, everyone. My name's Rajan Sharma. I cover European farming and biotech here at Goldman Sachs. I'm very pleased to have with us this morning Karl Gubitz, who is the Chief Financial Officer at argenx. Karl, thank you so much for joining us.
Rajan, thank you. Thank you for the opportunity.
Perfect. Maybe we'll go straight in. Obviously, macro and policy are kind of top of mind for everyone at the minute. Can we start there? Maybe on tariffs. You've outlined that you expect potential sector tariffs to have limited impact on argenx. Can you just kind of walk us through why you're comfortable from that perspective?
Yeah, thank you, Rajan. Maybe if I just take it one level higher to start off with. At argenx, we believe that we are building the company here for the long term. Our strategies are in place to achieve our Vision 2030. One of our strategies is to manufacture in region for region. That strategy has been in place even before the current administration. It goes back to the COVID days when the supply chains came under pressure. We made the decision that in all our priority regions to manufacture in region for region. Today, we already manufacture drug substance, that is the API for biologic, in Portsmouth, in New Hampshire. If you follow the current U.S. rules, your rules of origin apply on the drug substance, and that is U.S. manufactured.
Today, I think from a tariff point of view, we are well positioned.
OK. I guess one of the questions that's still coming up is, is that based on your view that the tariff will be applied to kind of a transfer price or a list price?
Yeah. So I mean, if a tariff will apply, and just one step back again, there are no tariffs on drugs today, as we all know. Even if tariffs get implemented, we believe that the rules of origin will position us that it does not apply to us. If it applies, yes, we believe that tariffs will be applied on the transfer price, which, of course, is the higher price.
OK, makes sense. Maybe moving on to one of the other topics of drug pricing. There's obviously President Trump's executive order, which was announced in May. We're heading towards sort of the initial 30-day timeline. To your knowledge, has there been any negotiations or discussions with the administration?
Yeah. Again, back to the long-term strategy before I talk about MFN. Our long-term strategy is to price within a narrow band, i.e., to really take time with the various authorities, with the various governments and players across the globe to explain the value proposition of Vyvgart and to maintain a narrow price band as much as possible. I think that strategy is the best protection you can have against the impacts of most favored nations. In terms of all the detailed discussions, I mean, we're not going to comment on that. We're going to stay out of that. I think that there's a lot of uncertainties, a lot of things which need to be sorted out. I do not think we want to be speculating as a company.
OK. I guess if that were to come to fruition, how would you think about kind of launching and pricing ex-US? You obviously talked about that narrow band. Has that been a deliberate strategy that you've taken?
Yeah. I mean, that strategy, I think that's what all companies will have to do going forward, is to make sure that there's an equalization, using the new administration's word, in terms of prices across the globe. I think going forward, you're going to see more of that. I think that's already part of our strategy. We try to apply that as much as possible.
OK. Could there be risk? I understand kind of the point on Vyvgart being priced in a narrow band, but is there kind of lateral risk in the sense that if competitor products—and I know that the FcRNs are still kind of an early class, but more broadly thinking about the complement inhibitors in MG, and if the price point came down in that class, could there be lateral effects?
Yeah. I think it will come down to the differentiation of FcRn as a class versus maybe other pathways. I think that precision medicine and FcRn are clearly differentiated. In the FcRn class, I think if you look at the efficacy, safety, and tolerability and the patient journey, Vyvgart is differentiated. I think that is probably the best protection you can have for those.
OK. I guess the third area of concern from a policy perspective is just the CMS guidance, which suggested in the third cycle of Medicare negotiations that subcutaneous and intravenous products may not be considered separate. I guess what's your take on that? Fundamentally, what's the impact for argenx, given that there was a relatively narrow period of time between the IV approval and the subcutaneous launch?
Yeah. There's, call it, less than two years difference between the IV launch and the subcutaneous subQ launch. If the subQ might or might not be treated as a separate product for the IRA negotiations. From our point of view, this is a 2034 issue. We already start to work on our second FcRn program. The IRA clock is ticking. We know that if we want to build an FcRn class, which will last decades, you will need more than one FcRn , differentiated FcRns , to really build the class. That is what we are focusing on. I don't want to comment on whether Halozyme will be successful in their argument that there is clinical differentiation when you add two moieties. I'll leave it for them. I think we are focusing on what we can control. That is our pipeline.
