Legend Biotech Corp Q4 FY2024 Earnings Call

Good day, and welcome to the Legend Biotech Fourth Quarter and Full-Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session, instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Caroline Paul, Associate Director of Investor Relations. Please go ahead.

Good morning. This is Caroline Paul, Associate Director of Investor Relations at Legend Biotech. Thank you for joining our conference call today to review our fourth quarter of 2024 performance. Prior to this call, we issued a press release announcing our financial results for the quarter. You can find the press release on our IR website at legendbiotech.com. Joining me on today's call are Ying Huang, the company's Chief Executive Officer; and Jessie Yeung, the company's Interim Chief Financial Officer. Following the prepared remarks, we will open up the call for Q&A. We have our President of CARVYKTI, Alan Bash; President of R&D, Guowei Fang; and Chief Medical Officer, Mythili Koneru, 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. In addition, adjusted net loss is a non-IFRS metric. This non-IFRS financial measure is in addition to, and not a substitute for, or superior to measures of financial performance prepared in accordance with IFRS. There are a number of limitations related to the use of these non-IFRS financial measures versus their closest IFRS equivalents. However, we believe that providing information concerning adjusted net loss and adjusted net loss per share enhances an investor's understanding of our financial performance. We use adjusted net loss as a performance metric that guides management in its operation of and planning for the future of the business. We believe that adjusted net loss provides a useful measure of our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. Our press release includes IFRS to non-IFRS reconciliations for these measures. With that, I will now turn the call over to Ying.

Hello, everyone. I’m glad that you're able to join us and hear about our recent accomplishments as the largest standalone cell therapy company. As you can see on Slide 6, we have been executing against our strategic priorities, paving the way for us to achieve blockbuster status and operational breakeven for CARVYKTI by the end of 2025 and anticipated company-wide profitability in 2026, excluding unrealized foreign exchange gains or losses. I would like to start by expanding on CARVYKTI's unique profile, which is the first and only CAR-T in multiple myeloma to clinically demonstrate a survival benefit versus standard-of-care. At the ASH 2024 Annual Meeting, we shared new results from the Phase 3 CARTITUDE-4 study that show 89% of evaluable patients achieved minimal residual disease negativity with a single infusion of CARVYKTI after a three-year follow-up compared to 38% for those treated with standard-of-care. As you may know, the FDA ODA Committee recently recommended the use of MRD negativity as a surrogate endpoint in multiple myeloma trials, which creates other potential opportunities for approval in the future. Additionally, we're pleased to see that CARVYKTI outcomes data is reaching the broader multiple myeloma community. The International Myeloma Working Group recently published a series of core recommendations on sequencing therapy for the treatment of multiple myeloma. Notably, in patients who are reasonable candidates for both BCMA CAR-T therapy and bispecific T-cell engagers, one of these recommendations is to pursue CAR-T therapy first. Our sales trajectory since our launch is undoubtedly due to CARVYKTI's unique profile along with strong manufacturing and commercial execution. Remember, Legend and J&J are pioneering and undertaking at a scale that we believe has never been done before in the field of multiple myeloma for CAR-T. On this note, on Slide 7, we'd like to highlight how the FDA has approved our CMO Novartis facility for commercial production of CARVYKTI in New Jersey. We are looking forward to initiating clinical production at our facility called Tech Lane in Ghent, Belgium in the coming weeks and initiating commercial production there later this year. This is another critical component of our plans for serving patients in Europe and beyond to meet the increasing demand. We are thrilled with our industry-leading early launch performance and we're not stopping there. We're continuing our commitment to bringing CARVYKTI to all eligible patients in the U.S. and Europe, who might benefit from its differentiated efficacy. We're pleased that CARVYKTI recently received approval for reimbursement in Spain. Moving to Slide 9. In the fourth quarter of 2024, net trade sales of CARVYKTI were approximately $334 million, which is a 110% increase year-over-year and a 17% increase from the third quarter. This performance was aligned with our expectation for accelerating growth in the second half of last year and was driven by strong demand, continued capacity expansion and the CARTITUDE-4 label launch for use as early as the second line. Regarding OUS performance, sales of $31 million increased 138% year-over-year and 15% quarter-over-quarter, owing to our recent increases in capacity and launches in Germany, Austria, Switzerland, and Brazil. In the United States, we continue to certify more hospitals as authorized treatment centers. The total number of U.S. hospitals that are certified to treat with CARVYKTI is now 102. We believe outpatient administration remains another key competitive advantage for us. CARVYKTI is the only approved CAR-T in multiple myeloma that has seen significant use in outpatient settings. Because of the delayed onset of CRS with CARVYKTI, providers are able to utilize outpatient administration to support patient needs. We are pleased with the progress we have made since one year ago when outpatient treatment accounted for 30% of our overall volume and anticipate a majority of our volume coming from outpatient use by the end of this year. We're also committed to facilitating best practice sharing as we treat more and more patients. We have now treated over 5,000 patients with CARVYKTI, which has created the most comprehensive CAR-T patient dataset in multiple myeloma. New data is constantly being generated about CARVYKTI's benefit over risk profile. For example, at the Tandem Meeting in February, real-world data was presented on risk mitigation strategies for CARVYKTI. On the clinical front, for CARVYKTI, as you may know, CARTITUDE-5 is fully enrolled and we expect to complete enrollment for CARTITUDE-6 this year. We believe these trials are key to moving CARVYKTI into the front-line setting. We believe these studies we have underway and our manufacturing and commercial execution will enable us to maximize CARVYKTI's potential. As you can see on Slide 12, CARVYKTI is the proven leader forging the path to cure in multiple myeloma. Turning to our upcoming company milestones on Slide 14, as we continue to work toward doubling CARVYKTI's supply in 2025, we anticipate growth to be driven by capacity expansion in Belgium and in New Jersey. In addition to increasing our manufacturing capacity, we're working to include our overall survival benefit in CARVYKTI's label, which is the gold standard that doctors want for their patients. Looking at long-term growth for Legend, we're building out our pipeline programs and we look to use the successful model we have pioneered with CARVYKTI and take it to other therapeutic areas where options are limited. These include blood cancers, next-generation multiple myeloma therapies, solid tumor programs, and autoimmune diseases. The new research facility we're building in Philadelphia is a testament to our commitment to pipeline investments, and we are looking forward to opening it later this year. To sum up, CARVYKTI is the market leader in multiple myeloma CAR-T therapies. We have scaled up our business and delivered on our commitment to doubling CARVYKTI's supply. We have continued to expand the body of evidence on CARVYKTI's differentiated clinical profile and we continue to build out our pipeline to leverage our end-to-end expertise and ensure long-term growth. Now, it's time to take a closer look at the financials. So, I will turn the call over to Jessie.

Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $334 million in total net sales for CARVYKTI during the fourth quarter, an increase of 110% year-over-year. As a reminder, we share equally in all profits and losses of CARVYKTI with our partner, Janssen. As you can see on Slide 15, total revenues for the fourth quarter were $187 million, consisting of $168 million of collaboration revenue from the sale of CARVYKTI and license revenue of $18 million from the recognition of deferred revenue in connection with our license agreement with Novartis for the development, manufacture, and commercialization of LB2102 and other CAR-T therapies selectively targeting DLL-3. Net profit for the fourth quarter was $26 million, or $0.07 per share compared to net loss of $145 million or $0.40 per share for the same period. The increase was primarily driven by an unrealized foreign exchange gain of $110 million for the quarter due to our treasury center based in Ireland. We have U.S. dollar-denominated deposits, while the functional currency in Ireland is euro. For the same period last year, $38 million in unrealized foreign exchange loss was reported. As we have said in past quarters, the largest fluctuation in unrealized gains and losses can occur from quarter-to-quarter due to our treasury center based in Ireland. Moving on to expenses. Collaboration cost of revenue for the fourth quarter 2024 was $69 million compared to $32 million for the same period last year. These expenses are Legend's portion of collaboration cost of sales in connection with collaboration revenue under the Janssen agreement, along with expenditures to support the manufacturing capacity expansion. Additionally, cost of license and other revenue for the fourth quarter of 2024 was $5 million compared to no cost of license and other revenue for the fourth quarter of 2023. These costs are in connection with our license agreement with Novartis for the development, manufacture, and commercialization of LB2102 and other potential CAR-T therapies selectively targeting DLL-3. Research and development expenses remained flat for the fourth quarter 2024 at $104 million compared to $106 million for the same period last year, as we continue to develop cilta-cel and our pipeline programs such as our solid tumor programs. Administrative expenses for the fourth quarter were $34 million compared to $29 million for the same period last year. The increase of $5 million year-over-year is primarily due to the expansion of administrative functions and infrastructure to increase manufacturing capacity. Selling and distribution expense for the fourth quarter was $49 million compared to $34 million for the same period last year. The increase of $15 million year-over-year was due to costs associated with the commercial activities for CARVYKTI, including the expansion of the sales force and the second-line indication launch. Other income was $125 million for the fourth quarter compared to $18 million for the same period last year. The increase was almost entirely driven by an unrealized foreign exchange gain for the three months ended December 31, 2024. In the same period last year, there was an unrealized foreign exchange loss of $38 million. The unrealized foreign exchange gains and losses were primarily driven by our treasury center based in Ireland. We have U.S. dollar-denominated deposits, while the functional currency in Ireland is euro. On this note, on Slide 18, you will notice we are introducing non-IFRS earnings measures to provide more insights into our financial performance. After excluding certain items that are not representative of the company's core business, our adjusted net loss was $59 million or $0.16 per share for the fourth quarter compared to an adjusted net loss of $89 million or $0.24 per share for the same period. Finally, we ended the year with $1.1 billion in cash and equivalents and time deposits. Our spending remains on track and we continue to maintain a strong balance sheet. Thus, we believe we have sufficient capital to fund our operating and capital expenditures until we anticipate reaching profitability in 2026, excluding unrealized foreign exchange gains or losses. Our profitability guidance implies further growth acceleration, which shows that we are making good progress towards our long-term goals. I will now pass it back to Ying for closing remarks.

