Welcome everyone. I am Sean Laarman, the Head of Mid-Cap Biotech Equity Research here at Morgan Stanley, and welcome to our Global Healthcare Conference. For important disclosures before we begin, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, we welcome Karl Gubitz, CFO from argenx, and An Vandebosch, Head of Development. Thank you both for joining us today.
Thank you. Thank you, Sean. It is great to be here.
Yep. Maybe just to kick off, we have got some more broader questions thematically. How is the rise of China innovation changing your competitive position, if at all, and your R&D and business development playbook?
What is happening in China, I think is exciting. It is exciting for patients, it is exciting for the ecosystem. It creates a lot of new avenues to find biology. I think for us at argenx, it does not really change, because I think the mode which we have built is around innovative biology. It is a way we find new indications, and we build those indications in our commercial engine.
The way we think about China is it gives us another avenue to explore biology, to find that next molecule. What we are doing as a company is we are investing in China. We have opened an office for this purpose, where we have got a small team to help us hunt for business development opportunities. No change in strategy. It is just augmenting or adding a geography where we are finding targets for our IIP, our Immunology Innovation Program.
Thanks, Karl. Moving on to AI, so another hot topic in drug development more broadly. Are you able to give us a sense of how argenx is thinking about the adoption of AI and impact on your business?
I think all pharma companies, and I think all companies actually, are investing in AI. It's clearly a hot topic, and so for us too. Where we are today, I think it's a journey. Most of our AI initiatives are pilots, proof of concepts, and informing our strategy. We've got a clear AI strategy because AI needs to be part of our business. It's not a strategy which stands alone. I think if you want to be a biology innovator, you also need to innovate on the side of data. Our strategy is built around pillars.
We've got a strategy for discovery, helping us find molecules. We've got a strategy around research. We want to use that to help do the clinical studies earlier, finding patients, site selection, so forth. We've got a strategy on tech ops. We've got a strategy on commercial, all about that patient interaction. Very importantly, scaling the argenx way, which is so close to our heart and how we're operating as a company, building AI into our ways of working. So different strategies, but it's a big focus point for us as a company.
Great. Last macro type question before we delve into the heart of argenx. Which policy variable, if any? Is it FDA, Medicare negotiations, MFN, global pricing? What matters most to your economics, and what have you changed, if anything, because of it?
I think all of those are super important, and as a company, we continue to focus on it and spend a lot of time on it. Maybe just quickly on the FDA, our interaction with the FDA has been positive. We didn't feel or see any disruption on any of our interactions with them. In terms of MFN, Global Guard, all of those, I will put it all under pricing, if you like. Pricing, of course, is not going to go away. This administration, next administration, it will continue to be an important factor for all drug development biotechs, pharma. The only way to address this long term is to innovate.
Society will only pay for innovation. That is core to our strategy of how we select drugs, what are we trying to do. Novel biology, find those white space indications where we can have a disproportionate impact on patients. Once you're there, you continue to innovate. We're adding indications, presentations, and that's how you deal with it. On top of that, we do, of course, a lot of scenario play to make sure that we are ready for any change, because I think it's a fluid situation.
Sure. Thank you. Now to move on to the heart of the issue, which is company specific. I want to structure these questions to really get across the growth message. Maybe, and I promise that I'll ask some different questions to breakfast, I'll try to at least anyway. You saw 17% sequential growth in Q2 on Q1. Just to give investors a flavor, how much of that would you attribute to the seronegative label, and how do you think about that as a contributor going forward?
Our key growth driver, of course, continues to be in MG and CIDP. In MG specifically, the growth is driven by biologic expansion. 80% of MG patients are still not on a biologic. That is where the growth is. By the way, if you ask five docs, four of them will tell you start with Vyvgart. I think expansion and growing the biologic patient share is the key growth driver. PFS is super critical in that because that's a clear differentiator for us. It helps us to get into the community. Seronegative, which we got the label expansion in May, is an important contributor to that.
