Legend Biotech Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 20, 2023

There are 20 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Legend Biotech Reports Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please note that today's conference may be recorded.

Operator

I will now hand the conference over to your speaker host, Jessie Young, Head of Investor Relations and Public Relations. You may begin.

Speaker 1

Good morning. This is Jessie Yang, Head of Investor Relations and Public Relations at Legend Biotech. Thank you for joining our conference call today to review our Q3 2023 performance. Joining me on today's call are Yin Huang, the company's Chief Executive Officer and Laurie Macomber, the company's Chief Financial Officer. Following the prepared remarks, We will open up the call for a Q and A.

Speaker 1

We will be joined by Guo Wei Fan, Chief Scientific Officer and Steve Schaffel, Head of Commercial Development for the U. S. And Europe. 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.

Speaker 1

Thank you. I will now turn the call over to Ying.

Speaker 2

Good morning, and thank you for joining us today to discuss the Q3 financial and corporate accomplishments of Legend Biotech. We are pleased with the progress we have made over the last quarter to advance our portfolio and pipeline of innovative therapies that are focused on addressing the serious and Intractable Disease Patients Face. Last week, we announced that we have entered into An exclusive global licensing agreement with Novartis, which grants Novartis the rights to develop, manufacture and commercialize LB-two thousand one hundred and two and other potential CAR T therapies selectively targeting DLL3. LB-two thousand one hundred and two is an investigational autologous chimeric from payment of $100,000,000 and are eligible to receive up to $1,010,000,000 in milestone payments as well as tiered royalties on net sales. We will also be reimbursed for development costs for the ongoing Phase I clinical trial, which will evaluate the safety and efficacy in patients with small cell lung cancer and patients with large cell neuroendocrine carcinoma and to determine the recommended dose for Phase 2 study.

Speaker 2

We're excited by this transaction, and we look forward to seeing how this therapy performs in the clinic. CARVICTI or Siltacel continues to drive our revenue and direct our priorities. We have worked tirelessly to bring CARVICTI to patients who are eligible for treatment, and our efforts are reflected in the total net sales of $152,000,000 in 3rd quarter, bringing total net sales for 2023 to $341,000,000 so far this year. Our Q3 performance was driven by ongoing market launches, expanding market share and capacity improvements, as well as the commercial launch of CARVICT in Germany, which contributed to quarter over quarter ex U. S.

Speaker 2

Growth of 300%. In the U. S, we have experienced growth of 23% quarter over quarter. We remain steadfast in our goal to make CARVICTI available and accessible to patients worldwide, and we look forward to sharing highlights of that journey with you today. We have progressively met strong demand for CARVICTI in collaboration with Janssen.

Speaker 2

First, Janssen has scaled the in house production of lentivirus at its factories in Switzerland and has another factory in the Netherlands under construction to complement and support LV Supply, which should be online by 2025. LV expansion is crucial because it is often the rate limiting factor in any car T manufacturing and growing LV supply is an important front in our ramp up. 2nd, we're still on track with our preplanned capacity increase at our Ryerson site and production from our CDMO is supporting that expansion next year. 3rd, the first of our state of the art manufacturing facilities in Ghent has received a license from the Federal Agency for Medicines and Health Products in Belgium. This was an important hurdle Clear.

Speaker 2

And once the investigational medicinal product dossier is approved by local authorities, we'll begin manufacturing at Gantt for clinical use by end of this year. The Gantt facility will be an important part of the CARVICTI supply chain network. We're committed to bring CARVICTI to more patients who are eligible for this important therapy. Our manufacturing ramp up supports commercial delivery as well as our ongoing CARTTITUDE clinical development program with Janssen. Of the 5 clinical trials evaluating Siltacel, 3 are ongoing and CORT2-six, our Phase 3 study for frontline patients, enrolled its first patient.

Speaker 2

The activation of 1 of our Ghent facilities will enable us to continue the commercial ramp we began in the U. S, while onboarding new clinical patients. In addition to making capacity enhancements, we work with roughly 60 35 treatment centers across the U. S. And are expanding access to CARVICTI in select European countries, including Germany.

Speaker 2

Our teams are working hard on multiple fronts to bring this efficacious onetime treatment to patients in need. We are pleased to share that since trials began in 2018, we have treated more than 2,000 people with Siltacel. Our pipeline is also robust, and we're exploring the potential of cell therapies in both hematologic malignancies and solid tumors. The funds from our transaction with Novartis will primarily be used to develop other promising pipeline assets, such as our allogeneic cell therapies. The armoring used in LG-two thousand one hundred and two can also be deployed in other pipeline program if validated in the clinic.

Speaker 2

We continue to explore innovation in our pipeline and are excited about their progression. Now I want to turn this to Laurie.