Thank you, Jessie. CARVYKTI is the fastest launched CAR-T therapy. The achievements of our global teams have set us up for great success in 2025, and we are poised to provide CARVYKTI to even more patients around the world. I want to thank each of our 2,600 employees for their commitment and dedication to Legend. Now, it's time to take your questions. Operator, we're ready for the first question, please.

Thank you. Our first question comes from Jon Miller with Evercore. Your line is open.

Hi, guys. Thanks for taking my question, and congrats on all of the progress and a great fourth quarter. I would love to ask more about the safety profile and your plans to develop a trial that more aggressively manages ICANS and neurotox in a more trial-like setting. I think we all saw the IST posters that came out a month ago, which is great. But Ying, you've spoken in the past about running your own Phase 2 using a more Arcellx-like management system. Where are the plans for that trial, and when is the earliest we could see data from that? Thank you.

Thank you for your question. Regarding the posters presented at Tandem, these were single-center studies, but they suggest a promising beginning for the risk mitigation strategies we've talked about recently, using absolute lymphocyte count as a predictive biomarker for patients at higher risk for MNTs or Parkinsonism. In those posters, CBCI selected a threshold of 5,000, while Mayo Clinic opted for 3,000 as a predictive cutoff. Our CARTITUDE studies indicate that aiming for 3,000 might capture more patients effectively. We discussed this with the investigators at CBCI, and they plan to use the 3,000 cutoff for future studies. Regardless of the cutoff, ALC is clearly a predictive biomarker, and when combined with dexamethasone treatment, it aims to reduce or prevent Parkinsonism. Moving forward, we have aligned these ALC cutoffs within the CARTITUDE studies, and enrollment is ongoing throughout the year. I should also mention the prospective study you referenced, which will be initiated by some of the investigators who shared their findings at Tandem. With both internal initiatives and the investigator-initiated trial using the thresholds I mentioned, we anticipate presenting data throughout this year and into next year that will address the MNTs and Parkinsonism. The Mayo Clinic also noted cranial neuropathies, which are important to highlight as they tend to be reversible in most cases. The two cases from CBCI that exhibited cranial neuropathies showed complete symptom resolution with a prednisone taper and a seven-day dasatinib treatment. Generally, cranial neuropathies tend to reverse. ICANS and MNTs are the most significant, but we have clear mitigation strategies in place going forward, and we are confident in the overall positive benefit-to-risk profile for CARVYKTI.

Thanks, My. And then, Jon, maybe I'll just add a comment about our own sponsored trials. So, we have already amended all the protocols for the CARTITUDE program, including ongoing CARTITUDE-6 and also ongoing CARTITUDE-2, including additional new cohorts for CARTITUDE-2. So, that will be with a cut-off of 3,000 cells per microliter for ALC monitoring and then a three-day flat dosing of 10 milligrams twice daily for three days. So, that's already being implemented at all the CARTITUDE program sites.

Excellent. Thanks so much. If I could get one follow-up. I'm very curious to hear about your plans for ASCO this year. Are you going to have meaningful updates to your existing trials and new data in early lines this year?

So, Jon, as you know, the typical policy for both J&J and Legend, disclosure policy is that we cannot comment until the abstract is officially accepted by any major medical meeting. However, suffice to say that both Legend and J&J are very excited about the data we're presenting at ASCO potentially this year. So, stay tuned.

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

Hi. Thanks a lot for taking our question. This is Hang Hu on behalf of Gena Wang. So, our question is about commercial. So, the first one is, like, what's the quarterly revenue breakdown in terms of the second line to third line patients versus four plus line patients? And the second one is, we're curious about the demand for CAR-T therapy in multiple myeloma. We see it is higher than the numbers of patients receiving treatment now. So, could you give more color on that? For instance, what's kind of like the physician capacity and also for the additional patients could be treated with CAR-T therapy, whether they’re from the epidemic center? Yeah. Thanks.

