Legend Biotech Corp Q4 FY2023 Earnings Call

Good day, and welcome to Legend Biotech Reports Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to hand the call over to Jessie Yeung, Head of Investor Relations and Public Relations. You may begin.

Good morning. This is Jessie Yeung, Head of Investor Relations and Public Relations at Legend Biotech. Thank you for joining our Conference Call today to review our Fourth Quarter and Full Year 2023 Performance. Joining me on today's call are Ying Huang, the company's Chief Executive Officer; and Lori Macomber, the company's Chief Financial Officer. Following the prepared remarks, we will open up the call for a Q&A. We have Guowei Fang, Chief Scientific Officer; and Steve Gavel, Head of Commercial Development for the US and Europe, joining the Q&A session. During today's call, we will be making forward-looking statements, which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied herein. These forward-looking statements are discussed in greater detail in our SEC filings, which we encourage you to read and can be found under the Investors section of our company website. Thank you. I will now turn the call over to Ying.

Good morning, everyone. We're glad you could join us today because a lot has happened since our last earnings call. First, we're excited at the prospect of bringing our lead therapy CARVYKTI to more multiple myeloma patients in Europe. As many of you have heard, CARVYKTI received a positive opinion from the Committee for Medicinal Products for Human Use to expand into earlier lines of treatment. CARVYKTI is the first CAR-T therapy to receive a positive CHMP opinion in the second-line setting for patients with relapsed and lenalidomide-refractory multiple myeloma. The formal European Commission decision is expected in April. As for the approval of CARVYKTI in the United States in the second-line, we are scheduled to meet with the FDA's oncologic drugs advisory committee this Friday, the 15th, to answer any outstanding questions they have. We are preparing for a potential launch in this expanded indication on the PDUFA date of April 5th, and we will, of course, keep you posted. Now I'd like to turn to other achievements and activity since our last earnings call. Our work to bring CARVYKTI to more patients globally resulted in total net sales for the fourth quarter of 2023 of $159 million. For the full year, total sales for CARVYKTI were $0.5 billion. The increase in our fourth quarter performance versus the third quarter was a result of the ongoing launch of CARVYKTI and share gain from capacity expansion and manufacturing efficiencies. We've now been on the market for seven full quarters, and we are the fastest launched CAR-T therapy. We anticipate continued quarter-over-quarter growth throughout 2024 as well. We believe our cash balance of $1.3 billion provides us with financial runway through the end of 2025. In order to serve more patients and meet our revenue targets, we've expanded our supply of lentiviral vectors significantly through a large reactor in Switzerland, operated by our partner Johnson & Johnson. In addition, Johnson & Johnson has another factory under construction in the Netherlands. We also continued to expand our internal manufacturing capacity in partnership with Janssen. Our cell processing site in Ghent, Belgium, called Obelisc, produced the first batches of CARVYKTI for clinical use in January 2024. We hope to start commercial production in the second half of the year. Construction progressed on our second manufacturing site Tech Lane in Belgium, which is expected to be complete at the end of the year. We have increased capacity at our Raritan, New Jersey facility, doubling cell processing capacity since the beginning of 2023. The increases to our production capacity will help ensure we meet our target of supplying CARVYKTI to 10,000 patients by the end of 2025. I am excited to announce we have a new veteran leader with more than 25 years of experience now overseeing our manufacturing sites. Our own Birk Vanderweeen has been promoted to Senior Vice President, Global Manufacturing and Technical Operations. Our previous Head of Global Tech Ops, Liz Gosen, has stepped aside from full-time work for personal reasons and is now serving as a Senior Advisor for us. Birk joined us in 2021 to start our European organization and the manufacturing facilities I just mentioned. Before joining Legend, he served at Janssen, Teva, and AstraZeneca. Birk has earned the trust and respect of our global manufacturing teams and he's already made a big impact. The increase in production capacity, enabling us to meet growing patient demand, comes in parallel with new data we presented at the American Society of Hematology meeting in December. In an oral presentation, we unveiled data showing improvements in patient outcomes as early as second-line treatment in our pivotal Phase 3 CARTITUDE-4 study. The results demonstrated clinically meaningful improvements in health-related quality-of-life measures and reductions in symptoms following treatment with CARVYKTI compared to standard-of-care. In other news from the fourth quarter, we continue to bring more hospitals online and we now have a total of 65 US hospitals certified to treat CARVYKTI patients. Additionally, about 30% of patients are not administered in an outpatient setting. Turning to the pipeline, we're investigating the potential of our cell therapies in blood cancers beyond multiple myeloma and also in solid tumors. We've started dosing patients in our DLL3-targeted program, the Phase 1 clinical trial LB2102 in lung cancer. The armoring using LB2102 can also be deployed in other pipeline programs if validated in the clinic. After Phase 1, Novartis will take over and conduct any further development, including manufacturing and commercial activities. To sum up 2023, we closed the year with accomplishments on several fronts. Now I would like to turn the call over to Lori to walk you through the financials for 2023, Lori?

Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $159 million in total net sales for CARVYKTI during the fourth quarter, an increase of 189% year-over-year, driven by the progress we have made with ongoing market launches, expanding market share, and capacity improvements. As a reminder, we share equally in all profits and losses of CARVYKTI ex-China with our partner Janssen. Turning to our revenue, total revenues for the fourth quarter were $79.5 million consisting almost entirely of collaboration revenue from the sale of CARVYKTI. Net loss for the quarter ended December 31st, 2023 was $144.8 million, or a loss of $0.40 per share, compared to a net loss of $135.9 million, or a loss of $0.41 per share for the same period last year. For the year ended December 31st, 2023, net loss was $518.3 million, or a loss of $1.47 per share, compared to a net loss of $446.3 million, or a loss of $1.40 per share for the year ended December 31st, 2022. Moving on to expenses, collaboration cost to revenue for the fourth quarter 2023 was $32.5 million, compared to $23 million for the same period last year. These are Legend's portion of collaboration cost-of-sales in connection with the collaboration revenue under the Janssen agreement along with expenditures to support the manufacturing capacity expansion. Research and development expenses for the fourth quarter 2023 were $105.7 million, compared to $80.8 million for the same period last year. The increase of $24.9 million for the three months ended December 31st, 2023, compared to the three months ended December 31st, 2022, was primarily due to continuous research and development activities for cilta-cel, including higher patient enrollment for Phase 3 clinical trials for cilta-cel, and an increase in research and development activities for other pipeline items. Administrative expenses for the three months ended December 31st, 2023, were $28.7 million, compared to $26.7 million for the same period last year. The increase of $2 million year-over-year was primarily due to the expansion of administrative functions to facilitate continuous business growth and continuing investment in building Legend Biotech's global information technology infrastructure. Selling and distribution expense for the three months ended December 31st, 2023, was $33.7 million compared to $25.8 million for the same period last year. The increase of $7.9 million year-over-year was due to costs associated with the commercialization of CARVYKTI. To summarize, our spending remains on track and we continue to maintain a strong balance sheet. As of December 31st, we had $1.3 billion in cash and equivalents, deposits, and investments. Additionally, as we enter the new year, we received a $100 million upfront payment in early January in connection with our global license agreement with Novartis for certain CAR-T therapies targeting DLL3. Thus, we believe we have sufficient capital to fund our operating and capital expenditures through the end of 2025. Thank you. I now pass it back to Ying for closing remarks.

Thank you, Lori. 2023 was an impressive year for Legend. CARVYKTI has proven to be the fastest launched CAR-T therapy. The achievements of our global teams have set us up for great success in 2024 and we're poised to provide more therapy to even more patients around the world. I want to thank each of our 1,900 employees for their commitment and dedication to Legend. And with that, we'd like to take your questions. Operator, we're ready for the first question.

Thank you. Our first question comes from Jessica Fye with J.P. Morgan. Your line is open.

Great. Good morning, and thank you for taking my questions. I have a question regarding supply and I appreciate the details provided in your remarks. I know you set a target of 10,000 doses for the end of 2025. Do you have a target for the end of 2024 that you could share? If not, how should we approach the manufacturing ramp-up that you're planning to ask the FDA to approve this year? Thank you.

Hey, Jess. This is Ying. Thank you for the question about manufacturing. So I'll take that one. We did mention in the beginning of last year that our goal is to provide a combined global supply of 10,000 doses per year when we exit 2025. Beyond that, we're not providing any guidance on 2024 manufacturing scale-up. But I can tell you that, Jess, if you look at last year, we applied for FDA approval for two capacity increases in our site in Raritan, New Jersey, and we did successfully achieve both approvals from the FDA. This year our plan is the same; we are planning additional two capacity increases that we plan to request from the FDA. So that's the same cadence as last year. That's our plan for 2024.

Thanks.

Thank you. Our next question comes from Jonathan Miller with Evercore ISI. Your line is open.

Hi, guys. Thanks so much for taking the question. I'd like to ask about your early pipeline, both beyond DLL3 and that armored CAR. What can investors look forward to? And even if you're not specifying targets, can you give us a little bit of color about whether your choices are likely to be familiar to folks, they'll be familiar targets, or if these are new places to go looking for CAR? And then separately, do you have any plans to get into the autoimmune space, like so many of your peers?

