Earnings Call Transcript - ARGX Q3 2023

Operator, Operator

Good morning. My name is Ralph, and I will be your conference operator today. I would like to welcome everyone to the call. 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, Vice President, Global Head of Corporate Communications and Investor Relations

Thank you, operator. A press release was issued earlier today with our third quarter 2023 financial results and 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 to Tim.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Beth, and welcome everyone. It is incredible to see what the Argenx team has accomplished this year meticulously delivering on the ambitious plan they laid out in January. We are reaching more and more gMG patients around the world and brought a subcutaneous product to the markets only 18 months after the IV launch. We reported stellar CIDP data and now have a path forward to approval next year. We advanced our pipeline with an important go decision in MMN with empasiprubart and are also keeping our promise to invest in the next generation of exciting preclinical assets, which we will talk about next year. Stepping back, we are working on 13 indications for VYVGART alone, with more slated to begin before 2025. We have accumulated extensive clinical trial experience with our first-in-class FcRn inhibitors and continue to publish and present on this differentiated efficacy and safety profile. All of this is furthering our leadership in the space and broadening our understanding of the potential of VYVGART to change how we view autoimmunity. I would first like to share key highlights from the quarter and then move on to milestones ahead for the remainder of the year. The strength of our launch continues with double-digit growth quarter-over-quarter. Karen will share additional details later in the call. But at a high level, I'm really pleased with where we are today. We continue to hear countless patient stories and testimonials about VYVGART, and this is motivating our teams to drive further growth. We focus our VYVGART expansion goals across three key areas: expanding within the gMG team and paradigm, expanding geographically, and expanding into new indications. First on expanding within gMG, we are already seeing traction with new patients and new prescribers three months into the Hytrulo launch. We are the only gMG treatment that is available as an IV and as a simple subcutaneous injection, both offering a consistently strong clinical benefit. This choice in how and where patients want to be treated will help us move into earlier lines. Looking to our geographic expansion, we received VYVGART approval in Canada, had our first patients in Italy and China, and moved another step closer to bringing Hytrulo to patients in Europe with a positive CHMP opinion, including self-administration on the label. In addition to our commercial success, we achieved a key win for the CIDP community over the quarter and I'm planning ahead for indication expansion. We had a positive meeting with the FDA and can confirm we are on track to file our sBLA before the end of the year. The top-line results from our trial were nothing short of game-changing. This was the largest global clinical trial for CIDP to date and we not only confirmed CIDP as an IgG-mediated disease, but also set a new standard for CIDP trials in the future. Efficacy was apparent across patient subtypes, and we saw approximately 99% roll over into the open-label extension study. Given the high unmet need for safe and effective treatment alternatives, we feel a strong sense of urgency to bring our therapy to CIDP patients as quickly as possible. Therefore, I'm also pleased to tell you that we have notified the FDA of our intention to use our PRV with the CIDP submission. Today I'm speaking to you from the annual conference in Phoenix, Arizona, where the Argenx team is presenting a significant amount of data on VYVGART. We have now treated more than 1400 patients, generating over 1,000 patient years of data across all clinical trials. In MG, we now have almost two years of real-world experience in approximately 6,000 patients. This has provided us confidence in the consistency of the data and a deep understanding of the clinical profile of our Fc fragments, and why the way in which it binds to FcRn can lead to differentiated results. At the conference, we are presenting aggregated data from ADAPT, ADAPT subcut, and the associated open-label extension studies, which extend out beyond three years and 90 treatment cycles. We see that responses are repeatable cycle-over-cycle, and that clinical benefit improvements are of a consistent magnitude. We also see consistent results on minimal symptom expression. In every dataset, we are able to achieve approximately 40% MSE, which is an important part of our value proposition to patients. We also show in our data that patients who achieve MSE have quality of life measurements comparable to healthy populations, which is why we believe this metric should be the goal that physicians seek to attain with their MG patients. Safety continues to be a key differentiator, and we show that across all indications and schedules. Treatment-emergent adverse events are mild to moderate and do not increase with longer exposure. We do not see a reduction in albumin or an increase in cholesterol. The unique clinical profile that we have confirmed with this data can be linked to the unique design of rituximab, which was born out of Dr. Sally Ward’s groundbreaking immunology research on FcRn biology. Since that time, we have generated a new understanding of the role of FcRn beyond a regulator of IgG levels in circulation. We've noted FcRn's importance in the trafficking of antibodies into tissues, and that by binding FcRn our fragment can reach the tissues inside the disease very fast. It is also involved in the autoantigen presentation process, which may explain the data we saw in pemphigus in reducing autoreactive B cells. Lastly, given the natural way in which we bind FcRn, we can uniquely modulate the targets, blocking Argenx from binding, but not degrading FcRn itself into the lysosome for degradation. This has allowed us to select doses and dosing regimens that optimize the clinical benefit of rituximab without having to manage for dose-related adverse events. Our leadership in FcRn presents itself through our business. From the efforts of our commercial and medical affairs teams to the ongoing translation work of our scientists who are rewriting the textbooks of immunology. Looking ahead, we are excited to advance our pipeline with two upcoming Phase 3 read-outs. The first read-out will be the top-line results from our ITP ADVANCE subcutaneous study, followed by our pemphigus ADDRESS read-out around year-end. Let's begin with a high-level overview of Hytrulo in ITP. Our goal for the subcutaneous study is to replicate the Phase 3 IV results, which were recently published in The Lancet. The study had the same design and endpoints. Although we increased enrollment to give ourselves more room for success with a highly refractory patient population. The primary endpoint is challenging, so in terms of the threshold for success, we will focus on the delta between treated and placebo. This endpoint is designed to meet the regulatory requirements, but we will also be looking at the fast onset of action, the IWG score, and safety. The IWG score is what we view as the most clinically meaningful endpoint since it is based on how clinicians make treatment decisions in the real world. ITP patients are often very fit but suffer from fatigue and anxiety due to the risk associated with unexpected bleeding. They typically cycle through multiple treatments, and a trial-and-error approach, including multiple TPOs. What we have learned in our conversations with the ITP medical community is that there is a real need for a new modality to treat ITP, particularly new modalities that come with a favorable safety profile, which is potentially where VYVGART could step in. Next, we can expect to see data from the ADDRESS study in pemphigus around year-end, meaning the data read-out will fall right before or after year-end as we navigate the data analysis and communication around the holiday period. The safety trials for pemphigus were built on the adaptive Phase 2 results, where we saw a fast onset of action with 90% of patients achieving disease control after just one to two infusions and a quick time to see us on a low dose of steroids. In the Phase 3 study, we implemented an official stereotyping protocol, which is integrated into our primary endpoint. Similar to ITP, the primary endpoint is a challenging one, defined as the proportion of patients achieving complete remission on a minimum dose of steroids within 30 weeks. It combines reaching complete clinical remission, tapering to and maintaining a low dose of steroids, and sustaining this for eight weeks. The current standard of care, including steroids and rituximab, offers ample room for a fast, new, durable treatment with few side effects. This will be especially important in a post-COVID setting, now that we have a better understanding of the detriments of long-term immune suppression. In 2024, we have multiple catalysts from our pipeline to look forward to. I'm particularly excited for the MMN top-line results to be shared next year. This is the first indication for our second pipeline product, ENX.PA, and is a very serious disease that fits perfectly within the infrastructure we are building for gMG and CIDP. We also have two upcoming GO/NO GO decisions, first in both pemphigus at the end of this year, and also in myositis, which is expected in the second half of 2024. Phase 2 POTS results are expected in the first quarter of 2024. We have the potential for this to be a sizable opportunity. This is a study where we will learn a lot about the role of IgGs in this growing indication. Sjogren's results are expected to be shared in the first half of 2024. This is an exciting opportunity within rheumatology where we believe strongly in the role of IgGs as a disease driver. Lastly, we are focused on long-term sustainable innovation, and in order to achieve this, we need to invest in the growth of our early-stage pipeline. We have several exciting programs through our IIP, which we will communicate as we get closer to INDs, but we are working from a strong track record of success. Every program in our pipeline, including those that we are developing ourselves and those that are in the hands of others, have all been co-created with top-notch academic collaborators and are grounded in breakthrough immunology innovation. The new programs will also have this characteristic feature of assets from our IIP. I will now turn the call over to Karl.

