Earnings Call Transcript - ARGX Q2 2024

Operator, Operator

Good morning. My name is Adra and I will be your conference operator today. At this time, I would like to welcome everyone to the argenx Second Quarter 2024 Financial Results Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time, I would like to turn the conference over to Investor Relations, Beth DelGiacco. Please go ahead.

Beth DelGiacco, Investor Relations

Thank you. A press release was issued earlier today with our half-year 2024 financial results and second-quarter 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 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, CEO

Thank you, Beth, and welcome, everyone. I'll begin on Slide 3. Last week, many of you joined us for our R&D Day, where we laid out an ambitious vision for 2030 and shared a comprehensive overview of the growth opportunities ahead in our deal to achieve this vision. We are in a very strong position today to generate substantial value across our business, investing in our internal innovation engine, executing on our differentiated asset pipeline, and building on the commercial success we have achieved in our first 10 quarters since launch. This is a team that delivers on our innovation mission time and time again and is focused on our goal to transform autoimmunity and reach 50,000 patients globally. Given the recency of this update, we will aim to keep our prepared remarks brief and focus primarily on the second-quarter dynamics. But first, I'd like to highlight key themes that emerged from the R&D Day in the context of our 2030 Vision. Slide 4. The first theme is around how we innovate, centered on a model of co-creation. This model has been core to our growth since our founding and still exists in the most obvious form today with our immunology innovation program. We have a strong history of success in building out our differentiated pipeline, including eight out of 12 molecules that demonstrated human proof of concept and nine that are first-in-class targets. We have no shortage of opportunity in identifying novel targets and believe our overall approach sets us up to drive continued pipeline expansion for years to come. The second theme is the new standard we are starting with FitGard in MG. We are currently leading in advanced biologics in MG and have delivered 10 consistent quarters of growth since our initial launch. We are making excellent progress across all key indicators and are exactly in line with our internal long-term thinking for the MG marketplace. We think this represents a significant opportunity, and we have a strategic plan to reach more patients as we move into earlier lines of treatment and broaden to new populations through label-enabling studies in Seronegative and Ocular MG patients. We will use the same playbook for CIDP and are happy with the early days of the launch. We've got the best possible label, which puts us in a strong position for continued growth as we work to ensure access. Third, we laid out our next wave of indications and expect to initiate four new registrational trials this year across VYVGART and Empasiprubart. We set the bar high with a medicine like VYVGART, which we introduced at R&D Day, to further spotlight Empasiprubart. This is a second pipeline product opportunity, and we were able to show phenomenal patient data in MMN, which we see as the first of many indications where we hope to drive transformational impact. Slide 5. The progress we have made across our business over the quarter moves us another step closer towards achieving our 2030 Vision to bring five molecules to Phase 3, advance our late-stage pipeline to 10 labeled indications across our molecules, and ultimately to have 50,000 patients on an argenx medicine by 2030. One ambitious, but we believe we are well positioned to deliver on this goal with a continuum of innovation from discovery all the way to commercial. Underpinning our incredible success to date is the strong financial health of our business, which will enable us to continue delivering on our innovation mission, ultimately driving value for our patients and our shareholders. With that, I would like to turn over the call to Karl.

Karl Gubitz, CFO

Thank you, Tim. The second quarter 2024 financial results are detailed in the press release from this morning. Total operating income in the second quarter is $489 million. This reflects $478 million in product net sales and $12 million in other operating income. In the second quarter, the $478 million in product net sales is attributed solely to MG patients. We received the CIDP approval on June 21st, and our teams were immediately in action the next day. It takes time at the start of a launch to get patients through the funnel from prescription to injection. So the first CIDP revenue will be a third-quarter event. Product net sales of $478 million represent a 20% growth quarter-over-quarter compared to Q1 2024, which is typically more challenging due to insurance re-verifications and loss of shipping days related to holidays. The product revenue breakdown by region is $407 million in the U.S., $20 million in Japan, $35 million in EMEA, and $14 million from products supplied to Zai Lab in China. Operating expenses in Q2 were $535 million, an increase of $29 million compared to Q1 2024. SG&A expenses were $256 million in Q2, an increase of $20 million compared to Q1. The increase reflects a full quarter impact of the expansion of a customer-facing organization in the U.S. as well as incremental expenses to prepare for the CIDP launch. R&D expenses on the continued investment in our pipeline were $225 million in the second quarter, broadly in line with the previous quarter. The operating loss for the quarter was $45 million, offset by financial income of $30 million and a tax benefit of $44 million. The tax benefit is a result of a deferred tax asset recognized in our U.S. legal entity due to intra-group inventory movements. It is a temporary timing difference and will reverse in future quarters. Overall, we saw a net profit for the quarter of $29 million and earnings per share of $0.49. It is important to note that the net profit was primarily driven by the recognition of a deferred tax asset, and we still had an operating loss for the quarter of $45 million. We are on a clear path to profitability, but we are not there yet. We continue to have a strong balance sheet with $3.1 billion in cash. Based on our year-to-date cash burn of $77 million, we are updating our 2024 cash burn guidance from approximately $500 million to less than $500 million. Our guidance on expenses remains unchanged. This puts us in a strong position to invest in innovation across our business. We have many opportunities to do so. There's a sizable opportunity in our current markets, in new markets with our VYVGART franchise, with our current pipeline, and through our immunology innovation program to expand our pipeline. This is how we will set ourselves up for a sustainable future where we continue to generate significant value for our shareholders. I will now turn the call over to Karen, who will provide details on the commercial front.

