This is Yatin Suneja from Guggenheim. It is my pleasure to welcome Karl Gubitz, who is the Chief Financial Officer from argenx. Karl, thank you so much for making time. We always appreciate it. Since you are the CFO, you are here, I would love to talk about the transaction that you did yesterday. Maybe talk about the BD strategy. We saw you going after a little bit more of a later stage asset in the form of Forte. Now you went a little bit earlier from a development stage. What is the strategy? How you are thinking about deploying capital?
Thank you, Yatin, and thank you for being here. It is always a pleasure. It is just down the road from our office, so it is very convenient travel time for us. Yes, yesterday we announced the acquisition of UNP, Unnatural Products. Of course, it is still subject to all the customary closing conditions. We are very excited about this because, I mean, in general, of course, peptides is a very important space at the moment, a very competitive space.
You see lots of companies moving into that. We view it as the right modality, the right target. At argenx, we always follow the biology, and I think opening up new modalities is something which we are really interested in, and we can follow the science and let the science lead. Our partnership with UNP goes back about two years. We are public on it. They have been working on our oral peptide.
We also recently became minority shareholders, and now we continue to, subject to the conditions, bringing them into the company. We are really impressed with the culture of the company, the science of the company, the leaders of the company, what they have achieved. I think part of the diligence, of course, was our own FcRn, which has been ongoing for a while, and we can, of course, that diligence is an important proof point. I think what we are trying to do here is that VYVGART, of course, is an important growth driver, and as a company, we understand that VYVGART will provide really good growth in the short term, the medium term, but also in the long term as part of that FcRn strategy, but we also need other pillars of growth.
Having other pillars of growth next to VYVGART, next to the FcRn franchise, is important to deliver a durable company for the long run, where you continue to see revenue growth this decade, but also in the next decade. Building these pillars of growth next to VYVGART and FcRn, of course, we have Empa, and I am sure we are going to talk about Empa later on. From a business development, we did the Forte acquisition, which gives us the CD122. We can talk about that separately. Now we also have done UNP, for the reasons which I have just mentioned. I think as a company, we will continue to use the strength of our balance sheet.
We will use the strength of VYVGART in terms of a P&L it gives us, the revenue growth translating into increasing operating margins, which gives us the cash flow and that balance sheet so that we can do it. I think you can expect us to continue doing business development also in the future as we build the company for the long run and as we deliver on Vision 2030.
Got it. Likely remain more on the earlier stage side or closer to commercial phase III side?
I think that, of course, we'll follow the science, we'll follow the opportunity. We will look at the impact on patients, looking for that differentiated patient impact. We like product in a pipeline, avoiding the binary risk, which sometimes come with a single indication for an asset. But if you ask us what problem are you trying to solve with business development, it really is revenue growth in the next decade. If that is what the focus is, you can expect us to, our BD efforts to be more aligned to finding like a phase I, phase II type of asset. That said, if opportunity comes around and we see something which is of interest and some product which we can fit, for example, into our commercial engine, we will also look at that. But that in itself is not the target.
As I said, we think we're in a position of strength with our P&L and our balance sheet, not in a position of desperation. That allows us to make very disciplined capital allocation decisions.
Got it. Very good, very helpful. Let's maybe pivot to the financial performance and the commercial momentum. I think in Q3, you delivered really robust growth. I think according to our estimate, the growth in the last two quarters was actually the highest from a sequential dollar number perspective. What is driving that? Is it just the seronegative that is driving it, or is it a halo effect? Just maybe articulate that for us, and how should we think about sort of going forward?
Yeah, I think it's different elements to that. I think you start with the base business. Our base business in MG and CIDP continues to grow. If you take MG, for example, as we sit here today, only 20% of patients are on a biologic. 80% of those patients are still on the older drugs, orals, methotrexate, immune suppressants, and so forth. VYVGART is leading the biologic growth. You ask five docs, four of them will say you start with VYVGART. That is still intact. The base business is growing. PFS for self-injection, of course, is transformational for patients. That is the key growth driver that is still intact. What you saw in Q3 is the impact of a seronegative launch. Remember, we got the approval in May.