It gives us the broadest possible label. Nobody else has a label as broad as we do. The triple-seronegative, which is a subsection of a seronegative, around half of that, had no other treatment options. That is where most of our seronegative patients are coming from, and it is important growth driver. The growth since launch, 18 quarters, has been exceptional. To maintain that growth, you need new innovation. The new innovation which we have now is seronegative, so it is an important contributor.
Sure. Thank you. On my estimates, at least, I think generally consensus, just north of EUR 6 billion revenue for the year is what is being expected. Then I think about some of the opportunities that lay in front of you. We looked at the myositis data. Going on from the R&D Day into the actual release of the phase III top line, in my view, it probably couldn't have read out better than what it actually did.
If you look at the IMNM indication, you've got 20,000 patients in the U.S., which is the epidemiology. My estimates are 6,000 - 7,000 patients are seeking treatment for what is a severe disease. In terms of what we should expect as investors from here in terms of the regulatory path, just focusing on IMNM side, focusing on the regulatory path from here, and how should investors think about the launch giving some of those dynamics?
Yeah. An, do you want to comment on the regulatory path, and then I'll comment on the commercial.
Yeah. As you have seen, and as we read out in the call, when we reported the results, we have strong results in IMNM and DM. They are really consistent with stat sig in IMNM and borderline in DM, and that puts us forward in the path forward to have the conversation with FDA on DM. For IMNM, of course, we will use the data to go forward in that conversation, but it will be a matter of review and discussion with the regulator.
Sure.
From a commercial point of view, as you said, 20,000 patients in the U.S. It is a prototype argenx indication, completely wide space, no treatment options, severe debilitating disease. So the opportunity for patients and for us as a company, of course, is clear. How quickly we can ramp at launch, of course, we are looking at different scenarios. What I will say is that if you look at our history and how we get ready for a launch, how we prepare the market and ultimately the resources we apply to that, we are going to play to win. I think those patients are waiting, and we hope to make significant inroads into that patient population once we launch. A big element, of course, will be payer work, which we need to do.
It will take a while to get all the payers signed up here, but the value proposition of Vyvgart is well understood, well appreciated. We have done it a few times now with gMG and all the label expansions with CIDP. So I think we know how to do it. We have relationships. So I think we are bullish on the long-term opportunity here. In the beginning, of course, we will have to work through all those factors.
Sure. On the DM side, I think it is double the number of patients. Epidemiology is about 40,000.
Yes.
But if you go back to IMNM, you look at the T score, clinically meaningful stat sig. Clinically meaningful on DM, but not stat sig. How should investors frame the opportunity, given the data that you have seen on DM?
Of course, BREPO will launch before us. I think they are basically already launched. That is a JAK2. It is an oral, of course, that comes with advantages. But a JAK, of course, also have some safety issues, which I am sure The Street will be aware of. But in terms of DM, it is a heterogeneous disease. It is a big patient population. I think it will take more than one or even more than two innovators to develop that space, and I think each drug will find its place. An, anything you want to comment on how our drug compares?
Well, what we have seen, repeating the results and the data, we have seen quite consistent results between IMNM and DM in phase II and phase III. We will let the data tell and where each patient can play.
Sure. Thinking about the catalyst that we have got coming up, we have got a pretty catalyst-rich next 18 months. This year, you have got the Q3 results, we have got the celiac results, but also just to focus a little bit on empasiprubart in MMN. How are you thinking about translation of the phase II results into phase III? How should investors think about the bar for success, and how should we think about the commercial opportunity?
Yeah. I'll let An talk about answering your question directly, but if I can just quickly add how important empasiprubart and MMN is for us as a company. With Vyvgart, of course, we all know it's a generational drug, once in a decade type of drug, which builds companies. That playbook, novel biology, first-in-class, product in the pipeline, continue to innovate with presentations, continue to raise the bar, building the markets. That is the playbook. That is what made argenx successful, and we believe we can replicate that playbook with our C2, with empasiprubart. MMN is, of course, the first indication on deck, and we will get that phase III data later this year.