Makes sense. Maybe we'll just go back to Q1 earnings, where there was obviously kind of a net pricing was in focus. There was the talk around the channel mix. Could you maybe just talk about where we were at the end of 2024 in terms of channel mix, gross- to- net, and how you think that evolves through 2025 and what the drivers are?
Yeah. Thanks, Rajan. Maybe just we think we printed, well, we know we printed a good quarter in Q1. 7% growth in Q1 following a very strong Q4. And that 7% is quarter over quarter, Q1 over Q4 2024. We think that is a really strong performance. The underlying KPIs in terms of patient adds, physician expansion, really pleased with where the launch is for both MG and CIDP. In Q1, you get impacted by your typical, what we call seasonality, that impacts many drugs, all drugs probably in the U.S. That is the main driver of why the revenue growth compared to the previous quarter is lower than other quarters. You see the same thing a year ago when you go from Q4 2023 to Q1 2024, the growth band was 5% versus the 7% we printed in Q1. Really good quarter.
The launch is where it's supposed to be for both indications. Yes, I also commented on gross- to- net. This again goes back to my consistent comments during 2024, where I always reported that gross- to- net is stable at around 12%-13%. There's no discount. We don't play a discount game. The channel is under control, if you like. I also said with the launch of PFS in Q2 2025, PFS will be a pharmacy channel drug, i.e., Medicare Part D for Delta. For reasons which we all understand, the 20% for patients after once we hit catastrophic and just more discounts in the pharmacy channel, gross- to- net will increase. It will increase gradually starting Q2 as PFS becomes a bigger share of a product mix. That's what I said at the end of 2024.
In Q1, what we saw was that patients want to move to Medicare Part D. Medicare patients want to move to D if they have an option, if a payer and prescriber allows that. They want to do that because of an out-of-pocket cap of $2,000. We saw patients, mostly on Hytrulo, switching to D. Again, going back to 2024, we always had patients on D for Delta. It was a small number, but growing quarter over quarter, but still small. In Q1, you saw a lot of patients moving to D. This is not a material driver for the performance in Q1 in terms of a net sales number. It is a dynamic, which we are explaining. Yes, in Q2, Q3, Q4, you will see gross- to- net, of course, increasing.
I also provided that for MG, your net price per patient in Q1 is still approximately $225,000 per year. That has not really changed. It is still ballpark. Those are the dynamics, which I think we explained in the Q1 discussion.
Those patients that are in Part D, so this is before the PFS launch, is the expectation that they move to the PFS so that the Part D impact is essentially a PFS issue?
I think many, most of those patients will ultimately move to PFS because you still have to pay for the infusion. For the nurse, typically it's a nurse coming to your house through a specialty pharmacy or from the infusion center to do the injection in your house. Now with PFS, you provide independence to the patients. It does not need to be HCP administered. The freedom is on them to inject themselves. We think that many of those patients will switch to PFS. From my point of view, I do not think the gross- to-n et changes where it would have been by year-end. The journey just started a little bit earlier.
OK. OK. That makes sense. Are you comfortable in your conversations with investors and analysts, I guess, that people are modeling that correctly?
I think, I mean, yes, I think that we aim to stay close to the street and to the analyst to provide a broad understanding of what happened. I did not provide an update on gross- to- net in Q1. In Q2, it is part of mandatory disclosures I have to provide. You will be able to see it in Q2.
OK. Makes sense. Maybe moving to some of the positives of the PFS and thinking about launch dynamics. It was approved in April. Could you maybe just talk about what the initial launch momentum has been like?
Yeah. We're very excited about PFS. As a reminder, for MG, you see linear growth quarter over quarter now, 13 quarters in a row. If you take out the quarterly impacts of seasonality and so forth, if you step back, linear growth. We are now in our 14th quarter of MG. To maintain that growth, you need new innovation. The PFS is providing that new innovation. We think it will expand the patients. It will expand the prescriber base. There are many patients out there who lead active lives. They have families they have to look after. They've got demanding jobs. They can't commit to the logistics of scheduling every week or in cycles going to an infusion center, going to the physician's offices for their injections. Those are the patients we think were waiting for PFS.