Karen Massey, COO

Thank you, Karl. I'm very excited about our Vision 2030, especially the ambition we have set for ourselves to impact the lives of 50,000 patients globally. To reach this goal, we will need to expand in a multidimensional way, getting more medicines approved across many indications, product presentations, and geographies. We have a strong commercial playbook in place that delivered in gMG, and we'll be leveraging that same approach for CIDP, focusing on evidence generation that matters most to physicians and patients, empowering patients to demand more from their treatments, and executing our strategies with speed and urgency. We know that patients are waiting, and we also know that every day counts in building out our first-in-class leadership position. Starting with gMG, I'm extremely proud of the team who worked really hard to expand our reach into new patients for our 10th consecutive quarter of revenue growth. We said this in Q1 and can reiterate it today that all key indicators of growth are performing well, and the fundamentals of the commercial business are strong. Focusing on the key drivers of growth this quarter, we saw the seasonality impact in Q1 normalized in Q2 with an impressive 17% quarter-over-quarter growth. Within the U.S., Hytrulo continues to attract both new patients and prescribers to the VYVGART franchise. This is important for a few reasons. First, over 50% of new Hytrulo patients are coming from oral treatments, and 60% are brand new to VYVGART, which is consistent with our goal to reach early aligned patients and to expand new patients with Hytrulo. Second, we continue to expand our prescriber base for MG, many of whom have the potential to become CIDP prescribers. This will serve us well in our early conversations with physicians who have grown accustomed to the favorable safety and efficacy profile of VYVGART Hytrulo. We continue to gain traction outside the U.S. as well, where we are focused on securing broad access. We have strong momentum in EMEA, and VYVGART is now available in countries representing 82% of the gMG population in the region. We also continue to see strong growth in Japan, including positive early indicators on the launch of ITP. This launch rolled out rapidly, and 74% of HCPs were made aware of VYVGART in the weeks following approval. It is clear that there is a need for innovation in ITP, which is why we are also launching an efficient label-enabling study with VYVGART IV in the U.S. after discussions with the FDA. Lastly, in China, we continue to be very impressed by patient additions each quarter, and now subcutaneous is also available following approval earlier this month. Even with our strong performance to date, we believe that we're still at the front end of the opportunity in MG. We believe earlier use of advanced biologics will expand the addressable market significantly and that we can reach broader populations of MG patients with our label expansion studies in seronegative and ocular MG, each of which represents 15% of the total MG population. Based on these evolving dynamics, we have updated our addressable market in MG to 60,000 patients. Following our approval in June, we recognize that all eyes are on CIDP, and we share your excitement. We are thrilled with the broad label that we obtained, which will support use across the treatment paradigm. Now we're leveraging our MG launch playbook to maximize our impact in CIDP, driving rapid adoption with neurologists based on the strength of our data, empowering patients, and working diligently with payers to secure access as quickly as possible. Reception has been incredibly positive with physicians, particularly regarding the strength of the data and the improvement in function. We've already reached 25% of our key targets within 14 days of launch, and 20% of the prescriptions we're receiving are from new prescribers to VYVGART. Many of the prescribers are starting multiple patients. Right now, our priority is to bring as many patients into the top of the funnel as possible. Once enrollment starts, payer approval at this stage takes a few weeks, after which patients can be scheduled for their first injection. This shows the importance of getting payer policies in place quickly. As this process unfolds, the time from prescription to injection will shorten. Based on where we are today, we're making good progress with payers and tracking to plan. Looking forward, we have an ambitious plan to successfully execute multiple launches across our pipeline to reach 50,000 patients by 2030. We're on track to start multiple Phase III studies before the end of the year, each of which brings us a step closer to reaching new autoimmune indications where there is a high unmet need. The TED registrational study has already started, and we see an opportunity here to provide a differentiated and targeted therapy with favorable safety. We look forward to initiating a Phase 3 study in Sjogren before year-end, following the positive signal we saw in our Phase 2 proof-of-concept study. There are no approved treatments for Sjogren patients, and we know the disease goes well beyond sicca symptoms and can affect patients' ability to work and complete daily tasks, particularly due to fatigue. This is a sizable opportunity. While data will drive the specific target population, we know that there are 100,000 moderate to severe Sjogren patients in the U.S. We also look forward to decisions in myositis and BP on whether to advance to Phase III later this year. Finally, before year-end, we will start a Phase III trial with our second molecule, empasiprubart, in MMN. This is an indication that fits perfectly into our neuromuscular focus, and it is another indication where the unmet need is high and IVIG is currently the only approved treatment. The data we generated in Phase II were tremendous and very meaningful to patients. We demonstrated consistent improvement in grip strength, and in cohort 1, 94% of patients felt better on empasiprubart compared to their peak with IVIG. Similar to MG and CIDP, we believe this is an underdeveloped market likely to grow over time as more innovation enters. Overall, this is an exciting time for the company. We have seen phenomenal growth to date and we look forward to continuing with this momentum as we enter the second half of the year, applying innovation to every aspect of our business to reach even more patients. I'll turn it back to you, Tim.