Thanks for the question. So, with respect to market demand and commercial uptake, we continue to get good receptivity to the CARTITUDE-4 data, and I'll just share a little bit more about what we're hearing from customers and then go into some of the numbers. We're hearing very positive receptivity to the clinical profile, inclusive of obviously the PFS and the overall survival data that's now in the public domain, all from a one-time treatment, and as you mentioned, indication in earlier lines, specifically the second through fourth line opportunity. At this point, we're about three quarters plus into the launch of the CARTITUDE-4 indication and we have already converted nearly 60% of our usage to that in the second through fourth line population. So, that's a very strong evolution quarter-on-quarter of bringing our total revenue across two earlier lines and it sets us up well to maintain leadership in these earlier line opportunities.

Thank you, Alan. And I'll also add that both our commercial sales forces and also from our partner, J&J, are now targeting 8,000 hematologists in about 3,000 clinics. So, we're working very hard to penetrate deeply into the community setting.

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

Great. Thanks for taking my question. Maybe a couple. The first one, just housekeeping. The share count, I noticed that you're using the fully diluted $402 million, which is up from $367 million last quarter. Is this the run rate we should use from now on, or is there kind of a one-timer in there or anti-dilution kind of measures and that's why you're using that? And then the second one is more about the pipeline. Can you give us a sense of what data we can expect from sort of the early pipeline and maybe some of the INI programs that you have going on and anything this year? Thank you.

Hi, Yaron. So, for this time, we actually recorded a net profit with the IFRS measures. And then with net profit, we have to calculate using all the investors' shares as well. So, you see a different number with other diluted numbers. But going forward, if we switch back to net loss, then you will see the same calculation in Q4 again.

So, for the early pipeline, we are very excited about a few key categories this year. We have two U.S. Phase 1 programs on target cell therapy targeting Claudin18.2 for gastric as well as targeting DLL-3 for small cell lung cancer. We will have the dose escalation readout this year and then decide to the next phase of development. On the IIT trial side from China, we have multiple readouts on allogenic program targeting different diseases. So, we expect to have those readouts before the end of this year as well. As Ying communicated, we are just about to initiate a new research center in Philadelphia, focusing on disruptive technology, including the in-vivo cell therapy approach. We expect to see our asset moving into clinic development with that particular platform. Lastly, I think on the autoimmune front, we have a macro program currently undergoing IIT trials, including both autologous as well as allogeneic approaches. In particular, we have a triple-targeting autologous cell therapy product targeting CD19, CD20, and CD22. This asset is being tested across a very broad spectrum of autoimmune diseases—in fact, more than 10 different disease indications. We expect to have initial clinical readouts for this particular asset as well.

Thank you. Our next question comes from Jessica Fye with JPMorgan. Your line is open.

Hey, guys. Good morning. Thanks for taking our question. With all the various sources of capacity, slots, etc., kind of coming online, can you just give us a little color about how to think about the cadence of revenue growth this year? Thank you.

Yeah. So, overall, we're feeling reasonably confident about doubling capacity and achieving the consensus number. As our partner J&J has said previously, and as we'll share a little bit more here, our growth over 2025 will not be perfectly linear. The way to think about it is coming off of a strong Q4 and the back half of 2024, we anticipate Q1 that's more modest growth compared to Q4. This is because of seasonality and the fact that in November and December during the holiday weeks, we took the opportunity to do some important and regulatory required facility maintenance. So, that will actually lag into revenue in Q1. Following that, we expect step-ups in our manufacturing due to the Raritan step-up as well as the approval of the Novartis commercial operations. This will have a more meaningful impact in Q2 and Q3 as we see more meaningful growth in those two quarters.

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

Hey. Thank you for taking my questions. Well, since you mentioned early-stage pipelines, including DLL-3 and the Claudin18.2 CAR-T, I'm kind of wondering, could you share more color on the expected data for both assets this year and also the future clinical development strategies? And also, I'm trying to understand what is your perspective on the positioning for CAR-T therapies in solid tumor treatment? Based on the data you have seen, is there any obstacles you have been seeing in solid tumor CAR-T development? Thank you.