Karl Gubitz, Chief Financial Officer

Thank you, Tim. Our third quarter 2023 financial results are detailed in the press release from this morning. I will highlight the key points here. The continued momentum of our launch is reflected in your third quarter revenues. We generated $340 million in total revenues, including $329 million in global net product sales and $11 million in collaboration and other revenues. Our revenues include $700,000 in royalty revenues from VYVGART sales in China. Q3 global product net sales of $329 million represents growth of 22% versus Q2. The breakdown is as follows: the U.S. sales is $280 million, Japan $15 million, EMEA $26 million, and China $7 million. It is important to note two points on the VYVGART net product sales. First, in EMEA, net sales include a one-off positive impact of approximately $6 million as a result of a true-up of the German price. Remember that beginning in March, we started to accrue revenue in Germany at the protected negotiated price. The price was finalized in September and that’s what is reflected in the Q3 results. Second, the product net sales to China of $7 million is revenue generated on the supply of commercial vials to our first-party collaborator in China. In the sales of vials, Argenx receives a royalty, which is reflected in the $700,000 mentioned earlier. Our total expenses are $420 million for Q3, resulting in an operating loss of $81 million. We ended the quarter with $3.2 billion in cash, cash equivalents, and current financial assets. This includes the net proceeds of approximately $1.2 billion from the global offering completed in July. I will now turn the call over to Karen, who will provide more detail on the commercial front.