It is those patients which will help us maintain the linear growth, which we saw up until now. What we hear from patients and patient groups is that they love the independence, the fact that you can take it out of your, you can take the vial out of a fridge for 30 days, freeze zero, and you can travel with it. It provides a level of independence to patients which we were waiting for. A lot of excitement in the community. We're happy to report that around half of the patients on PFS is new to Vyvgart. Half of them are switches from Vyvgart Hytrulo, the butterfly needle, the HCP-administered subQ or IV. The other half is new. We're also very pleased with the HCP expansion, i.e., new neuros who are now starting to write Vyvgart and they're writing Vyvgart PFS.
I think it's early days. The launch is where it's supposed to be. The hurdle which we need to get over, of course, is the payer contracts. Like with any new drug, and this is a new drug from a payer point of view, it takes around two quarters to get all the payers signed up. We've done it now a few times with Vyvgart IV, and then with Hytrulo subQ. We've got the relationships. We've got the trust. We know what to do. The teams are out there negotiating. When we sign it, of course, it's public. You can find it with some of the payers. We're making good progress. It still takes time to get all the payers signed up.
OK. I guess just on that point, you said you've been through the process twice now. Is there any, using the learnings from the first two kind of payer contracts, is there any possibility that it could be slightly faster with the PFS?
I would always hope to go faster. It is a process. I mean, the payers, they have a process. They need to, some of them have new-to-market blocks. Yes, they are familiar with the drug because it is the same drug. They are familiar with the company. They are familiar with our teams. Maybe that helps. At the end of the day, it is a process you need to go through. It can take up to two quarters.
OK. Just from a manufacturing perspective on the PFS device, are you comfortable that you kind of have the manufacturing in place in the sense that you can meet the total volume opportunity?
Yeah. As a company, we have been very proactive by believing in the potential of Vyvgart early on. We think this is going to be, it's going to have a significant impact on many, many patients. We invested early through our CDMOs in the capacity for drug substance and drug supply and drug product, i.e., the fill and finishing. We had no issues with supply up until now. One of the things our strong balance sheet enables us to do now is to continue to invest early in enough capacity so that we have inventory for all presentations for all scenarios.
OK. And from a kind of just on that point, on the prefilled syringe, you also have an auto-injector in development. I think launch timeline there is 2027.
Yes.
Can you maybe just talk about what the incremental opportunity there is? Is this more of a it's not going to necessarily open a new patient population that the PFS won't, but it's just improving on what's available? Is that the right way to think about it?
Yeah. So the auto- injector, I think most of our audience know what the auto- injector is. You do not see the needle. And the device basically does the work for the patient. You do not have to push. I think our focus really is on the patient. We do not wait with the subQ to use it as life cycle planning later on. We are working really hard to get innovation to the patient as soon as possible. That is why we already have PFS on the market. Only three years after launch, we will have an auto- injector. Remember, it is the same drug inside the vial. The device is different. It is with Ipsen. It is now in the industrialization phase, which means it exists. I already had it in my hand. It is there. I can show you photos.
They are now building the factories who is going to build the device. It is new innovation. It is 5 mL. We are very excited. We will be able to offer that to patients if everything goes well in 2027.
OK. So I guess by that point, you would potentially have four formulations of Vyvgart, as you pointed out. It's the same drug. So how should we think about what the share of each of these formulations will be? Are there specific indications where PFS or IV may be preferred? Also, on a regional basis, is that likely to differ?
Yeah. I think at a high level, we hope to have many indications. The vision is to have all the presentations in all the indications. Outside the US, with IV, I think you always need IV for in-hospital setting. The majority of the presentation outside the US will quickly switch to PFS. It is because many of those health care systems are designed to keep the patient out of a hospital. They do not have the infusion networks which you have here in the US. In the US, I think it will be a little bit different. The IV and the Vyvgart Hytrulo butterfly HCP-administered drug will always be an important part of a portfolio. This is because of the buy and bill dynamics, where the buy and bill is part of the office dynamics of a practice.
That will always be part of it. Of course, the payer will have certain, will might have certain preferences. The patient might have certain preferences. What we will have is the only FcRn with IV, subQ HCP-administered, if that is what the physician and patient want, or a self-administration PFS. Later on, of course, subject to all the approvals for auto- injector.
OK. Maybe just thinking about MG a little bit in terms of some of the KPIs that you track, it's obviously an area that's becoming a little bit busier than when you first launched. Are you confident that you're still going to maintain that kind of market-leading position there? What are you tracking as forward-looking indicators?