Thank you for your question. As Guowei mentioned earlier, both DLL-3 and the Claudin18.2 CAR-T are currently in dose escalation. We are actually making good progress on both studies and we look forward to presenting the safety dose escalation data and some preliminary efficacy this year at multiple different conferences. On safety, preliminary efficacy, as well as biomarker data, that's actually quite interesting for both programs. I think DLL-3, we hope to complete the dose escalation in the entirety of 20 patients as planned. As you probably know, this study is under collaboration with Novartis, who are looking to continue the development of this. It's clear that this construct is of particular interest. As you'll see throughout this year, really exciting data will be discussed in various venues. Regarding the Claudin18.2, similarly, we are planning to complete the dose escalation this year and begin dose expansions. Currently, Claudin18.2 is an appropriate target in pancreatic cancer and gastric cancer, among others. We look forward to presenting, again, the safety, preliminary efficacy, as well as biomarker data and starting the expansions probably in the second half of this year.

I can also add a bit more color in terms of our overall early pipeline strategy for solid tumors. There are certain disease indications where the medical need is tremendous, such as pancreatic cancer and small cell lung cancer, where good efficacy with a manageable safety profile would have a commercial path forward. We are seeing other disease indications where additional new innovation is required to really drive commercial success of cell therapy in the solid tumor space. In those indications, we continue to innovate in different directions, for example, trying to improve the duration of response by engineering more complex cell therapy products, reconstituting both the innate as well as adaptive immunity and engineering various immune mechanisms to promote immune product infiltration into the tumor microenvironment, etc. Stay tuned, and we will have more additional innovation in the solid tumor space.

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

Hi. Thanks for taking my question. This is calling in for Kelly Shi. I just have one quick question. We know that two BCMA bispecifics are expected to report second to fourth line data in 2025 from J&J and Pfizer, and both trials exclude patients with prior BCMA agents. So, my question is, how do you see bispecifics competing with CARVYKTI in general? And as you mentioned, the IMWG recommended using CAR-T ahead of bispecifics based on existing data. What could we learn from this new upcoming data from those two bispecifics? Thank you.

As you mentioned, the BCMA bispecifics do exclude prior BCMA agents and they're approved in later lines of therapy compared to the current approval for CARVYKTI in second line and beyond. Therefore, IMWG, as you mentioned, in patients who are candidates for both do recommend CAR-T based on its superior efficacy and overall benefit-to-risk profile. In general, we do plan to continue to penetrate into these earlier lines of therapy, as Alan has mentioned. We hope to also continue not only in the academic centers but also in the community setting. We hope to continue to show this by our sales and growth for CARVYKTI.

Thanks, I would like to add a couple of points about this. I believe both treatment options will have their place in the market. However, I want to highlight some of the unique benefits provided by CAR-T, especially CARVYKTI. Firstly, as demonstrated by both late-line and second-line data, CARVYKTI offers unparalleled depth and durability of response. In the late-line patients in CARTITUDE-1, we showed a median PFS of nearly three years. Currently, the median PFS has not yet been reached in the second-line trial CARTITUDE-4. Secondly, which may not be fully appreciated by investors, when we speak with physicians and patients, they acknowledge that CARVYKTI provides the convenience of a one-time treatment with a lengthy treatment-free period, which leads to an enhanced quality of life. This is another significant advantage of CAR-T therapy.

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

Hey, guys. Thanks for taking my question. I want to follow up on Jessica's question, but maybe it was a bit longer of a time horizon. You guys have talked about exiting 2025 with at least 10,000 doses, and I guess historically, people have been assigning what they think that might be in revenues. But consensus for 2026 is well below what people have historically thought that number could be. I guess, what do you think The Street is missing about 2026? Are you going to be able to utilize the full 10,000 doses in 2026? Is 2026 sort of a point where you're no longer going to be supply capped? How should we think about that time period and beyond? Thanks.

Yeah. Hi. So, as we exit 2025 with the 10,000 doses, that's an annualized number, so that's an annualized run rate. As we think about 2026, we will be in a position to supply the market. We're seeing good evolution of our shares as well as our uptake in the community. We're really just at the very beginning of what we think CARVYKTI can achieve relative to, here, we're in 102 centers. Actually, now we're up to 104 certified sites as of today. We continue to expect that the number of sites will expand significantly. As Ying mentioned, we now have a significant presence in the community, and our partner J&J is very much a leader in the community setting. By reaching all those referrals and then ultimately having CARVYKTI administered even closer to the patients in more centers and into the community setting, we expect significant upside there. From a manufacturing standpoint, we're comfortable with the supply network that we've built across the four nodes. As mentioned, Raritan will continue to have step-ups and then a physical plan expansion in the second half of this year. Novartis is coming online right as we speak. We also have the two facilities in Europe to support European launches. Both the Obelisc facility is at capacity and continues to deliver, as well as by the end of 2025, that's when we'll have our Tech Lane facility. These will contribute to our ex-U.S. markets and continue to be meaningful contributors to our top line. Right now, ex-U.S. is about 10% of our revenue, but we see that growing. Demand from Germany is strong, and we have additional European markets. As was mentioned today, Spain now has national reimbursement. J&J is our partner in Europe, and they lead commercialization, but we're confident that there will be continued demand from Europe as well.