Yes, and to continue on your question from the phase II learnings versus phase III, what we have seen in the phase II trials is actually when you switch patients from IVIG to placebo, several return back to IVIG. That is what led us to set up the trial in the way we did as a head-to-head comparison versus IVIG. If you take the treatment burden into account, how long these patients are in the chair when they take IVIG, and what we know from empasiprubart, we believe that when we demonstrate that we're non-inferior versus IVIG, this is considered a win and success in the trial.
Sure. Next question is a bit of an algorithm, at least it is for me. You presented some data back at AAN in treatment-naive patients, CIDP patients that were treatment-naive, so hadn't had immunoglobulin. There is a bit of a conception that maybe Vyvgart is mandated second-line therapy here in the U.S., but it's not. It's just that the payors required the step through.
Exactly.
How do you anticipate getting more treatment or moving to the front line over time, given the bolus of patients is so much greater on immunoglobulin than what are on Vyvgart . So a lot of runway to growth. So that part of the question.
Yeah.
Second part is when we look to the empasiprubart data head-to-head against IVIG in CIDP, how important that is to the story and how much growth that could unlock?
Yeah. Expanding Vyvgart in CIDP beyond refractory patients, I think that will happen over time. Remember when we launched in MG, we talked about 17,000 patients being a refractory patient population. That is where most of our competitors are today. Vyvgart has moved beyond into the earlier lines. I think that playbook, of course, is not unique to Vyvgart and MG. You see that in rare diseases.
You typically start with your more refractory patients because that's where the unmet need is. Then you hopefully expand if you have a drug for it. We believe the same thing is going to play out in CIDP. Today, most of our patients are refractory patients, IVIG-refractory patients. Only around 15% of patients are naive patients. It is, as you said, that's not how the study was done. The study included naive patients. We've got the label.
It is the payors who are pushing us there at the moment. I think as physicians, as patients get more experienced, physicians will be more willing to add patients and also to move up earlier line. To help support that, we need data, and that is some of the data which you've referenced. We will create and publish more data, and over time, I think you will see Vyvgart also moving up the treatment paradigm in CIDP.
Sure. Thank you. On that, as we talked Q3 a little bit, we talked empasiprubart, MMN. But what about the Forte acquisition and the data coming out in celiac? How would you frame it to investors on what to expect, what you think the bar for success is, and how you think about the commercial opportunity relative to the rest of your business?
Maybe just quickly, and then An can comment on the data itself, which we are expecting. Forte, again, fits our playbook. Novel biology, first-in-class product in the pipeline, and gives us the opportunity to replicate the Vyvgart playbook. I think when we did the Forte acquisition, it didn't stand on one indication. We don't think of it as we bought an indication. We think we bought a product which we can put in many indications.
Of course, we're looking forward to the phase II data, and then we'll look at the data, and we'll try to get into phase III as quickly as possible because we do understand it's a competitive race. But what we do as a company at argenx is execution. We think that we can execute really well, and we will continue to do that also with AV102. Anything specific on the data?
Yeah. Forte had already done a phase I study in celiac, which read out positive and which created excitement. Of course, we will be reading out a phase II data set later this year. This is a learning study, so we will look at the data to learn more about the inflammation histology, but also about the symptoms, and based on that, determine what appropriate next steps are.
Wonderful. Thank you. Just on the competitive dynamics. We have some other complement inhibitors coming down the pipe. We've got Umervi, we've got ULTOMIRIS. There's a couple of drugs out there. On the other hand, you've got very broad label in MG. You've got CIDP. You've established market position. How do you think about the risk of competition and/or how do you think about the competitive dynamic moving forward with all those pieces moving?
First of all, competition, of course, is good for patients. Competition helps to build the market. Of course, we welcome all competition. In terms of how it impacts us and how we've been able to successfully position Vyvgart as the first biologic in MG, of course, it means that when competition come in, it doesn't really impact us. It actually helps to grow the market. We are the market leaders.
We get most of the new patients in terms of biologic patients. That is one of the success stories, one of the reasons Vyvgart is so successful in MG. That is also why we should continue to be able to drive growth. It's amazing that we sit here today. Vyvgart was launched 18 quarters ago, and we say, "Well, it's still the early stages of a launch," because only 20% of patients is on a biologic.
