Legend Biotech Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 12, 2024

Key Takeaways

  • In Q3, CARVICTI net trade sales rose 53% quarter-over-quarter and 87% year-over-year, with outpatient administration comprising 48% of volume and OUS sales up over 100% YoY.
  • CARTITUDE-4 interim results showed a 45% reduction in risk of death versus standard care at three-year follow-up in second-line multiple myeloma, marking the first CAR T therapy to demonstrate a significant overall survival benefit.
  • Legend secured NMPA approval in China for fourth-line+ use of CARVICTI and obtained EMA clearance to commercially produce at its Obelisk facility in Ghent, with US FDA approval for the Novartis facility anticipated next year.
  • The company reported a Q3 net loss of $125 million ($0.34/share) versus $62 million ($0.17/share) last year, driven by increased operating expenses and a $63 million unrealized foreign exchange loss.
  • CARTITUDE-5 is fully enrolled and CARTITUDE-6 continues to recruit, and Legend plans to open a new Philadelphia research site by summer 2025 to advance its cell therapy pipeline.
AI Generated. May Contain Errors.
Earnings Conference Call
Legend Biotech Q3 2024
00:00 / 00:00

There are 16 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Legend Biotech Reports 3rd Quarter 2024 Financial Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would like now to turn the conference over to Jessie Young, Vice President of Investor Relations and Finance. Please go ahead.

Speaker 1

Good morning. This is Jessie Yang, VP of Investor Relations and Finance. Thank you for joining our call today to review our Q3 performance. Joining me on today's call are Ying 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 Q and A.

Speaker 1

We have our Chief Medical Officer, Mike Philippe Cagnaro and our SVP of Commercial Development, Steve Gaffel joining the Q and A session. During today's call, we will be making forward looking statements, which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied here within. 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. Turning to our highlights. In the Q3, we are pleased that CABIC T cells continued their strong momentum, delivering quarter over quarter growth of 53% and year over year growth of 87%.

Speaker 1

We are also very excited about the results from the 2nd interim analysis from the CADELEVIPOLD trial, particularly the overall survival benefit that CABITI achieved. These results were announced as a late breaking oral presentation at the International Myeloma Society meeting in Brazil in September, and they received an enthusiastic response from healthcare providers around the world. Now, I am pleased to turn the call over to our CEO for his remarks.

Speaker 2

Hello, everyone. I'm glad that you're able to join us and hear about our recent accomplishments. As you can see on Slide 5, it's been another eventful quarter for us as we continue to make significant progress against our strategic priorities. I'd like to start by expanding on the importance of CARVICTI achieving overall survival benefit in the second line plus patient population. Let's turn to Slide 6.

Speaker 2

To frame this achievement precisely, CARVICTI is the 1st and only cell therapy to significantly extend overall survival compared to standard of care in patients with multiple myeloma as early as the second line. Specifically, CARVICTURE reduced the risk of death by 45% versus standard therapies after a 3 year follow-up period. Reaching this milestone is monumental for the company, for the marketplace, healthcare providers and patients. It puts CARVICTION in the enviable position of providing patients with longer lives, what some call the Holy Grail of oncology clinical trials. Hand in hand with overall survival, CARVICTI has also maintained significant improvement in progression free survival as compared to standard of care.

Speaker 2

Also at the International Myeloma Society meeting, a real world analysis of CARVICTI efficacy and safety was also presented. The results demonstrated the importance of risk mitigation and the critical learnings from our development program and real life experience with CARVICTI. It is noteworthy that with over 4,000 patients treated, we see a very low incidence of Parkinsonism and FDA public safety data also suggests that this condition is likely a class effect. As you know, the prior positive interim data from CARTITU-four resulted in FDA and the European Commission approving CARVICTIS use in second line study for relapsed and refractory multiple myeloma patients. We along with our collaboration partner, Johnson and Johnson are planning to submit the CARTITUDE for overall survival results to regulatory authorities in the U.

Speaker 2

S. And Europe in order to update our label with these new paradigm shifting results. In Q3, we also received approval for CARVICTI from China's National Medical Product Administration for treatment in the 4th line plus setting. We are pleased that CARVICTI continues to gain recognition from healthcare regulators around the world for the significant clinical benefits our one time infusion provides. Importantly, for the OUS rest of the world market, we have expanded our ability to produce CARVICTI for patients in Europe.

Speaker 2

Moving to Slide 7. In September, we received approval to produce CARVICTI commercially at our facility called Obelisk in Ghent, Belgium. This is a critical component of our plans for serving patients in Europe and beyond. Congrats to the team in Ghent for securing the approval in what we believe to be record time. It's another demonstration of Legend's commitment to expediting delivery of CARVICTI to all patients who can benefit from it worldwide.

Speaker 2

Moving to Slide 8. In Q3, net trade sales of CARVICTI were approximately US286 $1,000,000 which as Jesse highlighted is an 87.6% increase year over year and a 53.2% increase quarter over quarter. The robust quarter over quarter performance was aligned with our expectations of accelerating growth in the second half of the year and was driven by continued demand, particularly strength in the second line demand, share gains, continued capacity expansion and manufacturing efficiencies. We are firing on all cylinders and we expect sequential growth into the Q4. We look forward to treating many more patients in need in the months years to come.

Speaker 2

Our OUS sales increased over 100% year over year and 35% quarter over quarter. Thanks to our increase in capacity and ongoing launch expansion. In the Q3, CARVICTI became commercially available in Switzerland and I am pleased to share that Swissmedic just updated label expansion to the 3rd line plus treatment. Switzerland is the 5th country where CARVICT is now commercially available to patients along with United States, Germany, Austria and Brazil. In the United States, we continue to certify more hospitals as authorized treatment centers.