Karen Massey, Chief Operating Officer

Thank you, Karl. I'm really happy with where we are with our VYVGART launch, having rapidly and successfully brought a first-in-class medicine to patients across multiple markets. Today, I will share the details around the current launch dynamics and then highlight the ambitious plan ahead. Our goal is to continue to raise the bar for patients globally in what they can expect from a treatment for their autoimmune disease—changing what well-controlled means, so that they don't have to weigh the trade-offs between efficacy and safety and can experience a low treatment burden that allows them to get back to their lives. Before we discuss the performance over the quarter, I want to state that we have a multi-dimensional growth strategy in place. We have a bold vision for VYVGART, bringing innovative therapy to new patients, expanding our geographic reach, and maximizing the impact of new indications. We have already added Hytrulo to our product suite and continue to develop future product presentations to support our plan to move earlier in the treatment paradigm. Our third-quarter results show that we have now generated an impressive $816 million in net product revenues year-to-date. The majority of these revenues are driven by VYVGART, and there are a number of metrics we have observed that give us confidence in the trajectory of both VYVGART and VYVGART Hytrulo in the U.S. First, we're seeing that VYVGART naive patients comprise the majority of our Hytrulo prescriptions; uptake is not being driven by a switch dynamic but rather by expansion. By providing flexibility in how and where patients receive treatment, we are reaching a broader population, which is what we had hoped for. The initial feedback from doctors on VYVGART Hytrulo has been broadly positive, and they recognize the benefit of the simple 30 to 90-second single injection enabled by the unique Halozyme ENHANZE technology. We continue to make progress shifting into earlier treatment lines, and VYVGART Hytrulo is contributing to this expansion. With physicians, we're focusing not only on expanding our prescriber base but also on driving brand loyalty with our current prescribers. VYVGART Hytrulo is helping with both of these goals, and we're still at the front end of the adoption curve with neurologists. The opportunity before us is extensive. In the U.S., infusion sites are actively working to set up protocols to enable the injections. This takes time, and we're seeing consistent progress. The first Hytrulo payer policies are also being published. So between this and the sites becoming available for treatment and the high level of excitement from physicians and patients, we expect to see this pull through into new patients as well. Overall, we are right where we expect to be. We're on the path towards maintaining the trajectory of our launch, with consistent quarter-over-quarter progress towards reaching more gMG patients globally. Second, in terms of expanding our suite of product presentations, we truly value our first-generation subcutaneous format, but our goal is to continue to innovate on the patient experience with future product presentations as well. Our second-generation subcutaneous product is a prefilled syringe, which is already in development. Our plan for the PFS is to enable self-administration in the U.S., given the simplified experience for patients. We will also aim to advance our PFS product forward for both MG and future indications, including CIDP, in parallel. The approval path includes bioequivalence and human factor studies, as well as stability data. We expect to be able to share more information with you on timing early next year. Thirdly, we're delivering growth by moving into new markets with VYVGART. We're considering both how we expand geographically and how we look to repeat the success of MG in new indications. For our geographic expansion, we are focusing initially on China through our partnership with Zai Lab. After June approval, the first patients began VYVGART treatment during the third quarter. Zai also filed for an approval of subcutaneous efgartigimod, and we expect to hear back on an approval decision next year. We continue to make progress on pricing and reimbursements across the EMEA region and have had very good outcomes so far with our negotiations. For subcutaneous efgartigimod, we received a positive CHMP opinion in September, which was a significant milestone for the region, and notably, the label in EMEA will include self-administration. We also received an approval in Canada during the quarter, and we're planning for a launch before the end of year. Similar to Europe, the pricing and reimbursement discussions with the HCA in Canada have been going very well, and VYVGART has been recognized as better value than other entrenched biologics. This is an important win for patients in Canada. Lastly, regarding indication expansion, we conducted the largest trial ever run in CIDP, and the results were impressive. We are busy preparing for the launch in CIDP next year. As Tim already mentioned, we'll be filing our application with a priority review voucher because we recognize that patients are waiting for new innovation in CIDP. Our priority now is to take those key learnings from the MG launch and apply them to our CIDP strategy while also thinking about where we can expand and improve. We're also investing for the long term, building out our launch capabilities in a very intentional and disciplined way to enable success across multiple indications down the road. It's certainly an exciting time to be at Argenx. I'll now turn the call back to Tim.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Karen. As we conclude, let's come back to where we are today and where we are going. We are leading from a position of strength, delivering on our commitment to bring transformative treatments to as many patients as possible. Through intentional launch strategies and relentless execution, we continue to reach new types of patients in new regions and make clear progress expanding into new indications. As innovators, we're looking forward and are incredibly excited about the opportunity ahead of us to lead what we believe to be one of the biggest drug classes ever. Thank you for your continued support as partners in this mission. I will now turn the call back to the operator.

Operator, Operator

Your first question comes from Yatin Suneja from Guggenheim Partners. Your line is open.

Yatin Suneja, Analyst

Thank you for taking my question. Question on the PV study. Could you maybe talk about what you think you would like to show with regard to the seeming efficacy endpoint? And also, have you disclosed the powering assumption? How should we think about placebo performing? Thank you so much.

Tim Van Hauwermeiren, Chief Executive Officer

Good morning, Yatin. Thank you for joining us on the call today. The FcRn study, which is on track for readouts before the end of the year, we will actually give top-line data in line with how we typically show data. So they will be sufficiently complete and transparent to understand the clinical utility of the medication in this setting. It will center around the primary endpoint where we will assess the delta between active and placebo on the primary endpoint of FcRn, where patients need to achieve complete response on a minimum dose of corticosteroids for at least eight weeks. We will also disclose the key secondary endpoints, which have to do with steroid tapering and speed to disease control, and, of course, importantly, safety. So it will be comprehensive top-line data sets in line with how we have been showing top-line data in all the indications before. We have not disclosed powering assumptions—we never do that—but, by now, you know that we are relatively conservative when it comes to powering the studies. Remember, this is the single biggest FcRn study ever, with 222 patients involved. Thank you for the question.

Operator, Operator

Your next question comes from the line of Tazeen Ahmad from Bank of America. Your line is open.