Yeah. Competition is coming into MG. That's clear. New innovation is coming into the market. New innovation is good for the market. It helps to grow the market. Karen Massey, our COO, she launched Ocrevus. She knows the MS market really well. She talks about how new innovation, multiple new innovation into a market helped to grow the market with multiples. If you look at MG today, the share of biologics is, call it somewhere between 10% and 20%, eye level. I don't know where the share of biologics will be in a few years. It will be multiples of where it is today. I think there's enough place for innovation to come in and to help grow that market. We are very optimistic. We will continue to be the first biologic.
Remember, with 80% or more than 80% of the patients not yet on a biologic, they're on Mestinon, steroids, immune suppressants. That is where the bulk of the patients are. That is where the bulk of the opportunity is. With Vyvgart, with our efficacy, remember, we're changing the narrative to MSE, minimum symptom expression. In the absence of a cure, the best thing you can provide to a patient is to walk around symptom-free. We get 50% of patients into MSE, where I haven't seen other data comparing to that. On our safety and tolerability, I think it speaks for itself. No black box, no vaccinations, no REMS. It is a really clean safety and tolerability profile. Of course, on the patient experience, which I've already talked about. With all of those things, I think we are well positioned to be the first biologic.
If new competition comes and they play after us in a crowded market, that actually helps us. I think that is why our strategies are so focused on being the first biologic and moving up on the treatment paradigm. If we can continue to do that well, we will be very successful.
OK. Maybe just sticking with Vyvgart a little bit, in terms of duration of therapy, how are you tracking that?
Yeah. For MG, going back all the way to the ADAPT study, our duration of therapy—sorry, not treatment, not cycles. For MG, I mean, we have MG patients from the very beginning. Patients stay on the drug. In the ADAPT study, 20% of patients do not respond. We know that. 80% of patients do respond in MG. Over time, you continue to lose patients for whatever reasons. In general, patients continue to stay on the drug for many years. We still have patients from the beginning.
OK. And then thinking a bit about growth dynamics, I think you talked about 7% growth in Q1. What proportion of that was coming from myasthenia gravis versus CIDP?
Yeah. We did not break out that 7% growth by indication. I will just take you back to the underlying key performance indicators. And the key ones for me are patient adds and prescriber growth. For both MG and CIDP, we are where we think we should be. Those are both growing for both indications. I think we are doing well.
OK. On CIDP, how is kind of frequency of dosing tracking? Because it's obviously weekly versus every two weeks with MG. I think there's an open label trial which may allow for less frequent dosing.
Yeah. The CIDP label says weekly dosing here in the U.S. We know from the open label extension and also looking at industry analogs. In the real world, dosing will be less frequent than weekly. By the way, if you look at the European label, we shared the open label extension data with the authorities in Europe. You'll see that it's weekly or biweekly based on clinical evaluation. It's already in the European label. Where we are today in the U.S., I think it's fair to say that most patients still dose weekly because it's still relatively early in the launch. You will start seeing less frequent dosing. I can't share data with you today. At some stage, we will be able to share data because it will reduce over time.
OK. OK. Also just thinking about positioning in CIDP, similar question. We've seen some data from Sanofi. They've kind of progressed their C1 inhibitor. How do you think about the competitive landscape in CIDP relative to myasthenia gravis? You also have empasiprubart, and how does that coexist with Vyvgart?
Yeah. Where we are today is focusing on Vyvgart, making sure we get the launch off to a really good start. As I explained, we're really happy with that. CIDP is a big market. There's a lot of opportunity to transform the market. We also know from the ADAPT study that Vyvgart will not help all patients. Remember, in stage A of the ADAPT study, 67% of patients responded. That is also why we have EMPA now in a phase three in CIDP. Yes, we know that the C1 is also going through its clinical studies. I think it's a big market. There's a lot of opportunity. Together, we can grow the market. Today, what we have is Vyvgart. We're very pleased with the efficacy, safety, and tolerability data which we see from the study, but also from the real world.
I think we're off to a good start.
OK. Maybe just zooming out a little bit now. 2025 is an important year for argenx as you kind of transition to profitability. Can you just kind of help us think about how you think about a profitable company? Can you talk through it? Are you running the P&L for specific margins? What is the focus?