Thanks, Jonathan. This is Guowei. So, on the targeted from some of our pipeline targets are known ones, others are novel ones. I probably can provide some high-level thinking about where we're heading with our internal pipeline. We have a few priorities. First is really trying to build the multiple myeloma franchise, especially for patients post the CARVYKTI treatment. So in that space, we are targeting some of the known targets as well as novel targets currently under research and development, where you see a fairly diverse platform, both autologous as well as allogeneic approaches. Second priority we have is really focusing on the autoimmune disease indications. We see this as an emerging area with great opportunities. In this space, I think a differentiated approach is critical. Our internal focus at this point is primarily on an allogeneic approach, and we also have some investments in the autologous space, but we are really focused on the differentiation and the value those differentiated approaches can bring to the patient and the treatment setting. We also have some investment in the solid tumor space where we're focusing on some of the key hurdles associated with this disease pathology. For example, target expression heterogeneity, which is commonly associated with solid tumor disease indications, is a major limitation of traditional therapy from the current format. So there we are investing in key technological innovation to address solid tumor targeting and hope to generate a bystander cytotoxicity effect, thereby being able to extend the progression-free survival benefit for treatment. So this is probably just a high-level summary. Thank you for the question.

Yes. Thanks so much. And then one follow-up if I may. I noticed your burn here at about $103 million a quarter looks like you're not kind of in the runway guidance to end of 2025; it seems like you're not guiding for a lot of improvements in burn rate or any improvement in revenue offset by corresponding increases in spend. Is that a fair way to think about it?

That's correct. And if you take a look at being conservative, saying cash runway through the end of 2025, it's really going to be dependent upon our pipeline and how our pipeline advances. But we do believe as it stands today, we're comfortable with our cash balance and will bridge profitability for the BCMA program.

Thank you so much.

Thank you. Our next question comes from Ziyi Chen with Goldman Sachs. Your line is open.

Thank you for taking my questions, and for the upcoming ODAC meeting on Friday, could you share a bit more about the cutoff date for those data you could potentially share with the committee and also for the OS data for the as-treated group who was shared in 2023 ASH, which showed a very strong OS benefit compared to the intent-to-treat group? So will the discussion include the as-treated group as well? So which group will be more important per your previous communication with the regulators? And also, we're trying to understand your initial thoughts on the European countries launches. Any incremental updates on the launch and any preliminary strategy on that? Thank you.

Hey, Ziyi. This is Ying. I'll take your first question around ODAC. So at this point, I can tell you we submitted three data cuts to the FDA and also EMA on overall survival because we were told by the FDA that the focus of the upcoming ODAC on March 15th will be overall survival. So as you mentioned, the first data cut was submitted in the BLA in June of last year, and that was part of the first prespecified interim analysis with the data cut on November 1st, 2022. And then as part of the day 120 safety update we submitted to the FDA in October of last year, we put in another update on survival from CARTITUDE-4. And that was with a data cut of April of last year. And then most recently, on January 7, we submitted the latest survival data from CARTITUDE-4 with a data cut of December 13th of 2023. So those are the three different overall survival analyses we provided to the FDA, and those are three data cuts that will be discussed on Friday by ODAC as well. In terms of ITT versus as-treated, I can tell you that all our data analysis on the survival benefit was provided on the basis of intention to treat, ITT, and that is the all-cause mortality analysis, which is the most conservative scenario here. We do not plan to submit to the agency the data of survival on the basis of as-treated. So I hope that answers your question about ODAC. And then I'll ask my colleague Steve to comment on the European launch, given the most recent CHMP opinion.

Yes, thanks, Ying. A couple of things just to remind the listeners that our partner is responsible for CARVYKTI's launch planning outside the United States, with the exception of China. As far as Europe goes, as Ying mentioned, we are currently in Germany with CARVYKTI as well as Austria, and Austria came on board in December of last year. The intention, and this is through our partner, is that they are in active negotiations currently around our new CARTITUDE-4 data. So in terms of guiding regarding the country launch planning, we don't have any guidance yet because I know this is a pretty fluid environment right now with the agencies in Europe and our partners. So, unfortunately, I can't guide you at this point in time.

Got it, thank you. Ying and Steve.

Thank you. Our next question comes from Yaron Werber with TD Cowen. Your line is open.

Hi, this is Gina on for Yaron. Thanks for taking our question. I kind of wanted to ask about Parkinsonism, which is seen more with CARVYKTI than other CAR-Ts. Why do you think CARVYKTI uniquely produces Parkinsonism? And also we spoke to KOLs that said that it can have pretty irreversible effects. So do you think that this is going to deter use in an earlier line of setting, especially if competing CAR-Ts don't show this? Thanks.