Tazeen Ahmad, Analyst

Hi, good morning, and thanks for taking my question. Tim, just want to get a sense of how you're thinking about what the uptake of CIDP could look like relative to the very steep uptake you had with gMG and are still having with gMG. Just want to set expectations for that. Thanks.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for being with us today. And thank you for your question on CIDP. Of course, we are delighted with the stellar data that we generated in the CIDP trial. It is fair to say that the trial data put us in a position of strength. I believe Karen is here with me to comment on some initial thoughts regarding the takeoff in CIDP markets. Karen?

Karen Massey, Chief Operating Officer

Yes, thank you, Tim, and thanks for the question. We're certainly excited and getting ready for the approval of CIDP. We're doing the necessary work right now to get a good feel based on the real data we have and the strong data we have to break down the market into segments of neurologists, as well as patients, to really understand how quickly the uptake might be and how we can drive that to be as fast as possible. Based on what we're seeing early on, I wouldn't expect it to be as fast as MG. There is IVIG approved; I think we compete well versus IVIG. However, obviously, there's some loyalty from the neurologists and from the patients in this progressive disease where shifting to a new medicine is something to be deeply considered. So we're working it up, and we're going to do everything that we can. We will leverage all of our learnings from MG, and we'll leverage all of the work we've done on MG to maximize the uptake, but I don't think it will be as fast as we've seen in MG.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Karen. Thank you, Tazeen, for the question.

Operator, Operator

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

Derek Archila, Analyst

Hi, good morning, and thanks for taking the question. And congrats on the progress. Maybe a question for Karen, just in terms of some of the checks that we've done more recently with the positions and really starting to position VYVGART earlier in the line, even as early as first line in MG. Is that something that's consistent with your comments earlier in terms of what you're seeing? And again, how do you kind of navigate the payers if that is the case? Thanks.

Karen Massey, Chief Operating Officer

Yes, absolutely. Thanks for the question. That is consistent with what we're seeing and what our strategy is, where we think we can provide the most value. We're seeing a consistent movement since launch into earlier lines in the treatment paradigm. As neurologists get more comfortable with VYVGART, more confident in the safety profile in particular, they’re really seeing the benefit for patients. Certainly, from a payer perspective related to that part of your question, we're not seeing any challenges to date; we have broad access in the U.S. And, obviously, we're securing pricing and reimbursement across Europe very successfully. So the value of VYVGART, including in earlier lines, is really being recognized.

Tim Van Hauwermeiren, Chief Executive Officer

Most of the state policies actually stipulate that VYVGART can be used either straight after Mestinon or Mestinon with steroids, or Mestinon with steroids with one IST. So there is actually a natural positioning to move upstream in the treatment paradigm. This is the dynamic we had hoped for, and which is happening, but it's happening in its own cadence, which is going to take time. Thank you for the question.

Operator, Operator

Your next question comes from the line of Thomas Smith from Leerink Partners. Your line is open.

Thomas Smith, Analyst

Hi, guys, good morning. Thanks for taking our questions. And congrats on the progress in the quarter. Just on the timing for the bullous pemphigoid GO/NO GO decision, can you comment on what's driving the accelerated timing there? Is that faster than expected enrollment? Or is there some triangulating of this readout with the availability of Phase 3 pemphigus data? Or is there some other factors we should be considering there? Thanks.

Tim Van Hauwermeiren, Chief Executive Officer

Thanks for the question, Thomas. The bullous pemphigoid study is a seamless Phase 2, Phase 3 study where we derive sufficient confidence from the pemphigus data to venture into this trial design. The 40 patients GO/NO GO decision points—20 patients on active, 20 patients on placebo—is actually on time and will give us an indicator event that will guide us to continue to scale this trial into the Phase 3 part of the study, similar to CIDP. So I'm very happy with the performance of the team. Again, this is a significant recruitment effort, and we're on track to show you the data as planned. Thank you for the question.

Operator, Operator

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

James Gordon, Analyst

Hello, James Gordon, JPMorgan. Thanks for taking the question. Two questions on the PV and the ADDRESS trial, please. The first one is just the timing. So the transition of clinical trials having completed the primary on, I think it was August 22. So just in terms of further steps needed before you can reveal the headline results and what has been the cause of the slight delay announced today because it sounds like now we might not get the data, at least the headline data, until early 2024. So why has there been that slight delay? And then the follow-up question was just also on the same trial. Just understand there's some significant differences with reduction in terms of how quickly the drug has efficacy come on, and then maybe also to steroid tapering. So do you think that the pemphigus results from rituximab, where there was about a 30 percentage point placebo benefit, is a relevant comparison? Or is a smaller benefit than that still competitive? How should we think about that, please?

Tim Van Hauwermeiren, Chief Executive Officer

James, thank you for being with us today, and thank you for your questions regarding pemphigus. This is certainly an exciting indication and a very ambitious trial design. There is no delay in the pemphigus study. Remember, when the study is fully enrolled, there is a substantial amount of time involved in follow-up of the patients. We are assessing whether we can push patients into complete remission within a 30-week timeframe, and then actually rolling over into the open-label extension study where we continue to collect data, which will be important for top-line data readouts. In terms of comparing to the pemphigus trial, I would strongly advise against it. These are molecules with totally different modes of action, and therefore the trial designs are completely different. The pemphigus endpoint was taken at a totally different time point. It has its own particular steroid tapering protocol in the background; we work with ours, which is specific. So I would not really compare the two. It's a totally different situation. What we're looking for, for such stringent endpoints, is CRM for at least eight weeks within a 30-week timeframe. That's a statistically meaningful separation between active and placebo, essentially defining our primary endpoint. Then in the secondary endpoints, we will unpack the clinical utility of the drug in more detail by looking at the speed to disease control, the amount of steroid tapering we can achieve. We will also look at the pemphigus patients, which is a subset of the study. We will also look at whether we can actually push people into complete remission as part of the open-label extension study. Very exciting, very bold endpoints, which could represent a game-changer in the pemphigus space. Thank you for the question.