Speaker 2

The total number of U. S. Hospitals that are approved to treat CARVICTI patients is now 82. Recall that CARVICTI has a unique delayed CRS onset profile that allows for extensive outpatient administration. As you can see on Slide 10, outpatient treatment now compromised up to 48% of our volume and is a significant growth opportunity for us to reach even more patients.

Speaker 2

Usage in the outpatient setting is very important as we expand further into the community setting. This is a key consideration for hospitals as they seek to optimize allocation of limited beds and resources. Patients and their caregivers often prefer to check out of hospital after treatment. The option for outpatient treatment is a real differentiator for CARVICTI as the number of patients increases. CARVICTI has now achieved nearly 90% market share in the BCMA CAR T class of sales in the U.

Speaker 2

S. And Germany, and it continues to be the fastest launch CAR T product on the market. With the explosive growth of CARVICTI and our evolution as a company, we're excited to announce that recently we appointed a President of CARVICTI Business Unit, Alan Bash. Alan will be responsible for managing the continued growth of CARVICTI overseeing Legend's commercial, technical operations and quality functions of the franchise. Prior to joining us, Alan served as the CEO of 2 oncology focused biotech companies, most recently at ZioBio and prior to that at Checkmate Pharmaceuticals.

Speaker 2

Before that, Alan had a 23 year career with Bristol Myers Squibb, where he held various leadership positions across all major therapeutic areas, including oncology where he drove the expansion of products such as Opdivo, Yervoy and Erbitux. Alan also contributed to several blockbuster products in collaboration with other companies such as Abitify with Otsuka and Eliquis with Pfizer. We welcome Alan to the Legend family and look forward to introducing him to many of you soon. Turning to mid term growth for CARTIGI and LELDEND. We are pleased with the pace of enrollment for our first line trials, CARTIGI-five and CARTIGI-six.

Speaker 2

As you may know, CARTIGI-five is fully enrolled and we expect to complete enrollment for CARTITUDE-six next year. The speed of enrollment in these trials is a testament to the benefit risk profile of CARVICTIM demonstrated by our growing body of positive clinical trial results. Looking at longer term growth for Legend, we recently announced a new research facility being built in Philadelphia, which is a growing hub for biotechnology companies. The new site is centrally located among some of the top research institutions in cell therapy and provides potential opportunities for collaborations, which would expedite our innovative cell therapy research. We expect to be up and running in the summer of 2025 and we look forward to updating you on the progress of this exciting project.

Speaker 2

To summarize the Q3, it's been another quarter where we executed with excellence, which sets us up for a strong finish to the year. Now it's time to take a closer look at the financials. So let me turn the microphone over to Laurie.

Speaker 3

Thank you, Ying, and good morning, everyone. As Ying mentioned, we generated approximately $286,000,000 in total net sales for CARVICTI during the Q3, an increase of 87.6 percent year over year. As a reminder, we share equally in all profits and losses of CARVICTI ex China with our partner, Janssen. As you can see on Slide 12, total revenues for the Q3 were $160,000,000 consisting of $143,000,000 of collaboration revenue from the sale of CARVICTI and license revenue of $17,000,000 from the recognition of deferred revenue in connection with our agreement with Novartis to develop, manufacture and commercialize LV-two thousand one hundred and two and other potential CAR T therapies selectively targeting DL3. Net loss for the quarter ended September 30, 2024 was $125,000,000 or a loss of $0.34 per share compared to a net loss of $62,000,000 or loss of $0.17 per share for the same period.

Speaker 3

For the quarter, unrealized foreign exchange losses of 63,000,000 dollars was incurred primarily due to intercompany transactions and balances between the U. S. And non U. S. Legal entities.

Speaker 3

For the same period last year, dollars 16,000,000 in unrealized foreign exchange gain was reported. Moving on to expenses on Slide 13. Collaboration cost of revenue for the Q3 2024 was $52,000,000 compared to $43,000,000 for the same period last year. These are Legends portions of Collaboration cost of sales in connection with collaboration revenue under the Janssen agreement, along with expenditures to support the manufacturing capacity expansion. Additionally, cost of license and other revenue for the Q3 of 2024 was 3,000,000 dollars compared to no cost of license and other revenue for the Q3 of 2023.

Speaker 3

These costs are in connection with our agreement with Novartis to develop, manufacture and commercialize LB2102 and other potential CAR T therapies selectively targeting DL3. Research and development expenses for the Q3 of 2024 were $96,000,000 similar to the same period last year. These expenses are primarily due to research and development activities in SituCell, including start up costs for clinical production in Belgium, as well as continued investment in our solid tumor programs. Administrative expenses for 3 months ended September 30, 2024 were 35,000,000 dollars compared to $28,000,000 for the same period last year. The increase of $7,000,000 year over year is primarily due to the expansion of administrative functions and infrastructure to increase manufacturing capacity.

Speaker 3

Selling and distribution expense for 3 months ended September 30, 2024 was $44,000,000 compared to $21,000,000 for the same period last year. The increase of $23,000,000 year over year was due to costs associated with the commercial activities for CORDICTI, including the expansion of the sales force and support of second line indication launch. Other expenses were $62,000,000 for the 3 months ended September 30, 2024, compared to $100,000 for the same period last year. This increase was almost entirely driven by unrealized foreign exchange losses for the 3 months ended September 30, 2024. In the same period last year, there were no unrealized foreign exchange losses.

Speaker 3

The unrealized foreign exchange losses were primarily driven by intercompany transactions and balances between the U. S. And non U. S. Legal entities related to research and development activities.