Hey, Gina. This is Ying. I'll take your question on Parkinsonism. Well, first of all, if you look at the data that's both in clinical trials and also from the FDA AER database, this phenomenon of Parkinsonism is not unique to CARVYKTI. In fact, it was reported from patients who were taking YESCARTA, KYMRIAH, and also ABECMA. And so far, as of the end of last year, we could see about seven cases reported in the FDA database from the US patients. So that's the number. That's actually the fact. With regard to why you're seeing this kind of delayed Parkinsonism, I would say there's a couple of hypotheses out there. For example, it could be because of the T-cell trafficking into the CNS or in the brain when the patient has a leaky blood-brain barrier after years of therapy, or if the patient already had preexisting neurological situations such as neuropathy. So that could be one of the hypotheses, although at this point, I don't think there's any solid clinical evidence to show which is the root cause of our Parkinsonism. Regarding our question on Parkinsonism in the earlier lines, as we reported at ASCO, given the risk mitigation strategies we implemented following the six cases reported from CARTITUDE-1, we were able to show that the incidence of Parkinsonism was going down from about 6% in CARTITUDE-1 to about 0.5% in CARTITUDE-4. And that was a grade one case we reported at ASCO. So we believe that if you look at the earlier line patient population, because of the risk mitigation and also potentially because of the patient baseline differences, we think that is entirely a manageable phenomenon here. Thank you.

Thank you. Our next question comes from Kelly Shi with Jefferies. Your line is open.

Hi, this is Dave on for Kelly Shi. Congrats on the progress. I have a couple of questions. One is, as multiple BCMA agents are available now, have you received any feedback from physicians on how they position CARVYKTI versus other treatment? Also, on sales, when do you expect to provide sales guidance? And although you mentioned J&J will be responsible for outside the US, any color on when we should expect to record the first revenue in other countries in EU and Japan? Thank you.

We're going to take the last question around sales. So as far as the EU and Japan, I mentioned that we're already in Austria and Germany. And unfortunately, because of negotiations being ongoing, we can't comment on what country may be out next in Europe, and that includes Japan, for that matter. I think your other question had to do with selection of CARVYKTI in terms of patient type. What we're seeing, obviously right now within the US and in Europe, in the fifth line plus setting here in the states, as Ying mentioned in his opening remarks, we're running about an 80% market share in sites where we are basically competing against the BCMA. So I think that speaks volumes in terms of preference, in terms of physicians, and it's in all risk categories, whether it be standard risk or high risk. I think that where you see some other product use around bispecific use is when potentially CARVYKTI may not be available, or if a physician wants to bridge to a CAR-T therapy, you're seeing some uptick for sure in the bispecific space. I think that has, in terms of market erosion where you've seen it, at least in the research that we're doing, is you're seeing the market erosion occurring with a BCMA when a bispecific is used in front of a CAR T therapy as opposed to cilta-cel.

Hey Dave, I'll take your first question. I think it was on label update. So I'll provide the answer in two respects. Number one is that you're all aware that in late last year, we did receive an official label update that includes the two-year minimum follow-up of CARTITUDE-1 in late line multiple myeloma. And with that, the FDA also included label updates on AML and also MDS. So I want to provide a little bit clarification on this. So if you look at the total of 97 patients from CARTITUDE-1, we saw nine patients with ten cases. If you look at the cumulative rate of AML and MDS, it's roughly 10%. But recall this trial was started back in 2019, so essentially in the last five years, the cumulative rate of AML/MDS is roughly 10%. Now, there's a paper that was published at ASH in December of last year which looked at an insurance claim database over 1000 patients who are triple exposed, which means these patients have been treated with triple classes, including one drug from the emit class, one drug from protein inhibitors, and then one drug from a CD30 antibody? So if you look at that patient population, even without any treatment, the background rate of developing MDS or AML is roughly 3% each year. Therefore, if you look at the data from CARTITUDE-1, we don't believe that it is actually higher than the background rate. And we already got the label update on AML and MDS. Now, regarding the second one, as you guys all saw from the public communication from the FDA, all six brands of CAR T therapies will receive label updates on T-cell lymphoma. The FDA believes this is a class effect. So everyone will get similar or the same language. And right now, we and J&J are in discussion with the FDA about the exact language of the label update. Suffice to say that given the 23 cases reported from the FDA, and also the denominator is over 27,000 patients who were treated with those six brands at some clinical trial patients, it is a small and rare risk, and we think we'll get the label update in the near future. You also have a question about feedback from physicians on how they think about CARVYKTI versus other novel therapies. I think we have been in touch with physicians and KOLs since ASH, and at this point, we have not seen any prescription behavior that's changed based on either T-cell lymphoma or AML/MDS label changes. And if you look at efficacy, physicians continue to believe that CARVYKTI provides best-in-class efficacy with nearly three years PFS in late line. And then also again, if you saw the results from CARTITUDE-4 compared to standard care such as DPd or daratumumab, pomalidomide, and dexamethasone, we saw a 74% risk reduction in progression of death. And you will see on Friday how CARVYKTI has helped those patients in survival as well. So at this point, I think it's still positioned as best-in-class efficacy with the one-time injection convenience. That is how physicians view CARVYKTI. Thank you.