Tim Van Hauwermeiren, CEO

Thanks, Karen. I’m proud of the argenx team and their tireless commitment to changing the lives of patients through our science. We are perfectly positioned with the right team and the right approach to execute on the broad opportunity ahead of us. We will continue to lead with the strength of our data and deep knowledge to address the significant MG opportunity ahead and will apply the same rigor with CIDP. And this is just the beginning. We are eager to raise the bar for how autoimmune diseases are treated as we continue to expand our horizons, embarking on new paths to create long-term value for patients and shareholders. Thank you for your time today. I would now like to open the call to your questions.

Operator, Operator

Thank you. We will now begin the question-and-answer session. We'll take our first question from James Gordon at JPMorgan.

James Gordon, Analyst

Hello, James Gordon, Morgan. Thanks for taking the questions. Two questions, please. First question was on discard performance in Q2 and the extent to which we can extrapolate that to Q3. So sales were up $79 million, which was a strong performance. But how much, if any, would you say was one-off phasing that we should sort of take out if we're thinking about what the underlying performance would be? And if we're thinking about doing our Q3 modeling, how careful do we need to be about any reversals or seasonality? Or can we make quite a strong extrapolation from how well this goes down today? That's the first question, please. The second question was on Phase III initiation for ITP, and I saw a comment or heard a comment about this being an efficient trial. So how might this trial differ from the previous two Phase III in ITP? Can you expedite it if it's an efficient trial? And would you be going for a smaller patient population in some way or a similar sized population with a different design.

Tim Van Hauwermeiren, CEO

Thank you, James. Thank you for asking these two questions. I would like to hand over to Karen to comment on the underlying dynamics of the business and how she sees the overall trends in our business first. And then I will take the question on the ITP study. Karen, why don’t you go ahead with question one.

Karen Massey, COO

Thanks, Tim. And thanks for the question and for recognizing that, like you, I'm really pleased with the results of this quarter. The way I would think about it is that when you look at the first half of the year in totality, what you see is that we maintain that consistent momentum that we've had since launch. We've had 10 quarters of consistent growth. I would take that longer-term view as I look to the future. I am confident that we will continue that consistent momentum. The underlying dynamics are strong. We continue to get early aligned patients. The majority are coming directly from orals. We're growing both that and Hytrulo, and we are broadening that prescriber base, which also serves us well for the CIDP launch. So, I would say, think about consistent momentum and growth as we've seen over the last 10 quarters. I'll hand it back to you, Jim.

Tim Van Hauwermeiren, CEO

Thank you, Karen. Let me briefly comment on the ITP study. First of all, I would like to take a step back and remind the audience about the ADVANCE IV study, where we had very impressive efficacy with an IWG score of more than 50% in a refractory patient population and with a physician community that's excited about the very clean safety profile. Patients in our open-label extension study continue to do exceptionally well in ITP, and the Japan launch of ITP is going according to plan. The task we gave the team was to sit down with the FDA, go through all the data, and propose a small confirmatory study to push the ITP indication over the finish line. They succeeded in doing that. By leveraging all the insights and know-how we have on the disease and proposing alternative primary endpoints, we’re planning to start a smaller ITP trial before the end of the year. We believe this will help get the product over the finish line in that refractory patient population we’ve been studying all along. Thanks for the questions.

Operator, Operator

We'll go next to Tazeen Ahmad at Bank of America.

Tazeen Ahmad, Analyst

Hi, good morning, guys. Here's my one question. I was curious about the PFS filing. I know you've talked about already having applied officially. But given that there's no PDUFA, we're just curious about how we should expect to think about communication from your team on what part of the application is in process and what back and forth there might be? And do you have an idea of when you would be able to get that approval, given that doctors in particular seem to be excited about having that as an option for patients? Thanks.

Tim Van Hauwermeiren, CEO

Thanks, Tazeen. Thanks for being with us this morning. The answer to your question is simple: the filing has been submitted and accepted. We're currently in review with the FDA. We expect to have a better sense of approval timing as the process unfolds, so stay tuned. We will keep you updated on the progress we make. Thank you.

Operator, Operator

Next, we'll move to Allison Bratzel at Piper Sandler.

Allison Bratzel, Analyst

Hey. Thank you for taking the question. Maybe just a follow-up from the R&D Day. Could you help us understand just the scope of the data required by FDA that will be needed for filing in seronegatives and ocular MG patients? I think you described an ability to leverage existing trial data and real-world data, at least for seronegative patients, but I've been getting a bunch of questions on this. So any more color there would be helpful. Thank you.