Speaker 3

To summarize, our spending remains on track and we continue to maintain a strong balance sheet. As of September 30, we had $1,200,000,000 in cash and equivalents and time deposits. Thus, we believe we have sufficient capital to fund our operating and capital expenditures into 2026 when we expect to begin to achieve an operating profit. Thank you. I will now pass it back to Ying for closing remarks.

Speaker 2

Thank you, Laurie. Moving to Slide 14, we are excited that we had so much good news to share from this past quarter and we could not have done it without dedication of our 2,400 team members globally. Their commitment inspires me every single day, but we continue to have lots of work ahead of us, and we strive to execute our strategic priorities. Before we take your questions, I'd like to share context on the recent development. After our Annual General Shareholder Meeting in October, Genscript announced that they will deconsolidate Legend from their financial statements as they're no longer a majority shareholder of the company.

Speaker 2

This has no material impact on our operations as Legend has operated as a separate company since our spin off in IPO in 2020. Now it's time to take your questions. Operator, we're ready for the first question, please. Thank

Operator

you. And our first question will come from Gena Wang with Barclays. Your line is now open.

Speaker 4

Thank you for taking my questions. Maybe I will ask 2 questions. The first question is regarding I think the upcoming data update, investors have been very focused on CAR T2-one comparison to an ADAL Cell Imaging 1 heading to ASH update. And now we see the ASH abstract and we are going to see the full data at ASH in 3 weeks. So what are the key data points that investors should focus on regarding efficacy and safety?

Speaker 4

And a quickly follow-up question regarding the OS benefit, you showed the data for CARTA Q4. When should we see the OS benefit to be included in the NCCN guideline and in the label? Where are you in terms of the steps?

Speaker 2

Hey, good morning, Gina. Thank you for the questions. I'll take the first one. So we already saw the baseline from the IMAGINE-one trial. And you can tell that from every metric we look at, including the number of prior lines of therapy, the percentage of only 3 prior lines of therapy, the triple refractory patient population, the penta refractory population.

Speaker 2

I think we can conclude that clearly the patient population in IMAGEN-one is less sick than the patients we enrolled in CAR T2-one, that's first. Now we don't know for example some other metrics including the percentage of EMD patients, but that might be another metric that could tell us more, right. But even compared to their own Phase 1 trial, this is easier to treat patient population, suffice to say. Now secondly, if you look at efficacy, we did present CAR TID-one with about 12 month follow-up at ASH 2020. And again, if you look at the ORR rate, which is 97% and then the CR rate, it's 67%.

Speaker 2

But I want to mention that all every CR we observed is a stringent CR. Again, we would like to see whether the other party breaks down the percentage of CR versus stringent CR. However, as you may know, in myeloma treatment, it's always about durability. For that, unfortunately, we would not get much data from the other party. And we stand behind the consistent results we have seen from CAR T2, CAR T2, CAR T4 and all trials in across all the settings.

Speaker 2

So I think it's all about durability. It's about PFS. And we have 3 years, nearly 3 years PFS in the last time patient population as demonstrated in CAR T2-one. So regarding your second question, I'm going to ask Steve to comment on maybe NCCN.

Speaker 5

Yes.

Speaker 4

Ying, also regarding safety, can you comment?

Speaker 2

Sure. I mean, we do understand that if you use a proactive management strategy in terms of selecting patients and also managing patients with both IL-six and steroids, it can be very effective. In fact, if you look at the history of CD19 CAR Ts, right, if you recall almost 10 years ago, there was a perception that maybe the Juno CD19 was not as safe as the KITE CAR T yet in real life, I don't think it's been that case, right. If you look at the real world CRS and also neurotox. So clearly a lot of that has to do with the patient selection and also management.

Speaker 2

And we are already starting to institute those and we're talking to KOS about this. You'll see more data at ASH as well.

Speaker 5

Yes. Hi, it's Deviant. What I was saying is that it's hard to predict the guidelines in terms of when they will be updating them in terms of new data, but we would be expecting an update sometime by the end of Q4.

Speaker 2

And Gina, just to supplement, we and our partner Johnson and Johnson are planning to submit the overall survival data in a supplement to both FDA and EMA in the near future. So we do expect that will be reflected in the label in both U. S. And Europe by end of next year.

Operator

And our next question comes from Yaron Werber with TD Cowen. Your line is open.

Speaker 6

Hi. This is Jaina on for Yaron. Congrats on your quarter and thanks for taking our question. I have 2. Obviously, for the first one, you had a strong Q3, but I'm curious how we should think about quarter over quarter growth going into Q4?

Speaker 6

Should we expect the same kind of cadence? Or is most of kind of the growth driven from the additional manufacturing already realized in Q3? And then secondly, I think you've noted in the past that a key limiting factor for BCMA CAR T supply is the FDA cap on CAR T production. Is this just for BCMA CAR Ts? Because we're hearing that Gilead was never limited in their volumes for Yescarta and Tecartis.

Speaker 6

So what do you think that might be? Thank you so much.

Speaker 2

Sure. So let me address the first question about sequential growth in the Q4. I think you have heard from both the Legend and Johnson and Johnson teams reiterating that. We confirm we will expect sequential growth in the Q4. Now it is our policy not to comment or provide guidance, so I'm not able to give you any quantitative guidance.

Speaker 2

But yes, we are reaffirming sequential growth. Even though we have a fantastic growth rate in the Q3 already, but we still expect to see higher revenue number in the Q4. So regarding your second question, I guess, what we can tell is that from the BCMA class in both experience for abecumab from Bristol and also for CARVICTI from J and J and Legend, yes, in both cases, FDA did regulate the capacity. Now, I would refer you to ask Kite about their capacity for CD19. But our understanding is that FDA as a regulator does regulate all CAR T manufacturer facility capacity.