Thank you.

Thank you. Our next question comes from Leonid Timashev with RBC Capital Markets. Your line is open.

Hi. Yes, thanks for taking my question. I also wanted to ask on the ODAC and I guess, specifically, how you're thinking about competitive implications coming out of that meeting. I guess with regards to the drug you're going to be sharing the committee with, do you think any setbacks for them are going to be a positive for you as there's less market splitting, potentially less competition? Or do you think if they succeed that's going to be helpful given that they can drive greater awareness? And I guess is there any risk of the CAR-T space broadly being painted with the same brush, depending on what the competitor presents? Thanks.

Thanks, Leo, for the question. So I think if you look at the Federal register publication, you will see even though it's the same roster of ODAC, but it's actually two different panels. On the morning of March 15th, ODAC will discuss the application from us on the second-line indication for CARVYKTI, and then in the afternoon, the same ODAC roster of KOLs and experts will discuss the application from our competition in a third-line application. So I think it is a separate panel. It's not necessarily a panel on a CAR-T class, and I believe each application will be discussed and also debated by the KOL and also the agency on its merit. So I can't comment on our competition's application or the data, but we firmly believe that CARVYKTI provides overwhelming benefit in the PFS and also overall survival endpoints here. So that's what we can say about this. And if you look at CAR-T as a class in general, in late-line multiple myeloma, clearly the class of therapy has provided a new option for patients who have been treated and also failed all major classes, including an IMiD, a protein inhibitor, and also a CD38 antibody. At that point, these patients really did not have much choice besides the BCMA directed agents. So we firmly believe that there's a very important place for BCMA-directed CAR-T in the treatment of multiple myeloma here. Thank you.

Thank you. Our next question comes from Vikram Purohit with Morgan Stanley. Your line is open.

Hi. Good morning. Thank you for taking our questions. We had two. One on the pipeline and one on commercialization. So on the pipeline for the CARTITUDE-2 study, we were just curious about your latest thoughts regarding timing for data from cohorts E&F. And then on commercialization, you mentioned that around 30% of patients are administered CARVYKTI in the outpatient setting. How high do you think that could go in the near to midterm? And what do you think facilitates greater use in the outpatient setting? If you think that's a number that can move up significantly in the near term? Thanks.

Hey, good morning, Vikram. So I'll take the first question on CARTITUDE-2, cohort E&F question, and then my colleague Steve will probably answer the second one. So on CARTITUDE-2 cohort E&F, as a reminder, we enrolled a total of roughly 60 patients in cohort E&F, and these are newly diagnosed multiple myeloma patients. So we're not providing any guidance, but at this point, I think the earliest timing when we can report data probably will be towards the end of this year. And as you know, Vikram, we always report data at major medical conferences. So that's what we can say about timing for cohort E&F. Steve?

Thank you, Ying. The outpatient metric is significant, particularly as we expand into earlier lines with larger patient populations. Regarding the increase, several factors are driving outpatient use in the U.S. Firstly, our sites are recognizing the need to explore alternatives to admitting all CAR-T patients into hospitals. Currently, we have about a 30% share, and I believe we could potentially double that. The main limitation to increasing the outpatient metric will largely depend on our ability to bring products to market. Sites that have partnered with us from the beginning have outpatient usage rates significantly higher than 30%. As we aim to reach around 100% this year with new sites, it's essential for them to have patient representatives to verify that their observations regarding safety are in line with the product's label. Ultimately, it's crucial to get products into the hands of physicians, allowing them to become familiar with the drug, while also establishing the necessary infrastructure for outpatient use.

Very helpful. Thank you.

Sure.

Thank you. Our next question comes from Kostas Biliouris with BMO Capital Markets. Your line is open.

Thanks for taking our questions and congrats on the progress. A couple of questions from us. So the first one is around the 10,000 slots by year-end 2025, which is great to see again. I'm wondering, how should we be thinking beyond 2026? Is there any saturation of the slots you can produce, or you can potentially even double these 10,000 slots that you are guiding in the future if there is enough supply? And the second question is on CARTITUDE-4 data. If I recall correctly, last year you showed that during the bridging phase, the CARVYKTI arm had more events than the standard of care arm, although both arms were under standard of care. I recall that there was not really any characteristics between the two populations that could explain this difference. I'm wondering if there is any update on this front. Thank you.