Speaker 3

Thank you, Ying, and good morning, everyone. As Ying mentioned, we are very pleased with performance of our commercial product CARVICTI this quarter, which generated approximately $152,000,000 in total sales, an increase of 30% over the previous quarter, driven by ongoing market launches, expanding market share and capacity improvements. That performance also represents 176 percent year over year increase. As a reminder, We share equally in all profits and losses of CARVICTI, ex China with our partner, Janssen. Starting with cash and cash equivalents, time deposits and short term investments of $1,400,000,000 This will fund our planned operating and capital expenditures into 2025.

Speaker 3

Starting with revenue. Total revenues for the Q3 were $96,000,000 consisting of $75,900,000 in collaboration revenue from the sale of Carvicti and $20,100,000 in license revenue for the achievement of a milestone during the quarter as outlined in the global development plan under the Janssen agreement for sitacel. Net loss for the 3 months ended September 30, 2023 was $62,200,000 or a loss of $0.17 per share compared to a net loss of 85,000,000 or $0.26 loss per share for the same period last year. For the 9 months ending September 30, 2023, Net loss was $373,400,000 or a loss of $1.07 per share compared to a net loss of $310,500,000 or a loss of $0.99 per share for the 9 months ended September 30, 2022. Moving on to expenses.

Speaker 3

Collaboration cost of revenue for the Q3 2023 was $43,500,000 compared to $25,500,000 for the same period last year. These are Legend's portion of collaboration cost of sales in connection with the collaboration revenue under the Janssen agreement, along with expenditures to support the manufacturing capacity expansion. Research and development expenses for the Q3 2023 were $95,900,000 compared to $104,500,000 for the same period last year. The decrease of $8,700,000 for the 3 months ended September 30, 2023, compared to the 3 months ended September 30, 2022, was due to timing of expenses incurred in connection with the master technology transfer, manufacturing and clinical service agreement for BCMA CAR T product with Janssen and Novartis Pharmaceuticals Corporation. Administrative expenses for 3 months ended September 30, 2023 were $28,100,000 compared to $23,200,000 for the same period last year.

Speaker 3

The increase of $4,900,000 year over year is primarily due to the expansion of administrative functions to facilitate continuous business growth and continued investment in building Legend Biotech's Global Information Technology Infrastructure. Selling and distribution expense for the 3 months ended September 30, 2023 was $21,100,000 compared to $18,900,000 for the same period last year. The increase of $2,000,000 year over year due to costs associated with the commercialization of CARVICTI. To wrap up, our spending remains on track and we continue to maintain a strong balance sheet. As of September 30, we had $1,400,000,000 in cash and equivalents, deposits and investments, which Legend Biotech believes will fund operating and capital expenditures into 2025.

Speaker 3

Thank you. I will now pass it back to Ying for closing remarks.

Speaker 2

Thank you, Laurie. 2023 continues to be another remarkable year for Legend Biotech, and we look forward to closing out the year strong in the Q4. We have made considerable strides in enhancing our manufacturing capabilities and lowering our out of

Speaker 4

spec rate. We're proud to

Speaker 2

be a fully integrated cell therapy company focused on both hematologic, malignancies and solid tumors. Looking forward, we'll continue to invest in our manufacturing capacity as we work to deliver CARVICTI to patients expeditiously and responsibly. We'll also continue to expand our pipeline. At Legend Biotech, we strive to deliver long term value to our shareholders and are encouraged by these developments. Thank you for joining us today.

Speaker 2

We'll now open the call up for questions.

Operator

Thank you. And our first question coming from the line of Gena Wang with Barclays. Your line is open.

Speaker 5

Thank you for taking my questions. Also congrats on the great quarter. So maybe I have two questions. One is regarding, I think this morning we saw the news that Bristol's back right now, they will require And maybe based on that news, what is your interaction with the FDA so far? And are you also anticipating an outcome?

Speaker 5

And second question is regarding the competitive landscape. In terms of, say, efficacy profile, we will see some update at ASH. What is your thoughts regarding being competitive. And the other related question is the commercial strategy in the outpatient setting.

Speaker 4

Hi, good morning, Gina. Thanks for the question. So I'll take the first one first, which is regarding the AdCom, that will be hosted by FDA ODAC for our competition. So I can tell you that given our Interactions with the FDA so far on our CAR T2-four filing, clearly, the agency placed an emphasis on the OS benefit, overall survival benefit. Typically, the agent standard is that you have to demonstrate a significant PFS benefit with an overall encouraging trend in survival.

Speaker 4

So without disclosing anything further, I can tell you, Gino, that on August 4, when we received the filing acceptance For our QIAGEN report by the agency, we were advised that FDA was not planning to hold an ad hoc or advisory committee to discuss this document. That was as of August. Secondly, I'm also very pleased to tell you that as part of our so called For my safety update, we did submit to the FDA additional data. And again, we are seeing a stronger trend of overall survival Since the last update when the data was presented at ASCO. That's what I would say about the overall survival from CAR T2-four.