Speaker 2

It's not just even for franchise, but also for each individual facility that produces CAR T. You can also download the FDA review documents on the FDA website of the process and also how FDA determines the capacity.

Operator

And then, I also

Speaker 2

want to add that if you look at the performance of all commercial CAR T brands in the market, 10 quarters in since FDA approval of CARVICT in February of 2022, we have been able to supply the market with the highest number in terms of revenue and also slots.

Operator

And our next question comes from Kelly Hsieh with Jefferies. Your line is open.

Speaker 7

Congrats on the progress and thank you for taking my questions. So for the second line launch, can you elaborate more on the ramp up of candidates and how should we think about it comparing to baseline launch given that now we're 2 quarters after the approval in early line? And also do you expect a majority use of the CARVICT shifting to early line from late line in near future? Thank you.

Speaker 5

Yes. Why don't I take that question? It's Steve. Thanks for asking. Why don't I start with the second question first, and the question I think had to do with a percentage of patients in our CARTA-two-one versus CARTA-two-four indications.

Speaker 5

We expect to be exiting next year, for example, with the overwhelming majority of our patients treated to be in the CARTA-two-four population, something in terms of a ratio of 2 thirds to 1 third. In terms of where we are right now for this particular year, we are well ahead of where we thought we would be in terms of early line adoption. I think that's built up a number of different things, most notably the most recent overall survival data that coming out with now. So we expect that trend to continue and accelerate to where we would expect to be next year. But in terms of where we're pacing right now for the year, we're outpacing where we thought we would be in terms of our CLARITY-four launch.

Speaker 5

I don't think there was any other follow-up questions to that. Let me look here. I think that's it.

Speaker 8

Thank you.

Speaker 5

You're welcome.

Operator

And our next question comes from Jessica Fye with JPMorgan. Your line is open.

Speaker 8

Hey guys, good morning. Thanks for taking my question. My question is on just how we should think about the evolution of the mix of inpatient versus outpatient use. Specifically, is the shift that we're seeing driven by the conversion of existing treatment sites to more outpatient use? Or is that more a function of the new sites coming online as outpatient sites?

Speaker 8

And can you also just remind me where you think that proportion of inpatient versus outpatient could be looking out, say 12 months from now? Thank you.

Speaker 5

Yes, I'm happy to take that question. It's an important one. We've been monitoring this since our launch of CARTA Q1. So just to kind of back up to your point, the reason why and the reason why I think Ying was highlighting this in his opening on why it's so important is as we were launching our initial indication, we had basically our eye on the second indication, knowing that with the volume increase going into 2nd line plus, it would be substantial and it would be something that would be unprecedented in terms of the marketplace and in terms of volume of CAR T eligible patients hitting our hospitals. So it's the reason why you've seen rapid adoption almost up to 50% and in some cases at 50% in certain sites.

Speaker 5

So what's driving to your question about what's driving the adoption is primarily due to the fact of sites recognizing the volume impact that they will need to absorb and as a strategy to account for that, many sites have now moved to as much as possible outpatient use where appropriate. Where you see inpatient use in sites that have adopted the outpatient model are in the higher risk population, which makes sense. You see those patients often be admitted upon administration. So I think one of your question was so that hopefully speaks to what's driving the outpatient adoption. You had a question about who's adopting.

Speaker 5

Well, we're seeing pretty much wide adoption across the board. The primary adopters are those large major academic sites in the United States really kind of our top 18 sites that are driving the majority of our volume anyway. As sites come on board, new sites come on board, we see typically and this is true with even our early adopting sites. It takes some time for these sites to get going in terms of the outpatient setting. And the reason for that is the providers really just need to get enough patients on product to see how these patients are reacting and compare that to our label to get some real world experience.

Speaker 5

So you see kind of a slower adoption and we've seen that pretty much consistently with any new site that we have onboarded as far as our commercial footprint in the U. S.

Speaker 4

Thank you. Sure.

Operator

And our next question comes from Umer Raffat with Evercore. Your line is open.

Speaker 2

Hi, guys. This is

Speaker 9

John Maughan for Umar. Congrats on the quarter and thanks for taking my question. I'd love to start with one on the drivers of neurotox evolution across your trials. Obviously, Ying, you mentioned management patient selection being very important there. But where do you think the tolerability profile could go in the future for CARVICTI?

Speaker 9

Is it possible to control this even further going forward and to eventually get a better safety profile in the label? And then secondly, maybe since nobody's asked about it, I'd love to get the latest update on your autoimmune progress. I know you're in Phase 1 there, but what are you seeing from patient enrollment perspective? And when could we see potential data? Thanks so much.

Speaker 2

So, Joan, I am going to ask our Chief Medical Officer, my theory to ask to answer the first question.

Speaker 10

Yes. Thank you for your question. So regarding the neurotoxicity profile, you can see that compared to the CORTITUDE-one and the CORTITUDE-four data, we've seen a significant decrease in the delayed neurotoxicity, including the Parkinsonism. And I think that's a testament to the improvement in the management of these patients. So improved in terms of decreased tumor burden, appropriate like identification of these patients, etcetera.

Speaker 10

So clearly, there's it's currently with the CAR T2-four less than 1%, which I think is important to mention. In addition, moving forward, we've identified additional factors that we think can further drive this down. And we've talked to many KOLs that are already using this in the sort of the commercial setting. And as Ying mentioned before, competitors are using actively in their studies, which is the steroid use. And what we found is that absolute lymphocyte count or ALC is a good early indicator of potential rapid expansion and application of steroids in that setting does potentially mitigate this delayed neurotoxicity.