Hey, good morning, Kostas. This is Ying. I'll take your questions. So, on the first one line regarding the 10,000 slots by end of 2025, obviously, we and our partner J&J have plans to extend beyond that 10,000 capacity, because we do see that there will be quite significant demand once the drug is approved in the second line and beyond. So I would say we cannot provide any specific guidance on which year, but I can tell you, given the roughly $1 billion CapEx program we are conducting now, we think with certain incremental investment, we can actually get to a larger number in the near future after 2026. Now, of course, there's a limit to what we can do with this current round of CapEx. So we and our partner already are thinking about the next step. In fact, a decision could potentially be made this year in 2024, whether we need to conduct another round of CapEx or not. It all depends on, obviously, regulatory approvals and also the market assessment based on the feedback from physicians. So we do surveys of physicians from time to time based on the latest clinical data and also the competitive landscape. And you guys can stay tuned on our CapEx plan here. On your second question, on the initial imbalance of PFS events in the first couple of months, when both arms of the CARTITUDE-4 patients are receiving exactly the same, either bridging therapy on the CARVYKTI arm or the standard care in the control arm. We and our partner have tried exhaustively to look at all these subgroup analyses and also baseline characteristics. And in fact, Kostas, I can assure you that that was a question from regulators because we did have the SAGO Meeting in February when EMA conducted that committee to look at CARTITUDE-4 data. And that was a key question. So I can tell you that after the exhaustive analysis, the only thing we found was that there's a slight imbalance on the dosing density for a couple standard of care regimens, including some dose differences in POMALYST and then some dose differences in Velcade. And you guys will see that on the briefing book, I believe that will be published on Wednesday. So that's the only difference we could find out. And that is also why, after looking at all the data, as you see, Kostas, we received a very clean label from the CHMP recommendation. If you look at the document, it says that CARVYKTI is recommended for second line treatment of multiple myeloma after the patient has received one line of treatment that includes an IMiD and also a protein inhibitor. And also the patients are refracted to REVLIMID. That's exactly the enrollment criteria for CARTITUDE-4. And that's a clean label we got from Europe. So that hopefully gives you the hint. Thank you.

Super helpful. Thank you.

Thank you. Our next question comes from Ash Verma with UBS. Your line is open.

Hi, thanks for taking my question. So, in terms of the build to get to 10,000 annual doses exiting 2025, by our math, you'll need slot expansion of roughly 30% every six months to get to those levels. Does that align with your thinking? And then how much of the 10,000 doses are you expecting Europe to contribute? So that's one. And then secondly, can you comment on the European pricing in the long run? Would it trend more towards where your US pricing is, or is there any different dynamic at play there? Thanks.

Maybe I'll take the last question first and I'll turn it over to Ying to talk about some of the manufacturing questions you had. Yes, in terms of the European pricing, you're going to see some guidance coming out shortly related to Germany pricing. So I would expect to see that by the end of the month, possibly filling into the early part of April. So stay tuned on that. Ying, do you want to talk about the manufacturing question?

Yes. So, Ash, let me talk about how we plan to get to that 10,000 number by end of 2025. So, first of all, we have three internal nodes, right, in Raritan, like I mentioned earlier in this call, we already got two increases in capacity last year, and we're planning something similar this year. And we'll continue to do that in the year of 2025 as well. So that's part of that. But beyond that, we and J&J are doing actually the physical expansion of the Raritan site. So, essentially, after this physical construction is done this year in 2024, we're doubling our effective area of manufacturing at the Raritan site. So that will also factor into the capacity increase in the year of 2025. Because once the physical construction is done this year, we'll spend months installing the equipment, training the staff, and then get all the suites validated on the current GMP standard. So that's an important part of the Raritan increase. Right? And then let's talk about the two other nodes in Belgium. So the first one is called Obelisc, which is a standalone building we've released. That started clinical batch production in January, and our plan is to bring that site to commercial production for European demand by the end of this year. So towards the end of this year, we'll have another commercial note at Ghent. And then the much larger facility called Tech Lane, which is roughly 240,000 square foot by design. The physical construction will be done by the end of this year. So our plan is to bring that Tech Lane facility to clinical production early next year. And again, in the second half of 2025, that Tech Lane facility will enter into commercial production mode. So those are the three internal nodes, and those are very important cornerstone strategies how we can get to that 10,000. Now, beyond that, you guys all know we executed a three-way agreement with Novartis last year. It was for three-year clinical supply. Right now, we're expecting Novartis to file for IND potentially in the first half of this year. And after that, pending the FDA approval of the IND, Novartis will start to produce clinical trial material for us. So that external CMO strategy is also an important pillar of our strategy to get to that 10,000. So all this combined, by the end of 2025, we're on track at this point to get to that 10,000 dose annual capacity.

Thank you.

Oh, and lastly, I think, Ash, you asked about the revenue split. Obviously, it's way too early for us to comment because right now, whatever revenue we generate for CARVYKTI from Europe, it's all really by allocation because there's only so much capacity we could allocate to Europe. But in the future, once we have enough capacity to satisfy demand from both the US and European markets, then if you look at some of the prior CAR-T revenue splits, it's usually roughly maybe 50:50, slightly favoring the US. And then the ex-US, especially, European revenue is just shy of 50%. So we think that should be the same dynamic for BCMA CAR-T in myeloma.