Thank you, Alan. And Leo, maybe I'll just add a couple of points here. Number one, you're aware that recently Novartis received FDA approval for commercial production in the U.S., and we also received the Spain reimbursement pricing. Lastly, I want to emphasize the fact that based on our internal projection for demand, Legend and J&J have decided to jointly invest in the expansion of Tech Lane facility. This has received the executive committee approval from J&J and Legend's Board of Director approval. We should expect additional capacity coming online in 2028 from our Tech Lane facility in Belgium. This shows you that both partners are very confident about the demand.

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

Hi, good morning. Thanks for taking my question. We just wanted to revisit the topic of expanded use for CARVYKTI in the community setting. You spoke about this a little bit, but I was wondering if you could unpack in a bit more detail kind of what some of the key inflection points are that you're looking for throughout the course of this year to ensure that uptake in the community setting is in the second line-plus setting is trending how you would want it to trend? And also as you go through the year, what you will be looking to learn to better understand how, I guess, first-line uptake potentially could look for CARVYKTI, assuming those trials are successful in the community setting as well? Thank you.

Yeah. As it relates to adoption in the community, we look at it in terms of a three-stage plan. Right now we're in the first stage, which is to educate community physicians. As Ying mentioned, we're reaching over 8,000 community oncologists who treat myeloma, educating them on the profile and supporting them as they refer patients into certified treatment centers, and that's going very well. Every day we're out there, we're getting more support for referring those patients in line with the IMWG recommendation around considering referral for CAR-T. We're also building connections between the treaters in certified treatment centers and the referrals so that they know where and how to send patients. The second stage, which we will initiate this year, will identify certain regional hospitals and community accounts closely affiliated with hospitals who can administer CARVYKTI on-site. The third stage is really bringing CARVYKTI even closer to the patient, having it more widely administered in community oncology practices. We expect that to begin in earnest next year and carry us through the next few years as CARVYKTI gets administered in the community setting. We're partnered with the leader in myeloma in J&J, who has outstanding capabilities in reimbursement and access and commercial footprint. Both companies are deploying field commercial sales, medical, and nurse educators in the community. In terms of outpatient, just to share a little about that, we currently see that a little over half of our business is administered in the outpatient setting. This is driven by the fact that we have a unique profile; our median onset of CRS, as you know, is seven days. This enables patients to be more comfortably treated in the outpatient setting and monitored locally. This presents a better experience for patients and importantly, expands capacity for the treatment centers as they don't have to use inpatient beds for CARVYKTI's administration—a unique aspect of our profile that is gaining good receptivity, both at treatment centers and in the community.

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

Thanks for taking our question and congrats on the progress. Two quick questions from us. One on the activated centers. You mentioned there are currently 102 activated centers. Can you break these numbers down to how many of these centers can do outpatient and inpatient administration, only outpatient or only inpatient? And the second question is on currently ongoing clinical trials with in-vivo CAR-T therapies in multiple myeloma. How are you thinking about the competition from in-vivo CAR-T products, given the convenience that they could potentially offer? Thank you.

So, as we've put on the slide deck, 102 centers in the U.S. have been activated. In fact, as of today, that number is 104 centers. We continue to add centers each day. I should mention that globally across Europe, there are another 40 or so centers activated. Just to answer your second part, while we don't break it down specifically center-by-center, we can say that the majority of patients are receiving CARVYKTI in the outpatient setting. We look at that through claims data and have a number of other sources. So, again, a little over half of the patients right now are being administered in the outpatient setting. Newer centers, as we bring them on, sometimes start inpatient until they gain more experience. They quickly gain the comfort to start an outpatient protocol.

On the in-vivo front, we are closely monitoring and paying attention. It's a new technology that certainly brings a potential advantage and also potential liability. It's still in early days. So far, only one patient data has been released from Esso Biotech. We are closely monitoring their safety and durability of response. On the in-vivo front, we also have our own differentiated platform and are pursuing the in-vivo treatment option for various diseases as well.

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

Hey, everyone. Thank you for your questions. The first one is about an update on your demand compared to supply. When do you expect the supply constraints to be relieved enough for supply to exceed demand? Secondly, can you discuss the increase in demand on a per center basis? Are you seeing higher demand at each center, or is the demand growth mostly due to more centers opening up?