Speaker 10

And this is something that the KOLs have described to us and that they're actively doing in the commercial setting. So really good bridging therapy and sort of monitoring active monitoring of the ALC. We feel that both of these are important mitigations to potential neurotoxicity.

Speaker 2

And also, John, I would like to also mention that for our potential competitor, it's not fair for them to compare our data from 4 years ago when they compare efficacy. But then when they talk about safety again, why don't they compare to our current data, right, where we do see a dramatic lower incidence of paroxysmal in the CAR T2-four trial and also in real world, the physicians have been gaining experience in terms of how to manage that. And it is lower again than what we observed in CAR T2-1. Now on to your second question about our autoimmune program. Yes, we have officially kicked off our first human study for the tri specific CD19, CD20, CD22 targeting CAR T for autoimmune indications.

Speaker 2

And we have already opened our first site. Enrollment is ongoing now. But besides that, we also are working on a couple of other programs that are allogeneic, again, targeting autoimmune indication. So that should go into first in human study sometime in 2025. With regard to data, again, we're not guiding, but we do expect some sort of clinical data to emerge in the year of 2025 for the first program.

Speaker 2

Thank you.

Operator

And our next question comes from Costas Balores with BMO Capital. Your line is open.

Speaker 11

Good morning, everyone. Thanks for taking our question and congrats on the progress. One question from us on the competitive dynamics, although you already alluded to that. But given that the competitor captive products will be entering the market potentially in the late lines in about a year or so, how should we be thinking about the competitive dynamics there? Are you focusing on protecting your market share in late lines or just focusing on getting as much market share as possible in early lines?

Speaker 11

Thank you.

Speaker 2

Sure, Kasuf. Let me start by mentioning a fact, which is in the case of registration program for late line multiple myeloma, the first assessment of efficacy is at day 28 or a month after the last patient was enrolled. And then after that, FDA requires a 12 month minimum follow-up. So if you do the math, that is 13 months after last patient in. And of course, following that, the sponsor needs to clean up the data, lock up the database, get all the filing into the FDA acceptable format and then FDA will review.

Speaker 2

So we're not expecting anything to come in to the market next year or maybe even the year after that honestly depends on how fast the regulatory review would go, right. And that's just a fact. If you look at the regulatory history for CARVICTI, for Beqma, I don't understand why the agency, FDA would take any special treatment to any others. And then I'll ask Steve to comment on the question.

Speaker 5

Yes. Thanks, In terms of promotional focus, the fact that we are now clearly differentiating ourselves in terms of the only CAR T therapy in earlier lines today, which is second line plus. We will continue to promote in those earlier lines and that will remain our focus for the foreseeable future. One thing to keep in mind, and I think it's important comment here as it relates to any downstream competitors in the United States when a CAR T therapy is used, right now, at least in the private sector, and this is consistent with Medicare, the payers are not paying to go from a CAR T drug to another CAR T therapy. It's denied.

Speaker 5

So it's the primary reason, one of the reasons why we'll be driving our promotional efforts in the earlier lines, not to mention that's where the majority of the benefit is for our patients. But that will be consistent in terms of our promotional focus again for the foreseeable future.

Speaker 2

And Kostas, maybe I would also add another 2 comments here. First of all, I think outpatient administration is very, very important today. That is why compared to all the other brands, we have the highest revenue mix coming from the outpatient use, close to 50% of our revenue is coming from outpatient use. And that is a distinct important commercial advantage. Secondly, as you probably know, every hospital, every insurance plan has a preferred provider, has a formulary.

Speaker 2

And as a 3rd or 4th entry into the market, that increased the degree of difficulty in terms of launching into the commercial space as well.

Speaker 5

Yes. Maybe before we jump off that question, I think it's important because we never get the question of why, right? I mean, we get it once in a while, we get it early in terms of why this is one of the only CAR T therapies that have been used so frequently in the outpatient setting. And will be continuing to be the case in the foreseeable future, including this competitor that I think people are referring to. The reason behind the why is around the onset of CRS that you're seeing with CARVICTI.

Speaker 5

It's the only CAR T therapy today where you see a prolonged timeframe pass before the actual onset hits, which does allow or enable our sites to dose monitor remotely and then have these patients being brought in at a later date. It's my understanding with the competitor that we're referring to is their onset is relatively acute. So that's going to be very, very difficult to, in essence, utilize outpatient type guidelines, for a competitive product that has that type of acute onset. It makes it very difficult for physicians to discharge if patients are experiencing short term toxicity. So I did want to highlight that for you because I keep hearing about outpatient use and other particular CAR T products.

Speaker 5

It's one of the distinct clinical differences with this program, which enables us to, in essence, take our patients outside the hospital.

Operator

And our next question comes from James Hsin with DB. Your line is open.

Speaker 12

Hey guys, thanks for taking

Speaker 9

my question. Maybe this is another question for Alan and Yang on the outpatient setting. I think we kind of have a real world preview of what short onset CRS is with Ide cel, right? Like that doesn't do very well in outpatient. So how would Inida cel do well in outpatient?

Speaker 9

That's my question. Thanks.

Speaker 5

When you take me from a medical perspective, the uptake will the onset of action or the onset?

Speaker 10

So I think that CARVICT being given outpatient is something that we actually recently did an advisory board on. And there are several institutions that are actually doing this quite successfully and able to completely monitor remotely. And they're actually working on a publication to kind of continue to kind of promote this outpatient model, which is very easy to do because of what Steve mentioned earlier about the delayed CRS onset. Other competitors have it tend to be very early 2 days. And so what that does is it creates a setting where right after administration you have to kind of monitor these patients closely.