Speaker 4

And we remain very confident on the profile for CARVEPT. Secondly, on ASH and competition, I'm not a comment into any competitive data, But we stand behind the safety and efficacy of CARVICTI, which has been dosed by more than 2,000 patients already And that includes patients with dosed in the commercial setting after FDA approval last year and also patients who are dosed in various CARLI-two program and also CARLI-five in China. So we are very, very happy to see the very deep, consistent, durable response In every setting of multiple myeloma we have tested so far. With the commercial strategy, I'll ask my colleague, Steve, to comment. Steve?

Speaker 6

Thanks, Singh. Hi, Gina. I think your question had to do around outpatient and

Speaker 7

maybe I could just give you

Speaker 6

an update on what's happening in that particular area. We were holding constant at about 30 We're also forecasting as we enter in earlier lines with the Cartitude 4 launch next To exit, we hope to exit next year, I would assume maybe even doubling that. It's really predicated on bringing on board our sites and obviously Getting our consistent supply into market, but right now from a share perspective, that's how our claims data is measuring up.

Speaker 5

Thank you very much.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Jessica Fye with JMP Chase. Your line is open.

Speaker 8

Great. Good morning. Thanks so much for taking my question. On the heels of the Novartis licensing, Can you talk about what the next wave of targets Legend is interested in pursuing might be?

Speaker 9

Thanks, Yes, Kai. This is Huongui. So we have extensive internal pipeline, both in our targets as well as in Allogeneic, sales therapy front. In our target space, we continue to focus on blood cancer, building the vibegma melanoma franchise, At the same time, also expanding to the solid tumor indications. In allogeneic space, we have Several different platforms and we have deep investments in gamma data gene allogeneic platform in the past several year And expand the allogeneic platform as well.

Speaker 9

Currently, the allogeneic platform is primarily focused on the blood cancer indication.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Kelly Hsieh with Jefferies, your line is open.

Speaker 10

Thank you. Congrats on the great progress. How should we think about the Q over Q growth of CARBECTI into Q4 considering the J and J and Legend manufacturing capacity increase and also the level of demand in the baseline settings as the Tugendayle experienced a great launch? And also, how do you estimate the seasonality impact from holidays? And I also have a follow-up.

Speaker 10

Thank you.

Speaker 3

Hi, Kelly. This is Laurie. I'm going to give you just overview quarter over quarter and then I'll turn it over to Steve. As you look out going into Q4, As we've talked about before, we are doing a step up. We have gotten that approved.

Speaker 3

But as we've indicated before, you won't really see the impact of that until Q1 of 2024. And as a reminder, we've also signaled that in Q4, we will be doing some comparability runs as we're getting some of our additional nodes for Manufacturing capacity up and running for 2024 to help support the second line launch. So with that, if you look at Q4, we're not giving But you're not going to see significant growth quarter over quarter because of both of those activities. And with that, Steve, I'll turn it over to

Speaker 7

you. Yes.

Speaker 11

Hey, Kelly, it's Steve. I think it's actually going

Speaker 6

to do with the tech launch. So what we're seeing in market research that we're running is, where you see market share coming out of market in terms of CAR T therapies has been that from abecmab as opposed We're seeing still a robust demand in later line settings. I think you're going to see that continue in market with the bispecifics. If you see erosion in terms of share erosion, I see it coming from Becca, at least that's been the latest data we've seen in our research.

Speaker 10

Terrific. Thanks. And also regarding the initiation of CARTTITUDE-six trial in the frontline transplant eligible patient population, Could you actually share should we expect the U. S. Enrollment to start in near term?

Speaker 10

And if majority of the enrollment come from Europe. Do you consider impact on the enrollment of PACE compared to CARTIGUE V trial? Thank you.

Speaker 4

Thanks, Kelly. So we're very pleased to announce that the first patient has been enrolled last month in Spain. So we officially have kicked off the initiation of CAR II VI. And we are going to initiate the enrollment in the U. S.

Speaker 4

Also very soon. At this point, I can tell you that we will promise to enroll a certain percentage of U. S.-based patients because We have to submit the data to the agency later to make sure that we have a representative U. S. Patient population in the overall patient.

Speaker 4

Although Probably the majority of patients will be enrolled ex U. S. For CARTA-two-six.

Speaker 10

Thank you very much.

Operator

Thank you. And our next question coming from the line of Vikram Parikh from Morgan Stanley. Your line is open.