Operator, Operator

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

Amy Li, Analyst

Hi, this is Amy on Akash. Thanks so much for taking our question. So one on PV. How do you expect the more severe patients in Phase 3 to impact FcRn? Additionally, do you need the cell drop to have sustained remission? Or do you consider this as more of a bridge to rituximab? Thanks so much.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for these two excellent questions. So first of all, we do not see any difference between moderate and more severe patients in the ability to respond to the VYVGART. Remember, we had both on trial in Phase 2; it's true that in Phase 3, we're recording a somewhat more severe patient population, but we had them in Phase 2, and they have an equal right to respond equally fast and equally deep and equally durable to VYVGART as the milder patients. So there's no real differentiation there. Regarding the positioning of the product, and you're correct in calling out that we may be able to go faster to steroid tapering, which is something patients need. You cannot keep these patients on high doses of steroids for too long. We had this beautiful publication where we started to unravel the biology behind the durable clinical responses we have seen in Phase 2, as we tried to set in the prepared notes. FcRn is much more than just a receptor involved in IVIG homeostasis; it is also involved in all the antigen presentation. We see not only a sustained reduction in autoantibodies but also a sustained reduction in autoreactive B cells in our findings, which basically means that VYVGART is disease-modifying and has the ability to either postpone or completely replace rituximab. Thank you for the question.

Operator, Operator

Your next question comes from the line of Danielle Brill from Raymond James. Your line is open.

Danielle Brill, Analyst

Hi, guys. Good morning. Thanks for the question. I also have a question on PV. Sort of a follow-up. I'm curious what endpoints you think will dictate VYVGART's rank in the treatment algorithm? Specifically, and what do you think it needs to show to leapfrog rituximab? And then how should we think about potential recruits to BP? Thank you.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Danielle, for the questions. Of course, we have to be careful and wait for the Phase 3 data, because they will ultimately dictate whether we achieve a drug-induced indication and how to position VYVGART within the pemphigus treatment paradigm. We did extensive work with the community, both physicians and patients; actually, the entire global physician community is surrounding this trial. We have been doing extensive work with the patient advocacy group, and what patients need is a fast response. They want to see stopping the formation of lesions and closing of lesions as fast as possible. They also want to taper steroids as quickly as they can; they dislike steroids. So, if we can repeat the Phase 2 data in terms of a quick onset of action—we saw 90% of patients in Phase 2 achieve disease control within the first two weeks—and then keep them in a low disease activity, in a state of complete remission, whilst tapering the steroids, I believe this will position VYVGART very well within the pemphigus treatment paradigm. But let's not get ahead of ourselves; we need to wait for these data. Thank you.

Operator, Operator

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

Yaron Werber, Analyst

Great. Thanks for including me and congrats on another great quarter. So a quick—also questions from me for the ADDRESS study. The studies are including both naive and experienced patients. If you look at the rituximab studies, the placebo varied between a 10% and a 28% response rate. A lot of the KOLs are discussing a 30% to 40% delta. That was easily achieved. If you look at your CRA from the Phase 2, with the optimal dosing, can you give us a sense of this study's placebo? Is that 10% to 28% relevant at all, or do you think it will be even lower due to the tightness of the endpoint? And are you expecting a 50/50 split between naive and experienced patients in the study? Thank you.

Tim Van Hauwermeiren, Chief Executive Officer

Thank you, Yaron. From a patient population point of view, we expect the real-world population, which means that the majority of the patients will have been on therapy, with maybe some naive patients in there as well. I would caution against extrapolating from rituximab trials in terms of endpoints, which are different duration of treatment, different background tapering protocols, and therefore placebo behavior in that trial cannot be extrapolated into our trial. The way we designed the primary endpoint is to minimize any placebo response in this 30-week trial. So, let's not make assumptions on similar placebo responses or deltas between active and placebo. This is its own unique trial design. We would be very happy to see a statistically significant delta emerge between the placebo arm and the active; it's a very aggressive endpoint. Thank you for the question.

Operator, Operator

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

Myles Minter, Analyst

Hi, thanks for taking the question. I think I was on previously and actually announced some data showing that they can get a 10 ml auto injector in about a 30-second injection time. I know you're advancing a prefilled syringe version of VYVGART Hytrulo, and that's in development. Could you update us on that next year? Would that also potentially mean you'd introduce an auto injector solution based on that? Thank you.

Tim Van Hauwermeiren, Chief Executive Officer

No, thank you for the question, Myles. If anything, it just shows the power of the enhanced technology from Halozyme. It underscores again how important this technology is to win in the subcutaneous setting. We're very happy to have the exclusive license to the technology, which positions us in a position of strength. We're the only product out there, which can deliver a single subcutaneous injection with this volume of products. An auto-injector, of course, is in the works. As you know, Argenx is always planning for multiple steps ahead. So, we’re really feeling a sense of urgency to launch this first-generation subcu product ASAP because patients are waiting. We're already working on the prefilled syringe and we have also publicized that we are working on an auto-injector as a third generation. The data from Halozyme are looking very positive, and they underscore the power of the Halozyme technology to improve the patient experience. We will have more news on that next year. Thank you.