Thank you. Our next question comes from Edward Tenthoff with Piper Sandler. Your line is open.

Great, thank you very much for taking my question, and I appreciate all the good color and the update today. Congrats on all the progress. So my question really has to do with kind of second-line plus utilization. How do you envision physicians prioritizing patients assuming label expansion? Do you think that we'll see CARVYKTI use move to the earlier line, as evidenced by the kind of superior results that we saw from CARTITUDE-4? Is it really going to be up to the sites how they're allocating CARVYKTI? Any color on your early thoughts on that would be appreciated. Thank you.

Yes, why don't I take that, since we just had some data read-out specific to that question? So if you step back and look at the myeloma population segmented by standard risk versus high risk, that's how we do it. And if you assume that the high-risk population represents about 25% of the total, which is pretty consistent across all lines of therapy. What our data is showing, and we ran some research right after last year's ASCO when we released this data, and we actually just reran it recently, and it's been fairly consistent. So based upon the results that Ying has shared earlier in terms of our CARTITUDE-4 data, we're seeing for sure that 20% to 25% high-risk group moving over, or physicians going very quickly with CAR-T therapy like cilta-cel up front in the second line. And then we're also seeing, and this was a bit of a change, which was a positive change for patients, is yes, even within the standard risk population, physicians have said that they see them moving forward with CARVYKTI in standard risk in the second-line plus patient population as well. So that's quite exciting. Now, as you know, that's quite a sizable patient population for us, but that data, like I said, is fairly fresh.

I guess the last maybe tidbit of information to drip this real quickly is that the new dynamic that this launch represents is a referral dynamic, especially in the standard risk group. So as opposed to our CARTITUDE-1 launch, which was pretty much most of those fifth-line plus patients were already within our hospitals. Through our partner, and our partner is fully staffed, trained-up, and ready to go, they'll be pushing from a referral front in the outpatient setting where most of these standard-risk patients are today, to refer those patients that are CAR-T eligible to our site. So that's the only, I would say, added wrinkle to the second-line plus indication is really this active engagement in terms of referral from the outpatient clinics into our hospital.

Great. Super helpful color. I appreciate it and good luck this week.

Thank you.

Thank you. Our next question comes from Justin Zelin with BTIG. Your line is open.

Thanks for taking the question and congrats on the progress. So Ying, I wanted to ask if you could give us an update on the out-of-spec rate that you're seeing and your confidence on the FDA's widening of the out-of-spec window with the most recent submission. Thanks.

Hey, Justin, thanks for the question. So, I think what I can say is that in the last nine months or three quarters or so, the out-of-spec rating has been quite stable. Like we mentioned, it's in the teens range. So at this point, we are seeing a very stable trend of OS, and the next leg up would be pending the FDA approval. We hope we'll get a wider release back, and then we hope to have another significant reduction in the out-of-spec rate. Now, regarding the FDA approval, so, as you know, Justin, we did submit it in the supplemental BLA in June of last year, asking the FDA to widen our release back based on the clinical data we received from CARTITUDE-4 data. So we provided a wealth of what I call the sensitivity analysis by correlating the release spec with the clinical outcome. At this point, we are still confident that we should be able to receive the wider spec, but we don't comment on detailed interaction with the agency. You're going to have to wait and see when we receive the FDA approval, then we'll let you guys know what kind of regulatory action the agency has taken. Thank you.

Thanks for taking my questions.

Thank you. Our next question comes from Mitchell Kapoor with H.C. Wainwright. Your line is open.

Hey, everyone, thanks for taking the questions. I have two. The first one is kind of on the strategy of moving into earlier lines, knowing that you'll undoubtedly treat patients who would have otherwise been treated in the later line setting, can you kind of help us contextualize the true additional expansion opportunity of moving into earlier lines? And then the second is on the strategy of the sales force messaging, assuming a new approval in the earlier line setting, with new accounts, do you expect to ask the physician to potentially put patients on CARVYKTI in later lines first and then move to earlier lines? Or would you initially ask them to begin their patients in the earlier line setting? Thank you.

Yes, thank you, Steve, for that question. That's a good one. We will obviously be in launch mode with CARTITUDE-4, focusing heavily on the new indication, which is the second line plus nature, and all the patients who meet that eligibility criteria. From a messaging perspective, we will concentrate on CARTITUDE-4 and its second line plus aspect. Regarding the eligible patient population, I can provide some numbers that may assist you. These figures represent global patient numbers that meet the eligibility criteria, not necessarily those who have been treated, but at least the patients who are eligible. This information might help with your modeling. In the frontline setting, we estimate about a 22,000 patient opportunity globally; with CARTITUDE-4, this could triple to around 60,000 by 2028, with estimates ranging from 20,000 to 28,000. Hopefully, this provides some perspective on the incremental impact as we move into earlier lines.