Yeah. argenx is in a really strong financial position. We have $3.6 billion in the bank at the end of Q1. We are operating cash flows are positive in Q1. We also had growing cash flows at the back end of last year. That was not really operating cash flows. We are now in a position that we are adding to the cash every quarter. We will be adding to the cash every quarter with revenue growth outpacing OPEX growth. I do not want to talk about where we are going to what metrics we are chasing because we are not really chasing a metric. We are focused on, yes, growing the top line, delivering that quarter-over-quarter growth which we talked about, and pushing forward our clinical pipeline. We have a unique opportunity today to set the company up for the long run. We have Vision 2030.
We need to invest in our supply chain. Going through our capital allocation priorities, the first thing we do is deliver on the promise of Vyvgart. There's still a lot of work to do there, a lot of value we can generate for our shareholders. EMPA's pipeline, EMPA is leading that, our C2. We want to show you what we are doing with Vyvgart is repeatable and scalable. We want to show you with EMPA. EMPA will probably never be as big as Vyvgart. It should be in multiple indications. Many of those indications have the potential to be blockbusters. We are going to invest, continue to invest in our supply chain. We can talk about business development. Remember, as a company, collaboration and business development is in our DNA. We've got about 20 programs in our IIP, Immunology Innovation Platform.
Each of them is a small business development deal, if you like, because it is a collaboration typically with academic institutions. Then we can get back to returning cash to shareholders. We're not there yet. That is in the future. I think for now, it is growing the top line, delivering on our clinical catalyst. As the CFO, I am also very proud to say we can do all of that. We will grow the revenue line faster than we will grow the OPEX line. We're going to have increasing profits quarter over quarter. We're going to generate increasing free cash flows every quarter.
OK. Since you mentioned BD, how should we think about when that may become more of a priority? As you said, you've got $3.6 billion in cash that's going to grow. Is there times when you may look to kind of do deals to supplement the pipeline or even the commercial organization?
Yeah. I mean, I went through the capital allocation priorities. I think business development needs to be part of a mix. What I will say is that we've got a really exciting internal pipeline. I hope that you've seen the R&D day from last year. It's still on our website. Four INDs this year, EMPA 119, all of those. I think my point is we don't have to do BD today. If we do, it will be a really high hurdle in terms of a biology. It needs to be novel. It needs to be innovative. It needs to have a differentiated outcome for patients. I think those are the types of opportunities companies should go for. At argenx, that's what we are doing.
OK. You mentioned Vision 2030. I guess part of that is four new INDs this year. How are you tracking relative, firstly, I guess, to the Vision 2030 progress that you're looking for? How are you tracking relative to that? When should we get clarity on what the additional INDs will be in 2025?
Yeah. I mean, in terms of the four INDs, we can tick the box on two of those, 109 and 213, which is the second FcRn . We're making good progress on those. I think all programs, I mean, we give you more detailed updates at the quarterly earnings. As a company, we're super focused on executing for our shareholders. We have targets to deliver. We hold ourselves to those targets. We focus on it. I think that's been part of a success story for argenx. I've got no new updates for you other than to say that we're on track to reach Vision 2030.
OK. In terms of the strategy for the next generation FcRn , are you thinking about this as a lifecycle management for Vyvgart so it would be same indications? Or is there potential to go beyond where Vyvgart is?
No. I think we don't have to make decisions today. When we talk about our second FcRn program, we don't necessarily just talk about one. We've shown you one. I think if you want to, the FcRn class is too big for one molecule. There's a lot of opportunity. Yes, we can do a lifecycle play. Yes, we can have different molecules at different price points sitting next to each other going after different diseases. All of those options are on the table. Today, we're creating optionality. Tomorrow, we will have to make decisions how we're going to execute on those.
OK. In the last minute, I think the view is amongst investors for 2025, it's the year of execution for argenx because it's a little bit light on a phase three readout perspective relative to prior years. You do have the seronegative data at the end of the year. Could you just talk to kind of confidence going into that readout and what the incremental opportunity that unlocks?
Yeah. I mean, I do not necessarily agree that we are light. Because I think if you have a phase three readout later this year, that is very exciting. And with seronegative study, we will have results later this year. We still have to do the study, of course. That should add around 11,000 patients if it is successful. And remember, that can just slot in with our current infrastructure. We have no incremental investment. I think that should really help.
OK. Perfect. We are right at time. We look forward to that later this year. Thank you, Karl.
Thank you for the opportunity. Thank you.