Tim Van Hauwermeiren, CEO

Yes. And thank you for the question, Allison. So remember that we put strong results in treating patients. And if you already have an approval in Japan, the product is performing well in seronegative patients, and we have impressive case reports coming out of Europe where people have successfully been using the drug for seronegative patients. We made a commitment to the patient community that we would not give up, and we have been entertaining discussions with the FDA regarding seronegative patients. I think the FDA may allow for a fairly fast, elegant study in seronegative patients that, as we announced during the R&D Day, involves more relaxed trial design. So, we think the FDA is considering existing evidence and allowing us to run such a trial, which we view positively. Thanks for the question.

Operator, Operator

We'll move next to Rajan Sharma at Goldman Sachs.

Rajan Sharma, Analyst

Hi. Thanks for taking my question. I just wanted to discuss the competitive landscape in Myasthenia Gravis and how you see your continued differentiation. There's obviously a busy pipeline, with competition in Phase 3 also in development. Could you discuss how you think you differentiate in relation to those mechanisms? And then longer-term, what gives you confidence that VYVGART and the FcRn mechanism more broadly remains the preferred treatment option for early-line patients?

Tim Van Hauwermeiren, CEO

Thank you for the question. I will first hand over to Karen to comment on how she sees the overall dynamics of this market and how we're building it together. Karen, go first, and then I will briefly address your differentiation question.

Karen Massey, COO

Thanks for the question. Building on what we shared at R&D Day last week, we believe that innovation coming to the MG market is good because it enhances the impact we can have for patients, expands the market, and increases the number of patients treated with advanced biologics earlier. Therefore, we believe innovation is beneficial for patients, and we're well positioned to continue to lead in that growing market. Regarding differentiation, there are a few key factors. One is that we are the first-in-class FcRn agent, and it's clear that FcRn, and specifically VYVGART, is being used earlier in treatment. As mentioned earlier, over 50% of our patients are coming directly from oral treatments. We believe we have robust efficacy, as well as deep and sustained efficacy, with options for cyclical and biweekly dosing regimens. This positions us strongly in the market, not to mention our real-world safety profile. We have a significant first-mover advantage due to our long-term safety data and a lower treatment burden since we offer both IV and subcutaneous options. Overall, the dynamics in MG are positive, the market is expanding, and we're highly positioned to maintain and adapt our leadership. I'll hand it back to you, Tim.

Tim Van Hauwermeiren, CEO

Thank you, Karen. I appreciate your insights. If you look at the biology of the disease, it is clear that MG is an IgG mediated disease. Remember the mechanisms of action of these pathogenic antibodies, with component recruitment being one aspect. This also translates nicely into clinical data. 80% of VYVGART patients achieved an ADL score lower than 5, which is a threshold for entering clinical trials, and 50% to 55% of VYVGART patients achieved minimal symptom expression. There is always a need for more effective treatment lines due to alternative methods of action since the existing treatments only work in 80% of patients. However, it's challenging to provide more details in the absence of clinical data. So let's look at the data to further understand how the biology plays out. Thanks for the question.

Operator, Operator

We'll move next to Derek Archila at Wells Fargo.

Derek Archila, Analyst

Hey. Good morning and congrats on the progress. Thanks for taking the question. So just can you discuss how the time from payer approval to injection that you're currently seeing during the early part of the CIDP launch compares to what you saw in the early part of the MG launch? Is that similar or different? And could you provide a little color on why?

Tim Van Hauwermeiren, CEO

Karen, would you mind taking this question, please?

Karen Massey, COO

Yes, happy to take the question. Thanks. To start with, we're really pleased with the strong and positive response we're having in CIDP. To answer your specific question, as enrollments come in, it does take some time for patients to get approved by their payers. This period can take a few weeks before patients receive their injections, which is standard for any launch. That’s why we're focused on getting payer policies in place; once those policies are established, the process from prescription to injection can occur more quickly. I would say we're right on track with our initial expectations, both in terms of this process and in terms of discussions we're having with payers around establishing these policies. We're really pleased with our progress, as our team is acting with urgency. I think we're in a good place. I'll hand it back to you, Tim.

Tim Van Hauwermeiren, CEO

Yes. Thank you, Karen. And we would appreciate a bit of patience, Derek, because remember what we did for MG, right? I mean, it took us two quarters to install broad and favorable policies. That was our commitment to the patient community, and that was indeed a fast and outstanding job done by the team, and we will seek to replicate that for CIDP. Thank you.

Operator, Operator

Next, we'll take a question from Akash Tewari at Jefferies.

Akash Tewari, Analyst

Hey. Thanks so much. On the CIDP launch, you mentioned in the past that you're clearly seeing strong demand from doctors, but you wanted to clarify how that actually translates to patient demand, given the label, the overlap, and the prescriber base, as well as the amount of IVIG-experienced patients. Would it be fair to say that the CIDP launch will at least be half as successful as gMG out to the first year? And do you think we will see this kind of inflection after two quarters with CIDP like we saw with gMG? I just wanted to double-click on that point.