Speaker 10

It's not to say that you can't give it to outpatient, but it tends to be a higher hurdle to do so. And that I think is a significant advantage given that these hospitals are extremely burdened by doing all of these things in patient, keeping the patient in the hospital for prolonged periods of time. So it's a significant advantage as Steve mentioned.

Speaker 5

Yes. Let me one thing to add to my comments which are all spot on. The best proxy to look at and to ask yourself a question is why has the market if outpatient administration is so relevant, why hasn't the market successfully moved outpatient treatment with Beqma? And the reason for that is they also have a very acute onset of CRS. It's that simple.

Speaker 5

Or you would have seen that migration outside of the hospital there. So again, it's a benefit that it's like I said earlier, it's a very unique toxicity attribute of this program that is not only the BCMA therapies, but also CD19. And it's the first time that you're seeing this type of outpatient adoption across the class of CAR T. And it was something that we were hoping to have happened quite frankly, and it was something that our investigators predicted back when we were launching back in CORTISTRU-one. So anyways, I'll stop with that.

Operator

And our next question comes from Leonid Timasiab with RBC Capital Markets. Your line is open.

Speaker 13

Hey, this is Joe on for Leo. Thanks for taking our question. What are your expectations for Europe now that you have commercial capacity up and running? And what are some differences in between European and U. S.

Speaker 13

Positions in selecting CAR T over other options? Thank you.

Speaker 14

Yes. So it's Steve.

Speaker 5

So I don't want to take a crack at that one. So Europe had a very different model. So we just had a long discussion here I think around outpatient administration. So that model is not available for most sites in Europe. So this whole outpatient conversation, I don't think you're going to hear a whole lot about with CAR T therapies in general.

Speaker 5

So in terms of the CAR T adoption within Pan Europe, whether it be PCMA or CD19, it's been relatively slow. And unfortunately, it's been mostly a product of coming to an agreement around pricing. It's unfortunate, but that is a situation in Europe. As I believe you know, our partner is driving CARVICTI in the European markets today. And I won't reiterate the countries that we are launched into today because Inge already did that in the opening.

Speaker 5

But right now, the key driver for this brand in Europe is Germany and will continue to ramp up into next year and beyond. So that will continue to be our major market in Europe.

Speaker 2

This is Zeen. I also want to add that you probably know that in Europe where pretty much every country has a single payer system, the survival data is utmost important because those government agencies, they do care a lot about the outcome, right? So it's not about response rates or even just stringency. It is about durability. It is about PFS.

Speaker 2

And most importantly, they do ask questions about survival. So we're very pleased to be armed with this survival benefit we have observed in CAR TUL4. In fact, we're already talking to different countries and agencies in Europe, including Germany about this latest survival benefits we observed. And I want to emphasize again, to date, CARVICTI is the only and also the first CAR T targeting BCMA or any BCMA targeting modalities in the treatment of myeloma. That has demonstrated both clinically meaningful and also statistically significant survival benefit with a hazard ratio of 0.55.

Speaker 2

That is probably the lowest hazard ratio you have seen in any major myeloma trial to date.

Speaker 10

I will also add that the clinical trial enrollment as Ying mentioned in his opening, the CAR TUNE V and VI had significant or is having significant enrollment in Europe. So clearly, the treating physicians are very interested in being able to provide this therapy for their patients.

Operator

And the next question will come from Vikram Parrott with Morgan Stanley. Your line is open.

Speaker 12

Hi, good morning. Thank you for taking our questions. We had 2 on CARBIC D pipeline efforts. First, for the CARTITU-two study, we just wanted to see what you think the timeline could be for an update from cohorts E and F and your guidance on the best way to interpret that data when it's available? And then second, apologies if you mentioned this and we missed it, but I wanted to see what the status was on your end J and J's plan to discuss the MRD negativity as a potential endpoint for Cartitude 6 and when we could receive an update here?

Speaker 12

Thanks.

Speaker 10

Sure. Thank you for your questions. Regarding Cartitude II Cohorts E and S, which are the frontline newly diagnosed multiple myeloma, we ultimately need longer follow-up. So we will continue to monitor those cohorts very closely. And when we're able to have more follow ups, we'll be able to report that externally.

Speaker 10

Regarding your second question regarding the Cartitude 5.6 in terms of MRD negative, this is obviously with the recent ODAF discussion, the FDA is more open to using MRD negative ECR as potentially as an endpoint, particularly in these frontline studies where these endpoints tend to be extremely long in terms of PFS and OS. Therefore, we hope to get in front of the FDA and have some interactions with them on using this as an endpoint. So more to come.

Operator

And the next question comes from Mitchell Kapoor with H. C. Wainwright. Your line is open.

Speaker 12

Hey, thanks for taking the questions. I wanted to build on a question from earlier. When KOLs are successfully using steroids to manage some of the safety events, such as CRS and neurotox. Could you just talk about, is there a way to follow that formally and potentially include that in the label at some point? And then separately, could you talk about if there's any significant work that remains on the payer side for getting them up to speed with the second line label?

Speaker 12

Thank you.

Speaker 10

Yes. So regarding the steroids question, we hope to incorporate something like that in the CARTTITUDE-six protocol so that we can look at using ALC as an early surrogate marker for expansion and treat with steroids accordingly. Therefore, if we're able to incorporate that, we hope that that can also potentially go into the label and we do have precedence for this. If we look at Yescarta's label, they do have recommendations on steroid use. So we think that this is a good management tool moving forward.