Speaker 11

Hi, good morning. Thank you for taking our questions. This is Vikram. We had 2. First, Assuming you were to obtain approval for CARVICTI for the expanded label based on the CRITUDE-four data by next April, Could you just walk us through your latest thinking on what you expect the ramp to look like in earlier line use in 2024 onwards?

Speaker 11

And then secondly, back to the topic of competition. Bristol Myers and 270 have mentioned that they're making a bigger commercial I wanted to see if you've noticed any competitive impact at this point from those efforts and if you and J and J feel the need to increase your marketing and promotional spend behind CARVICTI in response to the efforts from Bristol Myers and N270. Thanks.

Speaker 6

Yes. Hi, it's Steve. So let me try to take them. I think the second part of your question had to do with site expansion also from a promotional spend. We'll continue to expand sites over time.

Speaker 6

We'll exit this year, we think right around 70 sites. I will see our site expansion is predicated on Delivering in our manufacturing capacity increasing. So, we are targeting by the end of next year to be exiting at about between 90 to 100. So that hopefully answered your question around site expansion. And as I remember, as I continue to state there, this is more than just site All these sites are not created equal in terms of the numbers of patients that they treat.

Speaker 6

Our philosophy is continue to increase Our site expansion to ensure that we can accommodate the demand within those sites. I think your second question had to do with Partitude Or can somebody help me, Joe? The ramp. The ramp. Yes, so thanks.

Speaker 6

So how we're planning the Cartitude 4 ramp in terms of the forecast perspective, We were initially and we continue to assume a very quick ramp up, especially in the high risk population in second line plus. In some of the research that we fielded post ASCO once we released the CARTTITUDE 4 data, we're also seeing high demand also in the standard risk population. So generally speaking, again, we're very excited as you can imagine in launching CARTA-two-four for our patients. But we see it much broader than we were initially thinking beyond the high risk group.

Speaker 11

Got it. Thank you.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Leonid Timoshenko from RBC Capital Markets. Your line is open.

Speaker 12

Hi, guys. Thanks for taking my question and congrats on the quarter. I wanted to Dick with the competition discussion for just a little bit. We've been hearing that there's actually been capacity constraints in the CAR T space as a whole, with actually BCMA and CD19 directed CAR Ts competing for beds and infusion capacity. I guess is this something that you're seeing, as you're continuing to launch Karvikty, do you expect these dynamics to lift or continue?

Speaker 12

Thanks.

Speaker 6

Yes. Hi, it's Steve. I'll take that again. I think that's a very, very good point. So that's why it's so important.

Speaker 6

This is why you're seeing a large percentage now of sites moving to So, yes, so to your point, it's a very valid point that you cannot continue to treat CAR T therapies as just a single inpatient modality. We knew that leading into launch and it was the reason why we were continuing to monitor How the market was moving to outpatient to increase capacity to your point. So you address capacity in essence 2 ways, right? So you continue to monitor to see how the market's Moving in the outpatient setting, and as I stated earlier, we're running at about 3 out of 10 patients now being treated that way, and we see that continuing to grow significantly over time. So that's the first piece of that of solving that issue.

Speaker 6

And then the second way you resolve that is by increasing sites themselves and we'll continue to do that as well. So it's a combination of a number of different moving parts. So we'll see how the market is moving in the outpatient setting. And then we'll also continue to add more and more To accommodate, to your point, the patient volume to ensure that we have enough or the sites have enough volume to pull through the volume of patients for our indication.

Speaker 4

And Leonid, this is Ian. Maybe I want to add that if you look at the number of transplants that are performed in the setting of myeloma, It's about 9,000 transplants that's performed every year in the United States market. So we think at this point, at least for myeloma, we're not Approaching that limit in terms of possible bets yet. As you know, if you look at our supply into the market, right, we're nowhere near that 9,000 number yet. Thank you.

Operator

Thank you. One moment please for our next question. And our next question coming from the line of Yaron Weber with TD Cowen. Your line is open.

Speaker 13

Great. Thanks for taking my questions. I just have 2. The first one, can you give us a little bit of a sense, we're hearing that not now, but potentially later on, if for RESA slots Might become more of a bottleneck as you're ramping up capacity. I don't know if you can give us a little bit of a sense how much capacity there Now and what can you do to enhance it?

Speaker 13

And then secondly, it looks like the Facility in Europe, in Belgium has now got approved on a local basis and you're noting that you need to wait for investigational medicinal product FDA approval and local authorities. Is that not centralized to the EMA or is it Sort of different done differently in Europe. And just reaffirm that you're not foreseeing any sort of Limitation on how many slots you're going to have in that plant in Europe? Thank you.

Speaker 6

Hi, there. It's Steve again. Why don't I take a crack at the apheresis question? The apheresis question really varies by site. I know we've been having a number of conversations with our sites as we work collaboratively to onboard them and certify them.