We are leading that biologic expansion, Vyvgart is leading that biologic expansion. Based on our efficacy, where we talk about MSE, Minimal Symptom Expression, our safety and tolerability, where we have 20,000 patient years, and on the patient convenience side, where PFS for self-injection is clearly leading with auto-injector to come, we believe that we will continue to see that growth.
The competition comes in, we get four out of five patients. The rest of our competition is basically very competitive to get the rest. Of course, you also hear competitors say that they get Vyvgart refractory patients, that of course is true. Vyvgart does not work for all patients. Around four out of five patients respond to Vyvgart, one of them do not. That is with Vyvgart refractory patients, and that is also where some of our competition is getting patients from. But if we look at our data, it is very consistent in terms of we are hanging on to the patients we believe we should be able to keep and that is playing out in the real world.
Sure. The top line growth is often discussed, a lot of debate around that. Not so much debate, everyone recognizes that the growth is there. I think what is maybe underappreciated in your story, and you do have to invest for growth, is you have seen well over 1,000 basis point expansion in operating margin over the last year. We look at some benchmarking, you are probably looking at operating margin across larger cap biopharma somewhere in the 40% range. How would you contextualize the balance of investment in the business to sustain the top line growth, versus an expanding margin profile?
Thank you, Sean. I love that question. I think, in terms of our capital allocation, how we make decisions, we always lead with the science. The science leads. We are a biotech company working for patients and investing in science. That is how we make decisions. We will also, in terms of giving guidance and talking about margins and putting ourself in a box, we are going to be very hesitant to do that because we love the flexibility.
If we see science to invest in, we want to invest in that science like we just did in Forte. It is not a but, it is an and we can give you margin expansion. I think that is a unique position. It speaks to the strength of Vyvgart, the Vyvgart launch, and the financial structure of a company. We have got a very flexible operating structure. I keep on reminding The Street that we are a EUR 60 billion market company. We have got 2,000 colleagues only. We outsource a lot. We are working with partners. We collaborate. That is our DNA. That is how we work. And of course, that allows us to be a little bit more flexible. But ultimately, over time, we are going to continue to expand that margin, but following the science.
Sure. Thank you. I guess the myositis data takes you into rheumatology. Again, related question, how do you think about the build-out of any commercial infrastructure associated with that TA entry?
Yeah, of course, we have got strong neuro capabilities, and if you think about myositis, including DM, and we have talked about what we need to do to get DM on label. It is not if, it is when. But for myositis, we will need neuro capabilities, which we already have, strong neuro capabilities. We will need rheum, and we might need a bit of DERM, but that is very small. In terms of rheumatology capabilities, we will need to go and build a field force. We will need to put those customer-facing organization in place.
We have done that before. I think we know how to do it, and the platforms already exist, and we can just build on that. In terms of size, we do not want to talk size now, but typical orphan disease. I think most organizations will talk about reps of around 100. I am not saying we are going to hire 100, but just in terms of giving you a sense of scale. But we will build that, and most of that resources will come online next year.
We might start adding a little bit of resources now. In Q3, the earnings call, which we will have in October, I will talk a little bit about expenses for this year because we do not guide as a company, but we gave The Street a rough idea of where expenses will be in 2026. But now we have a Forte acquisition, and we have myositis reading out successfully. We need to augment that, and so I will give you revised guidance at that date.
Sure. So increased cost at the moment with Forte going vitiligo, celiac, and alopecia. So got incremental costs associated with that.
Yes.
Okay. Thank you. Thinking about the next wave of FcRn and the pipeline breadth. ARGX-213, phase III ready for monthly dosing. Does it extend the franchise or cannibalize Vyvgart, and how do you sequence the two?
At the moment, people think of The Street believe look at argenx as a Vyvgart company. We need to change that to it being an FcRn company. Vyvgart has got a very long patent life. The matter of composition patent is until 2036, and we are adding patents on top of that, by the way. But eventually, Vyvgart will run into its LOE. We are starting to think about how you build an FcRn capability, and we have two second-generation FcRns. One is ARGX-213, which is once a monthly dosing. It is ready now.