Speaker 5

Why don't I take the second piece of that? I think there's a question on payer coverage. Yes. So for the CARTITU-four indication, I'm happy to say that no, there are no barriers at all around payment with our commercial plans at all. As a matter of fact, given the overall survival benefit that we're now seeing in that extensive treatment free interval, private insurers love a drug like CARVICTI, because of all the downstream cost savings that it presents, not to mention we've talked I think we beat up outpatient enough.

Speaker 5

They love a CAR T drug that can then be moved to the outpatient setting and reduce all that inpatient costs associated with that, obviously, when done effectively and safely.

Speaker 12

Thank you.

Operator

And our next question comes from Justin Zelman with BTIG. Your line is open.

Speaker 12

Hey, good morning. This is Jeet on for Justin. Thanks for taking our questions. So you've talked about lymphocyte monitoring and steroid use to manage the delayed neurotox. But in your experience, are there still a fraction of clinicians that are hesitant to use CARVICTI due to the neurotoxicity and Parkinsonism in the second line setting and due to concerns gain more weight as they look to the frontline setting?

Speaker 12

And my second question was just with the China approval now in place, how should we think about that launch trajectory moving forward? Thank you.

Speaker 5

You want to take a crack at the clinical piece and I'll do the commercial stuff.

Speaker 10

Sure. I can get started. Regarding the ALC and the steroid use, this is something that some clinicians have actively adopted. And we are potentially working on more publications on this front to create more awareness on this. That being said, clearly, I think this is going to be an important factor as we move into earlier lines of therapy.

Speaker 10

And that's why I think it's so critical to make sure that we inform treating physicians that there are ways to mitigate it appropriately.

Speaker 5

Yes. And maybe I could provide some of the research that's been consistent for over the years. You're absolutely right. So in the earlier line setting, toxicity is becoming even more important for treating physicians. We've seen that with all the research we've done with our CORTitude 4 launch.

Speaker 5

It's one of the primary reasons why we've deployed additional promotional effort in the pure outpatient setting. So you heard earlier in the opening from Lori that there was some expenses taken in the quarter for increasing the sales organization. Well, that increase was due primarily to address some of this particular question in terms of educating physicians who are not as familiar with CAR T therapies. Most of those folks are found in the community setting and we are now actively deployed to educate those physicians with our partner on the features and benefits of a product like CARVICTI as well as the toxicity profile and benefits that a product like this provides them. Again, I think the one of the key differentiators now and fortunately for us, we now have this overall survival benefit, which is extremely important.

Speaker 5

And it'll make that conversation even easier in areas where that there might be concerns of neurotoxicity in the earlier ones.

Speaker 2

So, Jian, on your second question about China launch, so we're actually in discussion with our partner Johnson and Johnson about this. But given the supply chain trend and also the availability of Lentiviral vector, We are obviously prioritizing markets such as U. S. And Europe, where we already launched CARVICTI. So that is ongoing discussion with Johnson and Johnson.

Speaker 2

And then regarding China, I do hear some questions from investors or analysts about the topic. So I may just want to add another layer of comment here. That is with President-elect Trump coming into White House in January and also all the discussion about tariffs. Is there any impact on Legend at all? So I can confirm that we use no raw material or starting material from China in the production of CARVICTI in U.

Speaker 2

S. And Europe. If you look at our supply chain operation to supply CARVICTI in U. S. And Europe, 100% of all raw materials starting material are coming from U.

Speaker 2

S. Or Europe. So that is a very clear cut answer to the tariff question. We don't see any impact at all whatsoever. Thank you.

Operator

And our next question comes from Rick Binkowski with Cantor Fitzgerald. Your line is open.

Speaker 14

Hi, good morning. Congrats on the progress and thanks for taking the questions. I have 2. So about a week ago, there were reports that Peter Marks and the FDA were reconsidering the black box warnings on CAR T products based on having better information about the background rate of secondary malignancies. So can I get a little color on what this means from the perspective of CARVICTI and also if there's been any recent communications with the FDA about this issue?

Speaker 14

And the second question, just looking at the clinical pipeline, there are quite a few Phase 1 trials being conducted in parallel. Could you just remind us which of these trials are in later stages and which of these programs are likely to see clinical updates from in 2025?

Speaker 10

Yes. Thank you for your questions. Regarding the secondary primary malignancy, despite the comments by Doctor. Marks, it still remains something that's seen across many different CAR T therapies. We have not had any specific discussions with the FDA on this as of yet.

Speaker 10

Regarding your second question regarding our pipeline, we do have 2 U. S. Studies in Phase 1, one involving DLL3 in small cell lung cancer, which we are in collaboration with Novartis on and a second, CLADIN18.2 in gastric and pancreatic cancer. Both of these studies have been enrolling well this year and we look forward to some publications next year on the Phase 1a dose escalation, both in terms of some safety and efficacy as well.

Speaker 2

And Rick, I would like to add that if you see some recent literature, which actually suggests that if you look at the background rate, so for patients who have been treated with multiple myeloma that are all standard of care versus the SPM rate in patients treated with CAR T, there's really no difference in terms of the incidence rate of SPM or second primary malignancy. So really, we're not seeing additional or higher rate of SPM in the CAR T treated patients versus patients treated with other method therapies for myeloma. And then also on the pipeline, we do have 8 ongoing Phase 1 IIT programs in China. I would say maybe we can focus more on allogeneic modalities including our Gamma Delta T programs and also our autoimmune programs. So those are probably 2 focus for the research effort.

Speaker 14

All right, great. Thank you.

Operator

And the next question comes from Sean McCutcheon with Raymond James. Your line is open.