Operator, Operator

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

Joel Beatty, Analyst

Hi, thanks for taking the question. For the post-COVID pops data in Q1, what would be good data? And could good data that will support further development of other settings?

Tim Van Hauwermeiren, Chief Executive Officer

Yes, this is an excellent question. This is one of the few indications where we actually need to go for signal finding first. I think there's a strong hypothesis delivered to us by the key opinion leaders in post-COVID pops that this is IgG-mediated. We need to establish a firm signal in what is a true Phase 2 trial in post-COVID pops, before we can think about venturing into the Phase 3 trials. We will be looking at the totality of data, and see the conviction that it is truly IgG mediated. So we have some fundamental answers to be given before we can go into Phase 3. We believe that post-COVID pops is not different from regular pops based on the data we have seen. But the experiment is ongoing, and we need to show the data now. Thank you for the question.

Operator, Operator

Your next question comes from the line of Alex Thompson from Stifel. Your line is open.

Alex Thompson, Analyst

Hi, thanks for taking my question. I guess a question for Karl. How should we think about the net price per patient for VYVGART now in Europe, since we have the final German price? How should we think about modeling that moving forward? Thanks.

Karl Gubitz, Chief Financial Officer

Thank you, Alex. As a reminder, we launched in September '22, and we got the final price in August '23. We're very pleased with the outcome, as it recognized the clinical benefit. This resulted in the $6 million true-up reflected earlier. Our European business, of course, is largely Germany. I must mention that in Germany, orphan drugs are subjected to a full AMNOG process, so we will renegotiate if our annual revenue exceeds $30 million. We have now exceeded that threshold. Basically, what I'm saying is that we will go back and renegotiate again. So we expect that price to drop during 2024. That said, we are pleased to have a strong commercial performance which resulted in the current invoice, and we are pleased with our partnership. We look forward to continuing discussions. For planning purposes, you have to assume that the European price will be lower than the U.S. price. Thank you.

Operator, Operator

Your next question comes from the line of Allison Bratzel from Piper Sandler. Your line is open.

Allison Bratzel, Analyst

Hi, good morning. Thanks for taking my question. Congrats on all the progress. Just one for you on the early experience with VYVGART Hytrulo. I know it’s early days in the launch, but just curious if we have any insight regarding the profile of early adopters of the subcu format. Is initial uptake concentrated among neurologists who are already heavy prescribers of IV VYVGART? Or what are you seeing there? And then, I know you indicated that the low uptake is primarily among VYVGART naive patients so far, but as Hytrulo coverage policies are put into place, could you walk us through what you would expect the major barriers preventing a patient from switching from IV to subcu to be? And then, just a point of clarification. I think you talked about $7 million in product sales to Zai Lab. Was that commercial supply related? Could you confirm that and how we should think about modeling that this quarter and going forward? Thanks.

Tim Van Hauwermeiren, Chief Executive Officer

Thanks, Allison. I'll let Karl address the question about the transfer of goods to Zai Lab in China soon. But maybe Karen, could you discuss the Hytrulo launch dynamics and patient profiles?

Karen Massey, Chief Operating Officer

Yes, absolutely. Thanks for the question. We're really excited about where we are with the Hytrulo launch. I would say we are getting positive feedback from both neurologists and patients. As you noted, payer policies are now going into place, and they broadly reflect IV policies. The market is responding well to this innovation. The majority of patients we’re seeing are naive patients, which means we're expanding the patient pool considering Hytrulo. We are adding new prescribers with Hytrulo as well. If you go back to what we've discussed, we have a very intentional and consistent approach to VYVGART to keep expanding quarter-over-quarter with prescribers experienced with VYVGART and VYVGART Hytrulo, and expanding the patient pool. We're getting very positive feedback. It has taken a little while for some of the logistics to be set up—some of the infusion sites need to establish new protocols for injections. But we're seeing that coming online now, and those injection sites are seeing the value of VYVGART. Also, don't forget that we do get self-administration in the EU and Japan for Hytrulo, or subcutaneous VYVGART. We're pleased with that as well.

Tim Van Hauwermeiren, Chief Executive Officer

Karl, could you address the second question?

Karl Gubitz, Chief Financial Officer

Yes, Allison. The $7 million we've sold to China is to Zai Lab. This is essentially stocking the country. This is inventory now sitting in the Zai Lab warehouses. The same amount, the $7 million is included in revenues and in cost of sales. We only, of course, get our share of that in royalties, which is about $700,000 mentioned previously and listed under other revenues. From a planning perspective, please exclude it as revenue and cost per sale, as it is at zero profit. Periodically, we will have to supply the China market, but we will be transparent about that. I suggest excluding it for planning purposes. Thank you.