We can start phase III studies. But we have a bit of time because the LOE is so far out, but we will get there. But we first want to see the profile of ARGX-124, our second second-generation FcRn. That is currently in phase I and first in human studies. We will get that data soon enough, and then we can determine which compound will be used for life cycle planning, which compound will be used for possibly broader indications, possibly at a different price point.
That should also be augmented with our combo strategy. We have ADAPT Forward, where we put Vyvgart and our C2 together, and it is currently in an MG study. Of course, we also have our oral program. All of that is designed to build on our current FcRn leadership and to make sure that we maintain and expand that leadership well and throughout the next decade.
Sure. Thank you. Thinking longer term, we wrote quite a large report on your company, I think two weeks or so ago. Thinking longer term, if you're doing this year, just call it say, EUR 6.5 billion of revenue, whatever it turns out to be, and we're forecasting, I think, EUR 13 billion. So basically doubling your revenue by 2030. Therefore, if you held the current price to sales multiple, then you're looking at a doubling in market cap over that time. While you don't have control over the price to sales multiple, at least the price component, you do have some control over the sales component.
If I think about not extra indications beyond what you have today in the broad gMG label, throw in CIDP, that EUR 6.5 billion revenue, and compound it whatever you want to do at 5%-10%, you're probably landing somewhere around EUR 8.5 billion, EUR 9 billion, something like that. So to get to the EUR 13 billion, you've got another EUR 3 billion-EUR 4 billion of revenue to add, which may come from your entry into rheumatology. You can get there by mapping it out on 20,000 IMNM patients at EUR 400,000 a pop is EUR 8 billion, and then throw in whatever contribution from DM. Am I thinking about it the right way? What's your confidence in those, I'm not asking you necessarily give long-term guidance, just your confidence in those kinds of aspirations.
Sean, first of all, thank you for that report. I've read it and read it again in detail and circulated with my team, and we're studying it see what we can learn.
Thank you.
It is a good read, everybody, please go read. In terms of 2030, I think our strategy is very clear. We want to reach 50,000 patients. We want to have 10 on-label indications, and we want to have five late-stage programs. That is our vision for 2030. We believe we are going to execute on that, and we are working hard to achieve that. I think if we can do that will of course translate into the market cap implications, and I am sure we will be rewarded for that.
But in terms of that focus on patients, focus on vision 2030, and doing it the argenx way, by being very disciplined in terms of how we invest money, but still let the science lead. We believe that is how you build a biotech for the future, and we are going to continue to execute on that strategy.
Wonderful. If I could go all the way back. Thank you, Karl, and thanks for the compliments. But if I could go all the way back to the EMPASSION PROVE HT study in CIDP. Maybe just sort of frame the treatment burden for patients on immunoglobulin that have CIDP versus what would happen if EMPASSION PROVE HT did improve on superiority. But then if you did prove superiority on IVIG, how do you think that melds into the conversation with payers around the different price points?
In CIDP or MMN?
Sorry, on moving forward to next year, the CIDP study.
Yeah.
Yeah.
Moving forward to next year's CIDP study. As we know from IVIG, the burden is long in the chair. There is a safety label. Based on that is something where, of course, we don't have Phase II data in CIDP, but we have Phase II data in MMN, and we don't expect it in the same way. That is an element to take into account for that study. We will have to see how the data turn out at that moment in time. Here, too, we believe that setting up the experiment in a direct head-to-head comparison versus IVIG was the right way to do, and we'll learn once we have seen the data. Karl, maybe you want to comment further.
Yeah. I think on the commercial opportunity, Vyvgart, of course, is growing, is doing really well in CIDP, but we are not able to help all patients. From the ADHERE data, 70% of patients responded with Vyvgart in CIDP, so 30% did not. In the real world, by the way, I think our response rate is slightly better than that. Probably over time, we might get to the 30%. We don't know. We'll see. There is a segment of patients which are not being helped. Maybe IGM plays a role there. I think we need to do the experiment and let the science speak.