Tim Van Hauwermeiren, CEO

Yes, Akash. Thank you for the question. Thanks for being with us today. It’s tempting to draw parallels between the gMG and the CIDP launch. However, what we aim to explain is that these are two distinct markets, each with their own dynamics. Maybe, Karen, you want to elaborate on this question.

Karen Massey, COO

Yes, that’s right. It’s challenging to draw direct comparisons; each has its own dynamics. Regarding the inflection point you mentioned after two quarters, I wouldn’t think about it in those terms. Payer policies will come in one by one over the next two quarters. What we like to consider is that by the end of two quarters, you might achieve critical mass, where neurologists feel confident that favorable payer policies are in place. We do expect to see uptake, as we have seen in MG, and we anticipate that it will be steady over time. However, the dynamics between the two launches are indeed different for the reasons you pointed out.

Operator, Operator

We'll go next to Alex Thompson at Stifel.

Alex Thompson, Analyst

Great. Thanks for taking my question. I guess, I wanted to ask about the OpEx trajectory over the next couple of years, how you're thinking about that in relation to expansion into additional Phase 3 programs, as well as considering commercial expansion beyond neurology. Thanks.

Karl Gubitz, CFO

Thank you, Alex. It's Karl. In terms of SG&A, our infrastructure is now largely in place. As you may recall, we expanded in the U.S. during Q1. For the rest of the world, we have built infrastructure in most of the markets, with a few big markets still outstanding in Europe. I would expect SG&A to continue to grow, but that growth will be muted, and you will see a rapid expansion. In terms of R&D, I think that will also grow quarter-over-quarter as we invest in the new science we discussed last week. We have a unique opportunity to invest in ourselves, setting us up for a long-term sustainable future. That is our plan, thank you for the question, Alex.

Operator, Operator

We'll go next to Thomas Smith at Leerink Partners.

Thomas Smith, Analyst

Hey guys, good morning. Thanks for taking the questions, and congrats on the strong results. For VYVGART in MG, can you just remind us on the data that's being generated that could support chronic dosing in addition to the current cycle-based dosing? And whether you expect to get chronic dosing explicitly added into the label? Or how important do you think it is for prescribers to have that chronic dosing flexibility in the label to facilitate access and reimbursement? Thanks.

Tim Van Hauwermeiren, CEO

Thank you for the question. The answer is straightforward. We have chronic dosing in the label. The label describes the use of VYVGART with the aim of achieving statistically significant positive outcomes in gMG patients. We have cyclical dosing, but that is essentially chronic use. We are the only company that has such a long timeline for chronic dosing of patients. It is important to highlight that the safety profile of the drug has remained consistent, with 50% to 55% of patients showing a consistent minimum symptom expression over multiple years. We have conducted the ADAPT NXT study to bridge a data gap for patients transitioning from chronic plasma exchange or chronic IVIg patients, as these individuals cannot follow a cyclical dosing schedule. In the NXT study, we have shown that every alternate dosing with VYVGART is equally effective as the cyclical dosing, both in terms of efficacy and safety. In summary, we're the only company with chronic dosing data, and we offer a diverse set of dosing schedules. Thank you for the question.

Operator, Operator

Next, we'll move to Yaron Werber at TD Cowen.

Yaron Werber, Analyst

Great. Thanks so much, and really nice start showing team. A quick question on Europe and Japan. I know Europe is very tough these days and Japan typically experiences lumpiness as you noted, along with changes in pricing. But could you provide any sense of what we should expect there in terms of sales acceleration? Thank you.

Tim Van Hauwermeiren, CEO

Yaron, that's a great question. Thank you for focusing on the global aspirations of the company. I'll hand this over to Karen.

Karen Massey, COO

Yes, happy to take this. Thanks for the question. Regarding Europe, I would say we're on track. As you know, it takes a bit longer to get pricing and reimbursement across all different countries. However, we're pleased with the progress we have made. In three of the big five markets—Germany, Spain, and Italy—we have good reimbursement coverage and strong clinical advocacy, which is driving consistent uptake in line with what we see in the U.S. We believe we've seen broader prescriber engagement beyond just academic centers, which is encouraging. As we continue opening new markets with pricing and reimbursement, we anticipate consistent growth. In Japan, I want to commend the team for their efforts. Quarter-over-quarter, we have seen incredibly steady growth, and that trend has continued this quarter. We recently launched VYVDURA, which is the subcutaneous form of the drug in Japan. Just like in other markets, this is helping expand the patient population eligible for treatment, particularly among earlier line patients. So, in summary, we expect consistent growth going forward in both Europe and Japan. Thanks for the question.

Operator, Operator

We'll go next to Matt Phipps at William Blair.

Matt Phipps, Analyst

Thanks for taking my question. Quickly, you mentioned the different endpoints in the next ITP trial. Is that just looking at a different timeframe for a sustained platelet response? Or can you use something like IWG responders as the primary endpoint? Also, can you provide any thoughts on where VYVGART is being used in the treatment paradigm for ITP patients in Japan? Are patients receiving it after multiple thrombocytopenia, or is it being used earlier in the treatment paradigm? Thanks.