Since then, we've got all the payer policies in place, more than 90% of covered lives, and you see those patients coming on drug in Q3. It's not just the seronegative patients, that of course contributed to the growth, but it's also the halo effect. By the halo effect, I mean we got prescribers who gave us a seronegative patient who never gave us a VYVGART script before, and then followed up with a VYVGART acetylcholine receptor-positive patients. Having the broadest possible label out there helps you in the physician's office to say, "Why not VYVGART? Lead with VYVGART." I think it is that which led to Q3 maybe be a little bit better than what the street expected.
Got it. Maybe then, trying to differentiate or help our investor differentiate between the gMG or MG and the CIDP dynamic. How would you characterize, let's say, the CIDP sort of launch in what innings it might be, what type of patients you are seeing, and then what happens when the ocular MG, pediatric gMG comes online?
So maybe just quickly on, start with MG. MG is different than CIDP because in MG, it is an add-on. Patient can be on, for example, steroids, and when you add on VYVGART, later on you can taper VYVGART. While CIDP, for example, is a switch. That is a little bit harder sometimes. By the way, that is why we do or why you see us so active with patient activation strategies. It is easier, or we see more success in patients switching to VYVGART when the patient asks the doc. So we want to empower the patient to ask, "Why not VYVGART?" So that is the difference between the two. In CIDP, IVIG is entrenched after decades where they were really the only drug.
So we came forward with new innovation, and typically you are going to get those patients who are refractory on IVIG, the patients who are not adequately treated on standard of care. That is what you see at launch, and that is still the majority of patients we get today. But over time, we can also do what we have done in VYVGART and what we have done in MG by moving up the treatment paradigm. We are not really there yet in CIDP. It is starting. But in MG, of course, our patients are all coming from earlier lines.
And the benefits of having the broadest possible label, because we already have the broadest label, but next year we hope to add to that by both the pediatric extension, which maybe is a smaller patient number, but the benefit and the halo effect of that will be there in terms of it is safe enough for children, but safety benefits should also be there for adults. Also, everybody knows VYVGART is approved for everything. Then later on in the year, if we get the ocular approval, we can go from gMG, generalized myasthenia gravis, to MG. We can take the G away, which will then again further expand the label, make it even harder for competitors because we are going to have an even broader, and we believe at least around 7,000 ocular patients out there which could be or should be VYVGART patients.
The total ocular patient numbers, of course, is much higher, but the total addressable market for VYVGART, we believe, is 7,000. And it is this continued innovation which will help us to maintain the growth.
Got it. Very helpful. Thank you for that. We just discussed about the indication. What about the presentation? You have an IV, you have a PFS, you have, I think, one more.
The Hytrulo, the HCP-administered subcu.
Yeah. How is the uptake across these segments? Which one is still the majority? Specifically focus on PFS, because if that becomes a bigger component, should we expect any drag on the gross to net?
It's a great question. I think one of the key differentiating factors of VYVGART is that we have three presentations. Outside the U.S., it's actually quite simple. PFS is very, very quickly becoming the dominant presentation. In countries like Germany, for example, PFS is in the high 90% of utilization. IV is still available. It's only used in the hospital setting in a very limited way. In the U.S., of course, you still see all three subsets or all three presentations, but the clear growth driver is PFS, the prefilled syringe for self-injection. It's because of that patient convenience. You can just walk to your fridge. It democratizes the use of VYVGART. You're not tied to the scheduling of an IV center. It's in your fridge. You can take it out of your fridge, throw it in your luggage, travel for 30 days. It's just so much easier.
You see Hytrulo for HCP administration. That is going down. The IV business is actually still strong. It is more or less flat. It is not declining. It is an important part of the U.S. healthcare system and the way, buy and bill all the infusion centers. So, it is an important part of our business, and it is still very important for patients and physicians and payers.