Speaker 6

So the apheresis question really is being up addressed by our sites because what they are doing is forecasting what the volume looks like for them, whether it be for obviously the CARTA launch, but they have a pretty good idea obviously by now, but more importantly, Cartitude 4. So as I keep mentioning, we are addressing this In a number of different ways, this question around capacity. And right now, like I said, the number that I was guiding earlier in terms of roughly to 90 to 100 that I gave earlier in terms of number of sites is in response to a number of these capacity questions to ensure that the market

Speaker 4

I'll take the question about the European facility. So We did receive a GMP certificate issued by the local FAAG, which is the counterpart of FDA in Belgium. And that is sufficient for us to start the clinical production next month in the U. S. Sorry, in Belgium.

Speaker 4

And then specifically on your question about the USF NDA. So right now, our plan is to start clinical production By end of this year in Belgium for certain clinical trials and then about midyear next year in 2024, We're planning to seek regulatory approval for our Obelisk Ghent facility to start producing commercial CARVICTI. Initially, we're planning to supply only the European market. So at this point, we would not need FDA approval. In the future, In the case where we do have excess capacity that we could use from the Ghent facility stand, we plan to come back and ask FDA approval.

Speaker 4

So you're right. In the case of commercial production for U. S. Patients, we would need SPLA approval by the FDA. But right now, in the very near future, We're only designating the GaN facilities for our European commercial demand and also clinical trial demand.

Speaker 4

But still that does help our supply in the U. S. Because as you know, right now, we're only producing both clinical trial material and commercial CARVICTI from our New Jersey facility. So whenever we can divert some of the demand from European market and also clinical trials to Ghent, That will free up more slots from our Raritan, New Jersey facility. I hope that answers your question.

Operator

Thank you. One moment please for our next question. And our next question coming from the line of Linhay Zhao from Goldman Sachs. Your line is open.

Speaker 14

Hi, thanks for taking my question. Two quick questions on the financials. The first one is, as we are still Enrolling for CAR V and now starting to enroll for CAR VI and the R and D expenses remained flat well over quarter. How should we see the R and D spending in Q4 and in 2024? And the second question is, it seems that the gross profit margin slightly And can you share with us some any colors on potential gross mark Okay, margin improvement in the near term.

Speaker 14

Thanks.

Speaker 3

Hi, this is Laurie. In regards to the R and D spend, I think you'll see a consistent quarter over quarter. I mean the activities itself have been pretty consistent with our investment in front lines for the Corvicti program as well as our pipeline. So we Continue going into 2024, we expect to see continual spend consistent with our historic. I'm sorry, can you repeat the second question?

Speaker 14

Yes, sure. The second question is about the gross profit margin. When do we expect to see a further increase on the profit margin?

Speaker 3

So from a gross margin perspective, we have been seeing improvements From a product perspective, as a reminder for gross margins, we have the product gross margin in there as well as the OpEx related to facility investments. So that's why it's hard for you to see the continual improvement in gross margins, because as we've talked about, we continue to expand our capacity with manufacturing. So We continue to have expenses hitting in that gross margin line. But as our volumes have increased and As we've made also some process improvements, our margins are improving from a product perspective, but we don't give specific guidance on those actual

Speaker 14

percentages. Got it. Thanks.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Jonathan Miller from Evercore ISI. Your line is open.

Speaker 15

Hi, guys. Thanks for taking

Speaker 16

my question. I'm going to ask about DLL3 actually as an entree to solid tumors more broadly. Can you walk us through the dose levels for the DLL3 Phase 1 versus CARVICTI and maybe talk a little bit about how that relates to your expectations for dosing in solid tumors more broadly? And I

Speaker 4

have a follow-up. Thank you. Hey, Jonathan. Thanks for the question. This is Ying.

Speaker 4

So If you look at our disclosure on clinicaltrials dotgov, you will see that we're planning to test 4 different doses ranging from 0.3000000 cells So this is a weight based dosing plan. And Because this is a solid tumor and we foresee that you may need a little bit bigger dose than in the hematology cancers. So if you look at our Prior dose ranging finding trials for the hematology such as multiple myeloma indication. This is a little bit higher starting dose Given that we probably need a larger amount of T cells, but on the other hand, we did put in armor, Namely the dominant negative TGF beta armor to help expansion and penetration to the tumor setting. So that is the dose we're looking at for DL3 in Phase 1.

Speaker 16

Thank you. And then on the Cartitude 4 label, can you remind us how big an impact that will have on out of spec rate when assuming it does get approved. And should we expect that out of spec rate Change to happen immediately on approval or will there be a ramp period or some sort of recertification for that?