Speaker 15

Hey, guys. Good morning and thanks for taking my question. Just one quick follow-up and then another question. The follow-up is, are there a specific reason you need additional follow-up for CARTTITUDE 2 for E and F? Are you waiting for any specific metrics that would have a read through to the frontline pivotal, say, 12 month MRD negative CR, for example?

Speaker 15

And then the second question is any additional color on the out of spec rate and where you see that moving in the near term with more distance between the widening of the release specs in April and presumably more fit patients entering the top of the funnel with earlier line approval? Thanks.

Speaker 10

Thank you for your question. So regarding the CAR T2 cohort ENF, just to remind you, these are both frontline newly diagnosed multiple myeloma patients. And as such, these patients typically have very prolonged course, including extensive PFS. So even for MRD negative CR, we still need quite a bit of follow-up in these patients. And that's why we won't be able to give you an exact timeframe when we anticipate this at this moment, unfortunately.

Speaker 2

Yes. Sean, also just as a reminder, if you look at the data from the PERSUSE trial conducted by our partner for DRVD regimen, you're looking at a 4 year PFS rate of 85%. So that is why it's really not meaningful to read this data with, let's say, even 1 year follow-up. That's the reason behind it. And then regarding our out of spec rate, in general, we're seeing quarter over quarter improvement.

Speaker 2

And without giving any specific numbers, I can tell you our OS in general is in the range of low teens. And one interesting observation so far since the second line approval by the FDA is that if we look at the preliminary out of spec data from the old indication based on CAR T2-1 and then versus the patients who are under indication of CAR T2-four second to fourth line. We did notice that between the two groups of patients in our commercial mix here that the CAR T2-four patients coming in with lower out of spec rate. I know this is early, this is preliminary, but that is an interesting observation we are seeing already in the manufacturing operation.

Operator

And our next question comes from George Farmer with Scotiabank. Your line is open.

Speaker 8

Hi, good morning. This is Chloe on for George. Thank you for taking all questions. So we have 2.

Speaker 10

I think I was wondering if

Speaker 8

you could speak a little bit more to the drivers of this accelerated approval for commercial production of the Obelisk site in Belgium? And can we and maybe some of the regulatory requirements around that? And can we expect more stepwise additions going forward kind of similar to the U. S. Or now that you have obtained kind of like a bolus approval for a bunch of commercial slots, you don't need to go back to the ADM before for further approval?

Speaker 8

And the second question is if you could walk us through your current assumptions for penetration of the frontline market

Speaker 2

now. Hey, Chloe. Thank you for the questions. I'll address the first one. So yes, we're very pleased with the approval from EMA on commercial production at our Obelix facility in Ghent, Belgium.

Speaker 2

That happened on September 19. And on the 2nd day, September 20, we already started our 1st commercial batch production in that facility. So this is again testament to the quality of our manufacturing operation in Obelisk facility. And because Obelisk right now is only producing for commercial patients in European Union. We don't need any CAF or regulation because you probably know, EMA actually does not regulate CAR T manufacturing capacity.

Speaker 2

This is different from the FDA policy in the U. S. And next year, when we do expect our much larger facility in Belgium called Techland to be online and that will be the same case again. So right now, we do expect clinical production to be approved in Techland in probably first half of next year, followed by the official EMA approval for commercial production in that facility by end of next year. And then I may also want to add that Novartis already won FDA approval to start clinical production in the summer.

Speaker 2

And I'm very pleased to announce that Novartis has already submitted the application to the FDA. So right now, we do expect FDA approval in the first half of next year for the Novartis facility in New Jersey to start commercial production. So everything is on track and we reiterate that we do expect to have combined in network capacity of more than 10,000 doses per year by end of 2025. That is on track. And then I'll ask Steve to talk about maybe strong lines.

Speaker 5

Was it frontline or earlier lines? Are we looking at Cartitude IV or Cartitude V and VI? I didn't know. 56. Yes.

Speaker 5

So thanks. So let me just comment on 4 because it does relate strategically to 5 and 6. So with the Cartitude 4 launch, we pivoted and changed our go to market model quite a bit. As you could recall, when we are launching with Cartitude 1, the fifth line plus setting, the overwhelming majority piece of our efforts as well as our partner was within our hospitals in the United States in particular, and that's true globally. With patients becoming healthier, as we've talked about during this call today, Our focus has not only focus could continue to remain in hospitals in the U.

Speaker 5

S, but also we're pivoting outside the hospital. So we're having a much broader reach in terms of the providers that will be diagnosing and eventually treating these patients. So that's a key component, which will then layer into Cartitude 56. By penetrating and making our presence known in the outpatient setting, that will be the same provider group that will be diagnosing these folks that will be eventually hopefully referred on as soon as possible for our frontline indications. So it's important to note there.

Speaker 5

I guess I'll finally leave you with up to now we have not really activated the patient or efficacy at this point in time mostly because of supply. We are actively now engaging with the patient and the advocacy groups now within the community setting. So that's an important development. And then finally, and I'll leave you with this because I think we're on time, is we'll also be now over time over the next few years also be very active with the large retail or outpatient community GPOs out there, the U. S.

Speaker 5

Oncologies of the world, the Florida cancers, etcetera, to think through ways to partner to bring this type of product closer to patients that are more mobile. So that's sort of TBD, but we're actively engaged with this now with our partner. That's very exciting. And it's really a new big step for CAR T therapies as we get closer to our CARTITUDE V launch. So I'll end it with that.

Speaker 8

Great. Thanks so much.

Speaker 5

You got it.

Operator

This does conclude today's conference call. Thank you for participating and you may now disconnect.

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