To answer your question for gross-to-net, in Q3, we announced that the gross-to-net percentage is slowly creeping up, and we hit 22%, so that is why I gave a number, 22%. It is slowly increasing because VYVGART is growing so fast, and VYVGART has a higher gross-to-net than the other presentations, and that is easy to understand why. It is because of that Medicare Part D subset of patients using VYVGART, where you pay the extra 20% to CMS as extra discount, extra rebate, I should say.
However, it does not change the net contribution, or call it the net price, argenx get, because, yes, the gross-to-net is higher for VYVGART, but the utilization is also higher.
Yeah.
A long way of saying a VYVGART patient uses more drug than an IV patient in a year. So, if VYVGART is the net growth driver, and with an increasing gross-to-net, it does not result in a drag on our growth.
Got it. Very helpful. As we move into the fourth quarter, which we already are, and next year, and you have four or five launches, right, between the ocular MG, IMNM, auto-injector, maybe talk about what are some of the big opportunities where you can capture meaningful share. Which one of these could be the biggest driver in 2027 from a growth perspective?
Yeah. Potentially five launches. I talked about pediatric and ocular and the autoinjector. The autoinjector, of course, is important for patients. Some patients don't like to see the needle, and the device is more patient-friendly. It's important innovation, but not as transformational as the PFS was, but still important. Those three should really help to maintain the growth in MG, which, of course, is our biggest indication. The autoinjector will also help with CIDP patients because those patients sometimes struggle with dexterity issues, so the device would be helpful. From a growth potential, I think probably the biggest growth percentage, growth number will come from IMNM, immune-mediated necrotizing myopathy. We got the data earlier this year. We will be filing before the end of this year. We'll talk about a PDUFA date probably early in January. We'll probably be able to give you the date.
That's 20,000 patients with no approved treatment option. I think you can see that this is a space where we can build the indication, high unmet need, and a lot of excitement from the community, both on the prescriber side as well as on the patient side. The fifth launch could be MMN, multifocal motor neuropathy, in empasiprubart. We call it Empa. The phase III results is due in December. It's a very important proof point for the company because argenx is known for VYVGART. VYVGART is a pipeline and a product where we can innovate on the presentations, and we can build a large franchise. That is what the company is being built on. We want to show to you that that model is repeatable and scalable, and we think we can do it with Empa. Empa will have multiple indications.
It's currently in two phase IIIs and other indications to come. The first phase III is, of course, MMN I just referenced in December. If that goes well, we can launch that also, hopefully, at the later stages of next year.
Got it.
So-
Sorry. Then maybe a couple questions since you mentioned on MMN. This is a non-inferiority study. Just talk about, is that sufficient? You've done it successfully in other areas, so just comment on that. Then with regard to the CIDP indications that you are running with empasiprubart, could they cannibalize or would they cannibalize some of the revenue that you get with VYVGART?
First, on MMN, yeah, the primary endpoint is non-inferiority, head-to-head with IVIG. There's a secondary endpoint of superiority. I think what's important is even if we only get the primary endpoint, i.e., non-inferiority, that will be more than adequate for a successful launch. Think of a superiority will be, of course, useful. You want to show superiority. It will probably help you a little bit with price setting, probably more outside the U.S. than inside the U.S., but that is not the base case, and that's not really what you need to be successful. But we're super excited about that opportunity, as I said. For our second phase III in CIDP, remember, VYVGART is also in CIDP. VYVGART, if you go back to that year study, 70% of the patients responded in phase III. VYVGART does not work for all patients.
There's a subset of patients who is in need of another treatment option. We're doing the study with Empa. Now, we're not doing the study in VYVGART refractory. We've given Empa the chance to shine in all patient segments, including naive patients. So, we're going to wait for the data and let the data speak, and then we can talk about co-positioning, where we can place it next to, in front, or after VYVGART. We're going to follow the data, and we're going to do what's best for patients, of course.