Speaker 4

Sure. So In part of our SPLA filing submitted to the FDA, we asked the agency to widen the release back based Because we provide a significant amount of so called sensitivity analysis to the agency trying to correlate the release back with the clinical outcome Such as PFS and survival. So based on that data, we and our partner at J and J are very confident that we And if we do receive such a wider release back from the agency, then Eventually, we hope that the out of spec rate can decrease by additional 5 to 10 percentage points from where it is today. That is our expectation, of course. We have to wait until we see the label and also the FDA approved release back Next April when the PDUFA date hits, but that is our hope.

Speaker 4

And to the second part of your question, Let's say, if we do receive a label and the wider release back today, it is going to take a little bit time because once we start to roll out the second line in the market and then we start to see more uptake, you will gradually see that lower OS will take place in the manufacturing process.

Speaker 16

Just to clarify what you just said there, Ying, when you say you'll take a little time to see that out of spec benefit come through, Is that because you're only going to see that out of spec benefit in the second line plus patients? Is it not going to also apply to Manufacturing and laterals?

Speaker 4

You raised a very good question, John. Unfortunately, I don't have answer to you because We would have wait and see what the agency gives us. It's possible that we'll get a uniform release back From both the first indication and the second indication, but it's also possible that the agents decided to give us 2 sets of release backs, which haven't before. I'm So at this point, I actually don't know the answer, but it's a very good question. We'll have to wait and see what the FDA says.

Speaker 16

Thanks so much.

Operator

Thank you. And on for our next question. And our next question coming from the line of Ashburma from UBS. Your line is open.

Speaker 17

Hey, guys. Thanks for taking my question. Good morning.

Speaker 1

I have 2. So just in terms of

Speaker 17

your partnership With Novartis, could that eventually allow you to use a T charge program to further lower the carbic t vein to win And then second one, just wanted to see where you are on the CARDINAL2 study with the cohort E and F. I just wanted to Get an idea, is that something that we could see at the ASH abstracts late breaker tomorrow? Or is this more for ASCO next year? Thanks.

Speaker 9

So for the T charger platform, it's a unique manufacturer platform developed by Novartis, and this is only applied for LV-two thousand one hundred and two, internally we are also developing novel manufacturing process and we are going to move internal developed manufacture into other cell therapy product in the future? Thank you.

Speaker 4

Ash, this is Ying. I'll take the second part of Question, which has to do with CAR T2 Cohort E and F. So I can tell you that at this point, we have completed enrollment for both According to Cohort E and F in the newly diagnosed patient cohort, but we're not going to release data at this moment because as you know, Typically in the frontline setting, the PFS is relatively long. So we believe it will be more informative when we present data with a longer follow-up. So you should stay tuned when we present cohort E and F in the future.

Speaker 4

Thank you.

Operator

Thank you. One moment for next question. And our next question coming from the line of Kasas Priyalikis from BMO Capital Markets. Your line is open.

Speaker 7

Hello, everyone. Thanks for taking our question and congrats One question from us on the clinical ongoing trials. Can you comment on whether the enrollment in CATV-five is completed. And given that the CATitude 6 tile is slightly larger than CATitude 5, should we expect an impact from these increase on the commercial slots or these 2 are somewhat independent now with the clinical manufacturing support from Novartis and the GARN sites?

Speaker 4

Thank you. Thank you, Costa, for your questions. So on CAR TUV, We're very much on track to complete the ex U. S. Enrollment of CARDIGO V by end of this year.

Speaker 4

And now we're looking at Potentially over enrolling Cartagena V in the U. S. Because as I mentioned previously in this call, we would like to have a very U. S. Patient population in the overall patient enrolled in CAR T5.

Speaker 4

So we're going to probably extend the U. S. Enrollment by about one quarter into the Q1 of next year. But at this point, I can tell you that we're very pleased with the enrollment status. Like I said, We're pretty much down for the ex U.

Speaker 4

S. Portion for KAR2 V by end of this year. So everything is going according to plan, but we do want to over enroll in the U. S. Given the demand from patients and also given the fact that we would like to have a higher percentage of U.

Speaker 4

S. Patients in this trial. On CARTTITUVI, We just started our first patient last month in Spain, and it will probably take us about a couple of years while we enroll. So regarding to the production, we likely will utilize our Ghent facility that's coming online next month to start Production of Cardiutube VI. We could also use additional capacity from our CDMO to satisfy that demand for Cardiutube VI production.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Justin Zelman with BTIG. Your line is open.

Speaker 18

Thanks for taking the questions and congrats on the strong quarter. So can you give us an update on the out of spec rate for Corviki today, just how things have been trending? And second, just on Pipeline strategy, will you look to continue to seek partnerships for your pipeline assets in the future? Or Could you internally develop them and bring them forward? Thank you.