As we've said before, we're executing well on both the demand and supply fronts. By the end of this year, we'll be in a situation where supply is fully meeting the demand, and then we'll be able to keep pace with that. Regarding your question, we don't break it down in terms of specific sources, but I can share that the predominant growth will come from existing centers and the referral base into those centers. As I mentioned, as we reach out to the community and educate them on the earlier line approval for CARVYKTI, the main source of growth will be those referrals coming into the 104 activated centers.

Thank you. Our next question comes from James Shin with DB. Your line is open.

Hey, good morning, guys. Thanks for the question. Are there any updates on removing FACT accreditation to broaden outpatient CAR-T use? And then secondly, given CARTITUDE-5 and CARTITUDE-6 protocols now include ALC, have you decided whether you will have a breakout for those that reach 3,000 cells per ml requiring intervention versus those that do not?

In terms of FACT accreditation, the plan that we've heard from some centers is to really do more of an affiliation where they can be part of a FACT accreditation umbrella from a larger institution. Rather than removing it wholesale, it's more about leveraging the FACT accreditation from a larger center.

Regarding your ALC question, I just want to clarify that the ALC mitigation strategy was only incorporated into studies that are still ongoing enrollment. As Ying mentioned earlier, CARTITUDE-5 has completed enrollment last year. Therefore, this would not be involved with the additional mitigation strategies we've incorporated. How we will report it remains to be seen, but we clearly incorporated it into that study, as well as Ying mentioned in our study in CARTITUDE-2 in that cohort G. We look forward to presenting some of this data at the appropriate time this year or next year.

I know you asked about the breakout, right? Based on the biomarker data we've collected from the nearly 1,000 patient database from the CARTITUDE program, we believe about 20% of patients could potentially reach that threshold and therefore could benefit from ALC monitoring and the dexamethasone prophylaxis treatment.

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

Great. Thanks for taking the question. This is Jeet on for Justin. So, you've said you expect the majority of patients to ultimately be treated outpatient. But can you share any insights into what percent you think can ultimately be treated there? Is there a plateau here on outpatient versus inpatient? And a second question more on the financial side; how should we be thinking about CapEx going forward from a modeling perspective? Thanks.

We're seeing continued growth in the outpatient setting. I don't think we've modeled a cap on how far that can go. As I said before, centers tend to start with inpatient utilization and then quickly develop the outpatient protocol. This continues to grow. There's no cap on that.

We continue to invest in our CapEx worldwide, but the bulk of it will be completed in 2025.

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

Hi. Thanks for taking my questions. So, can you remind us when do you start to see meaningful benefit from the Novartis commercial manufacturing? And then, what percentage of your capacity, let's say, by the end of this year, would be driven off Novartis? And then secondly, it's encouraging to see this Tandem data, but how would this play out in the community setting? And as you're starting to look to have more of a focus on the outpatient setting, would the physicians manage the blood work, etc., in that setting without any resistance, or do you think that might potentially become a hurdle? Thanks.

With the Novartis commercial approval this quarter, we expect that it will start to meaningfully contribute in the second quarter of this year. We don't break down the percentage contribution of our overall capacity, but again, it's an important part of us doubling capacity this year.

Regarding your question about the exciting Tandem data that was presented and how this would be adopted in the community setting. ALC is a very typical lab result that is checked very frequently and commonly at all centers, including academic and community settings. It's easily applicable in both outpatient and inpatient settings. In addition, steroids, low short doses of steroids are very easy to manage as well. Steroids are inexpensive and readily available at all centers, again, in both the academic and community settings. Therefore, we think that if this proves to be a very successful risk mitigation strategy, it would be easily adoptable.

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

Hi, thanks for taking my questions. Two from me. One, can you talk about meeting demand in Europe a little bit more? We got some feedback from European docs that they've been having a bit of trouble getting demand filled for their patients? That's number one. And then number two, now that you have CARTITUDE-5 wrapped up and CARTITUDE-6 closing enrollments shortly, how should we think about R&D going forward? Thanks.

The demand in Europe is being satisfied by our two facilities in Ghent and in part by Raritan. However, more and more we will solely supply from our Ghent facilities. The Obelisc facility was approved for commercial use in September 2024. At this point, coming through the holidays, it is just now delivering at full capacity. By the end of 2025, we'll have our Tech Lane facility operational, which will further help manage demand. While demand is growing, we are still in a supply-constrained environment, with queues in the Ghent facilities to support the European markets. We're working closely with each center to deliver the product when we can.

Regarding your R&D spend question, we remain financially disciplined and that's why you see flat spending in R&D despite significant growth in revenue. You may still see R&D spending for BCMA, but in 2027, you may see a decline in BCMA R&D funding.