Tim Van Hauwermeiren, CEO

Two great questions. Thank you. For the ITP trial, I will hand over to Karen to discuss the commercial positioning. On the ITP trial, the reason we can go with a significantly smaller study in a confirmatory mindset is because we plan to focus on endpoints that assess the extent of disease control. We’re leveraging our existing knowledge and the expertise we've developed in running ITP clinical trials. I think this will lead to a study roughly the same size as our previous global Phase III trials. It’s a responsible investment considering the significant patient unmet need we have been identifying. Karen, could you discuss the Japan question?

Karen Massey, COO

Yes, happy to take that. First, the ITP launch in Japan is going very well. We have applied similar launch strategies that we used in our other launches, and the results have been strong. Early experiences indicate that it’s clear there is an unmet need in ITP patients. Up until now, what we've seen is that treatment has primarily taken place in later lines of therapy, which is typical for new launches. Doctors tend to start with refractory patients to get a feel for effectiveness before transitioning to earlier line treatments. However, our team has determined a positive response among hematologists, who are growing increasingly familiar with the FcRn mechanism of action and recognize its value in the treatment paradigm. So, overall, we’re pleased with our early results in Japan and anticipate that we will be able to draw strong conclusions from this launch to guide our U.S. strategies and potentially future launches. Thanks for the question.

Operator, Operator

We'll go next to Suzanne van Voorthuizen at Kempen.

Suzanne van Voorthuizen, Analyst

Hi team, this is Suzanne from Kempen. Thanks for taking my questions. I just have a small follow-up regarding argenx 121, the IgA degraded that was revealed last week at R&D Day. Can you give context to the indications where such a molecule might fit well? How many indications do you see? And how does the opportunity compare in size? Is there potential here for it to be as significant as the FitGard size? Or do you see more parallels with a drug like MPA in terms of the commercial opportunity? Any insights or directional comments would be appreciated. Thanks.

Tim Van Hauwermeiren, CEO

Thanks, Suzanne, for your question. When we develop any product for clinical use, we consider its potential application across multiple indications, not just as a single indication asset. As mentioned during R&D Day, there is an understanding of the pathogenic role IgA autoantibodies play in various diseases, and this is a relatively new area of research. We are very excited about exploring this further and are completing some background work on potential indications. The opportunity appears significant, with potential applications across a wide range of diseases. We mentioned IgA nephropathy as one potential indication, but there are others as well. In essence, we see a substantial market opportunity capable of supporting many generations of innovation and multiple innovative molecules. We'll stay conceptual for now, as we conduct further analysis. We think this represents a significant opportunity, but we will closely follow the biology of these indications as they evolve. Thank you.

Operator, Operator

We'll go next to Yatin Suneja at Guggenheim Partners.

Yatin Suneja, Analyst

Hey guys. Congrats on the quarter. Two very quick ones for me. Could you just talk a little bit more about the subcutaneous and IV dynamic? How does subcutaneous share currently compare to IV, and how is this growing the market? Also, as we think about the future with the CIDP launch, will any guidance be established for us? Thank you.

Tim Van Hauwermeiren, CEO

Thank you for both questions, Yatin. Let's start with the question on the subcutaneous versus IV dynamic. Karen, could you comment on that? I don't think we quantify it, but maybe you can elaborate on the dynamic.

Karen Massey, COO

Yes, happy to. While we don’t provide a specific patient breakdown currently, I would say both VYVGART and Hytrulo are growing in terms of new patient starts and revenue. The value of Hytrulo is that it opens up potential new prescribers who might not be interested or comfortable with an IV option. This expands our reach into new patients who may view an injection option as less intimidating than IV treatment. I want to highlight that our strategy with Hytrulo is not a switching strategy from VYVGART; about 60% of Hytrulo patients are new to the VYVGART franchise. This indicates that we are really expanding the market, both in terms of prescribers and patients with the subcutaneous option, which aligns with our goal of moving to earlier-line treatment. I'll hand it back to you, Tim.

Beth DelGiacco, Investor Relations

Actually, we had a cut in our line. If Yatin is still on, if you could just repeat his second question, that would be helpful.

Yatin Suneja, Analyst

Yes. I'm online. So the second question was about guidance. How are you guys thinking about establishing guidance? And when should we expect that?

Tim Van Hauwermeiren, CEO

Okay, that’s clear. Thank you, Yatin. This question is for Karl.

Karl Gubitz, CFO

Yes, thank you, Yatin. We did not provide guidance this year due to all the unknowns, particularly surrounding the CIDP launch and geographical expansion. As a company matures, we need to consider how to provide guidance. We will listen to our stakeholders, including our investors and analysts, when doing so. This is something we may consider discussing in January next year. For now, we'll focus on executing and continue providing our expense guidance and cash balance. I’ll leave it at that for now.

Operator, Operator

And we'll go next to Vikram Purohit at Morgan Stanley.