Speaker 4

So Justin, I'll talk about the out of spec rate question. We're very pleased where things have been trending in the last 6 months also. Our out of spec rate has been decreasing and also stabilizing. And It's been consistently in the teens range and right now it does stand below the 18% on label out of spec rate. Thanks to the very hard very much hard work from the Legend team and J and J team in the New Jersey facility.

Speaker 4

We have really We tried very hard to refine our manufacturing product by looking at various reasons for OS and also improving OS on various work streams. So That's where we are. I don't think we're very much different from the competition's out of spec rate at this point. So I think we're seeing a very encouraging trend. And like I mentioned, we do expect this to continue to go down, especially after FDA approves the second line indication.

Speaker 4

On the pipeline, the BD question, I'm going to refer that to our colleague, Gohoi.

Speaker 9

Yes. Thanks for the question. In terms of Development is to accelerate the development timeline and maximize the value for each individual asset so that we can In this particular case for LP2102, We see a unique synergy between ourselves and Novartis. We have a unique product design, A unique CAR construct sequence and unique ARMOR mechanism to facilitate the immune cell infiltration and overcome the Immunosuppression in the tumor market environment, whereas Novartis has its unique manufacturing process, which is particularly important for A disease of small cell lung cancer, as you know that disease progress very fast and faster manufacture process would add value to the product profile. So in this case, we see the synergy.

Speaker 9

And then in the future, we will continue to evaluate asset by asset and try to find the synergy and realize the additional value where it's possible at the same time if we As I said, we can develop by ourselves. We will also do it either way. Thank you.

Speaker 18

Thanks for taking my questions.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Mitchell Kapoor from H. C. Wainwright.

Operator

Your line is open.

Speaker 15

Hi, everyone. Thanks for taking the questions.

Speaker 14

I just wanted to ask

Speaker 15

a little bit more about the supply constraints and if you could give Kind of a quantitative sense of where we are in terms of meeting demand. I think at one point, there was a lot of Exceeding demand in terms of I think there was about 15% being able to be met. Could you just talk about where we're at today? And if you can't give a quantitative number, could you just kind of Help us understand the trend.

Speaker 4

Good morning, Mitch. Thanks for the question. And I'm going to answer this one. So If you look at the reported revenue last quarter, which was $152,000,000 $140,000,000 coming from the U. S, You sort of can guesstimate the number of patients we served in the commercial setting last quarter.

Speaker 4

I cannot give you The percentage of demand, we are satisfying. But I can tell you, starting from the beginning of the year, we always track our backlog In terms of patients waiting in the queue every month. And I can tell you from January until now, really essentially we're seeing exactly pretty much the same Number of patients in the backlog in the queue. So we're not seeing any difference in terms of demand for this product at this point. And we're working very hard to ensure a robust and reliable supply.

Speaker 4

So we are going to continue to expand our supply. As you just heard from our colleagues on the We did receive the 2nd FDA approval in the increase of our capacity recently. So we're continuing to ramp up given that approval. And then we're planning additional increase in capacity from our New Jersey facility next year as well. If you look at the number of patients we think are within the so called addressable market in the U.

Speaker 4

S, About 13,000 patients die every year unfortunately from multiple myeloma. And probably around 8000 to 9000 patients are eligible for receiving CAR T therapy. So at this point, given our supply, we think still we're nowhere near Being able to supply all the demand for COPIKTIA at this point.

Speaker 15

Okay. Thank you very much. And could you just kind of Help us understand what the launch preparation is looking like for moving into earlier lines. Is it mainly just messaging Changes with the sales force or what else can you tell us about how you're preparing for potential purchase if approved?

Speaker 6

Yes. Hey, Mitch, I'll take that one. It's Steve. So no, it's a bit different, right? So you're moving from a later line population that was largely these patients were largely in many of our major academic centers.

Speaker 6

In the earlier lines from the second line population, this will be a very different type of launch where you're largely reliant on the So what the U. S. Team has been working very closely with our partner is working through the models in terms of how to appropriately reach at outpatient clinic to ensure that an appropriate referral is made to one of our cilta cel centers. So it's a bit different. You'll see some increase in FTE expansion on behalf largely of our partner at Janssen because they play largely in that outpatient From the U.

Speaker 6

S. Legend perspective, you'll see some increase as we increase sites, but our commercial footprint for Legend Has been largely built around the inpatient setting as opposed to outpatient. I hope that answers your question.

Speaker 15

It does. Thank you all very much for taking the questions.

Speaker 4

Thank you. Thank you.

Operator

Thank you. And our next question coming from the line of Wolfred Bien of Daiwa. Your line is open.

Speaker 19

Hello. Well, congrats on the results and thank you for taking my questions. Well, I just have a follow-up on the gross margin currently at 43%, 44% over the past 2 quarters. So, and you mentioned about the expanding capacity. So what are the other drivers on margin or the gross margin given we have multiple facilities both internal and external coming online as well as an improving our spread rate.