Operator, Operator

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

Vikram Purohit, Analyst

Hi, good morning. Thanks for taking our questions. We have two regarding the potential impact of competition in MG. So first, what sort of impact have you seen at this point, if any, on physician views towards VYVGART and treatment options in MG more broadly in the past few months given the approval of the competing therapy from UCB? And how is the messaging regarding VYVGART potentially changing in response to competition? And the second, given that there are additional treatments in development for MG, we are curious to understand your perspective on how you think the market settles out over the coming years, and which factors you think are going to drive patient preferences and prescriber preferences towards one treatment choice or presentation versus another, as the number of moving parts in the marketplace potentially increases in the coming years. Thanks.

Tim Van Hauwermeiren, Chief Executive Officer

Thanks Vikram. I will hand over these two questions to Karen.

Karen Massey, Chief Operating Officer

Yes, thanks for the questions. The way we think about this in the MG market is still quite immature. There's a lot of competition and innovation coming to the market over the coming months and years. We see that as a good thing. Innovation is great for patients. The real competition we face is inertia; there’s an assumption that patients are well controlled with therapies from decades ago that simply aren't the case. From my perspective, more innovation addresses that inertia and expands the market over time. We've discussed this before; it may resemble developments in the MS market. What you see is an expansion in treatment rates, diagnosis rates, and improved outcomes for patients. So we see the market expanding, and within that, I think VYVGART is really well positioned. We have a first-in-class molecule with fragment technology. That strength comes through in the efficacy of clinical trials but also in the real-world performance we are seeing. The safety profile continues to hold, and we focus on treatment burden reduction. We started with infusion therapy, but with Hytrulo, we’ve decoupled patients from the infusion chair, and Tim spoke earlier about our continued innovation as we think about PFS and auto-injectors. As the markets expand, we believe VYVGART is incredibly well positioned, and we will continue to be intentional and disciplined in investing for growth.

Operator, Operator

Your next question comes from the line of Manos Mastorakis from Deutsche Bank. Your line is open.

Manos Mastorakis, Analyst

Hi, thank you for taking my question. Just a quick follow-up on CIDP and potential ITP launch in terms of sales force planning and expansion. Can you help us understand whether the new sales force will be required with different types of expertise? And what numbers are you looking to have deployed, at least in the U.S.? In other words, what will be the respective contribution of MG, ITP, and CIDP to the overall sales force? And then secondly, for indications such as bullous pemphigoid, where potential competition could be much cheaper—for example, dupixent, which could be a lot more cost-effective than what is currently available—how do you think about positioning and pricing?

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for these two questions. I suggest Karen take question one, and then we'll address the bullous pemphigoid question.

Karen Massey, Chief Operating Officer

Yes, certainly happy to. So, I'll start with the MG growth strategy. We are investing for growth; as we think about the opportunity in MG being larger than we thought. Obviously, the opportunity with CIDP based on the strength of that data is also significant, and we'll see where ITP, included, and PV fall out. Without getting into specifics right now, generally speaking, we’re effectively leveraging the field force and all of the infrastructure that we built for MG, and we're looking to invest for growth as we proceed. We'll share more details on this over the coming months, but the goal is to maximize opportunity value from VYVGART in the coming years.

Tim Van Hauwermeiren, Chief Executive Officer

And regarding the BP question, we aren't in a different situation than we are in the other indications. However, it is true there are other medications out there that can be done at a cheaper price. The question is, of course, what value they provide. Bullous pemphigoid is a very difficult disease, and there is actually very little competitive activity in the development space at the moment. Just like pemphigus, this is an IgG-driven disease, and by hitting the disease where it matters, we can have a dramatic impact on these patients. Let’s start with the clinical benefits we can demonstrate for these patients to derive the value, because it will ultimately come down to what value we offer. Let’s wait for the data, but if everything goes well, we will be in a very strong position to significantly improve the quality of life for these patients, while also extracting appropriate value. Thank you for the question.

Operator, Operator

Your next question comes from the line of Douglas Tsao from H.C. Wainwright. Your line is open.

Douglas Tsao, Analyst

Good morning. Sorry about that. Thanks for taking the questions. I'm curious, in terms of the early launch of Hytrulo, you've mentioned that it is largely patients who had not switched to new therapy. I'm curious what was holding them back? Was it prescribers getting to these patients, or for some of these patients, not being willing to pursue treatment with the IV option?

Karen Massey, Chief Operating Officer

Yes, thanks for the question. I don't think there was anything specifically holding them back, necessarily. We are in the early stages of the adoption curve for VYVGART even at seven quarters in. The introduction of VYVGART Hytrulo has opened the door for new prescribers, who might not have considered VYVGART before. We have a DTC campaign highlighting Hytrulo, presenting an option for patients who might have felt that IV was intended only for a more severe disease. This variability has opened up different patient options. Overall, I would say the trajectory of the launch is just based on prescribers and patients getting more experience with VYVGART and witnessing the impact on their quality of life. The safety profile continues to remain strong, and the introduction of two routes of administration bodes well for future growth.

Operator, Operator

Your next question comes from the line of Joon Lee with Truist Securities. Your line is open.

Joon Lee, Analyst

Hi. Congrats on the strong quarter and thanks for taking our questions. I missed this, but are you still on track to start the trial by year-end? It doesn't seem to be mentioned in the press release. Thank you.

Tim Van Hauwermeiren, Chief Executive Officer

Hi Joon, thank you for the question. Yes, we are on track. We’ve maintained alignment with all of the clinical milestones we had committed to at the beginning of the year. I am very proud of the execution power of the team. We have a great deal of work ahead, but these are all very exciting indications. Thank you for the question.