Great. Thank you.

Thank you. Our next question comes from George Farmer with Scotiabank. Your line is open.

Hi, good morning. Thanks for taking my questions. You guys mentioned an 80% market share of CARVYKTI in multiple myeloma versus Abecma. Can you comment on what's driving that decision for physicians to use Abecma even in the first place? And do you think that can improve? And then second question, maybe I missed this. Are you still guiding for profitability in 2026?

Hi, this is Steve again. We had a little mechanical difficulty on our end. Could you repeat that first question? I think the question was related to Abecma and its use.

Yes. So you guys said you had like an 80% market share, right? And just like wondering what's driving that decision to even use Abecma and do you think it can improve? And then the second question had to do with profitability in 2026. Is that still a message you guys are communicating?

Sure. So the messaging is still consistent with profitability for 2026. We've talked about bridging to profitability for the BCMA program. What's going to be critical there is our penetration into earlier lines of therapy and kind of our uptake down to revenues and to continue to drive our COGS down. And then the other component of that is really I talked about earlier is our pipeline advancement. So by 2026, we are projecting that we can break even or be profitable from an overall company perspective.

Great, thanks very much.

Thank you. Our next question comes from Gena Wang with Barclays. Your line is open.

Thank you for addressing my questions. I apologize for joining the call late, so I hope these questions haven't been covered yet. First, you mentioned previously that by the end of 2025, your capacity could reach 10,000 doses. What would be required to increase that to 20,000 to 25,000 doses, and how long would that process take? My second question is about the ODAC meeting later this week. Could you share what type of data you plan to submit to the FDA? Also, do you anticipate discussions regarding the toxicity profile, including neurotoxicities?

Hey, good morning, Gina. This is Ying. I'll take your questions. So, on the first one, I think I've commented previously that with this current run of very extensive capital investment between us and our partner J&J, we think we can go beyond that 10,000 and potentially go to numbers you quoted. It will take some incremental investment and it will take probably another couple of years to get there. But at this point, I'd rather not share any details around that. Just suffice it to say that, yes, we'll go beyond 10,000 with this current round of CapEx and also potentially help from our external partners on our CMO side. So that's the answer for your first question. And then the second one regarding ODAC, I can tell you that it's very clear from the FDA communication in writing and also verbally, that the focus of the ODAC will be discussing the overall survival benefit CARVYKTI provides in this patient population evaluated in the CARTITUDE-4 study, and in the context of some early imbalances, which you have seen from the PFS curve. Right. So that's really the focus of the ODAC here in terms of what they're focusing on. Now I'm sure it's a four-hour ODAC session, and in any ODAC meeting, they always talk about the overall risk-benefit, and that probably will touch upon also some of the adverse events, including CRS, neurotox, and second primary malignancies. But like I mentioned, again, the survival is the focus. The survival benefit is the focus, not the SPM issue or neurotox issue at this point, based on what we heard from FDA. Thank you.

Thank you. Our next question comes from Kelsey Goodwin with Guggenheim. Your line is open.

Oh, hey. Good morning. Thanks for taking my questions. First, I guess, how should we think about the first quarter 2024 sales, given kind of the step up in the back half of 2023 and likely not being fully recognized given the fourth quarter sales that we saw? And then secondly, on the AdComm, so given both are on the same day and crossover is obviously a main focus, could you remind us of the rationale for not allowing crossover in CARTITUDE-4? And do you think that that might be a hang-up for the FDA in any way? Thank you.

So for quarter-over-quarter growth, we're not giving specific guidance, but I can tell you we do anticipate quarter-over-quarter growth with more pronounced growth in the second half of the year with the anticipated launch into the second-line setting. Ying, I don't know if you want to talk about the crossover.

Sure. So thank you for the question, Kelsey. As you know, there's some difference between the two trials. And in the CARTITUDE-4 study, we did not allow crossover, which means we did not provide the patient who progressed on the standard of care to cross over to cilta-cel once they progress. However, once the patient progresses on the standard of care, they can actually get any commercially available therapy, including the two commercially available CAR T therapies, and also the commercially available bispecifics. And they can also enroll into clinical trials. So you will see some of the details on Wednesday when the briefing book comes out, what those subsequent therapies those patients receive. But I can tell you, yes, there are patients who did receive CAR T therapies after progression. So that's the fact. Now, on the other hand, even though we did not allow the crossover, but before we started enrolling patients, we actually had very frequent communication with both FDA and EMA as global regulators to talk about the protocol of CARTITUDE-4, including the not allowing the crossover design. So at this point, I don't think that will be a big focus of debate here at ODAC.

Perfect. Okay, thank you so much.

That's all the questions we have for today. Thank you for your participation. You may now disconnect. Everyone. Have a great day.