If a date of cards falls our way, having two drugs next to each other, we can talk about co-positioning at that date, but that will give us a very strong commercial footprint or foundation, I should say, to have continued success in CIDP.
Sure. Moving forward, another catalyst we're keenly anticipating next year is in Sjögren's. Again, standard question, how do you frame the competitive framework and the competitive benchmarks? How do you think about what the bar for success is, and how do you think about the commercial opportunity?
Yeah. Sjögren's, of course, large indication. Our data points suggest around over 300,000 patients in the U.S. And of course, there are other drugs. Competition is coming in, and some of them are even launching before us. But in terms of FcRn, and specifically around Vyvgart, we believe that the Vyvgart signature can be very successful in Sjögren's. Think of rapid response, deep and sustained. I think that, and with our safety and tolerability, where we already have over 20,000 patient years of safety data, can give us a really strong position to compete in such a large heterogeneous disease, where multiple players will have to work together to build that market. I think longer term, if the data falls our way, super excited about what we can do for patients here.
Sure. Thank you.
We've talked Forte, we've talked empasiprubart, we've talked further expansions for Vyvgart. But what in the pipeline that maybe you don't get asked a lot about excites you the most?
I don't know. An, do you want to talk about the pipeline? Maybe you want to talk about IgE.
That's one option. I was going to actually respond. What you called out is already quite exciting, especially with the Forte acquisition in that regard, and how we then expand our portfolio and pipeline. Of course, the data will have to tell and guide us in that regard. When you look further down the pipeline, there is, of course, pioneering novel biology with adimanebart. Although that's in phase. A bit further down the pipeline, I would say the ARGX-121. I believe also if you show how rapid and how deep we can inhibit the IgA, I believe that's also an exciting molecule to watch.
Yeah. If I can add, what makes me excited is not necessarily one specific program. It is the opportunity we have at argenx. We have the short-term growth drivers. We believe we do have the medium-term growth drivers. Think of Sjögren's, think of FB-102, all the other programs in your assets, in your program. Then with our financial structure, the strength of our balance sheet, our extra focus on execution, and the way we make capital allocation decisions, let the science lead. Let's focus on novel biology. Let's find those white spaces. Let's develop them. I think that is we're building a type of biotech here which will be durable and provide long-term revenue growth. I think the opportunity set we have here is what I'm very excited about.
Sure. I think I had you at about EUR 6 billion on cash on balance sheet, down to maybe EUR 4-ish post Forte. Thinking about what we've just discussed on the pipeline, do you think BD is more organic or inorganic from this point?
Yeah. We had EUR 5.2 billion at the end of the previous quarter when we used around EUR 2 billion, EUR 2.2 billion on Forte, but still a very strong balance sheet. I've talked about how we make decisions in terms of what we spend the capital on, capital allocation for what. Of course, FcRn is a very important pillar, and we talked about next gen combos, peptide, all of that. Next to it is the rest of our pipeline. We've talked about empa and how important that is, but there's also a number of other programs in there which we're very excited about, like the IgE and all the other programs. Then the third pillar of growth is business development. We've done Forte. You can expect us to do more.
You can expect us to look more at earlier stage, because the way I describe it is what problem are we trying to solve? We do have growth drivers in the medium and the long term. But if you look forward well into the next decade, Vyvgart and FcRn should be a really large franchise, which should generate a lot of revenue. To maintain a good revenue CAGR on that, you will need a number of other successful franchises.
And what do we need to do today to build those franchises, which gives us revenues early in the next decade to maintain the forward-looking CAGR we want? And that is where our business development efforts is focused on, and you can look forward to us hopefully executing more. But it will follow the same playbook. Novel biology. Look for those white spaces where we can be first in class and where we can build product and pipeline opportunities.
Wonderful. Well, we're right at time. Is there anything that I didn't ask that I should have asked?
No, I just want to say thank you to you for inviting us, and thank you to our investors who are supporting us on our journey. Thank you.
Okay. Thank you everyone.