Operator, Operator

Your next question comes from the line of Suzanne van Voorthuizen from VLK. Your line is open.

Suzanne van Voorthuizen, Analyst

Hi, Tim. Thank you for taking my question. It’s more of a long-term view, but I wanted to ask your thoughts on the recent developments where CAR T players are moving into autoimmunity, seeking to potentially cure lupus, but also moving into indications similar to argenx such as myositis. Could you elaborate on this development? What are your thoughts on this potential future modality versus VYVGART? Any considerations that you believe are relevant?

Tim Van Hauwermeiren, Chief Executive Officer

Hi Suzanne, and thank you for your question. Yes, we are watching all sorts of innovation coming into the autoimmune space. I think it is an exciting time to be in autoimmunity these days, with various modalities emerging. We are looking at CAR T technology, but to be fair and honest, we need more data. We’ve seen some early sets of data regarding sleepy patients. Ultimately, we need to wait and see how these CAR T data develop as they study different indications. Everyone will focus on the durability of the clinical response expected with this type of technology, as it is still early days. Our ambition in autoimmunity, as Karen explained earlier in the call, is not to wait with expensive innovations until patients reach the last line, but to move forward with affordable innovations early in the treatment paradigms. Our goal is to address the disease at its core, aiming to prevent the progression to severe, refractory patients where almost nothing works anymore. That is our mission in autoimmunity: to bring innovation as early as possible in the treatment paradigm, to mitigate disease progression and avoid patients reaching that final stage.

Operator, Operator

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

Samantha Semenkow, Analyst

Hi, good morning. Thanks for taking the questions. Just a couple of follow-up questions for me. Should we expect both the pemphigus and bullous pemphigoid data to be read out at the same time, or is the guidance simply that they will be read out near each other around year-end? And then for pemphigus, when we look at the Phase 2 data, about 20% of the patients seem to have achieved CRM as the main endpoint within the 30-week timeframe. Recognizing that the dosing schedule is different in Phase 2 than it is in Phase 3, how should we think about that translating into the readout for the ADDRESS study? Is that 20% around where you expect the bar, or would you expect it to be different?

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for both questions, Samantha. From a timing point of view, we aren’t going to get more granular than what we have disclosed publicly. We need to allow teams to navigate the Christmas period and complete a thorough data analysis. Then, we can share the data publicly. They will be close together. Regarding extrapolating from pemphigoid Phase 2 to Phase 3, remember that the objective of Phase 2 was distinct. This is the only indication where we studied monotherapy of VYVGART, rather than in combination therapy at different doses and dosing regimens with low doses of steroids. Therefore, you cannot simply look at numbers. In Phase 2, we aimed to fine-tune the dose, dosing regimen, and the ideal combinations with steroids, and then take that ideal combination into Phase 3. We have tested the ideal combination with quite spectacular results, but it was a relatively small patient number. That’s why we are now conducting the proper Phase 3 experiment. Thank you for the questions.

Operator, Operator

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

Rajan Sharma, Analyst

Hi, thanks for taking my question. To follow up on the question on competition, could you share your perspectives on early data from the immune advanced second-generation FcRn antibody? I realize it’s still early, but it would be helpful to get your thoughts on that. Specifically, how important do you think an incremental reduction in IgG is in driving clinical outcomes? Given the immune events, have the clear indications they are targeting initially, does that change your thoughts on the additional indications you may target with VYVGART or how quickly you may pursue those?

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for the question. It’s very difficult to comment on someone else’s data, especially when it's early Phase 1 data. I would invite you to study the Phase 1 data of VYVGART and the Phase 2 dose-finding data of VYVGART to compare and contrast. Our task as the leader in the space is to effectively take what we think is a phenomenal antagonist and move it into areas of high unmet medical needs, while continuing to pioneer the understanding of FcRn biology. I must advise caution in this call when comparing VYVGART data with other molecules. VYVGART has a distinctly different molecular design with different properties. We need to wait for Phase 2 data before any comparisons can be made. We will continue to focus on the pioneering role that we have and we will sharply focus on meeting patient needs. Thank you.

Operator, Operator

And we have time for one more question. Your final question comes from the line of Charles Pitman from Barclays. Your line is open.

Charles Pitman, Analyst

Hi, guys. Thanks very much for taking my question. Just quickly on bullous, can you clarify what it is that you're specifically looking for on the GO/NO GO decision? And to what degree will the expected readout of pemphigus VYVGART help you in terms of setting up the ongoing trial design post the GO/NO GO decision? To what degree is that design still adaptive to your impending learnings?

Tim Van Hauwermeiren, Chief Executive Officer

Thank you for the question. You're right in your assumption that the GO/NO GO decision point would still allow us to tweak certain aspects of the trial, such as sample size and powering. This is a very demanding endpoint. It's different than in pemphigus. In the pemphigus study, the endpoint is complete response on a minimum dose of steroids for at least eight weeks. In bullous pemphigoid, the endpoint is even tougher; it is a complete response from steroids. The GO/NO GO decision point allows us to gather early visibility on the achievability of this primary endpoint, enabling us to refine and adjust the study design as needed. That is the essence of the GO/NO GO decision point. Thank you for your question.

Operator, Operator

And ladies and gentlemen, this does conclude today's conference call. We thank you for your participation, and you may now disconnect.