Vikram Purohit, Analyst

Hi, good morning. Thank you for taking my question. We had one on the commercial opportunity in ocular MG. Based on the neurologist feedback you've received and just the experience you have in the space, how distinctly do you think ocular MG is managed and viewed and treated versus generalized MG? And based on that, how drastically do you think the cadence of patient adds could change based on a potential label expansion into ocular MG? Thanks.

Tim Van Hauwermeiren, CEO

Thanks for your question on ocular MG. Having been in the MG space for some time, we have heard concerns about the unmet medical needs in ocular MG. It would be a misapprehension to assume that ocular MG is merely a milder form of MG compared to the generalized type; ocular MG patients can experience severe limitations from debilitating symptoms like double vision. There are very few treatment options presently available, typically limited to steroids—some patients do well on steroids, while a subset of generalized MG patients desperately need alternative options. We've consulted closely with experts in the community and have developed a promising gMG study. We've had successful interactions with the FDA regarding trial design and endpoints. It has become apparent that some generalized MG patients may also be seen by ophthalmologists or neuro-ophthalmologists early on in their treatment. We believe this is a significant opportunity to elevate our presence in the MG space. Thank you for the question.

Operator, Operator

We'll take our next question from Charles Pitman-King of Barclays.

Charles Pitman-King, Analyst

Hi. Thank you for taking my question. Two from me. Just going back to the potential risks from competitive readouts to your dominant position in the second half of this year. What metrics will you be looking at from these readouts to determine whether any really pose a risk to your increasing market dominance? Also, regarding the Chinese commercial opportunity, I understand VYVGART is not being reported by Zai Lab in August, but could you discuss how you're thinking about this from a clinical perspective, what the shipment status is, and what expected addressable market and pricing structure you hope to benefit from going forward? Thanks.

Tim Van Hauwermeiren, CEO

Thank you for both questions. Karen, I will pass the second question to you. On the first question, we prefer to remain brief. Without data, we would find ourselves speculating, which we want to avoid as a science-based company. However, I will remind you how high we have set the expectations in the MG space. We believe our product has the fastest onset, the deepest action, and that we have maintained a clean safety profile over many years while also holding the broadest portfolio of product presentations, which we will continue to expand aggressively. So that's where the data stands, and I believe we will benefit from that competitive position. Karen, could you take question 2?

Karen Massey, COO

Yes, happy to address that. I won’t comment on Q2 results, of course; we will let Zai Lab manage that messaging. However, I do want to mention that it’s been a pleasure working with Zai, and we see great potential in our partnership for the long-term. Obviously, the Chinese market is massive, and through Q1, we’ve seen significant volume of new patient starts; this reflects great market opportunity there. Looking back, we've done well to secure approvals and NRDL listing, which certainly facilitates uptake. We also recently received Subcutaneous VYVGART approval in China, which adds to that potential; we remain optimistic about our outlook there, and confident in Volume Growth driven by our partnership with Zai Lab. Thank you for the question.

Operator, Operator

We'll go next to Leland Gershell at Oppenheimer.

Leland Gershell, Analyst

Great. Thanks for taking the questions. Just wanted to ask, Karen, you've been consistent in moderating expectations for securing payer agreements for CIDP. Has that process aligned with your expectations internally? Have you faced any pushback from payers regarding potential step-through from IVIG? Thank you.

Tim Van Hauwermeiren, CEO

Hi, Gershell. Thank you for the question...

Karen Massey, COO

Yes, happy to take that. It's an important question. We previously discussed the importance of getting these payer policies in place. I can confidently say we’re right on track with where we expected to be regarding the discussions with payers and how those conversations have evolved, as well as the specific policies we are working towards. With IVIG, it’s important to note that most patients have been exposed to IVIG at some point. Our clinical trial data shows equal responsiveness regardless of whether the background therapy is IVIG, no treatment for the last six months, or steroids. We believe we are well-positioned with our data, and the ongoing discussions with payers are progressing positively. I think we're set up for a successful launch in the coming quarters. Tim, would you like to add anything?

Operator, Operator

We'll go next to Samantha Simankow at Citi.

Samantha Simankow, Analyst

Hi. Good morning. Thanks for taking the question. Just one regarding the PFS. Now that you've filed and are preparing for a potential launch, how much more growth in gMG do you really expect this formulation will drive? What patient segments do you expect to open or expand? Do you think this will become a switch market rather than what you see with Hytrulo? How should we think about the magnitude of impact on revenue, assuming you receive that approval in the near future? Thank you.

Tim Van Hauwermeiren, CEO

That’s a great question on PFS. Karen, could you explain how this will continue to strengthen our momentum within the MG population?

Karen Massey, COO

Yes, I think that’s exactly right, Tim. This will reinforce the ongoing momentum we continue to build. We started with IV, then expanded into subcutaneous and are now venturing into PFS. This broadens our reach into new prescribers and patients. We foresee growth in the share of biologics in the market overall and expect that VYVGART will maintain its strong position as we continue attracting earlier aligned patients and a broader prescriber base. We hope to continue pushing our leadership and expanding as we leverage IV, subcutaneous, and PFS options for prescribers. Thank you for your question.

Operator, Operator

We'll go next to Joon Lee at Truist Securities.