Got it. Thank you. With regard to the IMNM, this is a new build-out for you because you're going into the rheumatology. Could you maybe talk about the size and scope of the build-out, and sort of the uptake there? How should we think about relative to your presence already in neurology?
Yeah. Our existing indications, of course, are all in neurology. The neuros are the prescribing physicians. IMNM is both neuros, but mostly rheums, rheumatology. We will have to expand our commercial footprint and build a rheumatology capability. If you go on LinkedIn today, you will see these roles being posted for rheumatology. It is happening. That is largely marketing, medical affairs, those kind of roles. The field force will be hired next year. We are not public yet exactly on the size, but if I can give you bookends, if you like, we launched MG with 70 reps, and now today, we have just over double that number. Of course, that is the bookends of what you can expect in terms of size for an indication like IMNM.
Got it. That probably gets expanded with DM, right? What was the conversation with the FDA on the DM front?
Yeah. Of course, on DM, we did not hit stat sig because we did not have enough patients. The powering was not enough to do that. But the data was consistent between IMNM and DM. We believe the drug works in DM. I think we have got broad acknowledgment for that from the community. We did have a discussion with the FDA, but the FDA, of course, said that we need to go and do another study.
Got it.
We can't comment on that yet because the size and the duration, all of those things are still up for discussion with the FDA. We are committed to those patients. We believe the drug works, and ultimately, we hope to launch probably closer to the end of the decade, just to put a ballpark number out there.
Okay. Helpful. With regard to the Forte acquisition, I think you've flipped two cards, celiac and vitiligo. Both have been successful, and there is one more study that is ongoing, alopecia areata. I'd love to hear anything you are willing to share on alopecia. What is the development part look like for both celiac and vitiligo? I think for celiac, you have said you will go into phase III, but I don't know if you've said that same thing for vitiligo.
Yeah. Going back to the Forte acquisition, we didn't buy the asset or invest in the asset for a single indication. We believe it's a pipeline and a product where we can replay the VYVGART playbook, where we can also innovate on the presentations, similar to what we've done with VYVGART. But we have flipped the data card on celiac, and next year, we will start a number of phase IIIs for the CD122, FB102. We are not public yet exactly what it will be. I assume we will probably talk about it at JP Morgan next year, early next year, when we will be ready, but we're not ready today. But what you can assume is that, or what you can expect, is multiple phase IIIs in multiple indications, and over time, not just the indications you mentioned, also other indications.
Got it.
But more to come, yeah, later.
Got it. Given this acquisition and a lot of R&D that you're doing, then the five launches that you will be executing on 2027, like, how should we think about an operating expense framework for next year?
Yeah. As a company, we don't give guidance. We don't give revenue guidance, but we talk about a framework. That framework is very important because the strength of VYVGART allows us to say revenue growth currently is at a higher percentage than OpEx growth, OpEx being combined R&D and SG&A. You can see that margin expansion in Q3, which just closed, that margin was 37% if you exclude the one-off transaction cost for Forte. With everything in, it was 28% margin expansion over time. As we look forward, yes, we have a lot to invest in. We have Forte, we've got UNP assets, we've got about 10 assets in the clinic. We're going to start a number of phase III's next year. A lot of opportunity to invest in innovation to build that long-term company. So, we did increase the OpEx for this year to $4 billion.
That includes Forte and UNP. But still margin expansion, of course. As we look forward to next year, we will continue to give you margin expansion. Higher revenue growth will increase faster than OpEx growth, with increasing cash flow quarter over quarter.
In that $4 billion, 2026 R&D and SG&A spend, both the Forte and this UNP factored in?
Correct.
Well, very good, Karl. That is all I had for you. I appreciate it. Thank you.
Well, thank you for the support. Thank you. Thank you, everyone.
Thank you.