Speaker 19

So what are the key moving parts actually and how should we be thinking of the margin profile maybe even in a longer term as Thank you.

Speaker 3

So just on the gross margin again, as We've talked about there's 2 components in the gross margin. So from your perspective when you look at quarter over quarter, it's a little bit hard for you to model it out. As I mentioned before, we continue to see improvement in the gross margin from a product perspective. Your gross margins are going to improve as your volumes go up. We also have our out of spec that's gone down based upon also process improvements we've made at the plant.

Speaker 3

So we are seeing The steady progression of the improvement under the gross margins from a product perspective, but you're continually getting noise in that number we report Certainly, because we have to report the facilities expansion, the expense side of it that cannot be capitalized. And as you know, we have expansion going on in Raritan. We have expansion going on in Belgium, and we also have expansion going on with our CMOs. So you're going to continue to see a lot of facilities expense related to those capital investments through the end of 2025. So it's going to create noise.

Speaker 3

Some quarters are going to be higher than others just depending upon where we are with some of those capital projects. But if there's something specific, if you want to talk And submit more question and we can always set up a call with you and try to go over a little bit more detail, but I can't give any granular numbers. I can't disclose any granular numbers from a product perspective.

Speaker 19

Understood. That's helpful. Thank you.

Operator

Thank you. One moment for our next question. And our next question coming from the line of Kelsey Goodwin with Guggenheim. Your line is open.

Speaker 8

Hey, good morning. Thanks for taking my question and congrats on the quarter. I guess, 2 quick ones from me. I guess, first, Do you have any updated view on how we should think about profitability for the joint venture, maybe kind of building on some of these past questions on gross margin? And then kind of following up on that, I guess, how should we think about the longer term COGS for CARVICTI kind of once these capital expenses are no longer included in those line items?

Speaker 8

And yes, maybe kind of what out of spec and manufacturing failure rate do you base in the assumption for longer term COGS?

Speaker 3

Thank you. Hi, Kelsey. So profitability, the messaging is still consistent with what we signaled before. For the BCMA program, we're looking to have breakeven and profitability by the end of 2025. And from a company perspective, we're striving for profitability by 2026.

Speaker 3

And I always put a disclaimer in there. It will depend What happens with our pipeline development, what we look to do from a business development perspective. But based upon the trajectory of what we know now, that is From a longer term COGS, as I mentioned earlier, you're going to continue to see noise in that COGS line all the way through the end of 2025 going into 2026. We're not giving any guidance on our actual COGS. I would say for your modeling purposes, you could probably use what's been the standard in the industry.

Speaker 3

It would be a good proxy for you for your modeling.

Speaker 8

Okay, great. Thanks. And maybe just one quick follow-up then on the profitability. I guess to what Then is that breakeven profitability by 2025, how much is that reliant on hitting that 10,000 commercial doses by the end of the year?

Speaker 4

Hey, Kelsey, I hope you understand that we cannot really disclose our internal modeling. But what I can say is that if you look at the cost for CAR T as a general modality, The cost of goods is probably somewhat higher than the typical cost of goods of monoclonal antibodies. However, the SG and A in terms of selling and distribution cost, it will be much lower. You can tell that from our financials, right? While we almost quadrupling our sales for CARVICTI this year versus last year, If you look at quarter, quarterly spend in sales and marketing, it's actually slightly lower than what we spent last year.

Speaker 4

So that gives a hint How we think about the profitability of Carvitin, Yalora. Thank you.

Operator

Got it. Okay. Thank you so much. Thank you. One moment for our next question.

Operator

And our next question is coming from the line of Sami Corwin with William Blair. Your line is open.

Speaker 3

Good morning. Thanks for taking my question. Given you plan on over enrolling will that delay when we should expect data from that trial? And then do you plan on providing Any revenue guidance for CaribSea at the beginning of 2024?

Speaker 4

Thanks for the question, Sami. So on the first question, no, we don't expect any delay because like I mentioned, We are pretty much on track to close all the ex U. S. Enrollment for CAR T5, which is the majority of patients by end of this year. That's exactly according to our plan.

Speaker 4

And then we're only over enrolling in the U. S. Next quarter just to make sure that we have a representative percentage of So at this point, we do not expect any delay in terms of readout of CARTTITUDE 5. And then on product guidance, we're not really giving product guidance for year of 2024 because Our partner J and J has this policy of not providing product specific guidance. So unfortunately, we will not Be in a position to provide you with guidance for CARB-two sales.

Speaker 10

Got you. Thank you.

Speaker 4

Thank you.

Operator

Thank you. And at this time, we have no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation and you may now disconnect.

Powered by Quartr
Earnings Conference Call
Legend Biotech Q3 2023
00:00 / 00:00