Joon Lee, Analyst

Hey, thanks for the update. Just for the no-go decision on myositis by year-end, are they all coming at once or one by one? If spatitimab works in one but not in the other myositis subtypes, what would be some of the reasons for that? What are you looking to learn from that to enhance the trust in your future indications and potentially reprioritize your existing pipeline indications? Thank you.

Tim Van Hauwermeiren, CEO

Great questions. In this basket trial, where we are looking at three subtypes of myositis, we will make the go/no-go decision all at once. We are synchronizing the first 30 patients across these indications to determine one collective decision. This is an operationally seamless Phase 2/Phase 3 trial. Therefore, the only decision we can make is a stop decision. The first 30 patients will provide informative data that will guide us. This will allow us to make adjustments in sample size if necessary across one, two, or all three indications. Our conviction in the biology is strong, and we have designed a responsible and thoughtful clinical trial, but there are inherent risks. Thanks for the question.

Operator, Operator

We'll go next to Gavin Clark-Gartner at Evercore ISI.

Gavin Clark-Gartner, Analyst

Hey. Thanks for taking the question. A quick one on thyroid eye disease. Could you confirm that you're doing weekly dosing in the Phase 3s? Also, could you share some thoughts on how enrollment is progressing as you are about four months into this trial? Thanks.

Tim Van Hauwermeiren, CEO

Thank you for the question on TED. You're correct that we are in weekly dosing. We're executing that pre-filing now, and I think the execution of the trial is being handled in a classical and typical manner. Stay tuned for further updates in the coming quarters; we're strong on the opportunity and traction we're generating with this global clinical trial. Thank you.

Operator, Operator

Next, we'll go to Andy Chen at Wolfe Research.

Andy Chen, Analyst

Good morning. Thank you for taking the question. Regarding the $450,000 pricing, could you discuss how robustly you believe this pricing can remain at that level? As you secure payer contracts, there's natural pressure for ASP erosion. Do you see room for this price point to increase over time, remain stable, or potentially decline?

Tim Van Hauwermeiren, CEO

Thank you for that question, Andy. I’m happy to address it. Firstly, the $450,000 number did not come out of thin air. It resulted from thorough value assessment and careful discussions with payers, where we introduced the Phase 3 data; the data resonates very well with payers, especially our functional efficacy outcomes. We are finalizing payer agreements, so stay tuned on that. While I cannot predict the future, it's reasonable to assume there may be price pressure as competition and new indications enter the market. However, we are committed to transparent and responsible pricing. I believe our market access strategies will position us well for the future. Thank you for your question.

Operator, Operator

Next, we'll move to Joel Beatty at Baird.

Joel Beatty, Analyst

Thanks, and congrats on the strong growth from Q1. Looking back, what led to the weaker Q1, and how much of that was seasonal in nature? Will it be expected to repeat, or were there any one-time dynamics affecting performance?

Tim Van Hauwermeiren, CEO

Thank you for asking that question. I think we alluded to this in the prepared remarks, but Karen, would you like to comment on the optics of Q1 and Q2 regarding the underlying strength of the businesses?

Karen Massey, COO

Absolutely. When we look at the business, the key indicators of growth indicate we are consistently adding new patients, moving early aligned, and broadening our prescriber base. We have experienced consistent growth for 10 quarters. I think the Q1 dynamics we saw across the industry, not just with VYVGART, relate to re-verification and seasonal influences, which are always in play. I would say our performance metrics and KPIs reflect consistent growth. We anticipate that this trend will continue. Thank you for the question.

Operator, Operator

We’ll take our final question from Douglas Tsao at H.C. Wainwright.

Douglas Tsao, Analyst

Hi. Good morning, thanks for taking my question. Quick follow-up on ITP: I understand you believe you have an efficient pathway from a regulatory standpoint. What feedback have you received from KOLs regarding this, and how are you thinking about the commercial positioning, especially in light of findings from the prior Phase 3 study regarding the effects of low-dose steroids? Thank you.

Tim Van Hauwermeiren, CEO

I’m not sure we fully understood the earlier question due to line issues; would you mind recapping your point?

Douglas Tsao, Analyst

Sure. I was inquiring about your regulatory pathway for ITP and KOL feedback, particularly about the commercial positioning given the previous study results on low-dose steroids.

Tim Van Hauwermeiren, CEO

Yes, we appreciate your patience. There is considerable excitement surrounding the data we've generated in the clinical trial related to the specific patient population we are pursuing. Our position for ITP is primarily as a third-line treatment option post-steroids and IVIG. The KOL feedback has been overwhelmingly positive, with many noting the high response rates and strong safety profile. They express enthusiasm over the ongoing open-label extension study findings, where patients continue to do well. Overall, we see a robust response from the marketplace regarding our product, and the feedback from KOLs has been highly collaborative, aiding us in proposing our FDA strategy. The positioning remains steady, and we are fully supported by positive KOL feedback that trends towards moving forward. Thank you for the question.

Operator, Operator

This concludes today's question-and-answer session and today's conference call. Thank you for your participation. You may now disconnect.