from the line of Gavin Clark-Gartner from Evercore ISI.

Gavin Clark-Gartner, Analyst

Apologies, but it's one more net price question. For the pre-filled syringe, what are your current assumptions for the number of payer contracts that will include VBAs moving forward, specifically wondering on the CIDP side. I'm wondering if this could offset the gross-to-net a little bit.

Karen Massey, Chief Operating Officer

Yes. So maybe just to start before I hand it over to Karl. To take a step back and remind everyone that our strategy with VYVGART is to provide as broader access as possible to patients. And certainly that we don't want them to be choosing between product presentation based on price. We want them to have access and be able to choose the product presentation that fits into their life. So that's the strategy that we're pursuing. And what we've seen, whether it through the MG launch, the CIDP launch and what we expect with the PFS launch is that our market access team, our experts are getting really good access in place quickly for patients. And we expect that will be the same and the agreements will be signed quickly to get that access in place for pre-filled syringe. But Karl, did you have anything else to add on the details.

Karl Gubitz, Chief Financial Officer

I think it's worth noting that generally, VBAs are less significant in the pharmacy channel compared to the medical channel. Let's leave it at that, and we will negotiate the contracts in the coming weeks.

Operator, Operator

Your next question comes from the line of Samantha Semenkow from Citi.

Samantha Semenkow, Analyst

Another one on CIDP. I'm wondering how has the discontinuation rate in CIDP trended? Are you still seeing physicians giving the majority of patients a 12-week trial? Or has that trended down as they gain more experience with VYVGART in this population?

Karen Massey, Chief Operating Officer

Yes. Thanks for the question. So in terms of CIDP, we are still seeing that doctors are giving that 12-week trial. And what we've seen as the launch has matured is that there has been a little bit of an uptick in discontinuation more towards we'd expect based on the ADHERE trial, but there is still a significant gap. I would say we're below that discontinuation rate. So what we're seeing is patients starting on VYVGART, having a positive experience and staying on VYVGART.

Operator, Operator

Your next question comes from the line of Leland Gershell from Oppenheimer.

Leland Gershell, Analyst

Great. Just 2 from us if we can. Just with respect to the upcoming data from the switch study from IV to VYVGART in CIDP. Just given the dynamics there and the positive launch. Just wondering how critical do you see those data for physicians to effect a switch in their patients. I also want to ask with respect to 119 later this year, we'll see the POC data in CMS. There are a few clinical endpoints being looked at. Just wondering if you have any threshold in mind when you look at those data for taking that program forward in CMS.

Tim Van Hauwermeiren, Chief Executive Officer

Yes. Thank you for the 2 questions. So the significance of the IVIG switch study is very simple. I think the ADHERE trial was a very ambitious trial, but there is only so much you can answer in one clinical trial. So we addressed that this is an Ig-driven disease; we addressed the magnitude of the effects you can show across the board in CIDP patients, but we did not really study in detail the switch dynamic. Remember, patients had to worsen so they could demonstrate active disease before they came on trial. That is a bit of an artificial experimental setting. The Phase IV trial is now investigating a practical question: how do you really switch in IVIg or SCIg patients to VYVGART, a simple trial design. It's a Phase IV, and it's meant to give some practical handle to treating physicians on how to do the switch. So I think it's an important data point. With regards to the 119 molecule, which is very close to my heart, congenital myasthenic syndrome, what we learned about these patients in the natural history study is that they actually look very much like the autoimmune myasthenic patients. There is a very strong fatigability aspect to that disease. Limb-girdle is really affected. So weakness of the shoulders, weakness of the hips. And therefore, we're really testing a menu of endpoints that just test which ones are really, truly capturing the nature of the disease; the classical ADL and QMG measures are in there. And we know what the clinical thresholds are for clinical relevance. So we will be looking through that lens at our patients, and we will inform you, of course, when we have the data in hand. Thank you for the question.

Operator, Operator

Your next question comes from the line of Joel Beatty from Baird.

Joel Beatty, Analyst

Just kind of a longer term one, I know the PFS rollout is just taking place. But have you started turning your attention a little bit now to firming up timelines and strategy regarding the auto-injector?

Karen Massey, Chief Operating Officer

Yes, thank you for the question. I appreciate your focus on the long-term perspective. Our team is continually working not just on the auto-injector but on overall innovations for patients. Regarding the auto-injector, we are progressing with our development plan, and our latest update indicates that we are advancing our understanding of how to produce it at a larger scale. Everything is on schedule, and we are excited about the opportunity to deliver ongoing innovations to patients in the future.

Operator, Operator

And your last question today comes from the line of Xian Deng from UBS.

Xian Deng, Analyst

So really, thank you for the comment on European and U.S. have very similar list price. But just wondering, could you give us some color on the sort of difference in terms of the net price, please? I'm sort of asking in relationship to how should we think about the commercial opportunity for PFS in Europe because on one hand, Europe does have this kind of lack of IV infrastructure compared to the U.S. But then on the other hand, probably, we have probably less net price. So how should we think about that, please?

Karen Massey, Chief Operating Officer

Thank you for the question. To begin with, I would like to emphasize something that Karl mentioned. Regarding our expansion outside the U.S., we have adopted a disciplined strategy to ensure financial sustainability while providing access to patients globally with VYVGART. We feel confident about our net pricing from that standpoint. You are absolutely right that we see a significant opportunity for PFS outside the U.S., particularly due to the hospital dynamics you noted. We have already seen our first patient dosed in Germany. Our experience with the Hytrulo butterfly execution showed a quick shift in Europe, especially among patients transitioning from IV to the butterfly formulation of Hytrulo. We expect this momentum to grow with PFS and will certainly contribute to our ongoing growth globally, beyond the U.S. We are genuinely excited about the PFS opportunity, not only in the U.S. but also globally, with upcoming launches. Thank you for your question.

Operator, Operator

And this concludes today's conference call. Thank you for your participation. You may now disconnect.