Thank you. Our next question comes from Sean McCutcheon with Raymond James. Your line is open.

Hi, guys. Thanks for taking the questions. Can you speak a bit more to how broadly the ALC monitoring and mitigation protocols are being implemented now and how that process of communicating these findings is going across the spectrum of treatment facilities versus how much of a gating factor for their clinical data will be for that process? And then maybe separately for that 2028 Tech Lane expansion, is that part of the current CapEx initiative? If not, can you give us some more color there? Thanks.

Regarding the implementation of the ALC, what's clear is that the Tandem results were intriguing for most and a lot of conversation has begun on this topic. Speaking with investigators, many are looking for potential ways and strategies to mitigate more notable neurotoxic diseases such as MNTs and Parkinsonism. Many centers are interested in utilizing this mitigation strategy. The NCCN guidelines suggest looking at ALC as a marker for CAR-T expansion. While the Tandem data was from single centers, it has certainly opened the conversation and we actively investigate additional studies, both internally and externally, to provide more information on this strategy moving forward. An investigator-initiated trial involves multiple centers participating. Additionally, we are incorporating this strategy into our internal programs with ongoing enrollment in the CARTITUDE studies. There will also be real-world evidence data coming out throughout the year.

Regarding your question on Tech Lane expansion plans, the Phase 1 will be completed this year, and we will have clinical production in the first half, commercial production in the second half. For Phase 2, we will invest an incremental of $150 million, starting in the second half of 2025. We expect completion in 2028, and early engineering and design work has already been initiated.

Thank you. Our next question comes from Rick Bienkowski with Cantor Fitzgerald. Your line is open.

Hey, good morning, everyone. Congrats on the progress, and thanks for taking the question. Given there is a lot of uncertainty regarding U.S. tariff policy, I wanted to ask about the potential impact on CARVYKTI. If broad tariffs are maintained on Canada, Mexico, and China, is there any impact on the manufacturing costs of CARVYKTI moving forward or any potential impact on the supply chain?

Hey, Rick. This is Jessie. Under our current assessment, we have no material exposure to tariffs in Canada, Mexico, or China. We will continue to monitor the situation closely. Just a reminder regarding your supply chain question: all our potential product comes from the U.S. and Europe, and we plan to supply Europe from our Belgium facilities going forward.

Thank you. Our next question comes from Prem Lachman with Maximus Capital. Your line is open.

Hi, Ying. I'd like to ask you two or three questions. First, can you clarify that the outlook for this year is modest sequential growth in the first quarter following a strong Q4, stronger sequential growth in Q2, as Alan said? The second half of the year will also be stronger. Are you comfortable with the consensus $1.9 billion estimate for this year? Secondly, regarding the '26 outlook that was asked earlier, with the 10,000 patient run rate, increased penetration in the outpatient setting, as you said, which is over $400,000 per patient, the math is straightforward, but the analyst estimates are lower. They expect a new competitor in the second half of the year. Can you clarify the market dynamics you intend to see versus a new competitor, in the second half of the year and how you're going to maintain your strong 90% market share or strength in the multiple myeloma market? Thanks.

Hi, Prem. Thank you for the questions. I'll address the first one. Yes, we feel highly confident about achieving the doubling of the commercial supply. I'm not sure about the exact consensus number, but as you heard from my colleague, Alan, we feel confident in delivering that to the market. I can also confirm that we do expect sequential growth in Q1 and the following three quarters. We do expect significant growth in the second quarter thanks to the Novartis CMO facility coming online alongside continued expansion in Raritan and our Belgium facilities. We do expect a stronger second half of the year as well, anticipating sequential growth in the third and fourth quarters. Regarding your second question, we do see potential competition coming in 2026, likely in the second half. However, you also heard from my colleague, Alan, that we already saw over half of our revenue coming from the second to fourth line. We have seen that in the last three quarters, every quarter based on our internal data from the ordering system. We've seen higher market share in the second and fourth line compared to previous quarters. We expect that trend to continue throughout 2025. By the end of this year, we fully expect that two-thirds to three-quarters of our revenue will come from the second to fourth line CARTITUDE-4 indication. We feel very well prepared to enter 2026 because the large majority of our revenue mix will emanate from CARTITUDE-4. As you know, we feel good about CARVYKTI's profile because of safety and efficacy consistently demonstrated across different settings. We also have unmatched PFS CR rates and now overall survival, which is anticipated to be written into the label in the first half in Europe and the second half in the U.S. approved by the FDA. We believe CARVYKTI is the best-in-class therapy that is prompted by data and facts. Thank you.

Thank you. That's all the time we have for questions. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.